CILEx L3 Equity & Trusts Introduction 3 — Questions and Answers
Question 1: What is 'proprietary estoppel'?
- An equitable doctrine that prevents a landowner from asserting their strict legal rights where they made a representation relied on by another who acted to their detriment (Correct answer)
- A rule preventing a party from denying the existence of a contract
- The doctrine preventing a mortgagee from clogging the equity of redemption
- A form of adverse possession based on estoppel
Correct answer: An equitable doctrine that prevents a landowner from asserting their strict legal rights where they made a representation relied on by another who acted to their detriment
Proprietary estoppel arises where: (1) the landowner made an assurance or representation about land rights, (2) the claimant relied on it, and (3) the claimant acted to their detriment. The court satisfies the equity by the minimum necessary to do justice (Thorner v Major [2009]).
Question 2: What is the 'rule in Saunders v Vautier [1841]'?
- Adult beneficiaries who are together absolutely entitled to the trust fund may collectively bring the trust to an end and direct the trustees to transfer the assets to them (Correct answer)
- A sole beneficiary cannot end a trust unilaterally
- Trustees must follow the directions of the majority of beneficiaries
- Beneficiaries can veto trustee decisions
Correct answer: Adult beneficiaries who are together absolutely entitled to the trust fund may collectively bring the trust to an end and direct the trustees to transfer the assets to them
The rule in Saunders v Vautier allows all beneficiaries, if they are of full legal capacity and together hold the entire beneficial interest, to collectively end the trust and direct the trustee to transfer the legal title to them or as they direct.
Question 3: What are the duties of a trustee?
- To act in the best interests of the beneficiaries, invest prudently, act unanimously, avoid conflicts of interest, and not profit from the trust (Correct answer)
- To maximise the return on the trust fund at all costs
- To follow all instructions of the settlor, including posthumous instructions
- To distribute the trust property as quickly as possible
Correct answer: To act in the best interests of the beneficiaries, invest prudently, act unanimously, avoid conflicts of interest, and not profit from the trust
Trustees have numerous duties including: acting in the best interests of all beneficiaries, investing with the standard of care of a prudent investor (Trustee Act 2000), acting unanimously, not profiting from their position (the no-profit and no-conflict rules), and maintaining accounts.
Question 4: What is the 'beneficiary principle' in trusts?
- A private express trust must have ascertainable beneficiaries who can enforce the trust; purpose trusts are generally void (Correct answer)
- All trusts must benefit specific named individuals
- Charitable trusts must benefit the public not private individuals
- Beneficiaries can always override trustee decisions
Correct answer: A private express trust must have ascertainable beneficiaries who can enforce the trust; purpose trusts are generally void
The beneficiary principle (Morice v Bishop of Durham [1804]) requires that there must be someone who can enforce a private trust. Pure purpose trusts (with no beneficiaries) are generally void, with limited exceptions.
Question 5: What is a 'charitable trust' and what are the four heads of charity under the Charities Act 2011?
- A trust for charitable purposes under s.3 Charities Act 2011: relief of poverty, advancement of education, advancement of religion, and other beneficial purposes (Correct answer)
- A trust for any non-profit organisation
- A trust where the income is used for the public good
- A trust exempt from taxation
Correct answer: A trust for charitable purposes under s.3 Charities Act 2011: relief of poverty, advancement of education, advancement of religion, and other beneficial purposes
Under s.3 Charities Act 2011, charitable purposes include: prevention/relief of poverty, advancement of education, advancement of religion, advancement of health, advancement of citizenship, and several other categories. To be charitable, the purpose must be for the public benefit.
Question 6: What is 'advancement of education' as a charitable purpose?
- Purposes that advance education, including formal schooling, research, and the development of the arts, provided there is genuine educational value and public benefit (Correct answer)
- Any activity that teaches a skill
- Running a school for profit
- Training professionals in a trade
Correct answer: Purposes that advance education, including formal schooling, research, and the development of the arts, provided there is genuine educational value and public benefit
Advancement of education as a charitable purpose (s.3(1)(b) Charities Act 2011) covers formal education, research (if of educational value and publishable), museums, libraries, and the arts. The purpose must be genuinely educational and provide public benefit.
CILEx L3 Equity & Trusts Introduction 3
What is 'proprietary estoppel'?