CILEx L3 Equity & Trusts Introduction 4

Question 1

What is the 'no-conflict rule' for trustees?

Accepted Answer

A trustee must not place themselves in a position where their personal interests conflict with their duty to the beneficiaries

Answer

The no-conflict rule requires trustees to avoid situations where their personal interests conflict (or may conflict) with their duties to the beneficiaries. This is part of the broader fiduciary duty and protects the integrity of the trust relationship.

Question 2

What is the 'no-profit rule' for trustees?

Accepted Answer

A trustee must not profit from their position as trustee beyond authorised remuneration, and must account to the trust for any unauthorised profit

Answer

The no-profit rule (Keech v Sandford [1726]) prevents trustees from making an unauthorised profit from their position, such as renewing a lease for their own benefit that they held in trust. All unauthorised profits must be disgorged to the trust.

Question 3

What equitable remedy prevents the defendant from doing something?

Accepted Answer

An injunction

Answer

An injunction is the equitable remedy that restrains a party from doing something (prohibitory injunction) or requires them to do something (mandatory injunction). It is a discretionary remedy awarded where damages would be inadequate.

Question 4

What is the remedy of 'account of profits' in equity?

Accepted Answer

A remedy requiring the defendant to hand over profits made from a wrong, rather than simply compensating the claimant for their loss

Answer

Account of profits is an equitable remedy that strips the defendant of profits made as a result of their wrong (e.g., breach of fiduciary duty, breach of confidence). The claimant receives the defendant's gain, which may exceed their own actual loss.

Question 5

What is 'rescission' as an equitable remedy?

Accepted Answer

Setting aside a transaction and restoring the parties to their pre-transaction positions

Answer

Rescission sets aside a voidable transaction (e.g., one entered into through misrepresentation, undue influence, or duress) and seeks to restore the parties to their pre-contractual positions. It is subject to bars including affirmation, lapse of time, and third party rights.

CILEx Level 3 Practice Test

CILEx Level 3 Practice Test

CILEx L3 Equity & Trusts Introduction 4