CILEx L6 Equity and Trusts

Question 1

Which of the following correctly states the three certainties required to create a valid express trust, as established in Knight v Knight (1840)?

Accepted Answer

Certainty of intention, certainty of subject matter, and certainty of objects

Answer

Knight v Knight established that three certainties must be present for a valid express trust: (1) certainty of intention — the settlor must intend to create a trust; (2) certainty of subject matter — the trust property must be identifiable; (3) certainty of objects — the beneficiaries must be ascertainable.

Question 2

In relation to secret trusts, what is the key distinction between a fully secret trust and a half-secret trust regarding communication?

Accepted Answer

For a fully secret trust, communication may occur at any time up to the testator's death; for a half-secret trust, communication must occur before or at the time of execution of the will

Answer

For fully secret trusts, the trust obligation can be communicated at any time before the testator's death (Wallgrave v Tebbs). For half-secret trusts, where the will reveals a trust exists but not its terms, communication must occur before or at the time the will is executed (Blackwell v Blackwell [1929]), not after.

Question 3

A trustee uses trust funds to purchase a property in their own name. The property doubles in value. Which equitable remedy is available to the beneficiaries?

Accepted Answer

The beneficiaries may elect to either claim the property itself (through a constructive trust) or trace the trust money into the property and claim its increased value

Answer

Where a trustee misapplies trust funds to acquire property, the beneficiaries have an election: they can assert a constructive trust over the property (Keech v Sandford principle) or trace the trust money into the asset and claim its full value. This ensures the trustee cannot profit from their breach of fiduciary duty.

Question 4

Under the law of resulting trusts, in which circumstance does a presumption of resulting trust arise?

Accepted Answer

When property is purchased in the name of another person and there is no evidence of a gift or loan

Answer

A purchase money resulting trust arises where A pays for property but it is put in the name of B. The presumption is that B holds on resulting trust for A, unless the presumption of advancement applies (e.g., transfers from parent to child) or there is evidence of a gift (Dyer v Dyer). The Equality Act 2010 s.199 was enacted to abolish the presumption of advancement but has not been brought into force.

Question 5

What are the fiduciary duties owed by a trustee that prohibit them from making an unauthorised profit from the trust?

Accepted Answer

The self-dealing rule and the fair-dealing rule

Answer

The self-dealing rule (a trustee must not purchase trust property) and the fair-dealing rule (a trustee purchasing a beneficiary's interest must show the transaction was fair) are the core no-profit/no-conflict rules. These derive from the strict fiduciary principles in Keech v Sandford and Bray v Ford, preventing trustees from placing themselves in positions where duty and interest conflict.

CILEx Level 6 Practice Test

CILEx Level 6 Practice Test

CILEx L6 Equity and Trusts