CILEx L6 Equity & Trusts Advanced

Question 1

What is the test for a 'fixed trust' as to certainty of objects?

Accepted Answer

The complete list (ascertainability) test — it must be possible to draw up a complete list of all beneficiaries

Answer

The 'is or is not' test — it must be possible to say of any given person whether they are a member of the class

Answer

Any trust with more than 10 beneficiaries automatically fails for uncertainty

Answer

Certainty of objects is not required for fixed trusts if the subject matter is certain

Question 2

What is the test for certainty of objects for a discretionary trust (McPhail v Doulton)?

Accepted Answer

The 'is or is not' test — it is sufficient if one can say with certainty whether any given individual is or is not a member of the class (McPhail v Doulton [1971])

Answer

The complete list test — a full list of all potential beneficiaries is needed

Answer

Any person must be identifiable without going to court

Answer

There is no certainty requirement for discretionary trust objects

Question 3

What is a 'Quistclose trust' and how does it arise?

Accepted Answer

A resulting trust that arises where money is paid for a specific purpose that fails, causing the money to return to the payer on resulting trust (Barclays Bank Ltd v Quistclose Investments [1970])

Answer

A trust imposed by a court on a company in administration

Answer

A trust created by a bank over customer deposits

Answer

A constructive trust arising from a breach of fiduciary duty

Question 4

What is the 'Hastings-Bass rule' as modified by Pitt v Holt [2013]?

Accepted Answer

Trustees' decisions may be set aside in equity if made in breach of a duty of care to take relevant matters into account, and the breach was sufficiently serious — not merely that the trustees failed to consider something

Answer

Any trustee decision made without considering all relevant factors is void

Answer

Courts will always reverse trustee mistakes that are disadvantageous to beneficiaries

Answer

The rule only applies where the trustees acted fraudulently

Question 5

What are 'Saunders v Vautier rights' and can they be excluded?

Accepted Answer

Adult, absolutely entitled beneficiaries can collapse the trust and call for the trust property — this right cannot be excluded by the trust deed

Answer

Beneficiaries can always end a trust by majority vote

Answer

A trustee can prevent beneficiaries from ending the trust by including an exclusion clause

Answer

The right only applies to fixed trusts with cash assets

Question 6

What is 'dishonest assistance' as a basis for third-party liability in equity?

Accepted Answer

Assisting in a breach of fiduciary duty with subjective dishonesty (judged by the combined objective/subjective test from Twinsectra v Yardley [2002] as modified by Barlow Clowes International v Eurotrust [2005])

Answer

Assisting a breach of trust where the assistant was negligent

Answer

Any involvement in a breach of fiduciary duty by a third party

Answer

Knowing about a breach of fiduciary duty without reporting it