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

For a fixed trust (where each beneficiary has a set share), the complete list test applies — it must be possible to draw up a complete, exhaustive list of all beneficiaries (IRC v Broadway Cottages Trust [1955]).

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

In McPhail v Doulton [1971] AC 424, the House of Lords held that the test for certainty of objects in a discretionary trust is the 'is or is not' test (also known as the Baden test) — it is sufficient if one can determine whether any given person is or is not within the class.

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 Quistclose trust arises where money is paid for a specific purpose — if the purpose fails, a resulting trust returns the money to the payer. This is significant in insolvency, as the money does not form part of the payee's general estate.

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

In Pitt v Holt [2013] UKSC 26, the Supreme Court restated the rule: trustee decisions can only be set aside if the trustees acted in breach of a fiduciary duty (not merely a non-fiduciary duty), and the consequences of the breach are sufficiently serious.

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

Under Saunders v Vautier [1841], adult beneficiaries with full capacity who together hold the entire beneficial interest can collapse the trust. This rule cannot be excluded by the trust deed — it is a fundamental right of beneficiaries.

CILEx Level 6 Practice Test

CILEx Level 6 Practice Test

CILEx L6 Equity & Trusts Advanced