FE-1 Company Law and Equity 2 — Questions and Answers
Question 1: What is an express trust and what are the three certainties required for its valid creation in Irish equity?
- Certainty of intention (clear intention to create a trust), certainty of subject matter (the property to be held on trust), and certainty of objects (the beneficiaries or purpose must be identifiable) (Correct answer)
- Only a written trust deed creates a valid express trust
- The three certainties are: certainty of payment, certainty of term, and certainty of purpose
- Express trusts require registration under the Land Registry
Correct answer: Certainty of intention (clear intention to create a trust), certainty of subject matter (the property to be held on trust), and certainty of objects (the beneficiaries or purpose must be identifiable)
Knight v Knight [1840] established the three certainties for a valid express trust. Without all three the trust fails: intention (language must show trust was intended, not a gift or debt), subject matter (identifiable property), and objects (beneficiaries or purpose sufficiently certain to be executed).
Question 2: What is the rule in Saunders v Vautier [1841] in Irish trust law?
- Adult beneficiaries who are absolutely entitled and sui juris (legally capable) and together hold the entire beneficial interest can collapse the trust and demand the legal title from the trustees (Correct answer)
- Trustees can never be compelled to transfer trust property before the trust period ends
- The rule only applies to charitable trusts
- Beneficiaries can terminate a trust by majority vote at any time
Correct answer: Adult beneficiaries who are absolutely entitled and sui juris (legally capable) and together hold the entire beneficial interest can collapse the trust and demand the legal title from the trustees
Saunders v Vautier allows beneficiaries who are of full age, of sound mind, and together entitled to the entire beneficial interest to bring the trust to an end and demand the trust property be transferred to them, regardless of the settlor's original intentions.
Question 3: What is oppression of minority shareholders under the Companies Act 2014 in Ireland?
- Section 212 provides a remedy where the affairs of a company are being conducted in a manner oppressive to a member or in disregard of their interests — the court can make orders including buyout of shares or winding up (Correct answer)
- Minority shareholders have no statutory remedy against the majority
- Oppression only applies where the company is insolvent
- Section 212 only applies to public companies
Correct answer: Section 212 provides a remedy where the affairs of a company are being conducted in a manner oppressive to a member or in disregard of their interests — the court can make orders including buyout of shares or winding up
The section 212 (Companies Act 2014) oppression remedy protects minority shareholders from majority abuse. The court can make any order it thinks fit including: regulating future conduct, authorising civil proceedings, buying out the oppressed shareholder, or winding up.
Question 4: What is a resulting trust in Irish equity law and when does it arise?
- A resulting trust arises by operation of law where property returns to the settlor or their estate because the trust fails (automatic resulting trust) or where one party pays for property put in another's name (presumed resulting trust) (Correct answer)
- A resulting trust is created expressly by the parties
- Resulting trusts only arise in commercial contexts
- A resulting trust is the same as a constructive trust
Correct answer: A resulting trust arises by operation of law where property returns to the settlor or their estate because the trust fails (automatic resulting trust) or where one party pays for property put in another's name (presumed resulting trust)
Resulting trusts arise in two main situations: (1) automatic — where an express trust fails for lack of certainty or incompleteness, the beneficial interest results back; (2) presumed — where A pays for property conveyed to B, equity presumes B holds on resulting trust for A (rebutted by evidence of gift or advancement).
Question 5: What are the duties of a trustee under Irish equity and the Trustee Act 1893 (as amended)?
- Trustees must: follow the trust instrument, act in the interests of all beneficiaries, exercise the standard of care of a prudent investor, avoid conflicts of interest, keep accounts, and act unanimously (unless authorised otherwise) (Correct answer)
- Trustees owe duties only to the settlor who appointed them
- Trustees can use trust property for their own benefit if they pay it back
- The Trustee Act 1893 has been entirely replaced by the Companies Act 2014
Correct answer: Trustees must: follow the trust instrument, act in the interests of all beneficiaries, exercise the standard of care of a prudent investor, avoid conflicts of interest, keep accounts, and act unanimously (unless authorised otherwise)
Trustees are fiduciaries with onerous obligations: strict adherence to the trust terms, no unauthorised profit from their position, investment duty (prudent investor standard under Trustee Act amendments), duty to account, and duty of impartiality between beneficiaries.
Question 6: What is the doctrine of subrogation in Irish equity and insurance law?
- Where an insurer pays an insured's loss, the insurer is subrogated to the insured's rights against the third party who caused the loss — the insurer can sue the third party in the insured's name to recover what it paid out (Correct answer)
- Subrogation allows an insurer to refuse payment if a third party was at fault
- The doctrine allows a debtor to step into the shoes of a creditor they have paid off
- Subrogation is only available in marine insurance under Irish law
Correct answer: Where an insurer pays an insured's loss, the insurer is subrogated to the insured's rights against the third party who caused the loss — the insurer can sue the third party in the insured's name to recover what it paid out
Subrogation prevents double recovery — the insured cannot recover from both the insurer and the third party. The insurer, having paid the loss, is entitled to stand in the shoes of the insured and pursue the responsible third party for reimbursement.
FE-1 Company Law and Equity 2
What is an express trust and what are the three certainties required for its valid creation in Irish equity?