SQE1 - Solicitors Qualifying Examination Part 1 The Law of Trusts Questions and Answers

Question 1

A testator's will contains the following clause: 'I give £200,000 to my trustees to distribute in their absolute discretion amongst my old friends'.
Which of the three certainties required to form a valid express trust is most likely to fail in this disposition?

Accepted Answer

Certainty of objects, because the term 'old friends' is conceptually uncertain.

Answer

Certainty of subject matter, because the amount of £200,000 is not segregated from the rest of the estate.

Answer

Certainty of intention, because the use of 'distribute in their absolute discretion' is precatory language.

Answer

Certainty of objects, because it is impossible to draw up a complete list of all the testator's 'old friends'.

Question 2

A settlor wishes to create a trust over 500 shares in a private company for her nephew. She completes and signs a share transfer form and gives it to her solicitor, telling the solicitor to 'deal with the transfer'. The solicitor places the form in a file but takes no further action. The settlor dies a month later. What is the most likely legal status of the shares?

Accepted Answer

An effective trust has been created under the rule in *Pennington v Waine* because it would be unconscionable for the gift to fail.

Answer

The trust is incompletely constituted because the settlor has not done everything in her power to transfer the shares.

Answer

The trust is completely constituted under the rule in *Re Rose* because the settlor has done everything necessary for her to do.

Answer

The trust is completely constituted because handing the form to a solicitor is equivalent to delivery to the company.

Question 3

A trustee is a chartered accountant managing a family trust. When exercising the general power of investment, what is the standard of care the trustee must exercise according to the Trustee Act 2000?

Accepted Answer

Such care and skill as is reasonable in the circumstances, having regard to his professional knowledge as an accountant.

Answer

The care an ordinary prudent man of business would take when managing his own affairs.

Answer

The highest possible standard of care as he is a professional acting for a family.

Answer

The same standard of care as a lay trustee, as the Act does not distinguish between professional and non-professional trustees.

Question 4

A mother provides the full £300,000 purchase price for a house, but for administrative convenience, the legal title is registered in the sole name of her adult son. There is no mention of a loan or gift. A decade later, the mother and son fall out, and the son claims the house is his absolutely. In the absence of any other evidence, what type of trust is most likely to have arisen?

Accepted Answer

A presumed resulting trust, with the son holding the property on trust for his mother.

Answer

An express trust, as the mother expressed her intention through the payment.

Answer

A constructive trust, because it would be unconscionable for the son to deny his mother's interest.

Answer

A statutory trust under the Trusts of Land and Appointment of Trustees Act 1996.

Question 5

A trustee, in breach of trust, makes an unauthorised and speculative investment of £50,000 from the trust fund. The investment subsequently fails, and the entire £50,000 is lost. The beneficiaries discover the breach. Which remedy are the beneficiaries most likely to seek against the trustee personally?

Accepted Answer

Equitable compensation to restore the trust fund to the position it would have been in but-for the breach.

Answer

An account of profits, to claim any gains the trustee made.

Answer

A tracing order to follow the money into the failed investment.

Answer

Rescission of the investment contract to recover the money from the investment company.

Question 6

A trust is established for the 'relief of poverty amongst the employees and former employees of X Ltd'. The class of beneficiaries is limited to several hundred people connected by their employment. Under the Charities Act 2011, why is this trust likely to be considered charitable?

Accepted Answer

Because the 'personal nexus' test, which would normally prevent a trust for a limited group from being public, does not apply to trusts for the relief of poverty.

Answer

Because any trust for the relief of poverty is automatically charitable, regardless of the beneficiaries.

Answer

Because the number of potential beneficiaries is sufficiently large to constitute a section of the public.

Answer

Because a trust for employees is always considered to be for the public benefit.