SQE1 Equity & Trusts 3

Question 1

Under section 1 of the Trustee Act 2000, what is the standard of care required of a trustee when exercising statutory functions such as investment?

Accepted Answer

Such care and skill as is reasonable in the circumstances, having regard to any special knowledge or experience

Answer

Section 1 of the Trustee Act 2000 requires trustees to exercise such care and skill as is reasonable in the circumstances, and where a trustee acts in a professional capacity, a higher standard applies by virtue of their specialist knowledge.

Question 2

In Milroy v Lord (1862), Turner LJ established a foundational principle of equity. Which statement correctly summarises it?

Accepted Answer

Equity will not perfect an imperfect gift; to be complete a donor must do everything necessary to effect the transfer

Answer

Turner LJ in Milroy v Lord held that equity will not perfect an imperfect gift; for a gift or trust to be effective, the donor must have done everything that, according to the nature of the property, was necessary to transfer it.

Question 3

Where a trustee commits a breach of trust that causes loss to the trust fund, what is the primary remedy available to the beneficiaries?

Accepted Answer

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

Answer

The primary remedy for a loss-causing breach of trust is equitable compensation, which is aimed at restoring the trust fund to its proper state rather than stripping gain or preventing future wrongdoing.

Question 4

The rule in Saunders v Vautier allows beneficiaries to collapse a trust and demand the trust property. What conditions must be met?

Accepted Answer

All beneficiaries must be adults of full capacity and together hold the entire beneficial interest

Answer

Under Saunders v Vautier, if all beneficiaries are adults with full mental capacity and between them hold the entire beneficial interest, they may collectively demand that the trustees transfer the trust property to them.

Question 5

Which of the following constitutes a breach of the self-dealing rule applicable to trustees?

Accepted Answer

A trustee purchasing trust property from the trust estate for their own benefit

Answer

The self-dealing rule prohibits a trustee from purchasing trust property because they simultaneously owe a duty as seller (to maximise price) and act as buyer (with an interest in minimising price), creating an irreconcilable conflict of interest.

SQE1 Practice Test

SQE1 Practice Test

SQE1 Equity & Trusts 3