You are on page 1of 4

THE UNIVERSITY OF

NEW SOUTH WALES

FACULTY OF LAW

JURD7285/LAWS2385 Equity and Trusts


END OF SEMESTER EXAMINATION Semester 1 2013

Time allowed: 2 hours, plus 10 minutes reading time

Examination condition: THIS IS AN OPEN BOOK EXAMINATION.


You are permitted to bring any printed or handwritten materials into
the examination room.

Total number of questions: 2

Value of questions: All questions are not of equal value. Question 1 is worth 40%
o the marks for this examination; Question 2 is worth 60% of
the marks for this examination.

Questions to be answered: You should choose ONE essay from Question 1 and answer
ALL of Question 2.

OTHER INSTRUCTIONS:

1. Your NAME and STUDENT ID should be written on the front of each exam booklet you use.
2. Your TEACHERS NAME and your CLASS DAYS AND TIME should be written at the top
right hand corner of each exam booklet you use.
3. Answers must be written in ink. Except where they are expressly required, pencils may be
used only for drawing, sketching or graphical work.
4. Answer each question in a separate booklet.
5. You may retain the examination paper.

END OF PAPER

Page 1 of 4
QUESTION 1
Choose ONE of the essay topics below. This question is worth 40%.

Question 1(a):

A fiduciary is a person who is obliged to act in the best interests of another. Discuss.

OR

Question 1(b):

The decision to deny proprietary relief in a case such as Giumelli v Giumelli (1999) 196
CLR 101 would be better dealt with through the law of priorities. Discuss.

Page 2 of 4
QUESTION 2

Please answer this question (worth 60%) in a separate booklet to Question 1.

Ruby Roe was a successful antiques dealer. When she died on 12 October 2005, her will appointed
her husband Sam Singh as executor and trustee. The will stated that most of Rubys assets
(including the antiques business and most of the stock in trade with two exceptions discussed
below) would be held by the trust. The beneficiaries of the trust were her husband Sam (50%), and
her two daughters, Nancy (25%) and Penny (25%). At the time of Rubys death, Nancy was 17
years old and Penny was 11 years old. The will specified that the trustee would have all powers
necessary to continue to conduct an antique business, including the power to buy and sell stock.

Two assets were not part of the trust a diamond tiara and an emerald necklace. As to these, the
will specified that As to my most precious possessions, my diamond tiara and my emerald
necklace, my trustee is to take care of these until my daughter Nancys twenty-fifth birthday on
5 January 2013, on which date Nancy is to choose one piece, the other going to my daughter
Penny. In 2008, the emerald necklace was stolen in a well-planned break-in. Unsurprisingly, on 5
January 2013, Nancy chose the diamond tiara for herself and Sam handed it to her. Recently, the
thief who had stolen the necklace was caught (he has admitted the crime). Turns out he gave the
necklace to his girlfriend, Aurelie, who sold it for $100,000. She put this money in her bank
account (which already had $20,000). Her account balance is now $20,000; she spent the
remaining funds as follows:
$20,000 on a car (currently worth $5,000)
$30,000 on a luxury holiday
$30,000 on jewellery (which has maintained its value)
$20,000 investing in shares (currently worth $25,000).
Aurelie denies that she knew the particular necklace was stolen, although she was certainly aware
of her boyfriends profession. Aurelie has other assets including a house and several expensive
artworks. Her boyfriend, the thief, is broke and is currently in jail. The current whereabouts of the
necklace is unknown.

Sam, who runs the antiques business as trustee, regularly attends antiques auctions to purchase
additional stock. In June 2010, he was attending an auction where one of the items on sale was a
Ming vase. Having learnt a lot about the antiques business since 2005, Sam realised that the vase
had a rare copper red underglaze, making it particularly valuable. There was not, however,
sufficient cash available in the business trust account to buy the vase on behalf of the trust. He also
didnt have sufficient money on his own to buy it outright. He felt that the only way to procure it
was to pay 50% of the cost from his own funds and 50% of the cost from trust funds. His view was
that this would enable both the trust and himself to make a lot of money. He paid $500,000 at
auction (50% from trust funds; 50% from his own funds), although the actual value of the vase is
likely closer to $5,000,000. Prior to the purchase, he called his daughters on their mobile phones
and informed them of the opportunity. Both daughters agreed that he should go ahead.

Soon after Pennys eighteen birthday (28 February 2012), Penny began studying law. Nancy and
Penny had a conversation in which it was agreed that Penny would assign 1/5 of her interest in the
trust (being 5% overall) to Nancy if Nancy would pay Pennys HECS fees upfront for the five
years of her degree. So far, Nancy has made 2 annual payments (you can assume there are five
annual payments, each of which is $10,000). Neither Nancy nor Penny informed Sam of this
arrangement.

Page 3 of 4
Sam makes distributions in his daughters favour each month (25% of profits each), although (in
accordance with the terms of the will) Pennys money was placed into a trust account operated by
Sam until her eighteenth birthday (after which Penny was given full access to the account).

As she progressed through her law degree, Penny started wondering more about her rights under
the trust. She became extremely annoyed earlier this year when she realised that her sister would
get to keep the tiara, while she got nothing to remember her mother by. She even took the tiara
away from her sister at one point (after sneaking into her room), wearing it to a student function,
although she returned it the next day (Nancy found out about this subsequently when she saw
photos from the function in Pennys room). Penny also regrets the deal she made with Nancy last
year and thinks she ought to have a greater share of the Ming vase.

Advise Penny. Please note in answering this question:


You may use initials to identify people in writing your answer.
You should cite relevant authority (you can use short forms of case names; please
underline case names and statutes)

END OF EXAM PAPER

Page 4 of 4