WARNING.

The format of this question paper was changed due the COVID-19 pandemic and applies to the 2019-20 examinations only.

LA3002 July ZB

Equity and Trusts (Level 6)

Monday 13 July 2020

You will have TWO HOURS AND 45 MINUTES in which to answer the
questions, including 15 minutes reading time. You must answer all parts of a
question unless otherwise stated.

You will have an additional 30 minutes to download the examination paper and
to upload your saved answers to the VLE; this time should be used solely for
these purposes.

You must answer TWO of the following SIX questions.

© University of London 2020

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WARNING. The format of this question paper was changed due the COVID-19 pandemic and applies to the 2019-20 examinations only.

1. Madge died in August 2019. Harold is the executor of her will. Madge
made her will in April 2019. It contains the following bequests:

(a) My cottage to my neighbour, Helen, trusting that she will follow

my instructions.

(b) £100,000 to my executor on trust to be distributed equally

amongst the surviving members of my graduating class at
Xavier’s College.

(c) The most valuable books in my collection of rare first editions to

Sarah.

(d) £20,000 to my executor, to appoint to any of my friends that he

considers deserving.

(e) Everything that is left to my nieces and nephews.

In February 2019, Madge visited Helen and handed her a sealed letter
to be opened after Madge’s death. Helen wanted to find out what was in
the letter, so she opened it once Madge had left. The letter said that
Madge wanted the cottage to go to Madge’s childhood sweetheart, Jock,
and that Helen should arrange for the cottage to be transferred to him
once Madge had died. Helen was uncomfortable with this plan, but
Madge died before Helen had the opportunity to speak with Madge about
it.

Madge graduated from Xavier’s College in 1958 along with 100 other
pupils. In 1971 there was a fire in which all the College files were
destroyed. There is therefore no conclusive record of the class of 1958.

Madge had ten nieces and nephews, but three of those nieces and
nephews cannot be located as they have been estranged from the family
for over a decade.

Advise Harold.

2. “Judges have been far too willing to allow the circumvention of statutory
provisions that require that transactions are effected or evidenced by
signed writing. Those provisions are included for good reason.”

Critically discuss.

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WARNING. The format of this question paper was changed due the COVID-19 pandemic and applies to the 2019-20 examinations only.

3. To what extent, if at all, do the legal principles that underpin the law of
trusts need to be adjusted as between trusts that arise in family or
domestic settings and trusts that arise in commercial settings?

4. Graeme, a solicitor, is trustee of the Jones Family Trust. The trust assets
include 1,000 shares in Pharma Corp, a private company.

Graeme is in financial difficulty. He cannot afford to buy a 21st birthday

present for his daughter, Lucy, so he decides to give her 50 of the
Pharma Corp shares. He lodges the paperwork for the share transfer to
take place, and 50 shares are put in Lucy’s name.

Graeme then decides to sell the remaining 950 shares and use the
proceeds to pay some of his creditors. He contacts his personal
accountant, Wendy, to ask whether she has any clients who might be
interested in buying some shares. Wendy is aware of Graeme’s financial
difficulties and that he is a trustee for a large family trust. Had she turned
her mind to it, she would also have recalled that Graeme does not own
any shares beneficially. Instead, she suggests that Graeme contact
Michel. Wendy bills Graeme for her time using her usual hourly rate.

Graeme contacts Michel in relation to the Pharma Corp shares. Graeme

tells Michel that he is looking for a quick sale. Michel knows that Pharma
Corp shares have been performing very well, making it strange that
Graeme wants to sell them. Michel is further surprised when Graeme
agrees to sell the shares for £230,000, as Michel believes their true value
is more like £300,000. Michel therefore arranges to complete the
transaction as quickly as possible.

Graeme uses the £230,000 to pay a number of creditors. This includes

paying £50,000 to Lots of Yachts. This is the balance owing under a
contract of sale for a yacht. The total purchase price was £100,000.
According to the contract, property in the yacht passed to Graeme when
he took delivery (which was about four months earlier).

The beneficiaries of the Jones Family Trust discover all of the above.
Graeme is now hopelessly insolvent. His main asset is the yacht.
Michel’s Pharma Corp shares are worth £350,000.

Advise the beneficiaries.

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WARNING. The format of this question paper was changed due the COVID-19 pandemic and applies to the 2019-20 examinations only.

5. Jess was an older woman with three adult children: Bella, David, and
Felix. She lived on a farm in rural England until her sudden death in
October 2019.

In September 2016, Jess and Bella were shopping for plants for Jess’s
garden. Jess forgot her debit card, so they agreed that Bella would pay
for the plants and Jess would reimburse her. Bella gave Jess the details
of the new savings account that Bella had opened. Bella said that she
wanted to use the money in that account for investment and important
purchases. When Jess was entering the details for the bank transfer,
she accidentally ticked the box to make the payment a monthly standing
order. From October 2016 to her death, Jess paid a total of £7,200 into
Bella’s bank account. Bella knew of the payments, but assumed her
mother was helping support her financial plan, so did not make any
payments herself. Bella used £5,000 from the savings account to
purchase a painting. The painting is now worth £10,000.

Jess was the owner of 500 shares in Development Co. The shares were
worth approximately £20,000. Jess wished to give the shares to David.
In August 2019, she completed a share transfer form and placed the
form and share certificate in an envelope addressed to Development Co.
She left the envelope on a table near the front door so it could be posted
the next day. However, the envelope fell down the back of the table and
was never sent. In anticipation of receiving the shares, David spent
£15,000 on a nose job and cosmetic dentistry.

Felix, now 35, has lived with Jess all his life. When he was 18, Felix
applied to study music at a college in London. However, Jess said that
if Felix stayed and worked at the farm, she would make sure he was
always looked after. Felix withdrew his college application. Ten years
later, when he was 28, Felix applied for a job as an apprentice chef. Jess
said that if he kept working on the farm, the farm would be his when Jess
died. Felix did not get the job, and he decided not to submit any more
job applications given Jess’s promise. Felix was never paid a full wage
by Jess, but lived in her house rent-free and was given a generous
monthly allowance.

Jess’s will leaves all of her real property to her children and all of her
personal property to her second husband, Keir. The executor of Jess’s
will found the envelope during a visit to the farm in November 2019.

Advise the executor in relation to the above.

6. Critically analyse the extent to which trustees should be able to avoid

liability for breach of trust, in particular by obtaining the consent of the
beneficiaries, relying on an exemption clause or invoking section 61 of
the Trustee Act 1925.

END OF PAPER

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