LA3002 May B3

LLB
BSc DEGREES WITH LAW

Equity and Trusts (Level 6)

Monday 7 June 2021

BLOCK 3 Available at: 15:00 UK time on Monday 7 June 2021.

Submit before: 20:00 UK time on Monday 7 June 2021.

You have FIVE HOURS in which to write your answers and upload them in the
required .doc or .docx format to the VLE. You are not expected to spend more
than FOUR HOURS writing your answers. The remaining hour is for
downloading, uploading, and to take short rest breaks.

You must answer THREE of the following SIX questions. You must answer all
parts of a question unless otherwise stated.

© University of London 2021

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1. ‘It is important not to forget the relationship between the law of trusts and
the law of contract, especially when considering how trusts principles
should be applied in commercial contexts.’

Critically discuss.

2. ‘The English rules in relation to equitable tracing are complex,

haphazard and inconsistent. Simplification is required.’

Critically discuss.

3. ‘There are very good reasons for the prohibition, in English law, of non-
charitable purpose trusts. This prohibition should not be relaxed.’

Critically discuss.

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4. Virat, Alexei and Sharon are trustees of the £200 million endowment
fund of Prince James University. Virat is an accountant, while Alexei and
Sharon are both corporate lawyers. The beneficiary of the fund is the
University, as represented by its governing council.

Virat attends a public lecture given by senior academics from the

University’s School of Geography. At that lecture, the academics
describe their research into sustainable transport, and note that their
work is consistent with the University’s pledge for zero carbon emissions
by 2030. Virat realises that there is a conflict between the University’s
research endeavours and emissions policy, and the investments in the
endowment fund, as the fund includes shares in companies in the oil,
gas and mining sectors. Virat forms the view that these shares should
be sold and the proceeds used for new investments. At their next
meeting, Virat tells Alexei and Sharon about the seminar and his
proposal to sell the stocks (currently comprising 15% of the fund’s
capital). Alexei and Sharon agree to this, and that Virat should work on
a proposal for replacement investments.

Virat arranges for the shares to be sold, realizing £30 million. He seeks
some advice from Natasha, a financial planner, in relation to how to
invest the money. Virat explains the background to Natasha and sends
her a number of documents, including a copy of the trust instrument
setting up the endowment fund. Natasha has a UK-based client that
operates a wine importation business, and that has – inexplicably, in her
opinion – been having difficulties attracting investors so that it can
expand its operations. Natasha advises Virat that this would be an
excellent investment opportunity as the value of the company is likely to
skyrocket in the coming years. Had Natasha read the trust instrument,
she would have noticed that there is prohibition on investments in any
companies associated with alcohol. Virat invests £20 million in the
business without notifying Alexei and Sharon.

Virat uses the remaining £10 million to purchase artworks by up-and-

coming British artists, again without notifying Alexei and Sharon. He
selects these artists with the (unpaid) assistance of his husband, Peter,
who runs a commercial art gallery in London. A number of the works are
purchased via Peter’s gallery. Although the artists receive the purchase
price in those transactions, Peter, as agent, is paid a commission from
the artists for these sales.

The following events occur. The wine importation business experiences

significant difficulties on account of Brexit, and the value of this
investment drops to £15 million – although the managing director is
confident that revenue will pick up. There is a flood at the University and
a number of the paintings – worth £5 million – are destroyed. Virat had
not yet arranged insurance for those paintings as he was busy with other
urgent matters.

Advise the University.

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5. Delphine, a former professor of economics at Queen’s University, died
in January 2021. Her will was executed validly in November 2018 and
made Sara the executor. The will included the following bequests:

(a) £30,000 to my brother, Paul, on the terms I have communicated

to him.

(b) The finest 50 stamps from my stamp collection to be held on trust

by my executor for whichever of my former research collaborators
she should appoint.

(c) All my shares to my sister, Camille.

(d) Anything that is left to be divided equally between my two

children, hoping that they will make further gifts to my
grandchildren.

In October 2018, Delphine left a voicemail on Paul’s mobile telephone.

She said that Paul would receive a bequest under her will, but that she
wanted him to follow her instructions regarding how that bequest should
be used. She said she would send him a letter that he was not to open
until after her death. Delphine sent the letter the next day. Paul filed the
letter in a safe place, and never brought up the matter with Delphine.
The letter instructed Paul to hold any money he received under
Delphine’s will on trust for Delphine’s grandson, Aaron, “to support
Aaron in his education”. At the time of Delphine’s death, Aaron had
completed his secondary education and had commenced an
apprenticeship with an electrician.

Delphine worked at Queen’s University for 40 years. She retired in 2005.

During her career, she published three sole-authored books, two jointly-
authored books and at least 80 articles and book chapters (some of
which were also co-authored).

At the time of her death, Delphine was listed as the owner of 2,000
shares in Technology Co (worth £60,000). In July 2020, Delphine’s
daughter Emma told Delphine that she wanted to expand her catering
business but needed to raise some money in order to do so. Delphine
said that she would give 500 shares in Technology Co to Emma to
support Emma’s plans. Delphine completed a share transfer form
requesting that 500 shares be transferred to Emma and 500 shares be
transferred to Delphine’s son, Timothy. The share certificate was held
by Delphine’s accountant, so Delphine gave him the completed form,
with instructions that he send the form and certificate to Technology Co.
However, the accountant was busy and forgot to send in the documents.
Emma bought new kitchen appliances following the conversation with
her mother. Timothy was unaware of Delphine’s plans.

Advise Sara.

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6. Until January 2021, Meg was the Operations Manager at a large
insurance company. This is a very senior role, and Meg’s responsibilities
included budgeting for and procuring equipment. She also owned a
holiday cottage and a vintage car.

In May 2019, Meg was negotiating with a number of computer retailers

in relation to a contract for the supply of computer equipment to the
company. To help convince Meg to recommend it to the board, a firm
called Amazing Electronics said it would pay Meg an “incentive bonus”
of £30,000 if she would support its proposal. Meg deleted Amazing’s
email without answering. When the various proposals were presented to
the board, the board selected Amazing. A few weeks later, Meg received
a letter from Amazing containing a cheque, made out to her, for £30,000.
Meg opened a new deposit account at the bank and paid in the £30,000.
A few weeks later, she used the £30,000 to buy shares in Pharma Co.

In August 2019, Meg learnt about an appeal to help pay for medical bills
for a woman who had been badly injured in a hiking accident, and who
required intensive physiotherapy as part of her recovery. Meg, who was
feeling guilty about having banked Amazing’s cheque, made a donation
from her savings account of £15,000.

In August 2020, Meg separated from her second husband (with whom
she lived in a rented flat in London). She was very concerned about her
husband attempting to claim her cottage and other assets as part of their
financial settlement, as she wanted to keep these to pass on to her three
(adult) children from her first marriage. She came up with the idea of
transferring the cottage and the car gratuitously to her friend, Bao, on
the basis that Bao would then transfer the cottage and car back to Meg
once everything had settled down.

In January 2021, Meg was summarily dismissed after her employer

found out about the £30,000 payment. Meg also discovered that only
£5,000 of the donation was spent, as the injured woman was able to
claim on her health insurance. The remaining £10,000 has been sitting
in a bank account for some time. Finally, Meg approached Bao on
several occasions in relation to reconveying the cottage and car to her,
but Bao is not responding to Meg’s messages.

Meg’s (now former) employer has indicated that it intends to commence

legal proceedings against her to recover the bribe. Meg – who has
reconciled with her husband – has no savings and is worried that she
will never get her cottage and car back. Her main asset is her shares in
Pharma Co which are now worth £50,000.

Advise Meg. Would it make a difference to your answer if Bao were

Meg’s son?

END OF PAPER

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