Examiners’ reports 2018

Examiners’ reports 2018

LA3002 Equity and Trusts (Level 6) – Zone A

Introduction
It is important to take care at the beginning of the examination to read the questions
carefully, determine what each question is about and to decide which three
questions to answer. There is a limited range of topics that might be examined and
no two questions will be about the same topic (although some slight overlap may
occur). If you think that two different questions are about the same issues then you
have misunderstood one or both of the questions.
The six questions are set to allow you to demonstrate your knowledge and
understanding of the law and your ability to apply it to specific issues. There are no
trick questions. If you ask yourself why the examiners are asking a question, you
can identify what it is really about and whether it will provide you with a good
opportunity to perform at your best.
Always pay careful attention to the question asked. For example, Question 3 quotes
Lord Wilberforce on mere powers, yet some candidates failed to mention powers at
all.
It is equally important to pay careful attention to the question asked, whether it is a
problem question or an essay question. If, for example, you are asked to discuss a
quotation, it is not sufficient to write a general essay on that area of law. You need
to consider carefully what specific issues are raised by the quotation.
After you decide which three questions to answer, divide the remaining time evenly
among them and, for each question, plan your answer before you begin writing.
This will help to ensure that you do not miss important points and that your answer
will be coherent and well presented. While this may leave you with only 30 minutes
of actual writing time per question, a shorter, thoughtful and relevant answer is
much better than a longer, rambling and sometimes irrelevant one.
As in previous years, the most common reasons why candidates performed poorly
on the examination were because they: (a) failed to manage their time properly and
thus did not provide three complete answers; or (b) failed to address questions
properly and wrote one or more answers that were mostly irrelevant. Some
candidates performed poorly on problem questions because they wasted time
describing the law generally before answering the question. Even if the description
of the law is accurate and relevant, it does not demonstrate to the examiners that
the candidate understands how to apply the law to the problem unless the legal
principles are repeated as they are applied. That is a poor use of time.
Level 5 and Level 6 examination papers
There were four different examination papers in Equity and Trusts this year, with
Zone A and Zone B papers set for both level 5 (LA2002) and level 6 (LA3002). The
questions were set and marked in order to evaluate the achievement of different
learning outcomes at each level (see the Module Descriptor). Level 5 candidates

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are expected to ‘classify types of trusts and identify their main distinctive features
and purposes’, while level 6 candidates are expected to ‘compare and contrast
types of trusts and explain their main distinctive features and purposes’. Level 5
candidates are expected to ‘identify appropriate available remedies’, while level 6
candidates are also expected to ‘evaluate’ them. Level 5 candidates are expected
to ‘explore key issues in judicial decision-making’, while level 6 candidates are
expected to ‘evaluate’ them.

Comments on specific questions

Question 1
Lisa was a single mother of two daughters: Nina and Priya. Lisa was the
registered owner of three houses in London: Green Gables, Maroon Manor,
and Violet Villa. She transferred all three houses to Nina, who became the
new registered owner. Lisa asked Nina to hold Green Gables in trust for her
(Lisa), to hold Maroon Manor in trust for Priya, and to keep Violet Villa for
herself (Nina) as a gift. Nina agreed.
Lisa died unexpectedly two months later. According to her will, her ex-
husband Sanjay is entitled to her entire estate. Sanjay claims that he is
entitled to all three houses because Nina is holding them in trust for Lisa’s
estate. Nina seeks your legal advice.
Advise Nina.
General remarks
This is a problem questions about formalities and resulting trusts, which are
discussed in Chapters 6 and 12 of the module guide and Chapters 5 and 6 of Penner.
Law cases, reports and other references the examiners would expect you to use
LPA 1925, ss.53(2), 53(1)(b), 60(3), Rouchefoucauld v Boustead [1897] 1 Ch 196,
Hodgson v Marks [1971] 2 WLR 1263, Lohia v Lohia [2001] EWCA Civ 1691, National
Crime Agency v Dong [2017] EWHC 3 (Ch).
Common errors
Common errors included errors about the role of intention in making a gift and failure
to refer to Hodgson and assuming that a death meant that the question involved
secret trusts.
A good answer to this question would…
explain that the oral evidence to prove the existence of the two express trusts for L
and P is inadmissible (LPA, s.53(1(b)) but would consider whether the fraud
exception in Rouchefoucauld might apply to prove the trusts. It would explain that a
resulting trust might apply since L did not intend to make a gift of the two properties
to N (Hodgson). It would discuss whether the presumption of advancement applies
to gifts from mothers and whether the presumption of resulting trusts applies to
voluntary conveyances of land (LPA 1925, s.60(3), Lohia, Dong). It would conclude
that the presumptions will not matter if the court believes N’s evidence of L’s intention.
Poor answers to this question…
treat the question as one on secret trusts, or treat the question lightly with no mention
of Hodgson or intention.
Question 2
Emma died recently. According to her will, the residue of her estate is to be
held in trust for so long as the law allows:

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a) to support Ice Skating UK (ISUK),

b) to construct and maintain a monument to the memory of the great
British figure skater Jennifer Nicks who died in 1980, and
c) to improve the facilities of the Dibley Ice Skating Club (DISC).
Dawn and James have been appointed as the executors of Emma’s estate.
They seek your advice concerning the validity of those trusts.
ISUK was a non-profit association that promoted ice skating in the UK, but it
closed down five years ago. DISC is a non-profit association with 250
members. It owns and operates a sports club with two ice skating rinks,
changing rooms, a dining lounge, a bar, and other facilities for use by its
members. Annual membership dues are £1,000 per adult and £500 per child.
Advise Dawn and James.
General remarks
This is a problem question about trusts for charitable and private purposes and gifts
to unincorporated associations, which are discussed in Chapters 9 and 10 of the
module guide and Chapters 9 and 13 of Penner.
Law cases, reports and other references the examiners would expect you to use
Charities Act 2011, ss.1_4, especially s.3(1)(g), Preamble to the Charitable Uses Act
1601, Morice v Bishop of Durham (1805) 10 Ves 522, Mussett v Bingle [1896] WN
170, Re Lipinski’s Will Trusts [1976] Ch 235, Hanchett-Stamford v A-G [2008] EWHC
330 (Ch), Re Vernon’s WT [1972] Ch 300, Re Finger’s WT [1972] Ch 286, cy-près
doctrine.
Common errors
Common errors were assuming that all sport was beneficial to the public rather than
considering whether ice skating itself fulfilled the public benefit requirement, not
recognising an anomalous trust, not applying cy-près and introducing irrelevant case
law under a general discussion of charities.
A good answer to this question would…
consider that clause (a) would have been valid charitable trust for the advancement
of amateur sport under s.3(1)(g) CA 2011 but suffers from an initial impracticality
because ISUK ceased to exist before E died. The funds can be applied cy-près to a
similar purpose if she had a general charitable intention. Clause (b) is not charitable
but could be valid as an anomalous testamentary trust for the creation and
maintenance of a monument for a deceased person, while clause (c) is a gift to the
members of DISC (Hanchett, Re Lipiniski).
Poor answers to this question…
treated this as a general essay, missed the cy-près application and the question
about charitable intention, and did not recognise unincorporated associations.
Student extract
In the case of the second purpose, it is likely charitable under 3(1)(f) which is
for the advancement of the arts, culture, heritage or science. On the face of
the facts it is suggested that Jennifer Nicky was a great British figure, he [sic]
was an asset for the British people and for the next generation. As a result, to
preserve his memory if anyone can make a trust for the construction and
maintenance of a monument that purpose can become charitable under the
Charities Act. The next question then needs to find out whether it is for the
public benefit. In the case of Independent School Council, it was held that the
public benefit requirement is satisfied where there is a benefit for the public,
no detriment, serve the benefit over a wide section of the population and the

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 poor must not be deprived. Taking into account this principle to could be
argued that as a well-known figure people [sic] will be interested to know
about him. It will be more easy for them to find out about his activities if they
can visit a place where all the information would be gathered together…
Comments on extract
The candidate does not see the point at issue, which is that this is not a charitable
purpose under the case law and statute, but that it could be an anomalous purpose
trust for the construction and maintenance of monuments to the memory of deceased
persons (Musset). The candidate’s argument for public benefit, although well made
out, rests on shaky ground – it suggests that the purpose is educative (‘information
gathered’) but there is no indication that a statue would satisfy this anyway. The
answer was awarded a low-2:2.
Question 3
In McPhail v Doulton (1970), Lord Hodson (dissenting) said: ‘In my opinion a
mere power is a different animal from a trust and the test of certainty in the
case of trusts which stems from Morice v Bishop of Durham is valid and
should not readily yield to the test which is sufficient in the case of mere
powers.’
Discuss.
General remarks
This is an essay question about certainty of objects, which is discussed in Chapter 5
of the module guide and Chapter 7 of Penner.
Law cases, reports and other references the examiners would expect you to use
Re Baden’s Deed Trusts (No.2) [1973] Ch 9, Re Gestetner’s Settlement [1953] Ch
673, Re Gulbenkian’s Settlement Trusts [1968] 3 WLR 1127, IRC v Broadway
Cottages Trust [1955] Ch 20, McPhail v Doulton [1971] AC 424.
Common errors
These included omitting any discussion of powers and discussing the other
certainties at length.
A good answer to this question would…
discuss the requirements for certainty of object and compare discretionary trusts with
both powers of appointment and fixed trusts. It might mention the certainties of
intention and subject matter by way of introduction but should not dwell on them.
Poor answers to this question…
gave a general description of all three certainties.
Student extract
Certainty of subjects [sic] refers to the beneficiaries who are supposed to
benefit from the proceeds of the trust. This needs to be clear because trust
assets may reach the wrong hands. The description can’t be vague neither
can it be too broad. There must be little room for subjectivity in identifying
who is a potential beneficiary.
Comments on extract
The candidate confused object with subject matter but this was not the worst error.
This paragraph was all the candidate had to say about the issue, having given equally
slight weight to the other certainties, with no reference to the question, and no citation
of case law or any other authority. There was no mention of powers of appointment
or fixed trusts. The answer received a failing mark.

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Question 4
John was a security guard employed by Dooley Jewellers. Meg paid £50,000
to John and, in exchange, he allowed her to steal diamonds from Dooley
Jewellers’ secure storeroom late one night. Meg tied John up and knocked
him out to help him hide his involvement in the theft.
Dooley Jewellers paid £25,000 to John as a reward for his bravery in trying to
stop the theft. He used that money, plus the £50,000 he received from Meg, to
open an investment account for his daughter Noreen. Meg sold some of the
stolen diamonds for £1 million, which she used to buy a house in London for
her father Eugene.
Meg vanished without a trace. John became ill and confessed his involvement
in the theft just before he died. Dooley Jewellers seeks your legal advice. It
wants to claim Noreen’s investment account and Eugene’s house.
Advise Dooley Jewellers.
General remarks
This is a problem question about constructive trusts, which are discussed in Chapter
13 of the module guide and Chapters 4 and 12 of Penner.
Law cases, reports and other references the examiners would expect you to use
FHR European Ventures LLP v Cedar Capital Partners LLC [2015] UKSC 45,
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, Angove’s
Pty Ltd v Bailey [2016] UKSC 47.
Common errors
Common errors included treating this as a question on tracing.
A good answer to this question would…
discuss whether F is a fiduciary and whether the bribe is held on trust for DJ (FHR
European Ventures). It would consider whether the proceeds of theft are held on trust
(Westdeutsche, Angove’s).
Poor answers to this question…
would simply give the rules for constructive trust or tracing.
Question 5
In Blackwell v Blackwell (1929), Viscount Sumner said: ‘A testator cannot
reserve to himself a power of making future unwitnessed dispositions by
merely naming a trustee and leaving the purposes of the trust to be supplied
afterwards, nor can a legatee give testamentary validity to an unexecuted
codicil by accepting an indefinite trust, never communicated to him in the
testator’s lifetime… To hold otherwise would indeed be to enable the testator
to ‘give the go-by’ to the requirements of the Wills Act, because he did not
choose to comply with them. It is communication of the purpose to the
legatee, coupled with acquiescence or promise on his part, that removes the
matter from the provision of the Wills Act and brings it within the law of
trusts, as applied in this instance to trustees, who happen also to be
legatees.’
Discuss.
General remarks
This is an essay question on secret trusts, which are discussed in Chapter 14 of the
module guide and Chapter 6 of Penner.

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Law cases, reports and other references the examiners would expect you to use
Re Boyes (1884) Ch D 531, Blackwell v Blackwell [1929] AC 318, Re Gardner [1920]
2 Ch 523, Kasperbauer v Griffiths [2000] WTLR 333, Ottaway v Norman [1972] Ch
698, Re Young [1951] Ch 344, Wills Act 1837, s.9.
Common errors
These included not referring to the quotation and giving general rules on secret trusts.
A good answer to this question would…
discuss the theoretical basis of finding secret trusts, whether they are express,
constructive trusts or testamentary dispositions and the difference between the
‘dehors the will’ theory and ‘fraud’ theory, and whether they justify ignoring the
formalities. It also might ask whether fully secret trusts should be treated differently
from half-secret trusts.
Poor answers to this question…
did not refer to the quotation and instead gave the general rules on secret trusts.
Question 6
In El Ajou v Dollar Land Holdings plc (1993), Hoffmann LJ said: ‘This is a
claim to enforce a constructive trust on the basis of knowing receipt. For this
purpose the plaintiff must show, first, a disposal of his assets in breach of
fiduciary duty; secondly, the beneficial receipt by the defendant of assets
which are traceable as representing the assets of the plaintiff; and thirdly,
knowledge on the part of the defendant that the assets he received are
traceable to a breach of fiduciary duty.’
Discuss.
General remarks
This is an essay question about knowing receipt, which is discussed in Chapter 17 of
the module guide and Chapter 11 of Penner.
Law cases, reports and other references the examiners would expect you to use
El Ajou v Dollar Holdings plc [1994] EWCA Civ 4, BCCI v Akindele [2001] Ch 457,
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, Re
Montagu’s Settlements [1987] Ch 264, C. Mitchell and S. Watterson ‘Remedies for
knowing receipt’ in C. Mitchell (ed.) Constructive and resulting trusts (Hart, 2010) 115.
Common errors
These included not referring to the quotation or to the case from which it was taken
and offering a general disquisition on accessory liability.
A good answer to this question would…
discuss the nature of liability for knowing receipt and the degree of knowledge or
notice required. It might consider whether knowing receipt should extend beyond
breach of fiduciary duty and whether beneficial receipt should be required. It might
mention dishonest assistance but should not focus on that.
Poor answers to this question…
offered a general description of accessory liability.