PgDL & MA Law

EQUITY AND TRUSTS

SBAQ Assessment – Past Paper - Answers

QUESTION 1

Two trustees currently hold £200,000 on trust. They are considering how to invest
the trust fund.
Which of the following best describes the trustees’ position regarding
investment?

A. All trustees must take professional advice when they make trust investment
decisions.
B. The trustees cannot pay a professional advisor out of the trust fund.
C. All trustees are subject to the same duty of care when investing.
D. The trustees should not invest the whole of the trust fund in the shares of one
company.
E. Once they have made their investment decisions, the trustees do not have to
take any further action.

Option D is correct. Trustees have a duty to consider the standard investment

criteria – suitability and diversification (s4 TA 2000) when investing. Investing the
whole of the trust fund in the shares of one company would be a breach of this duty.
Option A is wrong - s5 TA 2000; allows trustees to dispense with obtaining
professional advice in circumstances where they reasonably conclude it is
unnecessary or inappropriate.

Option B is wrong – s32 TA 2000; allows trustees to pay reasonable expenses of

agents and s31 allows them to recover expenses from the trust fund.

Option C is wrong - s1 TA 2000; the standard applied to the duty of care required of
trustees when investing depends according to the special knowledge or skill a
particular trustee has, professes to have, or is expected to have as a professional
trustee acting in the course of business.

Option E is wrong - s4 TA 2000; trustees must from time to time review the trust
investments.

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QUESTION 2

A man wants to create a trust of some private company shares when he dies. He
wants his solicitor to hold the shares on trust for his granddaughter.

Which of the following best describes what steps the man must take?

A. The man only needs to declare the trust orally.

B. The man must declare the trust in writing and transfer the shares to the
solicitor.

C. The man must transfer the shares to the granddaughter.

D. The man must declare the trust and include it in his validly executed will.

E. The man must transfer the shares to the solicitor.

Option D is correct. As the man intended his trust only to be effective on his death,
the man needs to validly declare the trust and then ensure that it is included in his
will which is validly executed in accordance with s 9 Wills Act 1837.

Option A is wrong - any trust with 3rd party trustees requires a valid declaration and
the transfer of the legal title to the trust property to the trustees.

Options B, C and E are wrong as all relate in some way to the creation of lifetime
trusts which was not intended here. [Additionally, in Option B, a lifetime declaration
of trust of shares does not need to be in writing (although it is good practice to do
so); in Option C, a settlor would not transfer the trust property direct to the intended
beneficiary (this would defeat the trust and be an outright gift); and in Option E, a
declaration of trust would also be required for a valid lifetime trust.

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QUESTION 3

By a valid will, a man created a trust “for my wife for life, remainder to my son.” The
man has died survived by his wife and his son (who is 15 years of age). The will did
not amend the statutory powers.

Which of the following best describes the trustees’ powers in relation to the
trust?

A. The trustees have the power to pay trust capital to the wife.

B. The trustees have the power to apply trust capital for the advancement or
benefit of the son.

C. The trustees have the power to apply the trust income for the maintenance,
education and benefit of the son.

D. The trustees have the power to apply trust income and capital for the
advancement and benefit of the son.

E. The trustees have the power to apply trust capital for the advancement and
benefit of the son but only with the mother’s consent.

Option E is correct. The trustees do have a power to apply trust capital for the
advancement or benefit of the son (s32 TA 1925), but they can only exercise this
power with the written consent of any person with a prior interest. Here, the wife, as
life tenant, has a prior interest (so Option B is not the best answer).

Option A is wrong- as the life tenant, the wife’s interest is limited to the trust income.
The trustees have no power to pay trust capital to her.

Option C is wrong- while the wife is alive, the son does not have an interest in the
income so income cannot be applied on his behalf (so Option D is also wrong).

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QUESTION 4

A journalist and a photographer are trustees of a family trust. The journalist wishes to
retire from the trusteeship. The trust instrument does not amend the operation of any
relevant statutory provisions.

Which of the following best describes the journalist’s position?

A. The journalist will have to apply to court in order to retire.

B. The journalist can retire provided the photographer agrees to appoint a

replacement.

C. The journalist can only retire with the beneficiaries’ agreement.

D. The journalist can retire provided the photographer agrees to remain as sole
trustee.

E. The journalist can retire at any time and will cease to be liable for any
breaches committed while they were a trustee.

Option B is correct. In the absence of any provisions in the trust instrument relating
to the appointment/replacement/retirement of trustees, the Trustee Act 1925 applies.
A trustee who wishes to retire, can only do so if two or more trustees remain (s39) –
so Option D is wrong. Under s36(1), a trustee who wishes to retire can do so
provided the continuing trustee appoints a replacement.

Option A is wrong- making an application to the court under s.41 TA 1925 not the
only way in which a trustee is able to retire.

Option C is wrong- trustees are able to retire without the agreement of beneficiaries.
S19 of TLATA gives the beneficiaries a power to require a trustee to retire and be
replaced; not a power to prevent a trustee retiring.

Option E is wrong- trustee remains liable for all the breaches which they committed
while a trustee.

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QUESTION 5

Which of the following gives rise to the presumption of a resulting trust?

A. A mother transfers her holiday cottage to her son.

B. A father provides the deposit for his daughter’s purchase of her new flat.

C. A woman transfers shares to her husband.

D. The groom opens a bank account in the name of his bride the day before their
wedding takes place.

E. A man purchases shares in the name of his wife.

Option C is correct. The presumption of advancement does not apply to voluntary

transfers from a wife to her husband. In the absence of evidence of actual intention,
it will be presumed that the wife intended to create a trust and the husband holds the
shares on trust for her.

Option A is wrong; s60(3) of the Law of Property Act 1925 says that where a
voluntary transfer of land occurs, the presumption of resulting trust will not apply.

Options B, D and E are wrong; the presumption of advancement will apply – father to
child, fiancé to fiancée, husband to wife.

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QUESTION 6

A man told his daughter, “I want you to hold my shares in Company Ltd on trust for
your two children.” The man handed his daughter his share certificate. That evening
the man completed and signed a stock transfer form in the daughter’s favour and
placed it on his desk. The following day, the man changed his mind and now wants
his shares back.

Will the man be able to recover the shares?

A. No, because as the daughter has the share certificate, she is the legal owner
of the shares.

B. No, because the trust is effective in equity as the man has satisfied the every
effort test.

C. No, because he has made a valid declaration of trust.

D. Yes, because the trust was not effective in law or in equity.

E. Yes, because the Rule in Strong v Bird allows him to change his mind.

Option D is correct. A valid lifetime trust with 3 rd party trustees as here (the daughter)
requires both a valid declaration and the transfer of the legal title to the trust property
to the trustee (so Option C is wrong). Is a valid declaration, but the man has not
correctly transferred the legal title in the shares to his daughter – the executed stock
transfer form, with the share certificate, should have been sent to the company for
registration. Legal title does not pass until this registration has occurred, so the trust
is not legally valid (so Option A is wrong). Also, not valid in equity as exceptions not
applicable here.

Option B is wrong- the man has not satisfied the every effort test as he has not put
the required documentation beyond his control

Option E is wrong- the rule in Strong v Bird is not relevant here as the man has not
died and in any event would not operate to save a failed lifetime trust if the settlor
evidenced a change of mind.

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QUESTION 7

Trustees are holding a trust fund of £200,000 on trust for two children, if they should
attain the age of 25. The boy is currently 18 years of age; the girl is 16 years of age.
The trust instrument does not alter the trustees’ statutory powers. The boy has asked
the trustees to give him trust capital for his university fees.

Which of the following best describes the trustees’ position in light of this
request?

A. The trustees must give trust capital to the boy as the request is for his
advancement and benefit.

B. The trustees will have to deduct any advancement they make now from the
share the boy receives when he attains the age of 25.

C. The trustees may make an advancement to the boy provided the girl
consents.

D. The trustees cannot make any advancement to the boy as he is not 25 years
of age.

E. The trustees cannot make any advancement to the boy as the girl is too
young to give her consent.

Option B is correct. S32 TA 1925 gives a power to advance capital to any beneficiary
who has an interest in the trust capital, even those with a contingent interest (so
Option E is wrong). However, s32(1)(b) also states that any money applied is to be
brought into account when the beneficiary becomes absolutely entitled.

Option A is wrong - s32 TA 1925 is a power; the trustees have a discretion as to

whether to make the advancement or not.

Options C and E are wrong - s32 TA 1925 only requires the consent of a beneficiary
with a prior interest. The girl does not have a prior interest, so her consent is not
required (her age is irrelevant).

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QUESTION 8

Last month, a mother died. In her will, she gave all her property “on trust for my
children as attain the age of 21, and if more than one in equal shares”. The mother’s
three children survived her – she has a son who is 22 years of age and two
daughters who are 18 and 14 years of age respectively.

Which of the following best describes the interests of the children?

A. All the children have vested interests.

B. The son has a vested interest and the daughters’ interests are contingent.

C. The two daughters cannot receive any trust capital until they attain the age of
21.

D. The son and the oldest daughter have vested interests.

E. The children could bring the trust to an end and divide the capital between
them.

Option B is correct. The son has reached the contingency age detailed in the original
trust; his interest has therefore vested. The two daughters have yet to attain the age
of 21; their interests remain contingent (so Options A and D are wrong).

Option C is wrong- the PRs/Trustees could make an advancement of trust capital to

either daughter under s32 TA 1925 despite their contingent interests.

Option E is wrong - three children are together absolutely entitled to the trust fund,
but one of them is under 18 so the rule in Saunders v Vautier cannot be used.

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QUESTION 9

A mother has died. Her valid will contained the following provision:

“I give all my estate to my Trustees to hold on trust for my daughter for life”.

The daughter was alive when the mother died.

Which of the following best describes the position of the trust?

A. On the daughter’s death, there will be a resulting trust.

B. On the daughter’s death, the trust will pass to the daughter’s estate.
C. The attempted trust is void.
D. The daughter is entitled to trust capital and income now.
E. On the daughter’s death, a constructive trust will arise.

Option A is correct. Will does not provide for what should happen to the trust fund
when the daughter dies. As there is a gap in the beneficial ownership. trust fund will
revert back to the mother’s estate by way of an implied resulting trust and will pass
under the mother’s intestacy (so Options B and E are wrong).

Option C is wrong- trust was validly declared and was contained in a valid will. The
daughter’s interest arose on her mother’s death, and she will be entitled to the
income from the invested estate.

Option D is wrong- daughter’s interest is for her life only; she has a limited
entitlement to income only.

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QUESTION 10

A company director has wrongly taken sums amounting to £25,000 from the
company’s bank account. £20,000 was paid by the director to their girlfriend. She
was surprised to receive such a large amount of money but did not ask any
questions. She used the money to pay off her debts. £5,000 was given by the
director to their brother as a birthday gift. The brother used the money to purchase a
luxury yacht and believed that the money was from the director’s company bonus.

Which of the following best describes the company’s position?

A. The company should bring a proprietary action against the girlfriend to

recover the money.

B. The company should bring a personal action against the brother to recover
the money.

C. The company cannot bring a proprietary action against the director.

D. The company is likely to succeed in a personal action against the girlfriend

and the brother.

E. The company cannot bring any action against the brother as he is an innocent
volunteer.

Option C is correct. Director has breached duty to the company. However, they no
longer retain any of the money they have misappropriated. There is no asset to
which a proprietary action can attach.

Option A is wrong - the girlfriend has dissipated her receipt of company money.

Option B is wrong - the brother has received property subject to a fiduciary duty, but
his lack of knowledge as to the provenance of the money is likely to mean that a
recipient liability claim would be unsuccessful. (So, Option D is wrong for the same
reason, although a personal action against the girlfriend might succeed.)

Option E is wrong - the brother as an innocent volunteer does not preclude the
company from bring a proprietary action against him to cover the company’s money,
or an asset which represents is (i.e., the yacht).

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QUESTION 11

During her lifetime, a woman decides to give her cottage in Dorset to her daughter
but only on reaching the age of 30. Her daughter is currently 14 years old. During a
telephone call, she asks her sister to look after the cottage in Dorset for her daughter
until she attains the age of 30 at which point the sister is to transfer the cottage to the
woman’s daughter. The sister agrees to hold the cottage in this way. Immediately
after the conversation, the woman writes to a solicitor explaining that from now on
her sister is holding the cottage on trust for her daughter.

Has the trust been validly declared?

A. Yes, because the woman has identified the person who will benefit with
sufficient certainty.

B. Yes, because the woman has communicated the terms of the trust to her
sister.

C. No, because the woman did not specify the address of the cottage.

D. No, because the woman did not use the word ‘trust’ when speaking to her
sister.

E. No, because the woman has not set out all the terms of the trust in the letter
to the solicitor.

Option E is correct. attempting to create a trust over land (the cottage); must comply
with s. 53 (1)(b) LPA 1925. - declaration of trust must be evidenced in signed writing.
The letter to the solicitor does not satisfy this formality as it does not record all the
salient terms of the trust, i.e. it does not identify that the daughter’s interest is
contingent on attaining the age of 30.

Option A is wrong - describing the beneficiary with certainty is only one aspect of
requirements for a valid declaration of trust.

Option B is wrong - s53 (1)(b) LPA means that an oral conversation (despite setting
out all the key terms) is insufficient to amount to a valid declaration.

Option C is wrong - nothing to suggest that the woman has more than one cottage in
Dorset, therefore, objectively, we can identify the subject matter of the trust.

Option D is wrong - the word “trust” not required, because it is clear from the wording
(“to look after/to transfer”) that a trust was intended.

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QUESTION 12

Two trustees hold a trust fund on discretionary trust for the settlor’s minor children.
The trust instrument does not vary the trustees’ statutory duties or powers and does
not contain a charging clause. One trustee is an accountant who advises on the
financial and taxation aspects of trust administration. The other trustee is a
professional chef. They are considering various matters on trust administration and
investment, including whether to follow an ethical investment policy, whether the
trust can acquire a commercial property, and whether they can delegate their
powers.

Which of the following best describes the position in relation to the

administration of this trust?

A. The accountant and the chef will each be expected to exercise the same
standard of care when they make decisions about the investment of the trust
fund.

B. The accountant and the chef could not breach their duties to the trust if they
decided to invest the trust fund in ethical investments only.

C. The accountant can be paid reasonable remuneration from the trust fund but
only with the chef’s written consent.

D. The trustees can delegate their investment duties to an investment advisor

but will remain vicariously liable to the trust for that advisor’s negligence.

E. The trustees can acquire commercial property with money from the trust fund,
but only if that property is to be occupied by a beneficiary or a beneficiary’s
company.

Option C is correct. Ss 28 and 29 TA 2000; as a trustee acting in a professional

capacity, the accountant will be entitled to reasonable remuneration agreed to by the
chef.

Option A is wrong - s1 TA 2000; a trustee, such as the accountant, who acts as a

trustee in the course of a business or profession with expected special knowledge or
experience, will be judged to a higher standard than the chef.

Option B is wrong – Cowan v Scargill; trustees are expected to invest in the best
interests of the trust, which is the best financial interests of the trust; pursuing an
ethical investment policy without authorisation or without consideration of the
financial yields from such a strategy could be in breach of trust.

Option D is wrong - s23 TA 2000; trustees not liable for the defaults of the advisor,
unless the trustees themselves had failed to comply with their duties in relation to the
appointment and review of this, of that advisor.

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Option E is wrong - s8 TA 2000, acquisition of property in the UK is an authorised

investment for the purposes of investment, or occupation by a beneficiary or any
other reason.

QUESTION 13
A trustee steals money from the trust and adds this to their personal funds and buys
a motorbike.
Can the beneficiaries pursue a claim in respect of the motorbike?

A. Yes, the beneficiaries could bring a proprietary claim asserting a proportionate

share of the motorbike.
B. Yes, the beneficiaries can claim to be the owner of the motorbike as it is a
depreciating asset.
C. No, the beneficiaries cannot bring a claim because they are not the legal
owner. Only a co-trustee can bring a proprietary claim.
D. No, the beneficiaries cannot claim a proprietary remedy because the trust
money is no longer identifiable due to mixing.
E. No, the beneficiaries must bring a personal action against the trustee.

Option A is the best answer. Foskett v McKeown allows the beneficiaries to claim a
proportionate share of the motorbike being a mixed asset.
Option B is wrong - just because the motorbike is depreciating in value does not
mean that the motorbike would belong to the beneficiaries. Instead, the beneficiaries
would have a claim to a lien over the property to secure an amount equivalent to the
stolen trust money.
Option C is wrong - beneficiaries can pursue an equitable proprietary claim.
Option D is wrong - equitable tracing can be used against a mixed fund or asset.
Option E is wrong - the beneficiaries have a choice of either a personal or a
proprietary action.

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QUESTION 14

In his will a man leaves his residuary estate on trust for his wife for life, remainder to
such of his children who attain the age of 25. On his death, he is survived by his
wife and two sons who are 24 and 28 years of age.

Which of the following best describes the beneficial interests in the trust fund?

A. The wife has a vested interest in the trust income, the eldest son has a vested
interest in the trust capital and the youngest son has a contingent interest in
remainder.

B. The wife and eldest son have a vested interest in the trust fund and the
youngest son has a contingent interest in remainder.

C. The wife and both sons have a vested interest in the trust fund.

D. The wife and youngest son have contingent interests in the trust capital and
the eldest son has a vested interested in the trust capital.

E. The wife has a vested interest in the trust income and both sons have
contingent interests in the trust capital as their entitlement is contingent on
them surviving the wife.

Option A is correct. The wife as the life tenant has a vested or immediate interest in
the income. The eldest son has a vested interest in the trust capital as he has
satisfied the contingency. The youngest son has not yet attained the age of 25; his
interest is contingent.

Option B is wrong - wife does not have an interest in the capital of the trust fund; as
life tenant, she only has an interest in the income. This option does not separate the
income and capital entitlement of the trust fund.

Option C is wrong - youngest son has not yet satisfied the contingency.

Option D is wrong - wife as life tenant does not have any interest in the capital.

Option E is wrong - terms of the trust do not dictate that the sons have to survive the
wife to take a vested interest in the trust capital.

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QUESTION 15

A will contains the following provision:

“I give the sum of £50,000 to my trustees to provide photography classes over the
next ten years for the children of the employees of my late father’s company.”

Does the provision create a valid trust?

A. No, because the purpose does not have a public benefit.

B. No, because the trust is not going to last for 21 years.

C. No, because the beneficiaries are not described with certainty.

D. Yes, because the purpose is charitable.

E. Yes, because the purpose brings a tangible benefit to an identifiable group of

people.

Option E is correct. The children of the employees of the company would receive a
sufficiently tangible benefit for the purpose to enforce the trust (Re Denley). Given
that certainty and perpetuities are also not going to be an issue, the trust would be
valid as a non-charitable purpose trust.

Option A is wrong - while the trust would not be valid as a charitable purpose trust
due to the lack of public benefit (because of the personal nexus, Oppenheim v
Tobacco Securities), it would be valid as a non-charitable purpose trust under Re
Denley (see option E).

Option B is wrong - the perpetuity rule relating to purpose trusts and the inalienability
of capital indicates that the trust capital must be spent on a once and for all project or
within 21 years (not that it must last for 21 years). Here the trust is limited to a 10-
year period.

Option C is wrong - both children and employees are both conceptually certain to
satisfy the given postulant test.

Option D is wrong - while the provision of photography classes would be a charitable

purpose within s 3 Charities Act 2011 (education or arts/culture), the purpose will not
be valid as a charitable purpose due to the lack of public benefit.

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QUESTION 16

For the last 10 years, the man has been living with the girlfriend in a house which is
registered in the girlfriend’s sole name. Before the man moved into the house, the
girlfriend said to him, “I would love you to live with me” and that she thought they
should get married. The man consequently gave up a good job in London and
moved to the country to be with the girlfriend. He was unemployed for a while but did
manage to get a less well-paid job eventually. Since then, he has paid one mortgage
payment when the girlfriend was made redundant and he has also paid most of the
household bills, so the girlfriend could afford the mortgage.

The man and girlfriend have just broken up. The girlfriend is about to sell the house.

Which of the following best describes whether the man might be able to claim
a share of the sale proceeds?

A. The man’s payment of the household expenses and one mortgage payment
may be sufficient to demonstrate an implied common intention to share
ownership of the house.

B. The man will be able to show that the girlfriend holds the house on a resulting
trust for herself and the man.

C. The oral statement by the girlfriend at the time the man moved in will
demonstrate express common intention to share ownership of the house.

D. The oral statement by the girlfriend at the time the man moved will act as a
valid declaration of express trust by the woman over the house.

E. The man has not suffered any detriment, so cannot claim under a common
intention constructive trust.

Option A is correct. Although in Lloyds Bank v Rossett it was indicated that only a
direct contribution to the purchase price (including making significant payments of
the mortgage, which is not the case here) would be sufficient to demonstrate implied
common intention, later cases such as Le Foe v Le Foe suggest that payment of
household expenses which enable the legal owner to pay the mortgage may be
sufficient to indicate a common intention.

Option B is wrong - the man did not make a direct contribution to the purchase price
of the house being the requirement for establishing a resulting trust.
Option C is wrong - not the best answer as the woman’s statement ‘I would love you
to live with me’ is unlikely to be sufficient to demonstrate an express common
intention to share ownership of the house. It does not refer to ownership at all.

Option D is wrong - valid declaration of an express trust over land must be

evidenced in signed writing (s53(1)(b) LPA 1925).

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Option E is wrong - not the best answer as the man will probably be able to show
that he has suffered a detriment by paying household expenses in order to allow the
girlfriend to pay the mortgage (and giving up a good job).

QUESTION 17

There are two trustees of a family trust. One trustee, a teacher, has been abroad for
nine months and has left the running of the trust to the other trustee, an architect.
The architect stole £15,000 from the trust’s bank account and deposited this into
their own bank account which already contained a balance of £8,000. The architect
then used £10,000 from this account to purchase shares in a plc company, now
worth £20,000. The architect then paid £8,000 to their son to celebrate the son’s
graduation from university. The son used the money to travel to the Far East. The
remaining balance of £5,000 was used to pay the architect’s credit card bills.
Which of the following best describes the position as to remedies available to
the beneficiaries to recover their loss?

A. The beneficiaries will not be able to bring a claim against the teacher because
the teacher is not vicariously liable for the actions of the architect.

B. The beneficiaries will be able to bring an equitable proprietary claim against

the son because he has received trust money for his own benefit.

C. The beneficiaries will not be able to recover at least £5,000 of the stolen
money because this amount has been used to pay the architect’s credit card
bills and has been dissipated.

D. The beneficiaries may be able to claim to recover their loss in full from the plc
shares.

E. The beneficiaries may be able to bring a claim against the teacher for breach
of trust but will only be able to bring a claim to recover half of their loss as
trustees are joint tenants.

Option D is the best available remedy. Using Re Oatway, the beneficiaries should be
able to exert their proprietary rights to claim that the trust’s money had been used in
full to purchase the shares (£10,000), and these have increased in value.

Option A is wrong - (Styles v Guy); there is no vicarious liability, but teacher may
have breached the trustee’s duty to watch over, and if necessary correct the conduct
of co-trustees as well as a secure the trust property If this breach enabled architect
to steal the money, the beneficiaries could claim against the teacher to recover their
loss.

Option B is wrong - no equitable proprietary claim is available against the son as he

has dissipated the trust money received.

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Option C is wrong - using the presumption in Re Hallet (the architect spent own
money first, contributing £8,000 to the purchase of the shares) would result in the
trust’s money being dissipated on the payment of the credit card bills. However, Re
Oatway disapplies presumption - the payment of the credit card bills is attributed to
some of the architect’s money already in the account. The beneficiaries should be
able to recover all the stolen money bringing a proprietary claim against the
architect..

Option E is wrong – if both the architect and the teacher are held to be in breach in
some way for the loss of the £10,000, they are jointly and severally liable to the
beneficiaries, and so the teacher could be sued by the beneficiaries for the entire
loss.

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QUESTION 18

A man said to his eldest son, “I want you to hold my watch on trust for my grandson”
and told him to collect it from his house. Three weeks later, the eldest son had still
not collected the watch so the man told his youngest son that he could have it
provided he collected it in the next two weeks. His youngest son did not collect the
watch and two months later the man died. In his valid will which he created five years
before his death, the man appointed his eldest son as executor and left everything to
his wife.

Does the eldest son hold the watch as trustee?

A. Yes, because the eldest son became the executor of the man’s estate which
sufficiently constitutes the trust.
B. Yes, because the man intended to create an immediate trust with his eldest
son acting as trustee.
C. No, the watch will pass under the man’s will to his wife as his intention to
create the trust did not continue until his death.
D. No, because the attempted trust was not constituted due to lack of delivery of
the watch and Equity will never assist a volunteer.
E. No, because the terms of his will negates the original attempted trust.

Option C is best correct answer, as it identifies how the watch will pass and why the
rule in Strong v Bird does not help in this case, which is because the man’s intention
to create a trust did not continue up to his death.
Option A is wrong - Strong v Bird; not enough for the intended trustee to be the
executor of the settlor’s estate. The four conditions from Strong v Bird will not be
satisfied because the man subsequently attempted to gift the watch to his younger
son; his intention to create a trust did not continue up to his death.
Option B is wrong – intention to create the trust not enough; needs valid constitution
which did not occur here either in law or in equity as Strong v Bird not satisfied.
Option D is wrong - had the watch been delivered to the eldest son, this would have
constituted the trust and it would be a valid trust. However, there are exceptions to
the maxim ‘equity will not assist a volunteer’. As a result, this answer oversimplifies
the principles behind constitution of a trust and does not demonstrate an
understanding of the exceptions to the rule, such as Strong v Bird.
Option E is wrong - will was created before the attempted trust and therefore does
not negate his intention to create the trust.

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QUESTION 19

A trustee stole £30,000 from the trust’s bank account over a period of time and then
disappeared. The trustee’s brother was employed as the trust’s accountant; he says
that he knew about the thefts but did not notify the co-trustee because he thought
nobody would notice and that his brother would get away with it. The thefts occurred
while the co-trustee was on a three-month cruise.
Which of the following best describes the action the beneficiaries should to
take?

A. Bring an action against the co-trustee for accessory liability.

B. Bring an action against the accountant for recipient liability.
C. Bring an action against the accountant for accessory liability.
D. Bring an action against the trustee who stole the £30,000.
E. Bring a proprietary action against the co-trustee and the accountant.

Option C is correct. The accountant may well be liable as an accessory because he

assisted the breach and was dishonest (he did not act as an honest accountant
would have acted).

Option A is wrong - although the beneficiaries could sue the co-trustee, it would be
for a passive breach of trust but not for accessory liability which is an action against
strangers to the trust.

Option B is wrong - accountant did not receive any trust property which is a requisite
for recipient liability.

Option D is wrong - the beneficiaries will be unable to sue the trustee who stole the
money if they cannot find him.

Option E is wrong - the co-trustee and the accountant did not receive trust property
which could be the subject of a proprietary action.

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QUESTION 20
By a valid will, a testator created a trust “for my wife for life, remainder to my
daughter and my son”. The testator died three years ago, survived by his wife,
daughter (now aged 19) and son (now aged 16). The will does not amend the
trustees’ statutory duties or powers in any way. All three beneficiaries would like
some capital from the trust.

Which one of the following best describes the trustees’ powers in relation to
the advancement of capital from the trust?

A. The trustees must advance the wife capital from the trust fund if she demands
it as she is over 18.
B. The trustees have no power to advance capital to the son as he is under 18
years of age.
C. The trustees have the power to advance all the trust capital to the daughter as
she is over 18 years age.
D. The trustees have the power to advance trust capital to the daughter and the
son but only if the wife agrees in writing.
E. The trustees have the power to advance trust capital to the son but only if the
wife and the daughter agree in writing.

Option D is correct. The trustees’ power to advance (pay) capital to beneficiaries

arises in S.32 TA 1925. Any advancement made under s.32 can only be made with
the written consent of any adult with a prior interest. As the wife is the life tenant, she
has a prior interest.
Option A is wrong - capital can only be advanced to beneficiaries with an interest in
the capital. As the life tenant, the wife only has an interest in the income earned from
the investment of that capital. She could only receive capital if the will varied the
application of s.32 which it does not.
Option B is wrong - capital can be advanced under s.32 to beneficiaries with an
interest in capital regardless of their age.
Option C is wrong - any advancement of capital to the daughter is limited (as a result
of the amendments to s.32 by the Inheritance and Trustees Powers Act 2014) to only
the whole of her presumptive share (i.e. a half of the trust fund, not the whole of the
trust fund).

Option E is wrong - although the daughter is older, she does not have a prior interest
to the son and so her consent is not required to any payment of capital to the son.

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