THE CHARTERED INSTITUTE OF LEGAL EXECUTIVES UNIT 5 EQUITY AND TRUSTS *

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1 10 June 2014 Level 6 EQUITY AND TRUSTS Subject Code L6-5 THE CHARTERED INSTITUTE OF LEGAL EXECUTIVES UNIT 5 EQUITY AND TRUSTS * Time allowed: 3 hours plus 15 minutes reading time Instructions to Candidates You have FIFTEEN minutes to read through this question paper before the start of the examination. It is strongly recommended that you use the reading time to read the question paper fully. However, you may make notes on the question paper or in your answer booklet during this time, if you wish. All questions carry 25 marks. Answer FOUR only of the following EIGHT questions. The question paper is divided into TWO sections. You MUST answer at least ONE question from Section A and at least ONE question from Section B. Write in full sentences a yes or no answer will earn no marks. Candidates may use in the examination their own unmarked copy of the designated statute book: Blackstone s Statutes on Property Law , Meryl Thomas, Oxford University Press, August Candidates must comply with the CILEx Examination Regulations. Full reasoning must be shown in answers. Statutory authorities, decided cases and examples should be used where appropriate. Information for Candidates The mark allocation for each question and part question is given and you are advised to take this into account in planning your work. Write in blue or black ink or ballpoint pen. Attention should be paid to clear, neat handwriting and tidy alterations. Complete all rough work in your answer booklet. Cross through any work you do not want marked. Do not turn over this page until instructed by the Invigilator. * This unit is a component of the following CILEx qualifications: LEVEL 6 CERTIFICATE IN LAW, LEVEL 6 PROFESSIONAL HIGHER DIPLOMA IN LAW AND PRACTICE and the LEVEL 6 DIPLOMA IN LEGAL PRACTICE Page 1 of 8

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3 SECTION A (Answer at least one question from this section) 1. Explain and critically evaluate the various ways in which the courts decide upon the validity of gifts to and trusts for non-charitable unincorporated associations. 2. I think that the time has come to accept that there is no difference in outcome, in cases of this nature [regarding the family home], whether the true analysis lies in constructive trust or in proprietary estoppel. per Chadwick LJ Oxley v Hiscock (2004). Critically analyse, in the light of the above statement, the similarities and differences between common intention constructive trusts and proprietary estoppel in the context of cohabitees claiming an interest in the family home. 3. (a) The investment duties which the law imposes on trustees must not be so strict that people are discouraged from accepting the role. On the other hand, the interests of the beneficiaries must be protected. Critically evaluate, in the light of the above statement, whether and, if so, how, trustees investment powers and duties protect beneficiaries while ensuring that the standards demanded of trustees are not too onerous. (20 marks) (b) Critically evaluate the extent to which trustees can take ethical considerations into account when deciding how to invest a trust fund. (5 marks) (Total: 25 marks) 4. Specific performance will not be awarded where it is not the most appropriate remedy, and this may follow from the discretionary nature of the remedy. Todd and Wilson, Textbook on Trusts, Companion Materials OUP website Critically evaluate and illustrate this statement with reference to decided cases. Page 3 of 8 Turn over

4 SECTION B (Answer at least one question from this section) Question 1 Three years ago, Aziz died. In his valid will he left his residuary estate to Jaya and Kamal to hold on trust for Aziz s widow, Bijal, for life remainder to their children. The following events have just come to light: In January, Kamal took 50,000 from the trust and paid it into his bank account, which already contained 20,000 of his own money. He withdrew 40,000 to buy shares in Adco Ltd. The shares are now worth 55,000. Then he withdrew 20,000 to fund his lavish 40 th birthday party. He bought a speedboat with the balance of 10,000. The speedboat is now worth 6,000. In February, Kamal took a further 30,000 from the trust to buy a diamond ring for his wife, Rachel. Rachel wondered how Kamal had found the money to pay for such an extravagant gift but decided not to ask any questions, as she had always wanted a diamond ring. While on holiday, Rachel lost the ring and it was not insured. Finally, Kamal stole a further 40,000 from the trust. Kamal s son, Shay, an accountant, helped to disguise the origins of the money by passing it through various different bank accounts. The money ended up in an account in Kamal s name in Monte Carlo but Kamal lost it all at the casino. Kamal has been declared bankrupt. Jaya says that she is not to blame for the trust s losses. She admits that she transferred the trust bank account into Kamal s sole name but says that she did this in order to speed up trust business and not to make it easier for Kamal to steal money from the trust. Advise the beneficiaries what actions they can bring in order to recover funds for the trust. Page 4 of 8

5 Question 2 Elsa died yesterday. Her valid will, which was made last month, appoints Rosemary as her executrix and gives her whole estate to a charity. The following events happened last March: Elsa handed her share certificate for her 10,000 shares in Barco Ltd to her granddaughter, Anna (aged 21), saying I am giving you these shares now instead of leaving you something in my will. The shares are still registered in Elsa s name. Elsa telephoned her daughter, Francesca, saying I would like Katie to have my cottage in the Lake District when she is 21 as I know how much she loves it. I want you to hold it on trust for her in the meantime so I am transferring it to you now. Katie is Francesca s 10 year old daughter. Later that day, Elsa signed a transfer deed and posted it to Francesca. The cottage is still registered in Elsa s name. Elsa was the beneficiary of a trust in which the trustees held the trust fund on trust for Gabrielle for life remainder to Elsa. After Gabrielle s death, Elsa had a meeting with the trustees at which she told them that she did not need the trust property; she instructed them to hold it instead on trust for her grandson, Joseph. Explain who is entitled to: (a) the 10,000 shares in Barco Ltd; (b) the cottage in the Lake District; and (10 marks) (10 marks) (c) Elsa s interest in the trust fund. (5 marks) (Total: 25 marks) Page 5 of 8 Turn over

6 Question 3 Robin died recently as a result of a car accident. He left a valid will which was witnessed by his friends, Sam and Tom. The will appointed Robin s sister, Vivien, to be his executrix and trustee and contained the following clauses: Clause 1: I give 40,000 to my Trustee to hold on trust for such of my relations who are in need and most deserving of financial help, in such shares as my Trustee thinks fit. Clause 2: I give 20,000 to the Bowton Hospice for its good work. Clause 3: I give the residue of my estate to Vivien on the trusts I have communicated to her. Before executing his will, Robin handed a sealed envelope to Vivien marked, Not to be opened until after my death. Vivien understood that it contained instructions to her to deal with Robin s property in some way after he had died, but knew no further details. After Robin s death, Vivien opened the envelope and found a letter addressed to her, signed by Robin, directing her to hold any gift which I leave to you in my will for Tom s benefit. The Bowton Hospice was a charitable company which closed down a month before Robin died. Advise Vivien who is entitled to Robin s estate. Page 6 of 8

7 Question 4 Clyde died two years ago. His valid will appointed his sisters, Annie and Sarah, to be his trustees and gave his entire estate to be held on trust for his son, Winston, for life, remainder to Grace and Joel. The will contained no administrative powers for the trustees. Grace and Joel are Winston s children and are now aged 21 and 14 respectively. Winston wants some capital from the trust to help with his family s finances. Sarah is willing to help him but Annie thinks that this would conflict with Clyde s wishes (which were to protect the trust property against Winston s extravagance). Winston says that if the trustees will not help him, he will end the trust and divide the capital between the three beneficiaries equally. Winston also wants the trustees to sell a holiday cottage in Wales which is part of the trust property because the beneficiaries never use it. Annie would like to buy the cottage and is willing to pay the full market price. Annie wants advice on whether she can remove Sarah and appoint someone else to be a trustee because Sarah has been absent on an extended holiday in Jamaica for six months. Annie would like to retire from the trust when she feels that there are responsible trustees running it. Advise Annie: (a) whether Winston (or his children) can obtain trust capital by insisting on a payment from the trustees or by ending the trust and, if so, how; (13 marks) (b) whether Annie can buy the cottage, and any precautions she should take to ensure the purchase is valid; and (5 marks) (c) whether Annie can replace Sarah, then retire, and, if so, the procedures she would have to follow. (7 marks) (Total: 25 marks) End of Examination Paper 2014 The Chartered Institute of Legal Executives Page 7 of 8

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