EQUITY & TRUSTS TUTORIAL EXERCISES

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 TUTORIAL 1

PART A: BASIC PRINCIPLES: THE NATURE OF EQUITY AND EQUITABLE REMEDIES

Question:

Consider the accuracy and helpfulness of the statements about the nature of equity. You
may find it useful to refer to cases you have studied in the land law and contract module
that involve equitable doctrines such as constructive trusts and promissory estoppel.

Equity is to do what is fair.

Equity describes a particular body of law, consisting of rights and remedies, which
evolved historically through the Courts of Chancery. (Pearce & Stevens, The Law
of Trusts and Equitable Obligations)

Equity is the means by which a system of law balances out the need for certainty in
rule making on the one hand, with the need for sufficient judicial discretion to
achieve fairness in individual factual circumstances on the other. (Alastair Hudson,
Equity & Trusts)

[E]quity is just, but not what is legally just: it is the rectification of legal justice the
explanation of this is that all law is universal, and there are some things about which
it is not possible to pronounce rightly in general terms; therefore in cases where it is
necessary to make a general pronouncement, but impossible to do so rightly, the
law takes account of the majority of cases, though not aware that in this way errors
are made so when the law states a general rule, and a case arises under this
that is exceptional, then it is right, where the legislator owing to the generality of his
language has erred in not covering that case, to correct the omission by a ruling
such as the legislator himself would have given if he had been present there, and
as he would have enacted if he had been aware of the circumstances. (Aristotle,
The Nichomachean Ethics)

If a claim in equity exists, It must be shown to have an ancestry founded in history

and in the practice and precedents of the courts administering equity jurisdiction. It
is not sufficient that because we may think that the justice of the present case
requires it, we should invent such a jurisdiction for the first time. (Re Diplock
(1948))

PART B : CERTAINTY OF INTENTION AND SUBJECT MATTER

Question 1

Felipe and Maria live together, although they are not married because Felipe has not been
able to get a divorce from his first wife, Sara. They both left school young, and they find
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reading and writing difficult. English is not their first language. Felipe has a bank account,
but Maria does not. Felipe won a prize of 5000 in an instant lottery. He and Maria were
very excited. They talked about what they would do. Felipe said, We can afford to have a
holiday now, and when we get back, we will have some savings, which will be good for you
if anything ever happens to me. Maria asked whether they should open a new bank
account, maybe an ISA, but Felipe thought it would be easier to put it into his normal
account as there would be a lot less paperwork. They went together to pay it in, and when
they handed over the cheque to the bank teller, Felipe said, this is our holiday fund, you
must look after it for us. Sadly before booking the holiday, Felipe fell ill and died. He had
no will and it appears that all of his property will go to his wife. Maria claims that the 5000
winnings were held by him on trust for them as joint tenants.

Consider whether Felipe intended to declare himself trustee of his winnings.

Question 2

For each of the following dispositions in Edwards will, explain why there is a problem with
uncertainty and identify whether the disposition is likely to be valid:

a) 10,000 to my Aunt Muriel, in full confidence that she will use it to brighten the lives
of the children living in her neighbourhood;
b) Half of my shares in Glaxo plc on trust for my children in equal shares;
c) Ten of the books in my collection of rare first editions are to be sold and the
proceeds held by my trustees on trust for my children.

Question 3

Why were Jones v Lock and Paul v Constance decided differently? Do you think they are
rightly decided?

PART C: CERTAINTY OF OBJECTS

Question 1

Why was it once thought necessary to produce a list of all the beneficiaries of a
discretionary trust? What reason was given when this requirement was abandoned? Do
you think this is correct?

Question 2

Dimity has just died. In her will, which was properly executed, she made the following
provisions:

a) 150,000 to my daughter Sara-Lee, safe in the knowledge that she will only use the
money for the benefit of herself and any children she might have in the future;
b) 25,000 to Howard and Hilda to distribute to those of my fellow stamp fanatics at
the Shipley Philately Club as they, in their absolute discretion, shall select;
c) My trustees are to allow my friends and neighbours to each select one bottle of
wine from my collection of vintage Californian wines. The wine that is left once my friends

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and neighbours have made their selection is to be held for my grandchildren in equal
shares.

Consider the validity of these bequests.

Question 3

Carlas will set up a discretionary trust to support red heads in their university studies.
The validity of the trust has been questioned by one of her residuary legatees, George,
who says that the class of beneficiaries is conceptually uncertain.

Surprisingly, the dispute ended up in court and has now reached the Supreme Court. You
are the research assistant to one of the Supreme Court judges. One of the issues that has
arisen in the case is the interpretation of the is or is not test from McPhail v Doulton
(1971). The judge has asked you to prepare her a memorandum explaining whether the
validity of Carlas trust would be different, depending on which judges reasoning from Re
Baden (No 2) (1972) was accepted.

1. Sachs LJ: Once the class of persons to be benefitted is conceptually certain it then
becomes a question of fact to be determined on evidence whether any postulant
has on enquiry been proved to be within it: if he is not so proved, then he is not in it.
That position remains the same whether the class to be benefitted happens to be
small orlarge The suggestion that such trusts could be invalid because it
might be impossible to prove of a given individual that he was not in the relevant
class is wholly fallacious.

2. Megaw LJ: the test is satisfied if, as regards at least a substantial number of
objects, it can be said with certainty that they fall within the trust, even though, as
regards a substantial number of other persons, if they ever for some fanciful reason
fell to be considered, the answer would have to be, not that they are outside the
trust, but it is not proven whether they are in or out. What is a substantial number
may well be a question of common sense and of degree

3. Stamp LJ: Validity or invalidity is to depend upon whether you can say of any
individual and the accent must be on that word any for it is not simply the
individual whose claim you are considering who is spoken of [that he] is or is not
a member of the class, for only thus can you make a survey of the range of objects
or possible beneficiaries.

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 TUTORIAL 2

PART A: COMPLETE CONSTITUTION AND FORMALITIES

Question 1

Geoff owned a house, The Myrtles, and a substantial holding in a private company run by
the family. In December 2015 Geoff decided to remarry and he thought that this would be a
good time to review the provision he had made for his children.

Geoff decided that his daughter Sian should have the title to Cartref, the family holiday
home in rural Wales. He wrote to her and said, Ive got some exciting news for you,
youre going to get Cartref for yourself, Ill explain all the details when you next come to
visit. Geoff then telephoned his solicitor to ask him to draft some documents. I want Sian
to get it absolutely as soon as she turns 25, he said, and until then, Ill hold it for her, but
it will be up to her how she uses it.

Geoff next telephoned his son Carwyn and told him that he was going to transfer the
shares in the company into Carwyns name. They decided that Carwyn would leave his
job as a retail manager and go to work for the family company. Carwyn was worried about
losing his steady income, but Geoff explained to Carwyn that he would be appointed as a
director at the next annual general meeting. Geoff obtained a copy of a share transfer form
and filled it in, but he then forgot to post it.

Sadly, Geoff died in a car accident a few days later. His executors are very uncertain
about how his property should be divided. Advise Geoffs executors about the ownership of
the house and the shares.

Question 2

Indicate whether writing is required to satisfy s53(1)(c ) in the following transactions:

(a) Evelyn is the sole beneficiary of a trust fund worth approximately 25,000. She is
now aged 26. She does not wish to continue to benefit from the trust. She asks the
trustees of the trust to bring the trust to an end and transfer the balance of the fund
to her sister Charley.
(b) Nita is the sole beneficiary of a trust fund worth approximately 50,000 created in
her grandfathers will. When the trust was set up by her grandfather, he had argued
with Nitas sister Nessa and her brother Alfie, and they were excluded from the will.
Nita thinks this was unfair. Nita declares herself trustee of the 50,000 in favour of
herself, Nessa and Alfie, and says that the trust fund will be used to provide little
luxuries none of them could afford on their salaries. She tells Nessa and Alfie that
she will decide what those luxuries might be.

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PART B: SECRET TRUSTS, DONATIO MORTIS CAUSA, RULE IN STRONG V BIRD

Question 1

In August 2015 Grazia, an elderly lady, met with her brothers Noah and Joshua. She told
them she was having trouble deciding what to put in her will. She wanted to be fair to the
three sons she had with her husband, but she also wanted to benefit her daughter, who
had been born when Grazia was only 15. Grazia had never told her husband about this
child, who was adopted, and she did not want her husband, or their sons, to find out from
her will. Grazia also said she was not keen to leave all her money to her children but had
not yet decided which charities to benefit. Noah and Joshua agreed it was a problem but
they then started talking about other matters and the issue of Grazias will was dropped.

In September 2015 Grazia drew up her will. She left 50,000 each to her sons Abel, Bing
and Cole, 100,000 to Noah and the residue to Joshua, on trust for the purpose which I
have mentioned to him. The following week she sent a letter to each of her brothers. The
letters told them the contents of the will and also included a sealed envelope, marked not
to be opened until after my death.

Grazia died in January 2016. Noah has opened his envelop, which contains a letter stating
that he is to hold 100,000 on a discretionary trust for Grazias daughter, Helena. The
letter also includes the last address that Grazia had for Helena. Noah has tried to find
Helena and has discovered that she died in September 2015, a few days after the will was
executed. Helenas sole beneficiaries under own will are her twin daughters, Isabel and
Katy.

In Joshuas envelope is a list of three religious charities. Joshua, who is not religious, does
not wish to carry out the trust, believing that religious charities are far too wealthy.
.
Question 2

Should the rule in Strong v Bird be abolished?

Question 3

Marcus was very ill in hospital. His daughter Katie visited him. He gave her a large
envelope, and said, Katie, I may not make it, and if the worst happens I want you to have
whats in here. Marcus died a week later. Katie opened the envelope and found that it
contained the key to Marcuss classic car. In Marcuss will, the car was left to Marcuss
brother Jim.

Advise Katie about the ownership of the car.

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 TUTORIAL 3

PART A: NON-CHARITABLE PURPOSE TRUSTS

Question 1

Henrietta, a retired professor of botany, has telephoned your office to ask for some legal
advice. She has a giant tortoise, Sybil, of whom she is very fond. Henrietta has just had
her 80th birthday and she is concerned about Sybils welfare should Henrietta predecease
her. Given that Sybil is only 30 years old, this is likely to happen (giant tortoises live a long
time). Henrietta has heard it is possible to set up a trust for Sybil. She would also like to
set up a trust to erect a monument in a local park in the memory of Sybil after Sybils
death. Finally, she wishes to leave money to fund the publication of an illustrated pop up
book about tortoises. You tell Henrietta you will do some research and get back to her.

Advise Henrietta.

Question 2

No principle perhaps has greater sanction or authority behind it than the general
proposition that a trust by English law, not being a charitable trust, in order to be effective,
must have ascertained or ascertainable beneficiaries. (Re Endacott [1960] per Lord
Evershed MR).

Do the various exceptions to the beneficiary principle mean that the above statement is
misleading?

Question 3

Which, if any, of the following bequests are likely to be valid?

a) 50,000 to my children to support them in their university education

b) My property in the Yorkshire Dales is to be held by my trustees and used to provide
short breaks for members of my family

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PART B: CHARITABLE TRUSTS

Question 1

-Critically discuss the operation of the public benefit requirement for charitable trusts.

Question 2
Christopher recently died. His will included the following provision.
My daughter Jessica is already well provided for, and I would prefer that my wealth was used for
charitable purposes. With that in mind, I make the following bequests.
a) 500,000 on trust to provide scholarships for students wishing to study to become dental
nurses and also to support the campaign for a legal ban on advertising sweets and
chocolates on television before 9pm;
b) 500,000 on trust to provide assistance for my former colleagues at the National Centre for
Dental Excellence who were made redundant and who have not yet found alternative
employment; and
c) 500,000 to the Trust for Retired Seaside Donkeys to support their home for seaside
donkeys from Whitby who can no longer work for their living.
d) 1,500,000 to my trustees to establish a gallery to display my daughter Jessicas paintings
and other artworks
At the time when the will was made, there were a few seaside donkeys left at Whitby, but there are
no longer any donkeys on Whitby beach. The Trust for Retired Seaside Donkeys does operate a
home for retired donkeys from Wales and the South West of England.Jessica had given her mother
a variety of paintings, pottery creations and other craft objects during her childhood. Jessica did not
study art after Year 10 as her art teacher said she had no aptitude for drawing, was the clumsiest
child the teacher had ever seen, and had the colour sense of a blind elephant.
Advise Christophers executor on whether these trusts are valid.

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 TUTORIAL 4

PART A RESULTING AND CONSTRUCTIVE TRUSTS

Question 1

You have been asked to advise Sajid on an issue that has arisen with the estate of his
father Khaled, who recently died at the age of 86. Khaleds will left everything to his
children in equal shares.

K had two children, Marry and Sajid. Sajid emigrated to Australia many years ago and
rarely returned to the UK for visits. Maryum lived close to Khaled and saw Khalid every
day. Maryum is married to Dipak, who is disabled after a serious car accident and unable
to work. Maryum works part-time but cannot work more hours as she has to look after
Dipak and their two primary school-aged children. Sajid says he would have liked to see
his father more often but his surfing business in Australia kept him too busy.

Four years ago, Khaled opened a joint savings account at Yorkshire Bank in the name of
himself and Maryum. He deposited 100,000 in the account and made occasional
additional transfers into the account. At the time of his death, there was 220,000 in the
account. Maryum was aware of the account, and says that it was opened so that she could
access money for her father if he became ill, but they had never discussed what was to
happen upon his death. She assumed, since the account was in joint names, that she
would receive the money. She had received a debit card for the account but never used it.

Explain what arguments would be used by Maryum to support her claim that she is
entitled to the money in the account by right of survivorship and what arguments would be
used by Sajid to support his claim that the money in the account is part of Khaleds estate.
Indicate, with reasons, whether you think Sajids argument is likely to be successful.

Question 2

Adam and Rabia were living together in a nice house with an Asian garden in Bradford.
When they bought the house in 2008 they agreed to place it in the name of Adam although
they had both contributed towards the purchase of the property (for the purchase they
used money from the sale of another house they jointly owned in London). The reason
was that they wanted Rabia to appear as a mere lodger in the house so that she could
make false claims for various social welfare benefits. In May 2015 their relationship ended
and Rabia asked from Adam to transfer to her an equal share of the property. Adam
refused.

In 2001 Imran, Rabias late father, appointed Rabia as a trustee in a trust for the education
of Waqar, Rabias younger brother. Imran transferred to the trust 100,000. Waqar
completed his studies at the University in the summer of 2015. The trust currently has a
surplus of 30,000 and Waqar asks from Rabia to give him the surplus money so that he
can buy a new car and spend the rest on parties with his girlfriend. Rabia refuses arguing
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that the surplus of the trust should be returned to Imrans estate to be distributed according
to Imrans will. According to the will, Rabia and Waqar should receive Imrans estate in
equal shares.

Now Rabia comes to your office to ask for advice on how to resolve the above problems.

Question 3

Helen who is a land developer agreed in principle with her friend Samina to form a
partnership to purchase a site for joint land development. However, when Helen was
preoccupied with her fathers funeral, Samina made second thoughts about the
partnership and without informing Helen, She purchased the property alone and started
the development without her.

Advise Helen.

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PART B: TRUSTEES DUTIES

Question 1

Martin, a solicitor, and Rick, a quantity surveyor, are the trustees of a discretionary trust set
up by James, an elderly accountant. The beneficiaries are James three grandchildren,
Mary, Emily and Amelia. Rick is the father of Emily and Amelia. The trust property consists
of the shares in Megabuck Ltd, a successful company that runs a chain of vegetarian
restaurants in Yorkshire. About a year after the trust was set up, James died. In his will he
also left 1 million to be added to the trust funds. The trustees were instructed to ensure
that the funds were invested ethically, and strictly forbidden from making any investments
in meat or fish products.

You are a solicitor practising in Leeds, where Mary lives. Mary recently qualified as an
accountant, and asked whether she could have a look at the trust accounts. Martin agreed
but Mary became quite concerned by some things she discovered and has come to you for
advice. According to Mary:

The trust was recently offered a large parcel of shares in Farm Supplies Ltd, a
company that supplies the restaurants with vegetables. Farm Supplies Ltd is a
private company and its directors do not permit the sale of shares to individuals who
have no trading relationship with the company. The trust turned the offer down,
because Farm Supplies Ltd also sells free-range chicken and duck. However, Rick
was told that he would be permitted to make an investment in his own right, and did
so. Rick now owns a 25% stake in Farm Supplies.
Mary has also discovered that the trust has provided more financial assistance to
Emily and Amelia than to Mary herself. Although Mary receives an annual allowance
from the trust of 3,000, she paid her own university fees and has been living in
shared accommodation to save money. Emily and Amelia are still students and they
live rent-free in houses bought by the trust. Mary suspects that James indicated that
there should be preference to Emily and Amelia, who were the preferred
grandchildren, but Martin has refused to show her the letter of wishes given to the
trustees when the trust was set up.

Advise Mary.

Question 2

Ahmed died in 2001 and by his will set up a trust which left shares worth 800,000 in an
advertising company, Smith & Jones Ltd. The will also left a sum of 500,000 to Ahmeds
trustees Faizaan and Mohammed, to hold for Ahmeds daughters Misbah, aged 15, and
Fatima, aged 21. They were directed to hold this for Misbah and Fatima in equal shares
contingent on reaching the age of 30.

Because of the size of the trusts shareholding, Smith & Jones Ltd asked Faizaan and
Mohammed whether they would like to join the Board of Directors or nominate someone to
sit on the Board, but they said no, they trusted the current directors to make good
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decisions. Faizaan and Mohammed also decided to invest half the 500,000 for the
children in further shares in the Smith & Jones Ltd, and transferred 250,000 to Mary, an
accountant, to invest in these shares.

Fatima has now discovered:

a) Smith & Jones Ltd has been incurring substantial losses. Although accounts had
been sent to Faizaan and Mohammed they had not read through them. The trusts shares
are now worth only 200,000.
b) Faizaan, who has a lot of experience in the advertising industry, recently set up a
small advertising agency of his own, Kauser & Son Ltd. The new agency is very
successful, especially as Faizaan has persuaded some of the customers of Smith & Jones
Ltd to change their agency.
c) Mary failed to invest the 250,000 in shares and has absconded with the money.
She was a sole trader and it now emerges she did not have formal qualifications and was
not a member of any professional body.

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 TUTORIAL 5

PART A: TRACING AND REMEDIES FOR BREACH OF TRUST

Question 1

Andrew is a partner at Law Firm A. Andrew helps to administer a number of trusts. One of
those trusts is the PP Trust, a family trust set up many years before by a partner at the
firm, now deceased. Although the firm manages the PP Trusts legal affairs, no-one at the
firm is a trustee of the trust any more. However, Andrew knows that the trust is
discretionary and that the beneficiaries are the children and grandchildren of the settlor.
Andrew also knows the settlor argued with his daughter, Christina, many years ago, when
she married and went to live in Italy. As a result, she and her children were not listed as
beneficiaries.

One day, Andrew receives a letter from Terry, one of the PP Trusts trustees. Terry instructs
him to sell a large parcel of shares, and to transfer the proceeds to a Chiara Bozzoli,
with an address in Italy. Andrew is a little puzzled, especially as he has a vague memory
that the daughter who was excluded from the trust married someone called Carlo Bozzoli.
However, he is very busy with a complex matter on another file and he does not want to
spend much time on the PP Trust. He sells the shares and sends a cheque to Chiara
Bozzoli, without double-checking the file or speaking to the other trustee about it. Andrew
carries out a similar transaction for Terry a month later, after which there are very few
shares left in the trusts portfolio.

A few months later, the other trustee, Timothy, contacts Law Firm A to find out what has
happened to the trust assets. Timothy has been overseas and left the administration of the
trust to Terry. When Timothy returned, he discovered that Terry had vanished. Timothy
was unaware of the share sales and the transfers to Chiara Bozzoli. It has now been
confirmed that Chiara is the daughter of Christina. Terry had decided to put right her
grandfathers wrong, and transferred the bulk of the trust assets to her. Chiara used the
money to purchase a business, but the business has failed and none of the assets are left.
Terry also invested in the business, losing everything.

Advise Timothy on whether the trust has any remedy against (a) Andrew and (b) Terry.

Question 2

Teresa and Terence are the trustees of a fund held for the benefit of Ben and Brian. The
fund has been valued at 37,000 (the BB account). In December 2015, Teresa and
Terence opened a new bank account (the TT account), in their own name, using 3,000 of
their own funds.

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In January 2016, Teresa and Terence took 17,000 out of the BB account and put it into
the TT account. In January 2016, they purchased a Citroen car for 20,000 using money
from the TT account and gave the car to their nephew Victor as a birthday present. Victor
asked how they had managed to buy him such an expensive present, and they said, if
you dont ask, we wont tell you any lies. Victor was worried but accepted the car anyway.

In February 2016, Teresa and Terence put another 10,000 into the TT account. They then
spent 4,000 on a holiday in Australia and Bali. Of the remaining 6,000, half was used to
buy shares in Fancy Nails Ltd, a company running a nail art salon and half was used to
buy shares in Cook Books Ltd, a company running a book store.

Teresa and Terence have now disappeared, and Ben and Brian are concerned that money
has gone missing from the TT account. Fancy Nails Ltd has gone into liquidation, has no
assets and very large debts. Cook Books Ltd is doing well, and the shares are worth twice
their original value. Victor crashed his car during the winter snow storms but received
13,000 in insurance money.

Advise Ben and Brian.

PART B: QUESTIONS & ANSWERS SESSION

This part will cover questions which students have as part of the module revision.

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