THE UNIVERSITY OF NEW SOUTH WALES

SEMESTER 1 2015 EXAMINATIONS

LAWS2385/JURD7285: Equity and Trusts

1. TIME ALLOWED 2 hours

2. READING TIME 10 minutes
3. THIS EXAMINATION PAPER HAS 3 PAGES
4. TOTAL NUMBER OF QUESTIONS 2
5. TOTAL MARKS AVAILABLE 100
6. MARKS AVAILABLE FOR EACH QUESTION ARE SHOWN IN THE EXAMINATION PAPER
7. ALL ANSWERS MUST BE WRITTEN IN INK. EXCEPT WHERE THEY ARE EXPRESSLY REQUIRED, PENCILS MAY
BE USED ONLY FOR DRAWING, SKETCHING OR GRAPHICAL WORK
8. THIS PAPER MAY BE RETAINED BY CANDIDATE
9. CANDIDATES MAY BRING TO THE EXAMINATION any printed or handwritten materials

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QUESTION 1 (worth 60/100 marks for this exam)
Ken and his partner Lucy have 3 adult children, Rosie (35), Buddy (32) and Jack (29). Ken owns
various paintings and antiques. Ken and Lucy are about to leave on a 1 year hiking trip and will be
uncontactable. Ken wants to make sure that in Ken and Lucys absence their children have some
assets which they can call upon should the children get into financial difficulty. Rosie is also going to
get married when Ken and Lucy return. Jack works as a funds manager at a large investment
company. On 29 December 2013 Ken visits Jacks office, and hands to Jack the following items:
1 Ming vase (worth $10,000);
1 Antique chair (worth $20,000); and
1 Brett Whitely painting (worth $50,000).
As Ken hands to Jack the items, Ken says to Jack:
I am giving you these things to hold on trust whilst I am away. If you, Rosie or Buddy gets
into financial difficulty, you must sell some of the trust property and give a sum of money as
you think fit to whomever is in financial difficulty. Mum and I will be back on 1 January 2015
and whatever is left you will give back to me. Does this sound ok?
Jack replies: Sure Dad. I am happy to do that.
On 1 January 2014, Ken and Lucy depart on their hiking trip. Jack lets Buddy and Rosie know that Ken
gave to Jack some items for Jack to sell if either of Buddy, Rosie or Jack get into financial difficulty
whilst Ken and Lucy are gone.
On 17 May 2014, Buddy telephones Jack saying: I have hurt my knee. I need surgery which will cost
$10,000. Jack agrees to pay Buddy the money he needs for surgery from the trust. On 20 May 2014,
Jack sells the Brett Whitely painting for $50,000 and this money is paid by the purchaser into Jacks
personal savings account. Prior to this deposit, Jacks personal savings account already contained
$50,000 of Jacks own money. On 31 May 2014, Jack transfers $10,000 from Jacks personal savings
account to Buddys personal savings account. Following this transfer there is $90,000 remaining in
Jacks personal savings account.
On 3 June 2014, Rosie telephones Jack saying: I have found a wedding dress on eBay. Can you
transfer $5,000 to me to pay for it? Jack agrees remarking that he has funds left over from the sale
of the Brett Whitely painting which are available for Rosie. Since 31 May 2014, there have been no
withdrawals or deposits in Jacks personal savings account, which remains at $90,000. Jack
withdraws $5,000 cash from his personal savings account and hands it to Rosie (leaving $85,000 in
Jacks personal savings account). Rosie uses the $5,000 cash to pay for the dress.
Jack has come across two investment opportunities. Forgetting that the balance of Jacks personal
savings account includes the remaining sale proceeds from the Brett Whitely painting, Jack transfers
$45,000 from Jacks personal savings account to buy shares in Plonk Ltd, and $40,000 to buy shares
in XYZ Mining Ltd.
Clara is Jacks personal assistant with 24 hour access to Jacks office, which is where the Ming vase
and antique chair are kept. Jack entrusts Clara with personal and business confidences. However,
unbeknown to Jack, Clara is a kleptomaniac. Late on 22 December 2014, Clara steals the antique
chair and Ming vase and sells both to the same purchaser for a total of $1,000 in cash. Clara uses the
sale proceeds paid to her by the purchaser to buy $500 worth of champagne, which she drinks over
Christmas, and $500 to repay her credit card debt.
On 1 January 2015, Ken and Lucy return home. Ken is upset to find that the antique chair and Ming
vase have been stolen. Ken is appalled that Jack let Rosie spend so much on a wedding dress.
However, Rosie had a good eye for a bargain and Rosie could have been expected to pay $150,000
for the same dress elsewhere. The shares in Plonk Ltd have risen to $100,000 in value but those in
XYZ Mining Ltd are worthless. Advise Ken, Rosie, Buddy and Jack about the availability of any
equitable proprietary remedies or equitable personal remedies.
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QUESTION 2 (worth 40/100 marks for this exam)

ANSWER 2(a) OR 2(b)

2(a) Whether there is an express trust depends upon the intention of the settlor, whereas the
constructive trust is a remedy to prevent unconscionability. Discuss

OR

2(b) A fiduciary will only ever be in breach of her obligations where she fails to act in the best
interests of the principal. Discuss

END OF PAPER