Phil, a widower, owned and lived at Brookfield House. He had three children: David, Kenton, and Schula. Many years before, Phil’s late father had bequeathed to him a valuable painting ‘Sutton Bay’.

Additional Period Summative Assessment

Department
Module Code and Title	LW3370 Equity and Trusts
Expected Exam Duration (in words)	Three hours
Number of Questions	10
Instructions to Candidates	Answer any THREE questions. Each answer should be no more than 1000 words including references. Penalties will apply for exceeding the word limit. You are not required to use OSCOLA referencing or provide a bibliography. You should treat this assessment as a traditional exam. Your overall mark will be a calculated average of the required number of answers. Each question will be marked out of 100. This is an open book exam and you are permitted to access appropriate resources to support your answers. You should attempt to complete this examination in the stated time length. If you have alternative exam arrangements in place by AccessAbility, you should follow these and submit your work within the designated time frame.  These questions are not designed to take you the amount of time that you have before the submission deadline (4 weeks) – this is to take into account that some students may have sporadic access to a computer or the internet, or caring responsibilities that will require some flexibility. You will need to submit your work as a Word Document via Turnitin. As we are giving students far more time than is needed, and there are university marking deadlines that are required for the purposes of progression and graduation, you will understand that there will not be a late submission period. Students who do not submit in time will have the assessment automatically deferred to the next assessment period.

1.  Phil, a widower, owned and lived at Brookfield House.  He had three children: David, Kenton, and Schula.  Many years before, Phil’s late father had bequeathed to him a valuable painting ‘Sutton Bay’.  Phil also owned some shares in Smallco Ltd, and his stockbrokers also held some shares in Bigco PLC which were held in the stockbrokers’ name as nominee for Phil. Phil also owned a small cottage called ‘Windermere Cottage’.

On his 60th birthday, Phil celebrated in the local pub.  David and Schula were with him but Kenton was working.  Feeling generous, Phil said, “Schula, I want to give you the ‘Sutton Bay’ painting.  Pick it up next time you come round”.  To David he said, “I want to give you all of my shares. When I find my share certificate for the Smallco Ltd shares, I’ll give it to you. And I’ll also contact my stockbrokers about the Bigco PLC shares.”  

Later that night Phil found the share certificate for the Smallco Ltd shares and he posted it through David’s letterbox.  He also wrote a note to Kenton that stated “From now on I will be holding Windermere Cottage for you - consider it yours from now on”.  He put the note through Kenton’s letterbox the same night. The next day he telephoned his stockbrokers and instructed them to transfer the Bigco PLC shares to David. However the Sutton Bay painting remained hanging on his wall in Brookfield House, in fact, until his death two weeks later, when he died unexpectedly without having made a will.

Explain the effect of Phil’s actions with reference to the ownership of:

a)         the Sutton Bay painting,

b)        the Smallco Ltd shares,

c)         the Bigco PLC shares

d)        Windermere Cottage.

2.         Freda died earlier this year. Until her death Freda had been the CEO of Leicester Shoe Co PLC.  Freda is survived by her husband Bert who is also a director in the same company. Shortly before her death, Freda drafted her own will, in which she named Ted and Amy as executors and trustees. Freda’s will contained the following dispositions:

a)         £1,000,000 to provide a respectably modest income to my mother Nancy for life, and then to my husband Bert absolutely.

b)        £100,000 to Ted and Amy to hold on trust and distribute the income as they think appropriate among the employees of Leicester Shoe Co PLC who have helped me the most. If there is any query as to who is entitled, then my husband Bert can decide.

c)         One item from my collection of antique Chinese ceramics to such of my friends who contact Ted and Amy in the twelve months following my death.

d)        The residue of my estate to Bert, feeling sure that he will use his good judgement in looking after our children Jamie and Charlie

Advise Ted and Amy as to the validity of these dispositions.

1. 3.            Blodwyn had been a proud Welsh woman, but has now died. She belonged to the Leicester Branch of the Wales Appreciation Club, which is a non-charitable unincorporated association, and this branch comprises approximately 25 members of all ages. Blodwyn’s will contained provisions as follows:

a)         £10,000 on trust to my best friend Dilwyn, for the care of my dog Polly, for 21 years.

b)        £200,000 to be held on trust for as long as is legally possible to pay for the publication of a free new political newspaper ‘the Force of Wales’ which shall be a symbol of Welsh integrity.

c)         £100,000 to the Wales Appreciation Club in Leicester to be used only for the purpose of building a bar in the club’s premises. 

All of the residue of Blodwyn’s estate was left to her sister Ceridwen.  Ceridwen wants your advice on the validity of these dispositions. She tells you also that Dilwyn actually strongly dislikes dogs, and also that the members of the club have recently decided that they do not want to promote the drinking of alcohol, but do want to set up a programme of educational trips.

4.         Explain whether the following trusts found in a will made in 2012 are charitable:

a)         A trust to promote the twin delights of the sport of snooker and alcohol consumption.

b)        A trust to provide an all-weather artificial hockey pitch at Beldray School (a private, fee paying secondary school).

c)         A trust to provide an animal refuge which is closed to the public, so that wildlife can remain free and undisturbed by human activity.

d)        A trust to provide a retirement home for employees and ex-employees of Big Business PLC (a major national company which has over 400,000 current employees).

5.         Lady Zaza is a successful musician and the managing director of a company called Melody Ltd.  She is married to Jack, who is a writer.  They have a daughter called Ally, who is 20 years old. 

In 1995, soon after they got married, Lady Zaza purchased a house in London and had this registered in Jack’s sole name.  In 2016, soon after Ally’s 18^th birthday, Lady Zaza transferred 1,000 shares in Melody Ltd to Ally.  However, since then, all of the dividends from these shares have been paid into Lady Zaza’s own bank account.

Jack intends to sell the house in London because he wants to use the money to go on a worldwide tour, promoting his latest book, “My life with Zaza”. 

Ally intends to sell the shares in Melody Ltd. to pay for a huge party that she is planning to have in Ibiza.

Lady Zaza is very upset.  She tells Jack that if he sells the house then the proceeds of sale will all belong to her, so he cannot fund his tour.  She tells Ally to forget about the party in Ibiza because “the shares are not yours to sell.”

Advise Lady Zaza. 

1. 6.            It has been suggested that the law for cohabiting couples in a dispute over the family home“is something of a mess and in urgent need of clarification.” 

Critically discuss this statement, with reference to relevant case law. 

1. 7.            In January 2018, Amelia decided to set up a trust fund of £1 million to provide for her two best friends, Chloe and Ruby, for life, remainder to any children they may have.  Amelia appointed Terry, a solicitor, and Josh, a friend, as trustees. 

There is no express remuneration clause in the trust deed.

Terry and Josh invested 25% of the trust fund in shares of luxury watchmaker Alpha, 25% in classic cars, and 25% to purchase an apartment in London for the beneficiaries to live in.  The remaining 25% was invested in a deposit account at Restful Bank.

In November 2018, Chloe had an argument with the CEO of Alpha and insisted that the trustees sell the shareholding in Alpha and buy shares in Folex (another luxury watchmaker) instead.  Terry and Josh did as Chloe requested.  

In December 2018, Terry and Josh decided to pay themselves a small salary for their work in administering the trust. 

In February 2019, Terry travelled abroad for three weeks on business. He asked his old university friend Mohammed, an investment banker, to take any important decisions relating to trust investments while he was away.  During Terry’s absence Mohammed, who had been dismissed by his company and was worried about his future, absconded with £100,000 from the trust fund.

In April 2019, the share prices of all luxury brands fell dramatically and the Folex shareholding is nearly worthless. The flat that the trustees purchased is now valued at half its original valuation.

a)         Discuss the potential personal liability of the trustees, Terry and Josh.

b)        How would your answer differ if there had been an express clause in the trust deed which exempted the trustees from liability except for actual fraud?.

8.         Barry receives £20,000 from his daughter Divia, who has asked him to invest it for her. He buys £40,000 worth of company shares for Divia, using £20,000 from the Stash family trust fund, of which he is the trustee, in breach of trust, to supplement the money from Divia. The shares do well and Barry sells them for £90,000. He puts this money in his bank account and draws on the account for his own purposes until there is only £60,000 left. He then adds £30,000 of his own money and transfers the balance of £90,000 to Divia’s bank account.

By chance, Divia has just bought a car on credit for £20,000, and when she receives the money from Barry she immediately pays off the credit bill. She then uses £20,000 to install a new kitchen in her house, which comes with a new fridge, washing machine and dishwasher. She also pays off the amount outstanding on her mortgage, which is £45,000. Finally she spends £5,000 on a celebratory meal with her friends. The money for the meal she actually pays from another bank account, so £5,000 is left in the account holding the money from Barry, but Divia would not have had the meal if she had not received the money from Barry.

Consider what the Stash family trust can recover from Divia by way of an equitable proprietary tracing claim.

Discuss.

9.         Explain the law of knowing (or unconscionable) receipt and the law of knowing (or dishonest) assistance. Critically compare the tests of fault or knowledge for the two types of liability and consider whether they should be different.

10.       In her will made in July 2018, Nicole left the following bequests:

a)         My cottage to be sold by my executors and the proceeds of sale to be given to Matthew absolutely.

b)        £25,000 to be transferred to my trustee, Mohammed on trust.

Three months after the creation of the will, Nicole met with Matthew and informed him that he would receive the proceeds of her cottage. She told him that it was her intention that Matthew hold the proceeds on trust for her nieces, Sonia and Harleen. Matthew agreed to this and Nicole, as a token of her appreciation, told Matthew that he could keep £5000 from the proceeds.

In December 2018 Nicole visited Mohammed and told him that he was going to receive some money under her will on trust. She also explained to him that after her death he could expect to receive a letter from her solicitor. She told Mohammed that he was to follow the instructions in the letter and distribute the money accordingly. Mohammed agreed to this arrangement.

Nicole died in January 2019 and Matthew has since established that Harleen died one year before Nicole. Matthew and Mohammed seek your advice as to their respective entitlements and duties with respect to the property they have acquired under Nicole’s will.

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