Equity & Trusts Flashcards
7 cards from real SQE1 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Equity & Trusts flashcards as text
Under section 1 of the Trustee Act 2000, what is the standard of care required of a trustee when exercising statutory functions such as investment?
Answer: Such care and skill as is reasonable in the circumstances, having regard to any special knowledge or experience
Section 1 of the Trustee Act 2000 requires trustees to exercise such care and skill as is reasonable in the circumstances, and where a trustee acts in a professional capacity, a higher standard applies by virtue of their specialist knowledge.
In Milroy v Lord (1862), Turner LJ established a foundational principle of equity. Which statement correctly summarises it?
Answer: Equity will not perfect an imperfect gift; to be complete a donor must do everything necessary to effect the transfer
Turner LJ in Milroy v Lord held that equity will not perfect an imperfect gift; for a gift or trust to be effective, the donor must have done everything that, according to the nature of the property, was necessary to transfer it.
Where a trustee commits a breach of trust that causes loss to the trust fund, what is the primary remedy available to the beneficiaries?
Answer: Equitable compensation to restore the trust fund to the position it would have been in but for the breach
The primary remedy for a loss-causing breach of trust is equitable compensation, which is aimed at restoring the trust fund to its proper state rather than stripping gain or preventing future wrongdoing.
The rule in Saunders v Vautier allows beneficiaries to collapse a trust and demand the trust property. What conditions must be met?
Answer: All beneficiaries must be adults of full capacity and together hold the entire beneficial interest
Under Saunders v Vautier, if all beneficiaries are adults with full mental capacity and between them hold the entire beneficial interest, they may collectively demand that the trustees transfer the trust property to them.
Which of the following constitutes a breach of the self-dealing rule applicable to trustees?
Answer: A trustee purchasing trust property from the trust estate for their own benefit
The self-dealing rule prohibits a trustee from purchasing trust property because they simultaneously owe a duty as seller (to maximise price) and act as buyer (with an interest in minimising price), creating an irreconcilable conflict of interest.
Under the rule in Re Hallett's Estate (1880), where a trustee mixes trust money with their own funds in a bank account and subsequently makes withdrawals, how are those withdrawals treated?
Answer: As drawn from the trustee's own money first, leaving the trust money intact
In Re Hallett's Estate, the court held that a trustee who withdraws money from a mixed account is presumed to have spent their own money first, thereby preserving the trust money for as long as the account balance permits.
Under the Variation of Trusts Act 1958, on whose behalf may the court give consent to a variation of trust beneficial interests?
Answer: Minors, unborn beneficiaries, and persons lacking mental capacity
The Variation of Trusts Act 1958 empowers the court to consent on behalf of those who cannot legally consent for themselves — namely minors, the unborn, and those lacking capacity — but adult beneficiaries with capacity must personally consent.