SQE1 FLK1 Practice Paper 9

A minority shareholder brings a derivative claim under Part 11 Companies Act 2006 alleging that the directors have been negligent. At the permission stage, the court must consider several factors. Which of the following would be most likely to result in the court refusing permission? A) The shareholder holds only 5% of the shares B) A person acting in accordance with the duty to promote the success of the company under s 172 would not seek to continue the claim C) The alleged negligence occurred more than two years ago D) The shareholder did not first raise the matter at a general meeting

A claimant in commercial litigation applies for specific disclosure of documents that the defendant claims are protected by litigation privilege. The documents are communications between the defendant and a third-party expert prepared after litigation was contemplated. Which test must the defendant satisfy to maintain the privilege? A) The documents must have been created for the dominant purpose of obtaining legal advice B) The documents must have been created for the dominant purpose of use in litigation that was reasonably contemplated or existing C) The documents must be confidential communications between solicitor and client D) The documents must have been created before any proceedings were issued

A commercial contract contains a liquidated damages clause requiring payment of £50,000 for each day of delay in performance. The actual losses suffered by the innocent party are approximately £5,000 per day. What is the likely legal status of this clause? A) The clause is enforceable as an agreed damages provision reflecting the parties' commercial judgment B) The clause is a penalty and therefore unenforceable, because it imposes a detriment out of all proportion to the legitimate interest of the innocent party C) The clause is void under the Unfair Contract Terms Act 1977 D) The clause is enforceable because parties to a commercial contract are free to agree any terms

A factory releases toxic chemicals into a river, contaminating the water supply of a downstream town. Multiple residents suffer illness. A class of residents wishes to bring a claim. Which cause of action is most appropriate for the class as a whole? A) Private nuisance, because each resident's land has been affected B) Public nuisance, because a class of the public has been affected C) The rule in Rylands v Fletcher, because there has been an escape of a dangerous substance D) Breach of statutory duty under the Environmental Protection Act 1990

A barrister is instructed to advise on whether a particular regulatory decision is amenable to judicial review. The decision was made by a private body exercising a public function under a contractual arrangement with a government department. Which test will the court apply to determine amenability? A) Whether the body is funded by the government B) Whether the body is exercising a function of a public nature, considering the source, nature and context of the power C) Whether the body has been expressly designated as a public authority by statute D) Whether the body is listed in Schedule 1 of the Freedom of Information Act 2000

A company enters creditors' voluntary liquidation. The liquidator discovers that a director continued trading for six months after knowing the company was insolvent, increasing the company's debts by £200,000. Under which provision can the liquidator seek a personal contribution from the director? A) Fraudulent trading under s 213 Insolvency Act 1986 B) Wrongful trading under s 214 Insolvency Act 1986 C) Misfeasance under s 212 Insolvency Act 1986 D) Transaction at an undervalue under s 238 Insolvency Act 1986

A claimant brings proceedings alleging that the defendant negligently advised them, causing financial loss. The defendant argues that even if they were negligent, the claimant would have suffered the same loss regardless because of a subsequent market crash. This raises which legal issue? A) Remoteness of damage B) Factual causation (but-for test) C) Duty of care D) Volenti non fit injuria

A contract for the sale of goods contains a Romalpa clause (retention of title clause). The buyer becomes insolvent before paying for the goods but has already incorporated the goods into a manufactured product. Can the seller recover the manufactured product? A) Yes, the Romalpa clause automatically extends to manufactured products incorporating the original goods B) No, unless the clause expressly covers manufactured or mixed goods and creates a charge that has been registered C) Yes, because the seller retains title to all goods and anything made from them by operation of law D) No, because retention of title clauses are void under the Insolvency Act 1986

A claimant alleges that a public authority's decision breaches their rights under Article 6 ECHR (right to a fair trial). The decision was made by an administrative body with no appeal to an independent tribunal. However, the decision is subject to judicial review by the High Court. Does this satisfy Article 6? A) No, because the initial decision-maker must itself be an independent and impartial tribunal B) Yes, provided the judicial review provides a sufficient scope of review to deal with the substance of the complaint C) No, because judicial review can never satisfy the requirements of Article 6 D) Yes, because any form of court review automatically satisfies Article 6

Under retained EU law, a claimant suffers loss because the UK failed to implement an EU Directive correctly before Brexit. The claimant seeks damages against the state. What conditions must be met under the Francovich principle? A) The Directive must impose obligations on individuals, the breach must be sufficiently serious, and there must be a direct causal link B) The Directive must grant rights to individuals, the breach must be sufficiently serious, and there must be a direct causal link between the breach and the damage C) The claimant must show the state acted in bad faith, and the damage was foreseeable D) The Directive must have direct effect, and the claimant must have exhausted all domestic remedies

A claimant suffers pure economic loss as a result of a negligent misstatement made by the defendant during pre-contractual negotiations. There is no contractual relationship between them. Under which principle might the defendant owe a duty of care? A) The Caparo three-stage test only B) The Hedley Byrne principle of assumption of responsibility for negligent misstatement C) The neighbour principle from Donoghue v Stevenson D) No duty of care can arise for pure economic loss outside a contractual relationship

A company's articles provide that the directors may allot shares with the authority of an ordinary resolution. The directors allot shares to a friendly third party to dilute the voting power of a shareholder who has been critical of the board. Which directors' duty has most clearly been breached? A) Duty to exercise independent judgment (s 173) B) Duty to act within powers (s 171) - specifically the duty to exercise powers for proper purposes C) Duty not to accept benefits from third parties (s 176) D) Duty to exercise reasonable care, skill and diligence (s 174)

In multi-track litigation, the court gives directions for trial including sequential exchange of witness statements. The defendant fails to serve witness statements by the deadline. What is the consequence under the CPR? A) The defendant's witness statements are automatically struck out B) The defendant may not rely on the evidence of any witness whose statement has not been served, unless the court gives permission C) The trial is automatically adjourned D) The defendant is in contempt of court

A contract contains a force majeure clause listing specific events including 'epidemic'. A global pandemic causes one party to be unable to perform. The other party argues that 'epidemic' does not cover 'pandemic'. How will the court likely interpret this clause? A) The clause will be interpreted strictly and 'epidemic' will not cover 'pandemic' as they are different concepts B) The court will apply the principles of contractual interpretation, considering the natural and ordinary meaning of the words in context and the commercial purpose of the clause C) The clause is void for uncertainty because 'epidemic' is not precisely defined D) The court will imply a term to extend the clause to cover pandemics

A local authority grants planning permission for a development. A neighbouring landowner seeks judicial review, arguing the decision was irrational. The authority considered all relevant factors and followed correct procedure. Under the Wednesbury test, when will the court find the decision irrational? A) When the court would have reached a different decision on the merits B) When the decision is so unreasonable that no reasonable authority could ever have come to it C) When the decision is merely unreasonable or unwise D) When the decision does not represent the best possible outcome for affected parties