Equity & Trusts - Practice Paper 2

Helen transfers her house to her son Ian, saying: "I am giving you the house but I expect to be able to live here for the rest of my life." Ian agrees verbally. Two years later, Ian tells Helen she must leave so he can sell the property. Helen also discovers that Ian has taken out a mortgage on the house without her knowledge. Separately, Helen transferred £100,000 to her daughter Jane ten years ago for "safekeeping." Jane has spent £30,000 on home improvements, believing the money was a gift. Helen now wants the £100,000 back. Advise Helen on her rights in respect of both the house and the money.

The fiduciary relationship imposes uniquely onerous obligations on those who occupy it. Critically assess the scope of fiduciary duties, the no-conflict and no-profit rules, and the extent to which the law has achieved an appropriate balance between protecting the principal and allowing fiduciaries to conduct their affairs.

Kevin creates a trust by deed, settling £800,000 on trust. The trust deed provides: "The trustees shall hold the fund for the benefit of my employees and their dependants in such shares as the trustees shall determine." Kevin's business employs 300 people. The trustees wish to appoint £50,000 to Louise, an employee who is critically ill. They also wish to invest part of the fund in ethical investments, even though these may produce lower returns. Meanwhile, Kevin seeks to add his newly adopted son Michael as a beneficiary. Advise the trustees on these matters.

The cy-pres doctrine allows charitable trusts to be saved from failure by redirecting funds to similar purposes. Critically evaluate the operation of the cy-pres doctrine under the Charities Act 2011 and assess whether the expanded statutory grounds provide sufficient flexibility.

Nathan is a solicitor acting as trustee of a family trust. He charges the trust £15,000 for legal services he provided to the trust. He also purchases a painting from the trust for £20,000, which he subsequently sells for £45,000. Nathan invests trust money in a property development scheme run by his law partner Oscar. The scheme fails and the trust loses £120,000. Nathan's co-trustee Pamela was aware of these transactions but took no steps to prevent them. The beneficiaries, Queenie and Robert, seek advice. Advise on the liability of Nathan, Oscar, and Pamela.