Equity & Trusts - Practice Paper 3

The distinction between resulting trusts and constructive trusts has become blurred to the point of incoherence. Critically evaluate this statement with reference to the domestic property context, the commercial context, and the theoretical debate about the proper basis for each type of trust.

Sandra, a wealthy philanthropist, makes the following dispositions by will: (i) £500,000 to the Helping Hands Charity "to provide warm meals for homeless people in London"; (ii) £200,000 to the Animals First Society, an unincorporated association dedicated to animal welfare; (iii) £100,000 "for the purpose of providing scholarships for deserving children of my former employees at my textile factory"; (iv) £150,000 "to be divided among such charitable organisations working in the field of medical research as my executors shall select." Sandra's factory closed five years before her death and she had 200 former employees. Advise the executors on the validity and administration of each gift.

Thomas, a company director, receives a bribe of £500,000 from a supplier to award a contract. He deposits £300,000 in a bank account and uses £200,000 to buy shares in a start-up company. The shares are now worth £800,000. Thomas also uses his position as director to divert a business opportunity to his wife Ursula, who makes a profit of £150,000. Thomas becomes insolvent. The company, VentureCo, seeks to recover the bribe money and challenge the diversion of opportunity. VentureCo's unsecured creditors argue they should share pari passu in Thomas's assets. Advise on the competing claims.

The equitable maxims remain the foundation of equitable jurisdiction, yet some are outdated and their application inconsistent. Select four equitable maxims and critically assess their continuing relevance and application in modern equity, with reference to case law.

William, a trustee, manages a trust fund of £3 million for the benefit of Xara (income beneficiary) and Yolanda (remainderman). William correctly invests £1 million in government bonds and £1 million in blue-chip equities. He invests the remaining £1 million in a commercial property. The property tenant defaults on rent, the property loses 40% of its value, and William fails to insure the building against fire damage. A fire destroys part of the building, causing £200,000 in additional losses. William claims he acted on the advice of his financial adviser Zach, who has since been struck off for incompetence. William seeks relief under section 61 Trustee Act 1925. Xara and Yolanda disagree about how losses should be borne. Advise on William's liability, the availability of section 61 relief, and the allocation of losses between income and capital beneficiaries.