SQE1 FLK1 Practice Paper 10

A company's sole director and 100% shareholder personally guarantees the company's bank loan. The company defaults and goes into liquidation. The bank seeks to enforce the guarantee. The director argues the corporate veil should be pierced to make the guarantee unenforceable. Will the court pierce the veil? A) Yes, because the company is a one-person company with no real separation from its owner B) No, because piercing the veil is only available to third parties seeking to hold shareholders liable, not to benefit the controller C) Yes, because the company was undercapitalised D) No, because the guarantee was given voluntarily and the Salomon principle prevents the director from denying the company's separate existence to avoid personal liability

A claimant applies for a freezing injunction (formerly Mareva injunction) to prevent the defendant from dissipating assets before judgment. Which of the following is NOT a requirement the claimant must demonstrate? A) A good arguable case on the merits B) That the defendant has assets within the jurisdiction C) A real risk that the defendant will dissipate assets to frustrate enforcement D) That the claimant has already obtained judgment in their favour

A contract for the sale of a business includes a non-compete covenant preventing the seller from operating a competing business within 50 miles for 10 years. A court reviewing the covenant's enforceability is most likely to hold that: A) The covenant is enforceable in its entirety as it protects the buyer's legitimate business interest B) The covenant is void as an unreasonable restraint of trade, and the court cannot sever or modify it C) The covenant may be partially enforceable if the court can sever the unreasonable parts (blue pencil test) and the remaining restriction protects a legitimate interest D) The covenant is automatically void because all non-compete clauses are contrary to public policy

An NHS hospital trust negligently fails to diagnose cancer. By the time the cancer is correctly diagnosed, the patient's chance of survival has reduced from 42% to 25%. The patient dies. The patient's estate brings a claim. How will the court approach causation? A) The claim succeeds because the hospital's negligence reduced the chance of survival B) The claim fails because the patient had less than a 51% chance of survival even before the negligent delay, so the negligence did not cause the death on the balance of probabilities C) The claim succeeds for the full value of the loss of life D) The claim succeeds for loss of a chance, with damages proportionate to the reduction in survival probability

A Secretary of State exercises a broad statutory discretion to set immigration policy. An applicant challenges the policy on the ground that it is disproportionate and breaches Article 8 ECHR. In applying proportionality review, which framework should the court use? A) The traditional Wednesbury unreasonableness test B) The four-stage Bank Mellat proportionality test: legitimate aim, rational connection, less intrusive means, fair balance C) The margin of appreciation doctrine from the European Court of Human Rights D) The Bolam test of professional reasonableness

A partnership at will has three partners. Partner A serves notice on Partners B and C to dissolve the partnership. Partner B does not wish to dissolve and argues the notice is invalid because it was not agreed by all partners. Is Partner B correct? A) Yes, dissolution of a partnership requires the unanimous agreement of all partners B) No, in a partnership at will, any partner may dissolve the partnership by giving notice to the other partners C) Yes, dissolution requires a court order under s 35 Partnership Act 1890 D) No, but only if Partner A holds a majority share of the partnership profits

A claimant in a commercial dispute wishes to use without prejudice communications at trial to prove that a settlement agreement was reached. The defendant denies any agreement was reached. Can the without prejudice communications be admitted? A) No, because without prejudice communications can never be disclosed in court B) Yes, because the without prejudice rule does not prevent proof that a concluded settlement agreement was reached during negotiations C) No, because the defendant has not waived privilege D) Yes, but only if the court grants permission under CPR Part 31

A principal discloses to a third party that they are acting through an agent. The agent enters into a contract with the third party on the principal's behalf but exceeds their actual authority. The third party later discovers the agent had no actual authority. Can the principal be bound by the contract? A) No, because the agent had no actual authority and therefore could not bind the principal B) Yes, if the agent had apparent (ostensible) authority based on a representation by the principal that the agent had authority to enter such transactions C) No, because disclosed agency means the principal must personally ratify every contract D) Yes, but only if the agent acted in good faith

A claimant in a professional negligence claim against a solicitor argues that the solicitor failed to advise on a specific legal risk. The solicitor argues that no reasonably competent solicitor would have identified that risk at the time. What standard does the court apply to assess the solicitor's conduct? A) The standard of a specialist in the relevant area of law, regardless of the solicitor's actual expertise B) The standard of a reasonably competent solicitor practising in the relevant area, judged at the time of the alleged negligence C) The standard of a perfect solicitor who would identify every possible risk D) The standard set by the Solicitors Regulation Authority Code of Conduct

A tenant holds a lease for a term of 5 years with a break clause exercisable at year 3. The break clause requires the tenant to give 6 months' written notice and to have paid all rent due. The tenant gives notice but owes £50 in service charge arrears at the break date. The landlord argues the break is ineffective. What is the likely outcome? A) The break is effective because the service charge arrears are trivial and de minimis B) The break is ineffective because the condition precedent of paying all rent due has not been strictly complied with C) The break is effective because the court will apply an equitable remedy to relieve the tenant D) The break is effective because service charges are not 'rent' within the meaning of the break clause

Under the retained EU law principle of indirect effect (the Marleasing principle), what obligation does a national court have when interpreting domestic legislation? A) The court must disapply domestic legislation that conflicts with an EU Directive B) The court must interpret domestic legislation, so far as possible, in conformity with the wording and purpose of relevant EU Directives C) The court must refer questions of EU law interpretation to the Court of Justice of the European Union D) The court must give horizontal direct effect to EU Directives

A company passes a special resolution to reduce its share capital under s 641 Companies Act 2006, supported by a solvency statement from the directors. One director has doubts about the company's solvency but signs the solvency statement anyway. What is the potential consequence for that director? A) No consequence, as the solvency statement is a collective board decision B) The director commits a criminal offence if they did not have reasonable grounds for the opinions expressed in the solvency statement C) The director is liable to a fine but not imprisonment D) The resolution is automatically void if any director had doubts

In a complex commercial dispute, the claimant applies for a cost-capping order under CPR Part 3. Under what circumstances will the court consider making such an order? A) Whenever the estimated costs of one party exceed £100,000 B) Where there is a substantial risk that without an order, costs will be disproportionately incurred and cannot be controlled by case management or detailed assessment C) Whenever either party requests it D) Only in cases involving litigants in person

A builder agrees to construct an extension for a homeowner for £50,000. Midway through construction, the builder demands an additional £10,000 to complete the work, threatening to abandon the site. The homeowner, having no alternative builder available, agrees to pay. After completion, the homeowner pays only the original £50,000. Can the builder enforce the promise to pay the additional £10,000? A) Yes, because the homeowner agreed to the variation and is bound by it B) No, because the builder provided no fresh consideration for the additional payment and exerted economic duress C) Yes, because the builder provided a practical benefit by completing the work D) No, because oral variations of written contracts are unenforceable

A local authority makes a compulsory purchase order (CPO) affecting a landowner's property. The landowner argues the CPO breaches Article 1 of the First Protocol to the ECHR (protection of property). For the CPO to be lawful, which conditions must be satisfied? A) The CPO must be in the public interest and subject to conditions provided for by law, with a fair balance between the public interest and the individual's rights B) The CPO must be approved by a referendum of local residents C) The landowner must have given prior written consent D) The local authority must demonstrate that no alternative land was available