Examiners’ reports 2015

Examiners’ reports 2015

LA3002 Law of trusts – Zone A

Introduction
It is important to take care at the beginning of the examination to read the questions
carefully, determine what each question is about and decide which four questions to
answer. There is a limited range of topics that might be examined and no two
questions will be about the same topic (although some slight overlap may occur).
The eight questions are set to allow you to demonstrate your knowledge and
understanding of the law and your ability to apply it to specific issues. There are no
trick questions. If you ask yourself, ‘why are the examiners asking me this question’,
you can identify what the question is really about and whether it will provide you
with a good opportunity to perform at your best.
Always pay careful attention to the actual question asked. For example, Question 5
concluded as follows: ‘Zach now claims that the Eastco Ltd shares, Blackacre, and
Whiteacre were all held on resulting trust for Margaret when she died and therefore
form part of her estate. Advise Zach.’ Yet a surprising number of candidates
attempted this question without discussing resulting trusts. Similarly, Question 6
asked, ‘What proprietary claims, if any, does Felix have?’ Again, a surprising
number of candidates spent a long time discussing his personal claims.
After you decide which questions to answer, divide the remaining time evenly
among the four questions, and for each question, plan your answer before you
begin writing. This will help ensure that you do not miss important points and that
your answer will be coherent and well presented. While this may leave you with only
30 minutes of actual writing time per question, a shorter, thoughtful and relevant
answer is much better than a longer, rambling and sometimes irrelevant one.
As in previous years, the most common reasons why candidates performed poorly
on the examination were because they (a) failed to manage their time properly and
thus did not provide four complete answers or (b) failed to address questions
properly and wrote one or more answers that were mostly irrelevant.

Comments on specific questions

Question 1
John Elsinore died nine years ago. Under his will, his 500 shares in Elsinore
Brewery were settled in the Elsinore Family Trust for his widow Gertrude for
life, with the remainder to be divided equally between their children, Pam and
Rosie. Claude and Henry were appointed as trustees. Gertrude was given a
power to appoint the capital to any of her children as she might see fit in her
lifetime.

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Six years ago, Pam created a valid charitable trust (called the “Mouse Trust”)
for the protection of small rodents. Bob and Doug were appointed as trustees
and the trust deed contained a covenant that Pam would transfer any Elsinore
Brewery shares to which she became absolutely entitled to Bob and Doug to
be added to the Mouse Trust.
Three years ago, Gertrude wrote to Claude and Henry saying that she wanted
to exercise her power of appointment to transfer 100 Elsinore shares to Pam.
Nothing further was done about this.
Last year, Henry retired as trustee of the Elsinore Family Trust and Doug was
appointed as his replacement.
Gertrude died recently. Pam and Rosie want to terminate the trust so that
each receives 250 Elsinore Brewery shares. Claude and Doug seek your
advice. They are happy to transfer 200 shares to Rosie, but believe that 300
shares now belong to the Mouse Trust because of (a) Gertrude’s intention to
appoint 100 shares to Pam and (b) Pam’s covenant with Bob and Doug.
Advise Claude and Doug.
General remarks
This problem concerns incomplete gifts and promises to create trusts, which are
discussed in Section 6.2 and Chapter 9 of the subject guide and in Chapter 8 of
Penner.
Law cases and other references the examiners would expect you to use
Re Pryce [1917] 1 Ch 234; Pennington v Waine [2002] EWCA Civ 227; Re Ralli’s
Will Trusts [1964] 1 Ch 288.
Common errors
Failing to address one or more of the main issues.
A good answer to this question would…
first discuss the effect of Gertrude’s request to exercise her power of appointment in
favour of Pam. The rule in Re Rose [1952] Ch 499 and Mascall v Mascall [1984]
EWCA Civ 10 would not apply since Gertrude did not do everything within her
power to complete the gift of 100 shares and Pam does not have the power to
compel its completion. However, the question is whether it would now be
unconscionable, according to Pennington v Waine [2002] EWCA Civ 227, for
Claude and Doug not to complete the gift.
The second part of the answer should discuss the effect of Pam’s covenant with
Bob and Doug, as trustees of the Mouse Trust, and the problems of enforcing a
covenant to settle by the intended trustees. It should then note that Doug is now a
joint owner of the promised assets as a trustee of the Elsinore Family Trust and
discuss whether he now holds Pam’s shares in trust for her as a trustee of that trust
or for charity as a trustee of the Mouse Trust, in accordance with Buckley J’s obiter
dictum in Re Ralli’s Will Trusts [1964] 1 Ch 288.
Poor answers to this question…
missed one or more of the important issues.
Student extract
Thus it shows that covenants to settle are sufficient in making and enforcing.
At common law these covenants are provided in registered deeds thus the
covenantee has a right to sue the covenantor for damages if he does not fulfil
what he has promised. So Bob and Doug would have the power to sue Pam
for damages if she does not perform her covenant. (Fletcher v Fletcher)

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Comment on extract
This ignores the later authority of Re Pryce (1917), in which Eve J held that trustees
should not enforce covenants in favour of volunteer beneficiaries. This must also
apply to covenant to settle assets in trust for a charitable purpose. Also, the
candidate failed to note that Doug already had title to the shares in question.
Question 2
“The rules relating to certainty of subject matter are illogical. There is no
good reason to treat company shares and bank accounts differently from
gold ingots or identical cases of wine. If a trust to provide a reasonable
income is acceptable, then there is nothing wrong with a trust of the bulk of
an estate.”
Discuss.
General remarks
This statement invites you to write an essay on certainty of subject matter, which is
discussed in Section 5.2 of the subject guide and in Chapter 7 of Penner.
Law cases and other references the examiners would expect you to use
Palmer v Simmonds (1854) 2 Drew 221, 61 ER 704; Re Golay [1965] 2 All ER 660;
Re London Wine Co (Shippers) Ltd (1975) 126 NLJ 977; Hunter v Moss [1993]
EWCA Civ 11; Re Goldcorp Exchange Ltd [1994] UKPC 3.
Common errors
Discussing all three certainties. Discussing Hunter v Moss, but ignoring the last
sentence of the statement.
A good answer to this question would…
focus specifically on the problem of identifying part of a bulk and the distinction
drawn in Hunter v Moss [1993] EWCA Civ 11 between tangible and intangible
assets. It would note the difference between, for example, a trust of 50 out of 950
shares and a trust in which the beneficiaries are tenants in common in the same
proportions, and the analysis in Pearson v Lehman Brothers Finance SA [2010]
EWHC 2914 (Ch). It would also discuss the problem of conceptual uncertainty in
relation to ‘the bulk of an estate’ (from Palmer v Simmonds) and ‘reasonable
income’ (from Re Golay).
Poor answers to this question…
merely described the relevant cases and rules without analysis, or were a general
essay on the three certainties.
Student extract
It is likely that ‘Hunter v Moss’ may be the correct authority as share are
intangible and are impossible to be segregated.
Comment on extract
The problem in Hunter v Moss was not that it was impossible to segregate the
shares to be held in trust from the rest, but merely that the settlor had failed to do
so. There was no discussion in the answer of the subsequent justification of the
outcome in that case on the basis of an equitable tenancy in common, nor was
there any discussion of ‘reasonable income’ and ‘the bulk of an estate’.
Question 3
“Every trust for a private purpose must confer some benefit on someone. The
people who will benefit from the performance of the trust must therefore be
its beneficiaries. This is true even of a trust to care for a specific animal since
that trust will benefit the person responsible for the animal’s care. It is

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impossible to imagine a private purpose trust without at least one

beneficiary.”
Discuss.
General remarks
This statement invites you to write an essay on private purpose trusts, which are
discussed in Chapter 11 of the subject guide and in Chapter 9 of Penner.
Law cases and other references the examiners would expect you to use
Re Denley’s Trust Deed [1969] 1 Ch 373.
Common errors
Failing to discuss the beneficiary principle, but merely describing the situations in
which private purpose trusts are permitted. Writing about charity, even though the
next question is about charity, not this one.
A good answer to this question would…
discuss the beneficiary principle and the reasons why private purpose trusts are
normally invalid if they lack beneficiaries. It would discuss the anomalous exception
for testamentary trusts for the care of specific animals and how they are enforced. It
would then discuss the approach taken in Re Bowes [1896] 1 Ch 507 and Re
Denley’s Trust Deed [1969] 1 Ch 373 of interpreting a trust for a private purpose as
a trust for the persons who would benefit from its performance.
Poor answers to this question…
failed to discuss the beneficiary principle or Re Denley’s Trust Deed.
Student extract
At first sight, the question purports to reflect the enforcer theory regarding
private purpose trusts, put forward by Hayton. This essay will argue,
however, that the question conflates the conceptual term of ‘beneficiary’ in
the trust relationship with the common parlance of ‘someone benefitting’ from
a purpose being carried out. After setting out the conceptual trust model and
indicating the problematic nature of private purpose trusts, the essay will then
refer to the case law to demonstrate the so-called exceptions to the no-
private purpose trust rule, most notably Denley’s WT. A brief reference to
Sanderson type trust and their role in carrying out a private purpose, the
essay will go on to conclude that the question’s assertion fails on the
conceptual reading of beneficiary but is accurate on the popular
understanding someone who benefits.
Comment on extract
This is the excellent opening paragraph of an excellent essay. It confidently and
clearly sets out what the candidate intends to say. Legal writing is not mystery
writing. Always tell your readers exactly what you intend to say so that they can
follow your arguments more easily.
Question 4
Roald died recently. According to his will, his entire estate is to be sold and
the proceeds are to be held in trust to be invested, with the income to be used
each year as follows:
“(a) £25,000 to relieve my children and grandchildren from needy
circumstances should they fall on hard times and otherwise to
educate the British public regarding the aims and
achievements of the Campaign for Nuclear Disarmament;

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(b) the remainder to be used to further the purposes of the Sisters

of St Matilda.”
The Sisters of St Matilda were nuns who lived in an enclosed community,
maintained beautiful gardens, and prayed. Once each year, on the feast of St
Matilda, members of the public were invited to join the nuns for prayers and
enjoy their gardens for the day. The community was dissolved five years ago
and the gardens are now a public park owned by the local government.
Danny was appointed as Roald’s executor and seeks your advice regarding
the validity of these will trusts.
Advise Danny.
General remarks
This problem concerns charity, which is discussed in Chapter 10 of the subject
guide and in Chapter 13 of Penner.
Law cases and other references the examiners would expect you to use
Charities Act 2011; Re Harwood [1936] Ch 285; Gilmour v Coats [1949] UKHL 1;
Re Scarisbrick [1951] Ch 622.
Common errors
Failing to discuss whether the clause ‘to relieve my children and grandchildren from
needy circumstances should they fall on hard times’ could be a charitable purpose
for the relief of poverty. Treating it instead as a private purpose trust without
beneficiaries, which is not the case as the children and grandchildren would be a
class of beneficiaries if the trust was not charitable.
A good answer to this question would…
note that clause (a) appears to create a trust for the relief of poverty and
advancement of education, while clause (b) appears to create a trust for the
advancement of religion. You should cite the relevant provisions of the Charities Act
2011 and discuss the potential problems with each clause with respect to the public
benefit requirement. Is the trust for the relief of needy children and grandchildren
valid as a trust for poor relations (Re Scarisbrick (1951)) or does s.4(2) of the
Charities Act 2011 change the law? Is the trust for education regarding the
Campaign for Nuclear Disarmament really for political purposes (Re Hopkinson
(1949))? Did the interaction of the Sisters of St Matilda with the public for one day
each year provide a sufficient public benefit (Gilmour v Coats (1949))? You should
also consider the possibility of the assets being used cy près if the trust in clause
(b) was charitable. Note that this is a case of initial failure and so it would be
necessary to find that Roald had a general charitable intention. While gifts to named
charitable institutions are normally regarded as gifts intended specifically for those
institutions (Re Harwood (1936)), it might be noted that the trust was ‘to further the
purposes of the Sisters of St Matilda’, which might indicate a general charitable
intention.
Poor answers to this question…
failed to consider the problem of public benefit as it affects each of the three
clauses of the trust.
Student extract
The second step is to see whether the clause is beneficial to the public or a
section of it. … [P]ublic benefit is to be understood in two senses: the nature
of the purpose addressed by the charity must be a benefit to the public, and
those who benefit from the charity must be sufficiently numerous in order to
constitute a section of the public as opposed to a private class of individuals.
If this can be proved, then the trust will be held to be beneficial to the public.

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Finally, it must be for exclusively charitable purposes. The issue is whether

this is for exclusively charitable purposes or whether the objective is a
political one. If the trust is ‘tainted with politics’ (has political aims) then it is
not valid as a charitable trust (McGovern v AG). Therefore it must be shown
that the trust is not tainted with politics and that it does not seek to change
any laws.
Comment on extract
This part of the answer relates to the clause: ‘to educate the British public regarding
the aims and achievements of the Campaign for Nuclear Disarmament’. It could be
improved in three ways. First, it states the law without applying it to the facts of the
problem. It should offer an opinion about whether the clause is valid or not. Second,
it does not adequately explain the distinction between ‘a section of the public’ and ‘a
private class of individuals’. A very large class will not be a section of the public if it
is defined in relation to the settlor (e.g. an employer of a large company providing a
trust fund to educate its employees and their families). Third, the problem of politics
relates to the question whether the purpose is beneficial to the public and not to
whether the trust is exclusively charitable. The court is unable to determine whether
a change to the law would be beneficial to the public or not.
Question 5
Margaret was a wealthy widow. In 2009, she transferred 500 shares in Eastco
Ltd to her son Alan. She also paid the purchase price for a fee simple estate
in Blackacre to be conveyed to her friend Dan. After the transactions were
complete, Margaret telephoned Dan and told him that Blackacre was
purchased in his name to be held in trust for Margaret’s infant daughter Ellen.
In 2010, fearing she would have to sell her fee simple estate in Whiteacre in
order to satisfy her creditors, Margaret transferred it to her niece Bella. Bella
orally agreed to re-transfer the estate to Margaret if the creditors cancelled
the debt.
In 2011, Margaret married Zach. In 2012, she made a new will naming Zach as
the sole beneficiary of her estate and she also repaid all her creditors.
Margaret died in 2014. Zach now claims that the Eastco Ltd shares, Blackacre,
and Whiteacre were all held on resulting trust for Margaret when she died and
therefore form part of her estate.
Advise Zach.
General remarks
This problem concerns resulting trusts, which are discussed in Chapter 12 of the
subject guide and in Chapter 5 of Penner.
Law cases and other references the examiners would expect you to use
Law of Property Act 1925, s.53(1)(b), s.60(3); Tinsley v Milligan [1994] 1 AC 340;
Tribe v Tribe [1996] Ch 107; Lohia v Lohia [2001] EWCA Civ 1691; Ali v Khan
[2002] EWCA Civ 974.
Common errors
Failing to apply s.60(3) of the Law of Property Act 1925 properly. Applying it to
Blackacre instead of Whiteacre or to both, or discussing it in relation to Whiteacre
but then forgetting about it when discussing the effect of Margaret’s illegal purpose.
Discussing secret trusts in relation to Blackacre even though the purchase for Dan
was inter vivos and not a testamentary disposition. Suggesting that the presumption
of advancement might apply in favour of Ellen even though Blackacre was
purchased in Dan’s name.

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A good answer to this question would…

discuss whether the apparent gift (i.e. unexplained transfer) of shares from the
widow Margaret to her son Alan would attract the presumption of advancement or
the presumption of resulting trust and note that either presumption can be rebutted
by evidence of intention. It would note that Margaret’s purchase of Blackacre for her
friend Dan would raise the presumption of resulting trust. Her phone call would
confirm that she did not intend to give Blackacre to Dan, but would not be sufficient
to create an enforceable express trust for her daughter Ellen because of the lack of
signed writing required by LPA 1925, s.53(1)(b). Margaret’s transfer of Whiteacre to
her niece Bella would probably not raise a presumption of resulting trust: LPA 1925,
s.60(3); Lohia v Lohia [2001] EWCA Civ 1691; Ali v Khan [2002] EWCA Civ 974.
Whether evidence of Margaret’s intention to create a trust for herself and hide
Whiteacre from her creditors was admissible would depend on whether any of those
creditors were prejudiced by her illegal purpose: Tinsley v Milligan [1994] 1 AC 340;
Tribe v Tribe [1996] Ch 107.
Poor answers to this question…
misapplied the presumptions and s.60(3) and misunderstood the effect of illegality.
Student extract
Margaret provided the purchase money of Blackacre and therefore it may be
argued that a resulting trust in favour of Margaret. However, under s 60(3) of
Law of Property Act 1925, in a voluntary conveyance of interest involving
land, a resulting trust not be presumed merely because the property was not
expressly transferred for the use of benefit of the grantee. Following Lohia v
Lohia, court require evidence showing that the transferor/conveyor, that is
Margaret, had the intention to retain equitable interest in the property. …
Regarding the Whiteacre, Zach may also want to rely on the general principle
of pretend intention resulting trust. … However, as mentioned above,
following s 60(3) of LPA 1925 and Lohia v Lohia, a resulting trust is not
presumed merely because the property was transferred voluntarily and was
not expressly transferred for the use and benefit of the grantee. Following Ali
v Khan, Zach may have to adduce evidence to show Margaret had a
continuous intention to retain the equitable interest.
Also, following Tinsley v Milligan, a person can only prove his/her interest in a
property without relying on his/her impropriety. Here, to prove Margaret had
intended to retain Whiteacre’s equitable interest, Zach might have to adduce
evidence that Margaret’s arrangement with Bella was to avoid legitimate
creditor from claiming Margaret’s asset in case of default.
Having said that, Zach may seek to rely on Tribe v Tribe and withdrawal
principle. In that case, the court allow evidence of wrongful purpose if the
person had withdrawn from the wrongful transaction before the wrongful
purpose was fully or partly carried out.
Comment on extract
This candidate made the common error of thinking that s.60(3) applied to
Margaret’s purchase of Blackacre in Dan’s name, which was not a ‘voluntary
conveyance’ from her to Dan. They did correctly apply s.60(3) to the transfer of
Whiteacre to Bella, which meant that Zach had the onus of proving that it was not
intended as a gift and that Margaret’s illegal purpose might make that difficult.
Question 6
Oscar is the trustee for Felix of a bank account with Unger Bank. In January,
there was £50,000 on deposit in that trust account.

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Vinnie is Oscar’s closest friend. Vinnie lost his job and was struggling to
make the monthly payments due on the mortgage over his house. In
February, Oscar withdrew £25,000 from the trust account and used it to
discharge Vinnie’s mortgage. Vinnie was unaware of Oscar’s breach of trust
and thanked him for his generosity.
In March, Oscar withdrew £10,000 from the trust account and used it to
discharge his own personal loan from Madison Bank. Oscar had obtained the
loan last November in order to buy a new car. The loan was unsecured.
In April, Oscar received a cheque for £200 as a birthday gift from his aunt. He
deposited that cheque in the trust account. He then withdrew £10 from the
trust account and used it to buy a lottery ticket. Oscar wrote a note to himself
that the lottery ticket was purchased using the money he received from his
aunt and not from the money held in trust for Felix. Oscar won £20,000 with
the lottery ticket and deposited that money in his own bank account with
Madison Bank.
In May, Oscar became bankrupt. His only significant assets are his car (now
worth £8,000), the £20,000 in his bank account with Madison Bank, and the
£15,190 remaining in the trust account.
Felix has discovered what has happened and seeks your advice. He knows
that his personal claim against Oscar for breach of trust may have little value
now that Oscar is bankrupt. What proprietary claims, if any, does Felix have?
Advise Felix.
General remarks
This problem concerns tracing and proprietary claims to recover misappropriated
trust assets, which are discussed in Section 19.2 of the subject guide and in
Chapter 11 of Penner.
Law cases and other references the examiners would expect you to use
Re Hallett’s Estate (1879) 13 Ch D 696 (CA); Re Oatway [1903] 2 Ch 356;
Bishopsgate Investment Management Ltd v Homan [1995] Ch 211; Boscawen v
Bajwa [1995] EWCA Civ 15; Foskett v McKeown [2001] 1 AC 102.
Common errors
Not recognising or properly explaining the claim for subrogation as a security
interest in Vinnie’s house, but thinking that Felix would share ownership of the
house with Vinnie under a constructive trust. Misapplying the tracing rules that
would apply to the mixture of Oscar’s own money with the money in the trust
account. Suggesting that the lowest intermediate balance rule was relevant even
though the balance in the trust account following the mixture never dropped below
£15,190 and the question was whether the £10 withdrawn from that account
belonged to the trust or to Oscar.
A good answer to this question would…
focus on the actual question asked regarding Felix’s proprietary claims and not
waste time discussing the personal liabilities of Oscar or Vinnie. Felix should claim
a right to an equitable mortgage over Vinnie’s house by way of subrogation:
Boscawen v Bajwa [1995] EWCA Civ 15. He could try to claim a trust of Oscar’s car
through backwards tracing: Smith, L. ‘Tracing into the payment of a debt’ (1995);
Bishopsgate Investment Management Ltd v Homan [1995] Ch 211. He could also
claim a trust of Oscar’s Madison Bank account on the basis that the entire balance
of £20,000 is the traceable proceeds of the £10 withdrawn from the trust account to
buy the lottery ticket: Foskett v McKeown [2001] 1 AC 102. Oscar should not be
allowed to resolve in his own favour the evidential difficulty created by his wrongful

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mixture of his own assets with the trust funds. However, if we treated this as a
presumption that Oscar acted honestly, rather than as a presumption against
wrongdoers, we would have to assume that he used his own money to buy the
ticket.
Poor answers to this question…
misunderstood subrogation and the theory of backwards tracing and misapplied the
tracing rules.
Student extract
Oscar withdrew £25,000 from the trust account and used it to discharge
Vinnie’s mortgage. It is submitted that according to Boscawen v Bajwa,
subrogation can be done. That is, Felix is entitled to replace the original
mortgagee in respect of the £25,000. Felix is therefore can secure the
misused £25,000 by holding interest in Vinnie’s house.
In March, Oscar further withdrew £10,000 from the trust fund and used it to
discharge his own personal loan from Madison Bank. It was also told that
Oscar had obtained the loan last November to buy a new car, which is now
worth £8,000 and the loan was unsecured. As the loan was unsecured, it is
not worth to apply the subrogation principle but Felix is entitled to trace the
money into the car. In Bishopsgate Investment v Homan, if a but-for test is
satisfied, the backward tracing can be performed. The test is that if it is
proved that the money borrowed is for the purpose of the relevant purchase
of the property, the claimant is entitled to claim the property. Therefore, on
the facts, Felix is entitled to claim Oscar’s car.
Comment on extract
The candidate correctly applies subrogation to the discharge of Vinnie’s mortgage
and explains why there is no point using it for the car loan. The candidate also
considers backwards tracing, but misunderstands it. Backwards tracing is really
only a theory without direct judicial support. It seems unlikely that Oscar purchased
the car intending to pay for it with misappropriated trust money. There would be no
need to get a loan if that was his intention.
Question 7
“Knowing receipt should be called dishonest receipt. No one will be
personally liable for receiving money in breach of trust unless they choose to
spend it with actual knowledge of the breach, and that is dishonest.”
Discuss.
General remarks
This statement invites you to write an essay on knowing receipt, which is discussed
in Section 16.6 of the subject guide and in Chapter 11 of Penner.
Law cases and other references the examiners would expect you to use
Re Montagu’s Settlement Trusts [1987] 1 Ch 264; BCCI v Akindele [2001] Ch 437.
Common errors
Confusing the reference to ‘dishonest receipt’ in the statement with dishonest
assistance.
A good answer to this question would…
focus on the standard of knowledge required for liability, the different approaches
taken in Re Montagu’s Settlement Trusts [1987] 1 Ch 264 and BCCI v Akindele
[2001] Ch 437, the argument by Mitchell and Watterson in ‘Remedies for knowing
receipt’ (2010) that it is really liability for breach of trust by the recipient and the
arguments made by Birks and others that it should be replaced or supplemented

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with strict liability for unjust enrichment, subject to defences. You could compare
knowing receipt with dishonest assistance, but should not merely write a general
essay on both kinds of liability.
Poor answers to this question…
were a general essay on dishonest assistance and knowing receipt.
Student extract
A recipient will be personally liable if he receives the trust property in breach
of trust. This makes it clear that the recipient has to dig into his own pocket to
restore the property. The main element is ‘knowing’. If he knows the status of
the property but ignores the facts and start using the property as his own,
then he will be, definitely, liable. If he receives the property, he has the duty
to hold the property for the beneficiary. Normally, this would require to return
the property to the trustee unless the trustee was not fraudulent in his
trusteeship. In that situation he will apply the court for the correct direction. If
he does otherwise, he will be personally liable. This give rise to ‘custodial
trustee.’ He has no obligation to hold the property but he must hold it to the
order of the rightful trustee. According to Mitchell and Watterson, a knowing
receipt is a distinct, custodial and primary liability. This is considered as
constructive trustee, because he has no duty to hold the property under an
express trust but equity will require him to hold it as constructive trustee.
Comment on extract
This might have been expressed a little better: for example, the candidate wrote ‘not
fraudulent’ when it appears from the context that they meant ‘fraudulent’. However,
it does convey a good basic understanding of the nature of liability for knowing
receipt, as explained by Mitchell and Watterson. It could be improved by explaining
more fully the difference between custodianship and the full range of duties to which
express trustees are normally subject.
Question 8
“The statutory rules that govern the execution of wills are now almost
completely pointless since they can safely be ignored by any testator who
chooses to use a secret trust.”
Discuss.
General remarks
This statement invites you to write an essay on secret trusts, which are discussed in
Chapter 8 of the subject guide and in Chapter 6 of Penner.
Law cases and other references the examiners would expect you to use
Wills Act 1837, s.9, s.15.
Common errors
Not focusing on the statement.
A good answer to this question would…
explain the formalities required by the Wills Act 1837 for making wills and codicils,
which require signed writing and two witnesses (in s.9), invalidate gifts to witnesses
and their spouses (in s.15) and require another properly executed will or codicil to
change a will (in s.20). It would then discuss how secret trusts enable testators to
get around those restrictions and the justifications for this. It might go on to discuss
the limits on secret trusts by requiring communication and acceptance by the secret
trust before death (for fully secret trusts) or on or before execution of the will (for
half secret trusts).

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Poor answers to this question…

were merely general essays on secret trusts that did not focus on the statement.
Student extract
In the case of Re Young as there was a settled principle that the beneficiary
of the will or his spouse could not attest the will. Here a chauffeur who was
the beneficiary of the trust he attested the will, thus it was a valid trust.
Comment on extract
This raised an interesting and relevant point, but failed to discuss it. The answer
would be improved if it cited s.15 of the Wills Act 1837, explained how it invalidated
gifts to witnesses, explained how witnesses could receive gifts either as secret
beneficiaries or secret trustees, discussed the theories that made that possible and
criticised the law on this issue.

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