100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Equity & Trusts Law - GDL EXAM SCRIPT (87%, DISTINCTION) CA$11.10   Add to cart
Quickly navigate to
Preview
  2.  
  3. GDL
  4.  
  5. GDL
  6.  
  7. GDL

Exam (elaborations)

Equity & Trusts Law - GDL EXAM SCRIPT (87%, DISTINCTION)

1 review
 104 views  3 purchases
  • Course
  • GDL
  • Institution
  • GDL

This document is my exam script for the Equity & Trusts Law paper on the GDL at The University of Law, which gained a mark of 87% (High Distinction). I found that the main barrier to doing well in GDL exams was not knowing how to write in the exams, so I hope this helps :) Each exam was three...

[Show more]

Preview 3 out of 20  pages

Document information

  • September 5, 2023
  • 20
  • 2021/2022
  • Exam (elaborations)
  • Questions & answers

Subjects

  • equity and trusts
  • fiduciary duties
  • breach of duty
  • remedies
  • express trust
  • resulting trust
  • constructive trust
  • proprietary estoppel
  • insolvency

Written for

  • GDL
  • GDL
  • GDL
All documents for this subject (73)

1  review

review-writer-avatar

By: akatiesutton • 6 months ago

Seller

avatar-seller
lawnotes08

Reviews received

Content preview

Equity & Trusts Law – GDL EXAM SCRIPT (Questions & Answers)

QUESTION 1:

Talish is a director of TrayStack Ltd. He has approached you seeking advice in relation
to the activities of another director, Unita, who has just been made bankrupt.

Three months ago, Unita made three unauthorised withdrawals of company funds
amounting to £80,000:

1. The first unauthorised withdrawal totalled £50,000. Unita used this money as
part-payment towards a new Audi car worth £60,000. Unita paid the balance of
£10,000 for the car using her own money.

2. Unita transferred the second sum of £20,000 into her own bank account
(which, prior to that transfer, had a nil balance). She then paid in the sum of
£40,000 from HeroQuest Ltd. HeroQuest Ltd is not connected to TrayStack Ltd.

Unita withdrew £40,000 to pay off some of her personal debts. The remaining
£20,000 is still sitting as a balance on her bank account.

3. The final withdrawal totalled £10,000. Unita directly transferred this sum
from the company to her boyfriend’s – Vijay’s – bank account. The account
already had £5,000 of Vijay’s money in it. Unita said it was a present for his 50 th
birthday, and Vijay was not suspicious about this at first, because he had
received a similar sum of money from Unita for his 40 th birthday. However, when
he checked his bank statement two days later, Vijay was very surprised to see
that the money had come from TrayStack Ltd and not from Unita’s own bank
account. He decided to spend the money as quickly as possible in case he was
asked to pay it back.

Vijay decided to surprise Unita by booking a river cruise holiday for the two of
them, costing £3,000. He used the remaining £12,000 to purchase corporate
bonds in EDP Finance BV.

Following some investigations, Talish advises that:
● Unita has managed to already put a large dent into the bonnet of her Audi car,
which will have detrimentally impacted its second-hand value.

● The value of EDP Finance BV corporate bonds has increased by 30%.

, ● Talish has received a letter from HeroQuest Ltd. The letter explains that Unita
was a director of HeroQuest Ltd, and that she stole the sum of £40,000 from that
company. HeroQuest Ltd alleges that it is entitled to the whole balance sitting in
Unita’s bank account.

Advise Talish of any remedies TrayStack Ltd may have against:

(a) Unita; and

(b) Vijay.




ANSWER 1:

PART A

Unita

Unita owed fiduciary duties as a director of TrayStack Ltd (‘TS’). She was obliged to
avoid situations where she had, or may have, a direct or indirect interest that conflicts,
or possibly may conflict, with the interests of the company (s.175 Companies Act 2006).
If TS can show that Unita’s breach of fiduciary duties caused loss to the company, they
can bring a personal or proprietary claim against her.

Did a breach of duty cause loss?

Clearly, Unita has fraudulently breached their fiduciary duties by making unauthorised
withdrawals of £80,000 from TS, causing loss.

TS cannot sue Unita as they are bankrupt, but may make proprietary claims. A personal
claim would be worthless as they would not get priority over the Unita’s creditors, while
a proprietary claim would give TS priority.

£50,000 together with £10,000 of Unita’s own money towards a £60,000 new Audi

Unita makes a mixed asset purchase where they buy a new Audi car worth £60,000
using £10,000 of their own money and £50,000 wrongfully taken from the trust. The car
depreciated, due to it being second-hand and because Unita put a large dent in the
bonnet.

, There are two options available to TS to recover the funds (under Foskett v McKeown):


1. Claim a proportionate share of the Audi; or
2. Enforce a lien upon the Audi for the precise amount of money taken.

Lien

TS should enforce a lien over the Audi for the £50,000 taken from the trust as the asset
has greatly depreciated due to Unita putting a large dent in the bonnet.

If the car has depreciated by more than £10,000, TS will not be able to recover all of the
£50,000 stolen by Unita. Because the large dent has greatly depreciated the value of
the car, and although it has only been three months cars depreciate rapidly anyway, this
may be the case.

A lien is a better option than claiming a proportionate share. TS would only get 5/6 of
the depreciated share of the car in proportion to the ratio of TS’s funds spent on the car
compared to the £10,000 of Unita’s own money.

Withdrawing £40,000 to pay off personal debts, with £20,000 remaining

Unita transfers another £20,000 into her bank account. She does not mix it with her own
money as the account initially has a nil balance. Then, she mixes two trust funds
together. Unita puts the £20,000 taken from TS with £40,000 she took from HeroQuest
(‘HQ’).

HQ can also claim for a breach of fiduciary duties that caused loss. As a director of HQ,
Unita also owed fiduciary duties to that company. Clearly, as the letter Talish received
shows, she breached their fiduciary duties by stealing £40,000 from HQ, causing loss.

To find out whether HQ or TS can claim the remaining £20,000, we can apply equitable
tracing to determine who the money belongs to.

The first in first out (FIFO) rule applies (as per Clayton’s Case). The first money paid out
of the bank account belongs to the funds of whichever trust fund’s money was first paid
in.

The £20,000 from TS was paid into the account first, followed by £40,000 from HQ. The
first withdrawal (£40,000) from the account was dissipated on Unita’s personal debts.
Neither company can recover this money. Applying FIFO, all of the £20,000 from TS
would be dissipated, and £20,000 from HQ. The remaining £20,000 in the account could
be claimed by HQ.

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller lawnotes08. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$11.10. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

80461 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
CA$11.10  3x  sold
  • (1)
  Add to cart