Question 1

The common law has always permitted a trust to be varied in certain circumstances.

Accepted Answer

False

Question 2

When does section 339 of the Insolvency Act 1986 apply?

Accepted Answer

Section 339 of the Insolvency Act 1986 applies in the context of the United Kingdom's insolvency law, specifically dealing with transactions at an undervalue. This section is relevant when an individual has entered into a transaction with another party, and that transaction took place within a certain time period before the individual was declared bankrupt.

The key points when Section 339 applies are as follows:

1. **Timeframe**: The transaction must have occurred within the relevant time period before the commencement of the bankruptcy. This period is typically two years before the bankruptcy petition for transactions with connected parties (such as relatives or associates), and one year for transactions with unconnected parties.

2. **Undervalue Transactions**: The transaction is considered at an undervalue if the bankrupt party either:
   - Received no consideration at all or significantly less than the value of the asset at the time of the transaction.
   - Entered into a transaction that was designed to put assets beyond the reach of creditors or otherwise prejudice the interests of creditors.

3. **Insolvency**: At the time of the transaction, the individual must either have been insolvent or become insolvent as a result of the transaction. Insolvency means that the individual was unable to pay their debts as they fell due, or their liabilities exceeded their assets.

4. **Challenge by Trustee in Bankruptcy**: The trustee in bankruptcy has the power to challenge such transactions and potentially have them set aside. If the court finds that a transaction at an undervalue has occurred, it can make an order to restore the position to what it would have been if the transaction had not taken place. This might involve the return of assets or payment of an equivalent value to the bankrupt's estate.

5. **Defenses**: There are defenses available to those who are challenged under this section. For example, if the transaction was carried out in good faith for the purpose of carrying on a business and there were reasonable grounds for believing that the transaction would benefit the individual's financial situation, it may not be deemed at an undervalue.

It's important to note that the specifics of how Section 339 is applied can be complex and may depend on the particular circumstances of each case. Legal advice is often necessary to navigate the intricacies of the Insolvency Act and to understand the implications of Section 339.

Question 3

What was important about the decision in Re Butterworth (1881-81) LR 19 Ch D 588?

Accepted Answer

The decision in Re Butterworth (1881-81) LR 19 Ch D 588 is an important case in the context of English trust law, particularly concerning the duties and powers of trustees. In this case, the court dealt with the issue of whether trustees had the authority to delegate their duties.

The case centered around trustees who were given the power to carry on a testator's business for the benefit of the beneficiaries. The trustees, however, instead of managing the business themselves, appointed a manager to run it. The business eventually failed, and the question arose as to whether the trustees had acted improperly by delegating their responsibility to manage the business to someone else.

The court held that trustees have a duty to perform their functions personally and cannot delegate those functions unless they have been expressly authorized to do so by the trust instrument or by statute. This principle is based on the fiduciary nature of the trustees' role, which requires them to act in the best interests of the beneficiaries with the utmost good faith, care, and diligence.

The decision in Re Butterworth established the general rule that trustees cannot delegate their duties, which is a fundamental principle in trust law. It emphasizes the personal responsibility of trustees to administer the trust with due care and skill. However, the case also recognized that there may be circumstances where delegation is necessary and appropriate, provided that it is done in accordance with the terms of the trust or with statutory provisions.

The principle against delegation has been modified and relaxed in subsequent legal developments, recognizing that in modern times, it is often impractical for trustees to personally carry out all aspects of trust administration. Modern trust law includes provisions that allow trustees to delegate certain duties under specific conditions, such as employing agents, accountants, or investment advisors to assist in the management of trust affairs.

Re Butterworth remains an important case because it laid down the initial strict rule against delegation, which has influenced the development of trust law and the understanding of the fiduciary responsibilities of trustees. Subsequent legislation and case law have built upon this foundation to create a more flexible approach to the delegation of trustees' duties, while still maintaining the core principle that trustees must act in the best interests of the beneficiaries.

Question 4

What is a trustee in bankruptcy's primary task?

Accepted Answer

The answer of What is a trustee in bankruptcy's primary...

Question 5

Which section of the Trustee Act 1925 permits trustees or beneficiaries to seek the court's consent to vary a trust by granting the trustees a power either to acquire or dispose of trust property?

Accepted Answer

The answer of Which section of the Trustee Act 1925...

Question 6

Re Windeatt's Will Trusts discusses the law of which other jurisdiction?

Accepted Answer

The answer of Re Windeatt's Will Trusts discusses the law...

Question 7

What is a protective trust?

Accepted Answer

The answer of What is a protective trust?...

Question 8

Following Chapman v Chapman, the court only had authority to sanction variation of a trust in four strictly limited situations. What were these?

Accepted Answer

The answer of Following Chapman v Chapman, the court only...

Question 9

The ability of the beneficiaries to vary the trust comes from the decision in…

Accepted Answer

The answer of The ability of the beneficiaries to vary...

Question 10

In which case did Lord Evershed MR explain the basic rule that it is not possible to vary a trust?

Accepted Answer

The answer of In which case did Lord Evershed MR...

Question 11

Which of these are limitations to the rule in Saunders v Vautier?
A)The beneficiaries are all adults who are mentally capable ('sui juris').
B)The beneficiaries must all have an absolute, vested interest in the trust property; and.
C)The trustees must agree to end the trust.
D)The beneficiaries have no other desire to end the trust by transferring the legal interest in the trust property to themselves.

Accepted Answer

The answer of Which of these are limitations to the...

Question 12

The Variation of Trusts Act 1958 is much wider in scope than section 57 of the Trustee Act 1925.

Accepted Answer

The Variation of Trusts Act 1958 allows for a wider range of alterations to be made to a trust than section 57 of the Trustee Act 1925, which only permits changes to be made for the benefit of beneficiaries who cannot be found or who cannot give their consent.

Question 13

The Variation of Trusts Act 1958 expressly confirming that the purpose behind its enactment was to remedy the restrictive decision in Chapman v Chapman.

Accepted Answer

The Variation of Trusts Act 1958 was passed to address the restrictive approach taken in Chapman v Chapman and provide greater flexibility in the administration of trusts.

Question 14

The House of Lords in Chapman v Chapman (1954) AC 429 narrowed the discretion of the court to vary a trust.

Accepted Answer

In Chapman v Chapman (1954) AC 429, the House of Lords held that the court's power to vary a trust was narrower than had previously been thought.

Question 15

Varying a trust to avoid tax can result in large savings to the beneficiaries.

Accepted Answer

Varying a trust, for example by changing the distributions or the terms of the trust, can have tax implications that can result in significant savings for the beneficiaries. This is because different tax rates and exemptions may apply depending on the structure of the trust and the timing of distributions. However, it is important to note that any changes to a trust should be carefully considered and made with the advice of a trusted legal and tax professional.

Question 16

How is a successful action under s 339 Insolvency Act 1986 undertaken?

Accepted Answer

The answer of How is a successful action under s...

Quiz 10: Variation of a Trust and Setting a Trust Aside