Breach of Trust by Trustees: Consequences and Remedies for Beneficiaries

Question 1

Which of the following is NOT a core ethical principle guiding trustees?

Accepted Answer

Prioritizing their personal interests over the interests of the trust

Answer

Acting in the best interests of beneficiaries

Answer

Exercising prudence and care in decision-making

Question 2

Which of the following is NOT a legal remedy available to beneficiaries upon a breach of trust?

Accepted Answer

Recission

Answer

Account of profits

Answer

Compensatory damages

Answer

Equitable compensation

Question 3

Which of the following is NOT a key element of the tort of knowing receipt?

Accepted Answer

Good faith

Answer

Knowledge of the breach of trust

Answer

Receipt of trust property

Answer

Intent to assist the breach of trust

Question 4

A key characteristic of a constructive trust is that:

Accepted Answer

It arises by operation of law

Answer

It is created by an express declaration

Answer

It can only be created during the settlor's lifetime

Answer

It is revocable at the settlor's discretion

Question 5

The key distinction between a resulting trust and a constructive trust is that:

Accepted Answer

Resulting trusts arise from presumed intention, while constructive trusts are imposed by the court

Answer

Constructive trusts are more flexible than resulting trusts

Answer

Resulting trusts can only be created during the settlor's lifetime

Answer

There is no difference between the two types of trusts

Question 6

Identify the option that does NOT represent a legal limitation on a trustee's discretionary powers:

Accepted Answer

Necessity to consult with beneficiaries before exercising discretion

Answer

Obligation to act in the best interests of the beneficiaries

Answer

Requirement to treat beneficiaries impartially

Answer

Prohibition against conflicts of interest

Question 7

Which action is NOT available to beneficiaries in response to a breach of trust?

Accepted Answer

Terminating the trust

Answer

Seeking damages

Answer

Obtaining an injunction

Answer

Appointing a new trustee

Question 8

Which legal obligation mandates trustees to prioritize the well-being of beneficiaries above all else?

Accepted Answer

Duty of Loyalty

Answer

Duty of Care

Answer

Duty of Impartiality

Question 9

What is the primary duty of a trustee?

Accepted Answer

To act in the best interests of the beneficiaries, and in accordance with the terms of the trust.

Answer

To ensure that the trust property is held securely.

Answer

To maximize the income generated by the trust assets.

Answer

To comply with the terms of the trust deed only.

Question 10

What is the key difference between a breach of trust and a breach of contract?

Accepted Answer

A breach of trust involves a fiduciary duty, while a breach of contract involves a legally binding agreement.

Answer

A breach of trust is always intentional, while a breach of contract may be unintentional.

Question 11

What is the legal framework for enforcing the duties of trustees?

Accepted Answer

Both equity and the common law.

Answer

Equity only

Answer

Statute law only

Answer

The common law only

Question 12

What is the role of the court in supervising trusts?

Accepted Answer

To ensure that the trust is being administered in accordance with its terms and that the trustees are fulfilling their duties.

Answer

To appoint and remove trustees only.

Answer

To resolve disputes between the trustees and the beneficiaries only.

Question 13

What is the key difference between a constructive trust and an express trust?

Accepted Answer

A constructive trust is imposed by law, while an express trust is created intentionally by a settlor.

Answer

A constructive trust benefits the settlor, while an express trust benefits a third party.

Answer

A constructive trust is revocable, while an express trust is irrevocable.

Question 14

What was the purpose of the Trustee Act 1925?

Accepted Answer

To consolidate and reform the law relating to trusts in England and Wales.

Answer

To make it easier for trustees to invest trust property.

Answer

To abolish the doctrine of cy-près.

Answer

To create a new type of trust known as a statutory trust.

Question 15

Which of the following is a duty of a trustee when investing trust property?

Accepted Answer

To act prudently and diversify the investments where appropriate.

Answer

To invest only in blue-chip companies.

Answer

To maximize the return on investment, regardless of the level of risk.

Question 16

Which of the following is NOT a core fiduciary duty of a trustee under English Trust Law?

Accepted Answer

To generate profits for beneficiaries, even if not expressly authorised by the trust instrument.

Answer

To provide a regular and comprehensive account of the trust's administration to the beneficiaries.

Answer

To safeguard and manage the trust property with appropriate care and diligence.

Answer

To act exclusively in the best interests of the beneficiaries, even if at odds with personal interests.

Question 17

In English Trust Law, what constitutes a breach of trust?

Accepted Answer

An act or omission by a trustee that contravenes their legally established duties, irrespective of intention.

Answer

A decision by the trustee that, in hindsight, proves financially disadvantageous to the beneficiaries.

Answer

Non-compliance with a specific court order unrelated to the trust in question.

Answer

An honest mistake made by a trustee while acting within the scope of their duties.

Question 18

In the context of breach of trust, what is a surcharge order?

Accepted Answer

A court order compelling a trustee to personally compensate the trust for losses arising from their breach.

Answer

A legal document establishing a trust and outlining the duties of the trustees.

Answer

A court order distributing the remaining trust property to the beneficiaries upon its termination.

Answer

A punitive measure imposed by the court to penalise a trustee for intentional misconduct.

Question 19

Under English Trust Law, what is a resulting trust?

Accepted Answer

A trust that arises by operation of law when an attempted express trust fails to fully dispose of the trust property.

Answer

A trust established through a testamentary document, such as a will.

Answer

A trust explicitly created by a court order, typically to address an injustice or legal dispute.

Answer

A trust formed when a person makes a legally binding promise to hold property for the benefit of another.

Question 20

What key distinction exists between a constructive trust and an implied trust in English Law?

Accepted Answer

A constructive trust is imposed by the court to prevent unjust enrichment, regardless of the parties' intentions, while an implied trust is derived from the presumed intent of the parties, despite the absence of an express declaration.

Answer

A constructive trust is a remedy for a breach of fiduciary duty, whereas an implied trust is a mechanism for transferring legal ownership of property.

Answer

A constructive trust is temporary, lasting only until the court orders a remedy, whereas an implied trust is permanent and irrevocable once established.

Answer

A constructive trust is always created through a formal written agreement, whereas an implied trust arises solely from the conduct of the parties.

Question 21

What is the primary role of the court in upholding the integrity of trusts in England and Wales?

Accepted Answer

To adjudicate disputes concerning trusts, enforce trustee compliance with their legal obligations, and grant appropriate remedies for breaches of trust.

Answer

To determine the distribution of trust property to beneficiaries, irrespective of the terms stipulated in the trust document.

Answer

To directly manage the assets held within trusts under their jurisdiction, acting as a substitute trustee.

Answer

To routinely create new trusts independently, without a pre-existing settlor or trust instrument.

Question 22

What is the most effective approach to mitigating the risk of breaches of trust?

Accepted Answer

Ensuring the appointment of trustworthy and competent trustees, coupled with drafting a comprehensive and unambiguous trust instrument.

Answer

Appointing a large number of trustees to oversee the trust, regardless of their individual expertise or suitability.

Answer

Mandating that all trust decisions be subject to unanimous approval from the beneficiaries, potentially leading to deadlock.

Answer

Implementing constant and intrusive monitoring of trustees, hindering their ability to exercise independent judgement.