THE UNIVERSITY OF NEW SOUTH WALES

SEMESTER 2 2014 EXAMINATIONS

LAWS2385/JURD7285: EQUITY AND TRUSTS

1. TIME ALLOWED- 2 hours

2. READING TIME -10 minutes

3. THIS EXAMINATION PAPER HAS 4 PAGES

4. TOTAL NUMBER OF.QUESTIONS- 2

S. TOTAL MARKS AVAILABLE - 100

6. MARKS AVAILABLE FOR EACH QUESTION ARE SHOWN IN ")"HE EXAMINATION PAPER

7. All ANSWERS MUST BE WRITIEN IN INK. EXCEPT WHERE THEY ARE EXPRESSLY REQUIRED, PENCILS MAY BE
USED ON LY FOR DRAWING, SKETCHING OR GRAPH ICAL WORK

8. THIS PAPER MAY BE RETAINED BY CANDIDATE

9. CANDIDATES MAY BRING TO THE EXAMINATION any printed or handwritten materials.

Question 1: Essay (40/o of marks on exam)

Choose ONE of the following topics.

(A) "The ability to avoid fiduciary obligations through contractual exclusion clauses unjustly
fetters the ability of courts to offer important protections to vulnerable parties." Discuss.

OR

(B) "Equitable proprietary remedies provide a means to allow the owner of equitable property
to recover their proprietary interests, but have no other remedial role to play." Discuss

. .l.
Question 2: Problem question (60/o of marks for exam)
On 13 February 2012, Rosie and her brother, Sam, entered into a formal deed (executed by both of
them) as follows:

1. Rosie Rimmer hereby transfers her title to the following items to her brother, Sam
Stevenson, t o hold on trust pursuant to the terms of this deed:
a. Her collection of artwork, including the painting by Picasso, hanging on walls in her
home;
b. Her diamond necklace, currently in her safe (access code 59-90-76);
c. Her ruby earrings, currently in her bedside drawer; and
d. Her cash, amounting to $100,000, currently stored in her safe,

(collectively 'Trust Property') .

2. Sam will hold all Trust Property on trust for his nephews (Rosie's children), Adam, Bernard
and Charlie, in equal shares.
3. Sam is t o invest the $100,000 in suitable shares.
4. On the 30th birthday of the youngest child, Charlie, all trust property is to be sold and the
funds divided equally among the beneficiaries.

The deed was executed in the hospital, by Rosie's bedside, and had been hastily handwritten by Sam
in line with Rosie's request. Rosie's children aFe currently (as at June 2014) 19, 20 and 22.

After the death of his sister, Sam fell into a deep depression. He could not bear to think about his
deceased sister or his nephews. He invested the entire $100,000 in shares in a single retail company
(PQR Ltd), which he knew about as it is a major customer of his own electronics wholesale business,
and he figured that they seemed to be doing well. Sam doesn't know a lot about investments. Sam
left the other items in Rosie's house, where the three boys Adam, Bernard and Charlie have been
living since their mother's death. The PQR Ltd shares_are now worth $70,000, despite the fact that
the stock market is, on average, slightly up since Rosie's passing.

Adam, the eldest son, is cu rrently living in his late mother's house. While chatting to his brother
Bernard about horse racing in June 2012, the two of them decide that they should place a bet on the
ho rse 'Sure Thing' in Saturday's races at Randwick. Without sufficient funds of their own, they
decide to pawn their late mother's ruby earrings, figuring it is less than their share of their mother's
property in any event. Adam takes the earrings from the drawer. The pawn shop gives him $5,000
for the earrings, which Adam and Bernard use to place a bet on 'Sure Thing' at 10:1. 'Sure Thing'
wins and they take the $50,000 winnings, recover the earrings for $5,500 (returning them to the
drawer) and use the rest of the money to buy a small yacht {which cost them $44,000 to purchase
and is currently valued at $35,000) and a fabulous dinner (cost $500).

In November 2012, Charlie {then 18), knowing nothing about his brothers' actions at that point,
decides to take a gap year before commencing his uni\,/ersity studies. He and Adam enter into an oral
agreement whereby in exchange for $30,000 cash, Charlie agrees to transfer to Adam his rights to
50% of the proceeds from sa le of the Trust Property (that he will receive on his 301h birthday). Adam

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pays the cash shortly after (Decembe r 2012) and Charlie spends it on a year-long European
backpacking adventure.

After returning from his gap year in early 2014, Charlie and Adam are at dinner where (after some
alcohol), Adam tells Charlie how he and Bernard bought the yacht and boasts how much money he is
going to have after Charlie turns 30 because "I really did well out of that deal we made, you got
some travelling cash but the artwork is worth a fortune". Adam adds, however, that "the share
investments are doing less well; uncle Sam seems to have put the whole lot into a single company
that hasn't been doing so well of late."

Charlie has sought your advice as to:

1. Any rights or claims he may have against his uncle Sam, and whether he can have Sam
replaced by a more diligent trustee;
2. Any action he may have against his brothers and, in particular, whether he can claim any
proprietary interest in the yacht; and
3. Whether Adam has any interest in Charlie's rights to SO% of the sale proceeds he will receive
on his 30th birthday under their oral agreement (you may assume that when the agreement
was made, there was no fraud, mistake, undue influence or unconscionability).

Advise Charlie, providing references to relevant authority (full citation not necessary).