THE UNIVERSITY OF NEW SOUTH WALES

SUMMER SEMESTER 2014 EXAMINATIONS

JURD7285 Equity and Trusts

1. TIME ALLOWED 2 hours

2. READING TIME 10 minutes

3. THIS EXAMINATION PAPER HAS 3 PAGES (including this page)

4. TOTAL NUMBER OF QUESTIONS 2

5. TOTAL MARKS AVAILABLE 100 (for 60% of marks for the course)

6. MARKS AVAILABLE FOR EACH QUESTION - All questions are not of equal value. Question 1 is worth
40% of the marks for this examination; Question 2 is worth 60% of the marks for this examination.

7. ALL ANSWERS MUST BE WRITTEN IN INK. EXCEPT WHERE THEY ARE EXPRESSLY REQUIRED, PENCILS MAY BE
USED ONLY FOR DRAWING, SKETCHING OR GRAPHICAL WORK

8. THIS PAPER MAY BE RETAINED BY CANDIDATE

9. CANDIDATES MAY BRING TO THE EXAMINATION any written materials (open book)

10. You should choose ONE essay from Question 1 and answer ALL of Question 2.

11. Answer each question in a separate booklet.

 QUESTION 1

Choose ONE of the essay topics below. This question is worth 40%.

Question 1(a):

Courts should be cautious about ordering an account of profits made as a result of a breach
of a fiduciary duty where the principal has suffered no loss. Discuss.

OR

Question 1(b):

Constructive trusts imposed with reference to cases such as Baumgartner v Baumgartner

do not fairly capture all contributions, economic and non-economic Discuss.

QUESTION 2
 Please answer this question (worth 60%) in a separate booklet to Question 1.

Geri Gladstone is trustee of the Harvey family trust, which was established by her late sister,
Henrietta Harvey, in 2010 to benefit her two adult children, Indigo and Joshua (as equal
beneficiaries). The trust holds assets worth a total of $2,000,000, including a bank account at ABC
Bank (in the name of Geri Gladstone, trustee Harvey family trust), shares and a house in Randwick.
Geri is the registered owner of the shares and house and she is authorised to operate the ABC Bank
account.

Prior to 2012, the Randwick house was rented commercially. Geri collected the rent, which was
deposited to the account at ABC Bank. When expenses were incurred by Geri in relation to the
property (fixing plumbing, repairing roof), Geri recovered those amounts from the account at ABC
Bank. Since 1 January 2012, Geri has allowed her daughter, Kate Kingsley, to live in the house. Kate
pays her mother a rent of $100 per month, which is significantly below the market rate of $1000 per
month. Geri collects rent from Kate and places it into the trust account each month. Geri informed
Indigo and Joshua of this arrangement by email in November 2011. Indigo and Joshua have thus far
remained silent about it in order to avoid offending their cousin.

Recently, Indigo has become concerned about Geris management of the trust. In particular:

She is upset that the trust is no longer benefiting from receipt of a commercial rent for the
property in Randwick.

She is concerned that Geri made a decision in 2011 to invest $5,000 of trust money in a
highly speculative mining share (currently worth a mere $100).

She noticed a highly suspect transaction in relation to the account at ABC Bank on 20 August
2013. The statement records a transfer, authorised by Geri, from the ABC Bank account to
an account in the name of her uncle (Geris husband), Larry, at PQR Bank in the amount of
$100,000. She strongly suspects that the new yacht her uncle owns was purchased with that
money. According to Indigos investigations, the yacht originally cost the same amount
($100,000). Now that the yacht is second hand, it would be worth approximately $80,000.
Indigo figures her uncle must have known that the money for the yacht came from the trust
as Geri and Larry are both retired, with no significant assets, living on a government pension.

Indigo raised these concerns with her brother Joshua, whose response was, Just let it rest, Indigo.
Geri is our aunt, Kate is our cousin and Larry is our uncle. Besides, I am sure Geri will fix things up in
due course. Look, if you are so fussed about the money for uncle Larrys yacht, I promise Ill transfer
to you whatever proportion of my entitlement under the trust is necessary to make it up to you.
Indigo is not prepared to let the matter rest and has approached you for advice.

Advise Indigo. Please note in answering this question:

You may use initials to identify people in writing your answer.

You should cite relevant authority (you can use short forms of case names; please underline
case names and statutes).