Session 10_DN

Joshua and Alma, spouses, executed mutual wills. According to their wills, upon the death of one spouse, the entire estate would pass to the surviving spouse. Upon the death of the surviving spouse, the estate would be divided equally among their two children – Mia and Sau. Joshua predeceased Alma, resulting in Alma inheriting the entire estate. Alma later remarried and executed a new will, bequeathing her entire estate to her new husband, Mark. What legal implications might arise from Alma creating a new will?

• Alma's new will is legally valid, and the mutual will has no binding effect after Joshua's death

• Alma's new will could be challenged by Mia and Sau, as it may breach the terms of the mutual will she had with Joshua

Emma is a trustee of a charitable trust. She recently invested trust funds in a company where she holds a significant number of shares. As a result of this investment, the value of her shares increased substantially. Emma did not disclose her personal interest in the company to the beneficiaries or the other trustees. What ethical breach has Emma committed with her actions?

• It is a gain made in breach of a fiduciary duty

• It is a situation where the trustee has made a secret commission

Enzo is a trustee of a family trust. He recently sold a piece of trust property to a third party, Sarah, for $500,000. Unbeknownst to the beneficiaries, Enzo had an agreement with Sarah to receive an additional $50,000 as a personal payment for ensuring the sale was directed to her. Enzo did not disclose this arrangement to the beneficiaries or the other trustees. What ethical breach has Enzo committed with his actions?

• It is a gain made in breach of a fiduciary duty

• It is a situation where the trustee has made a secret commission

Tina is a trustee of a family trust that holds various real estate assets on behalf of the beneficiaries, which include her nephews and nieces. Recently, Tina decided to purchase a piece of property using the funds from the trust account. However, instead of registering the property under the trust’s name, she registered it under her own name and later sold it at a significant profit. Tina then kept the proceeds from this sale for herself, without informing the beneficiaries or the other trustees. What ethical breach has Tina committed with her actions?

• It is a gain made in breach of a fiduciary duty

• It is a situation where the trustee has made a secret commission

Maggie, a trustee of the Summer Foundation Trust, which funds education for underprivileged children, is responsible for making investment decisions. During her tenure, she learns of a lucrative opportunity to invest in TechNova Inc. However, instead of informing the trust, she secretly purchases shares for herself. Within a year, the shares triple in value, resulting in significant personal profit. Tom, one of the beneficiaries, later discovers her use of insider information and her failure to disclose this opportunity to the other trustees or beneficiaries. What is the likely legal outcome in this scenario?

• Maggie did nothing wrong, as she invested her personal funds and is entitled to the profits.

• Maggie is liable for breach of trust, and the court may impose a constructive trust on her profits, directing them to the Summer Foundation Trust

• Maggie should only disclose her profits to the beneficiaries but can keep them since she used her own money

• Maggie should not be held accountable as long as she eventually informs the trustees about her investment

Grace, an elderly woman, created a trust with her friend Charles as the sole trustee. Charles declined to take the role due to health problems and suggested a professional trustee. However, Grace passed away before appointing a new trustee. Thereafter, Emily, Grace's niece, who was aware of the trust and its provisions, took the initiative to manage the trust, making investment decisions and distributing funds based on her understanding of Grace's intentions. However, Emily's makes some poor investment decisions which resulted in substantial financial losses. What is the likely legal outcome in this scenario?

• Emily will be held liable as a trustee de son tort, for improperly managing the trust assets

• Emily will not be held liable as she acted in good faith and intended to honour Grace's wishes

• The trust will be dissolved due to the failure to appoint a professional trustee, and no legal action will be taken against Emily

Jane, a trustee of the XYZ Trust, improperly transfers valuable artwork from the trust to an art gallery owned by her friend Oliver, a well-known curator. Oliver, who often helps manage art collections, is unaware of any wrongdoing. Jane sends an email to Oliver explaining that the transfer is entirely legitimate and part of a new initiative to showcase XYZ Trust's assets to the public. Oliver, relying on his longstanding professional relationship with Jane and her apparent authority as the trustee, accepts the artwork and displays it in his gallery. He does so without conducting any further inquiry because such transactions have always been routine and compliant in his previous dealings. Six months later, beneficiaries of the XYZ Trust discover the transfer and are also seeking to take action against Oliver. What would be the likely legal outcome in this matter?

• Oliver will be liable for knowing receipt having actual knowledge of Jane’s breach of fiduciary duty

• Oliver will be liable for knowing receipt by his knowledge in being careless by receiving the artwork in breach of fiduciary duty without making further inquiry

• Oliver will not be liable for knowing receipt as he had no knowledge of the breach and was reasonable in assuming the artwork transfer was legitimate

Jordan is a trustee of the Toto Family Trust, which holds substantial assets. He owes his friend, Mike, a significant sum of $50,000 and decides to repay Mike using funds from the trust, which constitutes a breach of trust. Mike is aware that Jordan does not have substantial personal funds and knows that Jordan’s sole employment is that he manages the Toto Family Trust, which has considerable assets. Despite this knowledge, Mike decides not to inquire about the source of the money. The beneficiaries of the Toto Family Trust have recently discovered the breach and wish to extend their action against Mike. What is the most likely legal outcome for Mike?

• Mike will be liable as a constructive trustee for recipient liability due to his knowledge of the breach of trust

• Mike will be considered an innocent recipient and will not be liable for any breach of trust

• Mike will not be liable for recipient liability as he did not have explicit knowledge that the funds were derived from the trust

Erica, a well-established real estate agent, has been working closely with Harvey, a trustee for a wealthy family trust. Harvey transfers a prime piece of real estate from the trust to Erica for a quick sale, without the beneficiaries' consent and contrary to trust instructions. Despite suspecting the transfer's legitimacy, Erica proceeds with the sale, earning a substantial commission. The beneficiaries later discover the unauthorized transfer and seek to hold Erica accountable. What would be the likely legal outcome in this matter?

• Erica is not liable as she was merely acting in her professional capacity and did not directly breach any fiduciary duty

• Erica may be liable as she knowingly received trust property in breach of trust

• Erica will not be liable as she had no knowledge of Harvey’s breach of trust

• Erica may be liable as she knowingly assisted Harvey in breaching the trust

Amanda, the trustee of the Graham Family Trust, unlawfully sells a valuable property to clear her personal debts. She enlists Julia, a reputable real estate agent with no previous interactions with Amanda and no knowledge of the trust, to facilitate the sale. Two months later, the beneficiaries of the Graham Family Trust discover Amanda's breach of trust and are considering legal action against Julia, seeking redress for their lost asset. Which of the following statements is correct regarding Julia’s liability?

• Julia is liable as a constructive trustee for knowingly assisting in the breach of trust

• Julia is liable for the commission she earned from the sale of the house

• Julia is not liable as a constructive trustee as she did not knowingly assist in the fraudulent design

• Julia is liable as a constructive trustee as she knowingly received trust property in breach of trust