No additional materials are provided for the following eight 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 What is the rule in Milroy v Lord (1861)?
Choose one answer. A. That courts of equity will not enforce bare promises
B. That courts of equity will not generally enforce voluntary covenants
C. That courts of equity will not order the perfection of imperfect gifts
D. That courts of equity will not enforce trusts in favour of volunteer beneficiaires
E. Don't know
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That's correct.
Although statements (a) and (b) are perfectly correct, they are not rules contained in Milroy v Lord. And statement (d) is plainly wrong. As cases such as Paul v Paul (1882) 20 Ch D 742 demonstrate, the objection is not that the claimant is a volunteer per se, for most trusts have volunteer beneficiaries. The fact that the claimant is a volunteer is only relevant where the trust is not completely constituted, where, in other words, there is no trust, merely a failed attempt to create one.
Correct
Marks for this submission: 1/1.Question 2
Marks: 1 What is a covenant to settle?
Choose one answer. A. A promise by deed to convey rights to the promisee outright
B. A promise by deed to convey rights to the promisee to hold on trust
C. A conveyance of rights to a third party to hold on trust
D. A written promise to convey rights to the promisee to hold on trust
E. Don't know
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That's correct.
A covenant is a promise in a deed, and a covenant to settle is a promise to set up a trust contained in a deed. Answer (d) is wrong, for though a deed must be written, writing itself is not enough to constitute a deed. Answer (a) is wrong because this is not a promise to create a trust, and answer (c) is wrong because it mentions no promise at all.
Correct
Marks for this submission: 1/1.Question 3
Marks: 1 What is the general attitude of equity to voluntary coventants?
Choose one answer. A. Equity will award damages for breach of a voluntary covenant
B. Equity will decree specific performance of a voluntary covenant
C. Equity will deem a voluntary covenant to have been fully performed
D. Equity will not lend its assistance to the enforcement of a voluntary covenant
E. Don't know
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That's correct.
The general rule, subject to one exception, is that only promises made for consideration will be enforced in equity, and then only those in which an award of damages is an inadequate remedy.
Correct
Marks for this submission: 1/1.Question 4
Marks: 1 What is the fundamental problem the intended beneficiary normally faces in trying to enforce voluntary covenants to settle?
Choose one answer. A. He is not privy to the deed
B. The deed does not purport to confer a benefit on him
C. The covenant cannot be enforced against a deceased covenantor
D. The intended beneficiary gave no consideration for the promise
E. Don't know
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That's correct.
Although the promise, because under seal, will be enforceable at law, the intended beneficiary cannot normally (Cannon v Hartley (1949) is exceptional in this regard) enforce it because he will not be privy (party) to it. Answer (b) is wrong, because the deed clearly does purport to confer a benefit on him. Answer (c) is wrong because the death of the covenantor does not extinguish his liablity for non-performance of the covenant; it is perfectly possible to pursue a claim for damages against his estate. Answer (d) is wrong because consideration is not needed for enforcement at law where the promise is contained in a deed.
Correct
Marks for this submission: 1/1.Question 5
Marks: 1 What exception is made in the case of marriage settlements?
Choose one answer. A. That equity will decree specific performance in favour of all intended beneficiaries
B. That equity will make an award of damages in favour of all intended beneficiaries
C. That equity will decree specific performance in favour of those within the marriage consideration
D. That equity will decree specific performance in favour of the next of kin alone
E. Don't know
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That's correct.
Although equity will not generally lend its aid to enforce a voluntary covenant, it takes a radically different view in the case of marriage settlements where the person seeking to enforce is within the 'marriage consideration'. In such cases, not only will the court decree specific performance, but it will do so even where damages are not an inadequate remedy. Answer (a) is wrong because relief is restricted to those within the marriage consideration. Answer (b) is wrong both for this reason and the further one that the remedy is specific performance, not damages. Answer (d) is wrong because, as re Plumptre's Marriage Settlement (1910) demonstrates, the next of kin will not be granted specific performance of a marriage settlement.
Correct
Marks for this submission: 1/1.Question 6
Marks: 1 What is the 'trust of the covenant' argument?
Choose one answer. A. That the right to sue vested in the covenantees is held on trust for the covenantor
B. That the right to sue vested in the covenantees is held on trust for the intended beneficiary
C. That the damages the covenantees will receive from suing the covenantor for breach of covenant will be held on trust for the intended beneficiary
D. That the covenantor holds the benefit of the covenant on trust for the intended beneficiary
E. Don't know
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That's correct.
The reason this argument will be made is that if the right is so held, then the intended beneficiary, though still not a beneficiary of a trust of the rights promised to be transferred, is at least the beneficiary of a different trust, a trust of the right to sue for failure to transfer the rights as promised. And given that he is the beneficiary of a completely constituted trust, it matters not that he is a volunteer (Paul v Paul (1882)). Answer (a) is wrong, because this argument would not suit the intended beneficiary. Answer (c) is wrong because this does not give the intended beneficiary what he is seeking, viz a lever to compel the covenantees to sue. Answer (d) is wrong because it is the convenantees, not the covenantor, who have the benefit of the covenant.
Correct
Marks for this submission: 1/1.Question 7
Marks: 1 What do the intended trustees generally have which the intended beneficiaries do not?
Choose one answer. A. They are parties to the covenant and so have a right specific performance
B. They are parties to the covenant and so have a right to damages at law
C. They are within the marriage consideration and so can claim damages in equity
D. They are within the marriage consideration and so can claim specific performance
E. Don't know
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That's correct.
Answer (a) is wrong, because although the covenantees are party, they will be trying to enforce a voluntary covenant, and equity will not generally lend its aid to the enforcement of such a covenant. However, the absence of consideration is no defence at common law: the fact of the promise being under seal and being enforced by a party to the covenant is enough. That is why (b) is correct. Answers (c) and (d) are both wrong because, even in the case of a marriage settlement, the covenantees will not usually be within the marriage consideration.
Correct
Marks for this submission: 1/1.Question 8
Marks: 1 What is the resulting trust argument which sometimes surfaces in this area?
Choose one answer. A. That any damages recovered by the covenantees in a suit against the covenantor will be held by them on resulting trust for the intended beneficiaires
B. That the rights promised to be transferred are held by the covenantees on resulting trust for the covenantor
C. That the covenantor is a resulting trustee of the rights he has promised to transfer for the intended beneficiaries
D. That the right to sue on the covenant being held by the covenantees on resulting trust for the covenantor, so too will any damages recovered from him in a suit for breach of covenant
E. Don't know
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That's correct.
Answer (a) is wrong, because a resulting trust is one arising in favour of the transferor of the rights now held on trust, and the intended beneficiaries transferred nothing to the covenantees. Answer (b) is wrong because the rights promised to be transferred have not been transferred at all - that is the very problem the intended beneficiary is trying to overcome. And answer (c) is wrong for the reason that this trust would once again not be a trust arising in favour of the transferor of rights.
Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extract from the judgment of Eve J in re Pryce [1917] 1 Ch 234 and then answer the five questions (Q9 - Q13) that follow.
Context
Under what was a typical marriage settlement, the defendant wife covenanted to convey to covenantees any after-acquired property she might receive to be held by them on trust for her husband and herself for their joint lives, for the survivor for their life, remainder to the children of the marriage (if any), and, in default of issue, remainder to her next-of-kin. This was known as the 'wife's fund'. The husband later gave the defendant a remainder interest he had from his own parents' marriage settlement, which interest vested in possession on the death of his mother. At that point, the defendant had a right to call for a transfer of these rights from the trustees of her husband's parents' marriage settlement to the covenantees/trustees of the 'wife's fund'. In breach of covenant, the defendant left the rights where they were, with the result that they were held for her absolutely. Her husband having now died, and in light of the fact that there were no issue of the marriage and that the only persons who would benefit from a transfer of the rights to the covenantees/trustees were the defendant widow's next of kin, the covenantees/trustees sought directions, inter alia, as to whether they were bound to take steps to enforce the payment and transfer to themselves of the rights currently held in trust for the defendant outright.
Question 9
Marks: 1 How does Eve J paraphrase the question asked by the covenantees?
Choose one answer. A. Whether the covenantees/trustees could be compelled to take steps to recover or enforce payment of transfer to them of the rights concerned
B. Whether the wife's next of kin could sue for breach of covenant
C. Whether the covenantees/trustees ought to take any steps to recover or enforce payment or transfer to them of the rights concerned
D. Whether the wife's next of kin could obtain specific performance of the covenant
E. Don't know
Feedback
That's correct.
The point to notice is that the word 'ought' has here been substituted for 'bound'. For that reason, answer (a) is what Eve J should have asked himself, but unfortunately didn't. And answers (b) and (d) are wrong because the next of kin were not themselves trying to enforce the covenant, either through an award of damages or a grant of specific performance.
Correct
Marks for this submission: 1/1.Question 10
Marks: 1 In relation to the 'wife's fund', what was the relevance of the fact that there were no children of the marriage?
Choose one answer. A. The trust failed and the rights were held on resulting trust for the wife
B. The only person who would gain from performance of the covenant would be the next of kin
C. If there had been children of the marriage, they would have been within the 'marriage consideration' and would have been able to bring an action for specific performance of the covenant
D. Both (b) and (c)
E. Don't know
Feedback
That's correct.
The wife was absolutely entitled to the rights held for her on trust by the trustees of her husband's parents' marriage settlement. By conveying those rights to the trustees of her own marriage settlement, she would thereby reduce her entitlement to a life interest, the remainder going to the next of kin. Given that this was a marriage settlement, had any children been born of her marriage, they would have been within the marriage consideration and so able to enforce the covenant in equity: Pullan v Koe (1913). No such right, however, is given to the next of kin: re Plumptre's Marriage Settlement (1910). Answer (a) is wrong, because the trust provided beneficiaries in case of failure of issue, viz the next of kin.
Correct
Marks for this submission: 1/1.Question 11
Marks: 1 If there had been children of the marriage, what effect would that have had so far as any trusts were concerned?
Choose one answer. A. None - there would be no trust until the rights in question were transferred to the covenantees
B. A constructive trust would arise in favour of the next-of-kin
C. A constructive trust of the defendant's interest would arise in favour of the children
D. None of the above
E. Don't know
Feedback
That's correct.
Since the covenant would now be specifically enforceable, application of the maxim that 'equity looks upon that as done which ought to be done' would generate a construcitve trust in favour of the children. Answer (a) is therefore wrong, and answer (b) is untenable because the next of kin could only take where there were no issue.
Correct
Marks for this submission: 1/1.Question 12
Marks: 1 What, according to Eve J, was the effect of the Judicature Act?
Choose one answer. A. That the same defences to a claim in equity could now be opposed to a claim at law
B. There was now only one court, and in it the rules of equity prevailed
C. All trusts were now executed, with the rights of the trustees now being vested in their beneficiaries
D. That voluntary covenants were now enforceable in equity
E. Don't know
Feedback
That's correct.
Answer (b) is the view of Sir George Jessel MR in Walsh v Lonsdale, not that of Eve J in this case, answer (c) would mean that our entire subject no longer existed, and answer (d) is the exact opposite of what Eve J was saying.
Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Why did Eve J order that the trustees ought not to take any action to enforce the covenant?
Choose one answer. A. Because any damages awarded at common law would be nominal
B. Because any damages would be held on resulting trust for the wife
C. Because it would give the next of kin by indirect means relief they could not obtain by any direct procedure
D. Because the next of kin were not party to the covenant
E. Don't know
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That's correct.
Answers (a) and (b) are wrong for the simple reason that these issues were not addressed in Eve J's judgment. Answer (d) is true, but irrelevant, the issue being the position of the covenantees, who were, of course, party to the covenant.
Correct
Marks for this submission: 1/1.Application
Please consider the following fact scenario, then answer the four examination questions (Q14 - Q17) that follow:
Fred covenanted with Ella that he would convey £50,000 from the £100,000 currently in his account with the London Bank plc and any earnings he might receive from a book he was about to publish to her to hold on trust for Peter. Although he later earned £1,000,000 in royalties from the sale of his book, Fred failed to keep either promise.
Question 14
Marks: 1 What is the relevance of the fact that the covenant concerns royalties in respect of a book not yet written?
Choose one answer. A. It is not possible to have a trust of after-acquired property
B. The royalties would be after-acquired property, and according to re Cook, no trust of the covenant is possible in such circumstances
C. Rights to after-acquired property are incapable of assignment and so cannot be transferred to Ella
D. There is no certainty of subject-matter with after-acquired property
E. Don't know
Feedback
That's correct.
It was for this reason that Buckley J refused to countenance the idea that the covenantees held the benefit of the covenant on trust for the intended beneficiary. You should note that his reasoning in this regard is extremely contentious. And though (a) is perfectly correct, no-one is saying that there is a present trust of the royalties. Answer (c) is not the right answer, for though true, no attempt was made by Fred to convey to Ella the right to receive the royalties. And answer (d) is wrong because the issue is not one of uncertainty of subject-matter but of no subject-matter at all.
Correct
Marks for this submission: 1/1.Question 15
Marks: 1 What would Peter need to establish before he could sue for breach of covenant?
Choose one answer. A. That he could sue on the covenant by virtue of the Contracts (Rights of Third Parties) Act 1999
B. That the right to sue on the covenant was held for him on trust
C. That this was a marriage settlement and he was within the marriage settlement
D. Either (a) or (c)
E. Don't know
Feedback
Answer (d) is correct.
There are two ways in which Peter could sue in his own right. The first, which is doubtful, is that the 1999 Act applies to voluntary covenants and that he is able to invoke the Act. If both those questions are answered affirmatively, then Peter would be able to sue for damages at law. Second, where the requirements of a marriage settlement are present, in which case Peter will be able to obtain specific performance in equity. Answer (c) is not strictly correct, for the right to sue in such case would be vested in Ella, not Peter. However, in such circumstances, Peter could compel Ella to bring a claim, and, if she refused, in certain circumstances bring the claim himself in her name.
Incorrect
Marks for this submission: 0/1.Question 16
Marks: 1 What barrier does re Pryce present to Ella, who is considering suing Fred for breach of covenant?
Choose one answer. A. That the court will direct her not to sue Fred
B. That the court, if asked for directions, will direct her not to sue Fred
C. That the court will only direct her to sue Fred if it finds that she holds the right to sue on trust for Peter
D. That even if she does sue, the damages she will obtain will be nominal
E. Don't know
Feedback
That's correct.
Answer (a) is wrong because Eve J said nothing at all about the situation in which the covenantee simply goes ahead and sues without asking. Answer (c), though arguably what Eve J should have said in re Pryce, was not part of his reasoning at all. And answer (d), though one of the arguments put forward to defend the result, though not the reasoning, in re Pryce, again formed no part of the reasoning of Eve J.
Correct
Marks for this submission: 1/1.Question 17
Marks: 1 Which of the following arguments could NOT be made to show that re Pryce was wrongly decided?
Choose one answer. A. That Eve J mistook the effect of the Judicature Acts
B. That Eve J wrongly held that the right to sue was not held on trust for the next of kin
C. That Eve J answered a different question to that from which he was asked
D. That the fact that the next of kin could not sue in their own right had no bearing on the covenantees' right to do the same
E. Don't know
Feedback
That's correct.
Answer (b) was a point which was unfortunately not addressed in Eve J's judgment. All of (a), (c), and (d) are perfectly legitimate arguments to make against the correctness of Eve J's judgment.
Correct
Marks for this submission: 1/1.
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