SQE1 sample questions

Question 94

A woman places £100,000 cash in trust for her children and grandchildren. The woman appoints two of her friends, who are both teachers, to be the trustees. The trustees have no prior experience in administering trusts and do not receive any remuneration for their time in administering the trust.

The trust instrument includes a clause which excludes trustees’ liability for any breach of duty: “howsoever caused, to the fullest extent permitted by law.” The woman did not discuss this clause with either the trustees or the beneficiaries.

The trustees believe that they are acting in the best interests of the beneficiaries when they invest all the trust fund in a newly established company. They do not consider the standard investment criteria or obtain professional advice before making the investment.

The company has now gone into liquidation and the shares are worthless. The beneficiaries sue the trustees for breach of their statutory duty of care and power of investment.

Will the trustees be able to rely on the exclusion clause in the trust instrument?

A. Yes, because they have acted honestly.

B. Yes, because they are not remunerated.

C. Yes, because they did not cause the woman to include the clause in the trust instrument.

D. No, because trustees’ liability for breach of statutory duty cannot be excluded.

E. No, because the beneficiaries did not consent to the exclusion clause.


A - Yes, because they have acted honestly.

Candidates who answered correctly: 36%


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