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Two women are the only beneficiaries of a trust fund. A man is the sole trustee of the trust fund.
The man has a personal current bank account which is overdrawn by £3,000. In breach of trust, the man transfers £15,000 from the trust fund to his current bank account which, after clearing the overdraft, leaves a balance of £12,000 on the current bank account.
The man then decides to purchase a house for £120,000. The man uses all the current bank account balance of £12,000 to pay for the deposit on the house. No receipts or payments were made into or out of the man’s personal current bank account between the receipt from the trust fund and the payment of the deposit. The remainder of the purchase price is provided as a gift to the man from his father. Title to the house is transferred into the man’s sole name.
The man has now been adjudicated bankrupt with debts of £200,000. The value of the house has risen to £150,000.
Which of the following statements best explains the claim, if any, that the beneficiaries should now make?
A. A personal claim against the man for £3,000.
B. A personal claim against the man for £15,000, secured by a charge on the house.
C. A proprietary claim for a 10% share of the house.
D. A proprietary claim for an 8% share of the house.
E. Neither a personal nor a proprietary claim is available against the man because he has been adjudicated bankrupt.
C - A proprietary claim for a 10% share of the house.
Candidates who answered correctly: 50%
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