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Trustees and Self-Dealing Rule Quiz

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Questions and Answers

According to James LJ, why is the Court not entitled to receive evidence about whether the principal suffered an injury?

To ensure justice for the principal

To make the legal process more complex

To favor principals over agents

To protect agents from facing dangerous inquiries (correct)

What is the suggested way to relax the fiduciary rule in Murad v Al-Saraj?

Shift the burden of proof onto the principal

Allow the fiduciary to prove the conflict of interest did not harm the principal (correct)

Increase evidentiary complexity for fiduciaries

Impose stricter penalties on fiduciaries

According to Arden LJ, what effect would shifting the burden of proof to fiduciaries have?

Serve as a sufficient deterrence (correct)

Lead to unjust outcomes

Increase fiduciary responsibilities

Decrease evidential complexity

What is a common scenario where a constructive trust may arise?

A holds funds given by mistake Signup and view all the answers

In what circumstances do fiduciary duties arise according to James Edelman?

When there is a relationship of trust and confidence Signup and view all the answers

What is emphasized by Edelman as crucial in determining when fiduciary duties arise?

"Undertaking" between parties Signup and view all the answers

Why is the Self-Dealing Rule significant for trustees?

To prevent conflicts of interest as the trustee acts as both vendor and purchaser. Signup and view all the answers

What is the key exception to the Self-Dealing Rule as explained in the text?

Holder v. Holder: Where a fiduciary purchases trust property in an auction. Signup and view all the answers

What is the Fair Dealing Rule, as described in the text?

A rule that ensures beneficiaries receive full value when trustees purchase their beneficial interest. Signup and view all the answers

Why do innocent purchasers take good title before a voidable transaction is voided?

Because they are unaware of the transaction being voidable. Signup and view all the answers

What are the reasons for the strict liability imposed by the Self-Dealing Rule?

To deter trustees from engaging in questionable transactions and to reduce evidentiary complexity. Signup and view all the answers

According to Lionel Smith, why may the goal of deterrence not be considered worthy for private law?

It may lead to an overly cautious approach among trustees. Signup and view all the answers