Examination Timing: 00H00M08S
Emily and David are trustees who have been planning to defraud the trust they administer by transferring some of its assets to a company they control. Emily intends to send David an email confirming that she will execute the transfer, but she sends this to Rachel, one of the beneficiaries of the trust, by mistake. Which of the following statements best describes the position?
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Your selected option: B
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The correct answer is B. The court has discretion to issue a prohibitive injunction to prevent an action from taking place if it appears just and equitable to do so. In this case, Rachel, as a beneficiary, can apply for a prohibitive injunction to prevent the fraudulent transfer of trust assets. Tracing is a mechanism to follow trust property into other assets, and specific performance is to compel completion of a contract. Thus, a prohibitive injunction is the appropriate remedy to stop the planned fraudulent transfer.
Key Point: Beneficiaries can seek a prohibitive injunction to prevent trustees from executing actions that breach their fiduciary duties or defraud the trust.
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