Re Vandervell (No 2) [1974] EWCA Civ 7

Facts

• The case arose from transactions involving shares in Vandervell Products Ltd, initially transferred by Mr. Vandervell to a trust for his children, with an option granted to the Royal College of Surgeons to purchase the shares.
• The option was exercised, but the beneficial interest in the shares was not effectively transferred.
• The central legal question was whether the shares were held on trust for Mr. Vandervell’s estate or if the beneficial interest had been validly transferred.
• The Court of Appeal determined that the beneficial interest in the shares had not been effectively disposed of, resulting in an automatic resulting trust in favour of Mr. Vandervell’s estate.
• The failure to comply with section 53(1)(c) of the Law of Property Act 1925, regarding the required formalities for dispositions of equitable interests, rendered the disposition incomplete.

Issues

1. Whether the failure to properly dispose of the beneficial interest in the shares resulted in an automatic resulting trust for Mr. Vandervell’s estate.
2. Whether the statutory requirements under section 53(1)(c) of the Law of Property Act 1925 must be satisfied for a valid disposition of equitable interests.
3. Whether a resulting trust arises by operation of law in the absence of an express intention or upon an incomplete disposition.

Decision

• The Court of Appeal held that an automatic resulting trust arose in favour of Mr. Vandervell’s estate as the beneficial interest in the shares was not effectively disposed of.
• The lack of compliance with the statutory formalities under section 53(1)(c) of the Law of Property Act 1925 rendered the relevant disposition of equitable interest ineffective.
• The judgment reaffirmed that resulting trusts arise automatically by operation of law when there is an incomplete disposition, irrespective of the transferor’s intentions.

Legal Principles

• A disposition of an equitable interest must comply with section 53(1)(c) of the Law of Property Act 1925 by being in writing and signed by the transferor.
• Resulting trusts can be automatic or presumed; automatic resulting trusts arise where there is a failure to dispose of the entire beneficial interest in property.
• Resulting trusts arise by operation of law and do not require evidence of the transferor’s intention.
• The distinction between express trusts (arising from intention) and resulting trusts (arising by operation of law) is essential in determining the consequences of failed or incomplete dispositions.

Conclusion

Re Vandervell (No 2) [1974] EWCA Civ 7 establishes the principle that, absent compliance with statutory formalities for disposing of equitable interests, an automatic resulting trust arises by operation of law, returning the equitable interest to the transferor or their estate, and clarifies the legal framework for resulting trusts in English trust law.