Re Vandervell's Trust (No 2) [1974] Ch 269

Facts

• The case involved a series of transactions concerning shares in Vandervell Products Ltd, initiated by Mr. Vandervell, the settlor.
• Mr. Vandervell established a trust for the Royal College of Surgeons, funding it through a transfer of shares.
• A dispute arose over the beneficial ownership of the shares after the trust was later varied.
• The central issue concerned whether, after the transfer and subsequent events, the beneficial interest in the shares reverted to Mr. Vandervell or remained with the Royal College of Surgeons.
• The court had to determine if the transfer constituted a gift or was made without consideration, which would suggest the creation of an automatic resulting trust.

Issues

1. Whether an automatic resulting trust arose in favour of Mr. Vandervell following the transfer of shares when there was no consideration and no clear intention to benefit the recipient.
2. Whether the beneficial interest in the shares reverted to Mr. Vandervell or vested absolutely in the Royal College of Surgeons.
3. Whether the distinction between resulting and constructive trusts was relevant to the fact pattern and outcome.
4. Whether equity required the imposition of a resulting trust to prevent unjust enrichment of the recipient.

Decision

• The Court of Appeal found that an automatic resulting trust had arisen in favour of Mr. Vandervell.
• It was held that the transfer of shares was made without consideration and absent a clear intention to benefit the Royal College of Surgeons, so the beneficial interest reverted to Mr. Vandervell.
• The court clarified that the presumption of a resulting trust can only be rebutted by clear evidence of a contrary intention, such as a gift.
• The court distinguished resulting trusts, which arise based on the transferor’s intention, from constructive trusts, which are imposed to prevent unjust enrichment.
• The decision was grounded in the equitable principle that a person should not be unjustly enriched at another’s expense.

Legal Principles

• A resulting trust arises by operation of law where property is transferred without consideration and without a clear intention to benefit the recipient.
• The presumption of a resulting trust is based on the transferor’s lack of intention to make a gift; this can only be rebutted by clear evidence to the contrary.
• Resulting trusts are distinct from constructive trusts: the former focus on the intention behind the transfer, while the latter function primarily to prevent unjust enrichment.
• Equity operates to prevent unjust enrichment and will not permit a recipient to retain a benefit acquired in the absence of consideration or intention to gift.

Conclusion

Re Vandervell’s Trust (No 2) [1974] Ch 269 confirmed that an automatic resulting trust arises where property is transferred without consideration and absent a clear intention to benefit the transferee, highlighting the critical role of the transferor’s intention and the equitable principle against unjust enrichment in the law of trusts.