In re Vandervell’s Trusts (No 2) (White v Vandervell Trustees Ltd)

A resulting trust arises when beneficial ownership is undisposed of. It ends when that gap is filled by the creation of a valid trust. Its extinction does not amount to a disposition of an equitable interest requiring signed writing under section 53(1)(c) of the Law of Property Act 1925.

A trust of personal property may be created without writing. Where trustees use an existing settlement’s money to acquire property, and the evidence shows that the property was intended for that settlement, the property is held on its trusts. A party who knowingly procured and treated property or income as belonging to the settlement, and induced the trustees to act accordingly, cannot subsequently assert an inconsistent beneficial interest. His personal representatives are in no better position.

The trustee company held an option to acquire shares formerly transferred to the Royal College of Surgeons. The earlier decision in Vandervell v IRC had established that, while no sufficiently certain trusts of the option had been declared, its beneficial interest resulted to Mr Vandervell.

In 1961 the company exercised the option using £5,000 from an existing settlement for Mr Vandervell’s children. The shares and subsequent dividends were treated as assets of that settlement. After Mr Vandervell’s death, his executors claimed that the shares and dividends had remained beneficially his because no signed writing had disposed of his resulting equitable interest.

Megarry J accepted the executors’ claim. The trustee company appealed. The central questions were whether the acquisition created a valid trust for the children, whether section 53(1)(c) of the Law of Property Act 1925 required writing, and whether the executors were precluded from asserting the alleged resulting interest.

1. Disposition. The Court of Appeal unanimously allowed the trustee company’s appeal and dismissed the executors’ action, with costs in the Court of Appeal and below. Leave to appeal to the House of Lords was granted.
2. Termination of the resulting trust. Lord Denning MR and Lawton LJ held that the resulting trust of the option existed only because no ascertainable beneficiary then filled the beneficial ownership. The exercise of the option extinguished the option itself. When the shares were acquired and became subject to the children’s settlement, there was no remaining gap in beneficial ownership and therefore no resulting trust for Mr Vandervell.
3. Creation of the children’s beneficial interest. The trustees used £5,000 belonging to the children’s settlement to acquire the shares. They informed the Revenue that the shares would be held upon that settlement and thereafter administered the dividends exclusively for the children. Lord Denning MR regarded this clear intention and conduct as sufficient to create a trust of personal property. Lawton LJ also applied the rule that a person using another’s money to buy property holds it for the provider of that money unless contrary evidence appears.
4. No written disposition was required. The resulting trust arose and ended by operation of law. Its extinction, followed by the creation of a beneficial interest in different property, was not a disposition of an existing equitable interest within sections 53(1)(c) and 205(1)(ii) of the Law of Property Act 1925. A trust of personal property could be declared without writing.
5. Alternative equitable grounds. Lord Denning MR and Lawton LJ held that Mr Vandervell could not have denied the children’s interest after knowingly arranging and approving the acquisition and causing dividends to be paid and administered for them. His executors were in no better position. Lord Denning MR additionally considered that the dividends handed over or treated as belonging to the children’s settlement constituted perfected gifts.
6. Pleadings. Lord Denning MR and Lawton LJ held that pleadings need state the material facts, rather than every legal consequence. Because all material facts were pleaded and no new factual inquiry was required, the trustee company could advance its revised legal analysis on appeal.
7. Stephenson LJ. Stephenson LJ expressed reservations about whether a sufficient declaration or estoppel had been established, particularly because the case had not previously been pleaded or argued in that form. He nevertheless agreed that the difficulties were not insuperable and concurred in allowing the appeal.

• Court of Appeal: On 3 July 1974 the trustee company’s appeal was allowed unanimously. The executors’ action was dismissed with costs here and below, with leave to appeal to the House of Lords.
• High Court: Megarry J gave judgment on 17 July 1973. The Court of Appeal overturned that decision.
• Earlier interlocutory proceedings: The Court of Appeal had ordered the Revenue to be joined in [1970] 1 Ch 44. The House of Lords reversed that order in [1971] AC 912, and the action continued without the Revenue.