Vandervell v IRC
Where a beneficiary directs his bare trustee to transfer the legal and equitable title to a third party, no separate written disposition of the equitable interest is needed, and an option held on uncertain trusts results back to the settlor.
Facts
Mr Vandervell wanted to give money to the Royal College of Surgeons to found a chair of pharmacology. He directed his bank, which held shares in his company on bare trust for him, to transfer the shares to the College. The company then declared dividends on the shares, which went to the College. At the same time, the College granted an option to buy back the shares to a trustee company controlled by Mr Vandervell, but the terms of the trust on which the option was held were not specified. The Inland Revenue claimed that Mr Vandervell was liable to surtax on the dividends, because he had not disposed of his equitable interest in the shares in writing, and because he retained an interest through the option.
Legal principle
The House of Lords held that Mr Vandervell had effectively disposed of his equitable interest in the shares, because where a beneficial owner directs his bare trustee to transfer both the legal and equitable title to another, section 53(1)(c) of the Law of Property Act 1925 does not require a separate written disposition. However, the option was held by the trustee company on a resulting trust for Mr Vandervell, because the trusts on which it was held had not been defined, so he had not divested himself of all interest in the shares and was liable to surtax. Lord Wilberforce said that the equitable interest could not remain in the air, and must result back to Mr Vandervell.
Related cases on formalities and constitution of trusts
- Re Brooks' Settlement Trusts [1939] Ch 993
- Cannon v Hartley [1949] Ch 213
- Choithram (T) International SA v Pagarani [2001] 1 WLR 1
- Fletcher v Fletcher (1844) 4 Hare 67
- Grey v IRC [1960] AC 1
- Hodgson v Marks [1971] Ch 892
- King v Dubrey [2015] EWCA Civ 581, [2016] Ch 221
- Mascall v Mascall (1984) 50 P & CR 119
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