Law school requires reading an abundance of case law. I am sure that most lawyers have a few memorable cases that standout from their time in class (Lord Denning; the ginger beer snail etc.). There are cases that have stood the test of time; cases that caused a momentous shift in an area or aspect of law; and cases that have been in the news media and public discourse in recent years (ex. Pecore).

One case that is still very relevant in the area of wills and estates, is Saunders v Vautier. A seminal case that has stood the test of time but in this author’s experience, is still occasionally overlooked.

Saunders v Vautier is a seminal English case which established the rule known as the “Rule in Saunders v Vautier”. There are narrow and broad interpretations of the rule, but generally it permits beneficiaries of a trust (if they are all capable adults) to apply to have the trust terminated and distributed contrary to the terms of the trust itself and the testator’s stated intention.

In Ontario (and elsewhere) trusts are often established by a testator in their Will. Trusts are commonly designed to preserve assets for the benefit of the intended beneficiary and may include conditions that the trust only be distributed upon a certain condition being satisfied. For example: a testator may direct that if a beneficiary of their estate becomes entitled to a share while under the age of 21, then their share will be held and maintained in trust for them, until they reach the requisite age.

This example is akin to the case that underpins the rule. Daniel Vautier was left stock in the East India Company by his great uncle. The great uncle left a Will directing that the stock be held in trust and dividends accumulated until Vautier reached the age of 25. Nine years after the death of his great-uncle, Vautier reached the age of majority and applied to the Chancery Court to access the stock early. The Chancery ruled in his favor, and Vautier received the stock earlier than his great-uncle intended.

This result would have been avoided if the will had included what is known as a gift-over. If a gift-over is included, the subject beneficiary’s interest will not vest and they will not have the right to demand the termination of the trust. For example: if the Vautier Will specified that another beneficiary would receive the trust assets if Vautier failed to survive to age 25, then Vautier would not have been able to force the premature termination of the trust on his own.

An expanded interpretation of the rule has been accepted by some courts in Canada,[1] and Underhill[2] summarizes the expanded rule as follows:

If there is only one beneficiary, or if there are several (whether entitled concurrently or successively) and they are all of one mind, and he or they are not under any disability, the specific performance of the trust may be arrested, and the trust modified or extinguished by him or them without reference to the wishes of the settlor or the trustees.

A gift-over can serve several purposes: avoiding the application of the rule in Saunders v Vautier; ensuring that the testators wishes are carried out in the event of the premature death of a beneficiary or an out-of-order death; and where a beneficiary renounces their gift.

For a more fulsome history and application of the rule in Saunders v Vautier in Canada and elsewhere see the Law Reform Commission of Saskatchewan’s paper.[3]

Written by: Alicia Mossington, Estate and Trust Consultant, Scotiatrust

[1] Fulsome summary by the Supreme Court of Canada in Buschau v Rogers Communications Inc. 2006 SCC 28 (CanLII).

[2] Underhill on Trusts (11^th), 1959 Art. 68

[3] Law Reform Commission of Saskatchewan. “The Rule in Saunders v Vautier and the Variation of Trusts” (Law Reform Commission of Saskatchewan, 1994). Retrieved from: <https://canlii.ca/t/sg8l>