The common understanding in cases of property involving an express declaration of trust was that the declaration was conclusive of the party’s intention as to ownership, unless that was varied later by way of a subsequent agreement or if proprietary estoppel applied. This was the position for a long time in accordance with the Supreme Court decision of Stack v Dowden. What was meant by a ‘subsequent agreement’ was never really clarified.
The questions arose as to whether such subsequent agreements were limited to written deeds or written agreements which varied the original declaration or whether they encompassed verbal and informal agreements.
The recent High Court decision in Nilsson v Cynberg ([2024] EWHC 2164 (Ch)) has offered important clarification on what constitutes a “subsequent agreement” in the context of express declarations of trust.
The decision examined whether such agreements needed to comply with the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989) or whether they could also include informal, verbal agreements that establish a common intention constructive trust.
Common Intention Constructive Trust
This article is not a detailed excerpt on common intention constructive trusts, however, a common intention constructive trust is established when two or more parties share an intention about property ownership and how it will be held, even if this intention isn’t formally documented in writing. These trusts do not always require specific formalities and can arise automatically under certain conditions.
A court may declare that the beneficial interests in the property are held in a specific way between co-owners based on their shared intentions. This can include granting an interest to a party who many are not named in documents but where it can be evidenced the intention was for them to hold an interest.
The parties’ intention is usually inferred from either an express agreement, formally or informally or based on their conduct. Conduct usually includes acts such as significant financial contributions to the purchase price or other acts which can demonstrate that there was an intention to share ownership of the property.
Nilsson v Cynberg – how the position was clarified (or even altered)
The issue which plagued the case of Nilsson was, in a case where a declaration of trust had been made at the time of the purchase of a property, to what extent could this be displaced by a subsequent agreement, i.e a constructive trust and whether such a subsequent agreement had to be in writing.
Judge James Pickering KC, sitting as a Judge of the High Court in Nilsson v Cynberg clarified how this conundrum should be interpreted.
The case involved two parties who had purchased a property in their joint names. At the time, they were required to fill out a Land Registry form which they would declare how the Property was held (in terms of shares). In that form, they specified that they were going to hold it in equal shares.
The parties would go on to separate and in conversations surrounding their separation, Mr Cynberg indicated he no longer wanted to retain an interest in the property and for Mrs Cynberg to have the whole of it, provided she left it to their children.
Following the separation and their discussions, Mrs Cynberg paid for all the expenses relating to the property without any contribution from Mr Cynberg. This included mortgage payments in full. Sometime later, Mr. Cynberg was declared bankrupt, and the trustee in bankruptcy sought to sell the property, arguing that half of the proceeds should go to Mr. Cynberg’s creditors based on the express declaration of trust which said they held the property in equal shares.
It was argued by Mrs Cynberg that the original declaration had been altered by way of their discussions citing Mr Cynberg had communicated to her that he no longer wanted an interest in the property. The trustees argued that such an agreement had to be in writing and could not be changed by an informal or verbal discussion.
The High Court held that an express declaration of trust could be overridden by a subsequent agreement and that this could include a common intention constructive trust. Therefore, the “subsequent agreement” was not limited to formal agreements meeting the LP(MP)A 1989 requirements.
This meant that Mrs. Cynberg was deemed the sole beneficial owner of the property.
Our Perspective
This decision is significant in the context of property law. For a long time, the conventional view was that subsequent agreements varying the original declaration of trust had to be in writing. The ruling shows that this view may be displaced or altered where the parties agree otherwise even informally. This widens the framework within which individuals can move away from documented agreements and rely on conversations or conduct to determine beneficial ownership.
Our property litigation team at Whiterose Blackmans specialises in property trusts and resolving disputes under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). To discuss your case, contact us today.
AUTHOR
Wakash Waheed
Partner and Head of Civil and Commercial Departments
Whiterose Blackmans Solicitors LLP, Diamond House, 116 Brudenell Road, Leeds, LS6 1LS