In the recent case of Nilsson and another v Cynberg [2024] EWHC 2164 (Ch) the High Court have confirmed that a common intention constructive trust (CICT) can vary an express declaration of trust.
What is a CICT?
These trusts are a method to determine beneficial ownership based on the intentions of the parties regarding the ownership of property even if those intentions were not formally documented.
There are two fundamental elements of a CICT being:
- There was an agreement or common intention as to an asset, which can be demonstrated either expressly or impliedly; and
- The intention was relied upon and one party has acted to their detriment on this basis.
Facts of Nilsson and another v Cynberg [2024]
In 2001, Stuart Cynberg and Collette Cynberg purchased a property that they held on trust as beneficial joint tenants and they declared this to be the case in the TR1. Beneficial joint tenants means that both owners hold the equity in the property 100% indivisibly, such that the surviving tenant inherits the other share by survivorship. In 2006, the couple married and subsequently separated in 2009 at which time they discussed finances.
It was agreed by both parties that Mrs Cynberg would own the property solely, provided that she left the property to their children. As a result of the agreement, from 2009 Mrs Cynberg alone paid for all of the property expenses and also used money from her inheritance in 2014 for works on the property.
The couple then divorced in 2018, and shortly after Mr Cynberg was declared bankrupt in October 2018.
Mrs Cynberg sought declaratory relief, stating that she solely owned the beneficial interest in the property. She asserted that the agreement and discussions following their separation had given rise to a CICT or proprietary estoppel which in turn had varied the declaration of trust in the TR1.
The Trustees in Bankruptcy’s defence, however, was that the express declaration of trust was conclusive and could not be overridden by an informal agreement. Therefore, no CICT could have arisen and additionally there was no proprietary estoppel. Mr Cynberg had therefore retained a 50% beneficial interest in the property.
Legal Argument
In the first instance, the Judge declared that Mrs Cynberg was the sole beneficial owner.
This was appealed by the Trustees in Bankruptcy on four grounds. However, the following two grounds were of particular significance:
First Ground of Appeal
Required consideration of whether a “subsequent agreement” to vary an express declaration of trust must comply with the requirements of S.2 of the Law of Property (Miscellaneous Provisions) Act 1989 or whether a CICT sufficed.
The Deputy High Court Judge concluded that a subsequent agreement to vary is not limited to one that complies with statutory formalities and may include a CICT.
Second Ground of Appeal
The second ground was that the extent of detriment suffered by Mrs Cynberg was insufficient to give rise to proprietary estoppel.
The High Court held that taking over the mortgage payments all associated bills and the home improvements was sufficient detriment.
Courts Conclusion
The High Court dismissed all four grounds of appeal and upheld Mrs Cynberg as the sole beneficial owner.
Key Takeaways
This case is important as it adds to the case law supporting that an express declaration of trust can be varied by subsequent agreements including CICTs.
In practice, these cases turn heavily on the facts particularly that in addition to providing evidence that there was a common intention, it must be demonstrated that an individual has acted to their detriment in reliance of the intention.
Constructive trusts are a complex area and if you are concerned about any such variation we recommend that all agreements/variations are formally documented.
If you have any queries relating to this topic, please contact Ben Rosen or Eleanor Catling at Quastels LLP.
