Property disputes: How an Express Declaration can be overridden by the formation of a valid constructive Trust
A verbal agreement between a couple as they separated has been upheld by the High Court over and above the declaration of trust they made when they first purchased the property in equal shares years earlier.
This case has important trust law implications for anyone who buys property together and ends up in dispute over ownership.
It makes clear that a verbal agreement can override an express declaration of trust if it leads to the formation of a valid constructive trust. In short, an important development for joint property owners.
What happened in this property dispute case?
Collette and Stuart Cynberg purchased their Chippenham home in 2001 with the Transfer Deed clearly stating they owned it 50/50 as joint tenants.
However, after they decided to separate in 2009, they agreed verbally that Mr Cynberg, who’d had an affair, would relinquish his interest in the home as long as Collette left it to their two children when she died.
Mrs Cynberg went on to pay the mortgage, council tax and all utility bills herself and when she inherited some money, used it to make home improvements including new windows and fencing. Mr Cynberg contributed nothing.
They divorced in 2018 and Mr Cynberg was declared bankrupt.
Why did a dispute over ownership develop?
When Mr Cynberg became bankrupt, the trustees in bankruptcy wanted to sell the property arguing that, based on the initial express declaration of trust, 50% of the proceeds should go to his creditors.
They said that the post-separation discussions between the couple had not created a common intention trust giving Collette full ownership of the property and that Mr Cynberg’s beneficial ownership rested in them as trustees.
Collette, backed by her former husband, argued that this express declaration of trust had been varied by their subsequent informal and verbal agreement which she had relied upon to her detriment.
What did the courts decide?
Initially, in November 2023, Collette succeeded in her claim at a district court. However, in January this year, the trustees appealed to the High Court on four separate grounds:
- That the TR1 (transfer deed) was conclusive and could not be overridden by a subsequent agreement.
- That the detriment Mrs Cynberg suffered was minimal (and therefore insufficient to be able to assert unconscionability), she had enjoyed benefits that outweighed the detriment and the detriment was not sufficiently linked to the assurances given by Mr Cynberg.
- The discussions between Mr and Mrs Cynberg were insufficient to found a proprietary estoppel or common intention constructive trust. The Trustees in Bankruptcy argued that the discussions amounted to an offer which was not acted upon, rather than an agreement.
- If there was any proprietary estoppel, this arose after the improvements to the property were carried out in 2014/15 and not in 2009.
Mr and Mrs Cynberg were cross examined and the conversations which took place in 2009 were found to be clear and straightforward with Mr Cynberg saying “the house is yours”.
Mr Cynberg’s trustees in bankruptcy were denied permission to appeal on all grounds and it was ruled that Mrs Cynberg was entitled to 100% of the beneficial interest in the property.
Why is this property dispute so important?
It underlines the importance of looking at the parties’ intentions and reinforces that an express declaration can be overridden by a ‘subsequent agreement’, which can include a verbal agreement (that is, in legal terms, a common intention constructive trust). It also helps to clarify what is sufficient to establish “detriment”.
An important aspect to the case was the trustees’ contention that the detriment suffered by Mrs Cynberg was insufficient to give rise to a proprietary estoppel.
Proprietary estoppel can be used to stop someone reneging on a promise or assurance, however informally made, when that assurance was relied upon by the other person to their detriment.
The Judge found that the detriment to Mrs Cynberg was far from minimal as she had solely paid the mortgage payments and funded home improvements and did not issue ancillary relief proceedings on the basis Mr Cynberg had handed over his share in the property.
The Judge also found that the trustees were incorrectly focusing on the home improvements as the only detriment when in fact there was detriment from foregoing the ancillary relief proceedings and most significantly, taking over the entirety of the mortgage repayments.
The High Court found that the proprietary estoppel had arisen in 2009, at the time the couple separated and jointly agreed that Mrs Cynberg would keep the house and not, as the trustees claimed, only after the home improvements made in 2014 and 2015.
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We are experts in the Trusts of Land and Appointment of Trustees Act (TOLATA) which gives courts certain powers to resolve property disputes between any parties who have bought property together.
This includes unmarried couples, family members and friends who may find themselves in a difficult situation if one person wishes to sell the property or move out.
Our solicitors can help with disputes concerning property owned jointly, whatever the connection, or if someone believes they have an interest in property owned by another person.
Contact a member of our team to book a free 30-minute initial consultation with one of our solicitors.