Are express declarations of trust conclusive?

Louise Clark analyses a decision on the issues that can result from divorce and subsequent bankruptcy. Key points An express declaration of trust overrides any arrangement reached prior to or at the same time as the declaration Such a declaration can be varied by subsequent agreement or estoppel The agreement need not be a formal agreement satisfying the requirements of the 1989 Act The House of Lords in Stack v Dowden [2007] UKHL 17; [2007] PLSCS 82 determined that an express declaration of trust is conclusive as to the beneficial interest in property unless varied by subsequent agreement or affected by proprietary estoppel. In Nilsson and another v Cynberg [2024] EWHC 2164 (Ch); [2024] PLSCS 152, the High Court has clarified when and how an express declaration of trust can be varied, including whether a formal agreement complying with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989 is required. Background The case concerned the ownership of a property at 9 Chippenham Road, Romford, acquired for £87,000 in February 2001 by Collette Cynberg and her husband, Stuart, in their joint names. The TR1 form declared that they held the property on trust for themselves as joint tenants. The purchase was funded with a 5% deposit from their joint savings and a 95% mortgage. Both worked and together they paid the monthly mortgage repayments and the general property and household expenses. The couple separated in January 2009. At that time there were a number of discussions about the property, the gist of which was that Stuart did not wish to retain an interest in the property and was happy for Collette to have it provided she left it to their two children in due course. Following the separation, Collette paid for all expenditure relating to the property including all of the mortgage repayments, council tax and the utilities. In August 2014, she received an inheritance and spent £10,396 carrying out minor works to the property including new windows, paving, heating and fencing. Collette also consulted solicitors with a view to commencing divorce proceedings. In 2015 and 2016, her solicitors pointed out to her several times that the property remained in joint names and that Stuart had offered to transfer it to her absolutely. The couple were formally divorced in March 2018 but the property remained in joint names. The claim In June 2018, Stuart was made bankrupt and the appellants were appointed his trustees in bankruptcy. A dispute arose over the beneficial interest in the property. The trustees, relying on Stack v Dowden, claimed that the declaration of trust in the TR1 was conclusive and they were entitled to Stuart’s beneficial interest. They rejected Collette’s assertion that the discussions between the couple were capable of giving rise to a common intention constructive trust and/or proprietary estoppel so that she now held the entire beneficial interest in the property. Collette succeeded in an application for declaratory relief. The County Court district judge found that the discussions between the couple led to an understanding that the property now belonged to Collette and that she had acted on that understanding to her detriment by taking over the entirety of the mortgage payments and household expenditure, as well as forgoing bringing ancillary relief proceedings and investing in home improvements. Consequently, a common intention constructive trust had arisen in 2009. Alternatively, there was a proprietary estoppel also dating from 2009. The trustees appealed. The law The High Court summarised the relevant authorities: An express declaration of trust will be conclusive unless amenable to rectification or rescission (Goodman v Gallant [1986] Fam 106) or varied by subsequent agreement or affected by proprietary estoppel (Stack v Dowden); An express declaration of trust cannot be overridden by what would otherwise be a common intention constructive trust arising prior to or at the same time as the express declaration of trust (Pink v Lawrence [1978] 36 P&CR 98); However, an express declaration of trust may be overridden by an equity arising in light of representations and promises made after the declaration of trust (Clarke v Meadus [2010] EWHC 3117 (Ch)); While a subsequent agreement could include a formal agreement under the 1989 Act, it was not so limited and could include a common intention constructive trust; Since the facts needed to establish a constructive trust and proprietary estoppel are analogous there is no reason to treat a proprietary estoppel claim differently. The appeal decision Consequently, the judge was not wrong to find that the express declaration of trust in the TR1 was capable of being overridden by a common intention constructive trust. The detriment Collette relied on fell into three categories: the home improvements; forgoing bringing ancillary relief proceedings; and taking over the entirety of the mortgage repayments. Contrary to the trustees’ submissions, the detriment was far from minimal and sufficient to find a proprietary estoppel. There was also a clear causal link between Collette’s decision to stay in the property and pay the entirety of the mortgage payments and Stuart’s assurance that the property was now hers alone. Finally, the trustees argued that any proprietary estoppel only arose after the home improvements were made and so the transaction was one at an undervalue within section 339(3) of the Insolvency Act 1986: the judge should have ordered that 50% of the beneficial interest in the property vested in Stuart’s bankruptcy estate. Had the home improvements been the only element of detriment there might have been some force to this argument, but the detriment in paying all of the mortgage payments and forgoing bringing ancillary relief proceedings began in 2009. The district judge was entitled to reach the decision that she had, which was clearly correct. Louise Clark is a property law consultant and mediator Photo © Tierra Mallorca/Unsplash