Nilsson and another v Cynberg

Property – Beneficial interest – Trustee in bankruptcy – Respondent and husband holding former matrimonial home as joint tenants under express declaration of trust – Husband declared bankrupt – Appellant trustees in bankruptcy seeking declaration as to beneficial ownership of property – District judge holding property owned solely by respondent – Appellants appealing – Whether declaration of trust varied by subsequent agreement or proprietary estoppel – Appeal dismissed In 2001, the respondent and her husband bought a property at 9 Chippenham Road, Romford in their joint names for £87,000. Of that, 5% came from their joint savings. The balance of 95% came from a mortgage in their joint names. On completion, they made a declaration of trust, on Land Registry Form TR1, that “The transferees are to hold the property on trust for themselves as joint tenants”. Following the purchase, they together paid the monthly mortgage repayments and the other expenses relating to the property and the household generally. In 2009, they separated and the husband left the property. They came to an understanding of sorts that he would not retain any interest in the property and that he was content for the respondent to have the whole property so long as she left it to their two children in due course. Following the separation, the respondent paid for all expenditure relating to the property. In particular, she paid all the monthly mortgage repayments, council tax, utility bills and other household expenditure. The parties eventually divorced in 2018. The legal title to the property remained in their joint names. The husband was later made bankrupt and a dispute arose whether the husband’s trustees in bankruptcy (the appellants) had an interest in the property. At first instance, the district judge held that the property was now owned solely by the wife. The appellants appealed. Held: The appeal was dismissed. (1) An express declaration of trust was conclusive unless amenable to rectification or rescission or varied by subsequent agreement or affected by proprietary estoppel. It therefore followed that an express declaration of trust was not capable of being overridden by (what would otherwise be) a common intention constructive trust which arose prior to, or at the same time as, the express declaration of trust. However, an express declaration of trust was capable of being overridden by a subsequent agreement. While a “subsequent agreement”, could include a formal agreement which complied with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989, it was not so limited and might include a common intention constructive trust: Goodman v Gallant [1986] Fam 106, Stack v Dowden [2007] UKHL 17; [2007] PLSCS 82; [2007] 2 AC 432, Clarke v Meadus [2010] EWHC 3117 (Ch), Pankhania v Chandegra [2012] EWCA Civ 1438; [2012] PLSCS 241, Bahia v Sidhu [2022] EWHC 875 (Ch) and Nilsson v Iqbal [2024] EWHC 49 (Ch); [2024] PLSCS 24 considered. (2) Standing back, that was a sensible outcome. The interpretation put forward by the appellants in the present case would result in that arbitrary distinction which did not follow from the decisions in either Stack v Dowden or Pankhania. The preferred interpretation avoided that arbitrary distinction, as well as being in line with the judgments in Clarke v Meadus and Bahia v Sidhu. Accordingly, in the present case, the judge below was not wrong to find that the express declaration of trust contained in the TR1 was capable of being overridden by a common intention constructive trust. (3) In considering whether a proprietary estoppel had been made out, the relevant detriment to be taken into account fell into three categories: (i) the home improvements; (ii) foregoing bringing ancillary relief proceedings; and (iii) taking over the entirety of the mortgage repayments. As to the home improvements, if those were the only detriment suffered, it was doubtful whether they would be sufficient to give rise to a proprietary estoppel. The sums involved were relatively small and, after some 15 years, were probably necessary on any basis. Foregoing bringing ancillary relief proceedings, on the other hand, gave rise to significant detriment. If in 2009, or shortly thereafter, the respondent had issued ancillary relief proceedings seeking the whole of the property, it was highly likely that such an order would have been made. In fact, she did not do so. Although she thought the expense of bringing proceedings was too much, it also appeared that she believed that there was no real need to apply to court given the agreement she had reached with her husband at the time of their separation. By not taking those steps, she had suffered a non-minimal detriment. As to taking over the mortgage repayments, the appellants’ argument overlooked the reality of the situation. Following the separation, the respondent began paying the entirety of the mortgage repayments; but on the appellants’ case she only received 50% of the benefit of those payments in terms of increased equity, with the benefit of the other 50% going to her husband. That was a significant detriment; moreover, the idea that some 15 years after stopping paying anything towards the mortgage the husband could turn around and claim half of the equity in the property (not that he ever did) seemed to be wholly unconscionable. The trustees (who now stood in the husband’s shoes) could be in no better position: Guest v Guest [2022] UKSC 27; [2023] EGLR 2 considered. (4) Overall, no criticism could be made of the judge’s finding that the detriment suffered by the respondent was sufficient to found a proprietary estoppel. Such detriment was far from minimal. Over the years since the separation, the respondent had become emotionally attached to the property and developed a home for herself and her children. Had she been aware that she did not in fact own the whole property, and that the property might need to be sold, she could have made alternative arrangements at an earlier time to vacate and minimise the disruption and upset caused by such a change. Moreover, any supposed benefit accruing to the respondent by having the continued benefit of the original mortgage was significantly outweighed by the fact that for many years she paid the entire mortgage herself yet half of the equity in the property continued to belong to her husband. It was clear from the evidence that the respondent’s decision to stay in the property and pay all the mortgage repayments was wholly related to her husband’s assurance that the property was now hers alone. There was no reason to interfere in the judge’s determination on detriment. Samuel Parsons (instructed by Brachers, of Maidstone) appeared for the appellants; Oliver Ingham (instructed by Sternberg Reed LLP, of Barking) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Nilsson and another v Cynberg