This case is part of a wider article, "No Contract. No Problem?", where I explained the importance of taking legal advice when buying, or acquiring an interest, in a property, regardless of whether it is a building or land, I explained the relevance of Section 2 of The Law of Property Act (Miscellaneous Provisions) Act 1989 which imposes some restrictions on individuals’ freedom to determine what contractual obligations they will accept in the course of that transaction. The following case study demonstrates what can happen when you have what you think is a clear agreement to purchase, or acquire an interest in, a property or other land, from somebody but it is either not in writing, or only partially in writing. If you do not have a contract to purchase that satisfies the Act’s requirements, you may be able to enforce alleged property rights via a claim based on a ‘common intention constructive trust’; alternatively, the equitable claim of proprietary estoppel may also come to the rescue. You can read the detailed background to this cases here.
Mr. and Mrs. Cynberg bought a property in joint names. The purchase price came from their joint savings and on completion, they completed the Land Registry Form TR1. In relation to box 11 of that form (entitled "Declaration of Trust"), they ticked the box which declared that "The transferees are to hold the property on trust for themselves as joint tenants."[1]
This was a case therefore, where the parties had spelt out their beneficial interest upon acquisition. Much later however, Mr and Mrs Cynberg separated. At and around that time there were a number of discussions between them, the gist of which was that he did not wish to retain an interest in the property and that he was content for her to have the whole Property so long as she left it to their two children in due course.[2]
Following their divorce and Mr. Cynberg’s subsequent bankruptcy, a dispute arose between his Trustees in bankruptcy and Mrs. Cynberg as to the beneficial interest in the property. Mrs Cynberg pointed to the discussions which had taken place between her and Mr Cynberg at around the time of their separation and asserted that this gave rise to a common intention constructive trust and/or proprietary estoppel such that the entire beneficial interest in the Property was now held by her alone. The Trustees argued this was not enough to dispose of Mr. Cynberg’s interest.
In a former, leading case[3] it had been decided that an express declaration of trust, as existed in Nilsson, is conclusive unless varied by ‘subsequent agreement’ or affected by proprietary estoppel. One of the key questions in Nilsson was whether "subsequent agreement" in this context meant only a subsequent formal agreement which complied with the requirements of the Act, or whether it was also capable of including a subsequent informal, common intention constructive trust.
The Court decided in favour of the latter and that, based on the discussions had been Mr. and Mrs. Cynberg, she was solely beneficially entitled to the property, having relied upon their agreement to her detriment by a) foregoing ancillary relief proceedings at the time of their divorce, particularly in circumstances where the beneficial interest in the property would have been undisputed by Mr. Cynberg at the material time, and b) taking over the mortgage repayments for some 15 years.[4] She thus defeated the Trustee’s claim for possession and an order for sale.
[1] Para 6, Nilsson
[2] Ibid. paras 9 and 10
[3] Stack v Dowden [2007] UKHL 17
[4] Paras 58 to 60 of Nilsson
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