Disputes between cohabiting couples following the breakdown of a relationship are on the rise. This is hardly surprising given more couples are choosing not to marry. Whilst the claims either party can make against the other are much more limited than their married counterparts, there is frequent dispute regarding the property in which they reside. This area of law is governed by the Trust of Land and Appointment of Trustees Act 1996 (TLATA).
In a co-owned property, parties will ordinarily set out in the Transfer Deed how they wish to hold the property by way of declaration of trust, for example as joint tenants or tenants in common. Well established case law dictates the express declaration of trust as set out in a Transfer Deed is binding upon the parties unless varied by subsequent agreement.
Background of the case
Mr and Mrs Cynberg purchased a property in 2001. They executed the Transfer Deed confirming they wished to hold the property on trust as joint tenants.
The parties separated in 2009. They agreed the property was Mrs Cynberg’s and she took on financial responsibility for it from that time. The parties did not conclude divorce proceedings until sometime later in 2018, they did not initiate a property transfer, and did not formalise their separation by way of financial remedy order approved by the Court. As such the property remained in the joint names of both parties.
Mr Cynberg was subsequently declared bankrupt and the trustees in bankruptcy sought to argue Mr Cynberg had a 50% interest in the property. Mrs Cynberg argued she held 100% of that interest.
The question for the court was whether the express declaration of trust entered into by the parties upon purchase had been varied by the parties’ subsequent informal agreement, it having previously been assumed by the Courts that only a subsequent written declaration of trust would suffice.
The court’s decision
Ultimately, Mrs Cynberg was found to hold 100% of the beneficial interest in the property. In effect, the High Court found that an express declaration of trust can be varied informally. That is, a later common intention constructive trust can override the declaration of trust and need not comply with any formalities. Mr and Mrs Cynberg’s verbal agreement therefore constituted a subsequent agreement.
Implications and Goughs’ View
The facts of the case are specific, and it is not known at this time as to whether the decision will be subject to further challenge. It is entirely relevant that Mr and Mrs Cynberg were in full agreement as to the position, likely to be a rare occurrence in a property dispute.
However, given the court’s decision that a verbal subsequent agreement can be sufficient to vary a declaration of trust the ruling could have significant implications for those who jointly own property if one party is seeking a greater share. Many courts and lawyers have in the past relied heavily on case law such as Pankhania v Chandegra [2012] whereby it was assumed that a written declaration of trust in the Transfer Deed is binding unless varied by a subsequent express declaration. Cohabitees have been reluctant to pursue a TLATA claim and ‘give it a go’.
Other considerations may be had in terms of public policy, and how this case impacts creditors looking to pursue debtors through the courts. May it lead to scenarios whereby couples are able to feign separation and collude to argue that subsequent agreements mean that the express declaration of trust is varied. Whilst the insolvency laws protect against this to some extent, there might be scope here to push their limits.
Whilst the judgement hasn’t flung open the door in respect of such disputes, it has certainly left it ajar. In our view this will, if it stands, make it easier for couples to run successful constructive trust claims in our courts, thus increasing the amount of litigation arising.
