James Pickering KC sitting as a deputy High Court judge. A declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel. A ‘subsequent agreement’ is not limited to those compliant with the LP(MP)A 1989 but can include informally arising constructive trusts.

Background

In 2001 the parties purchased a property. The TR1 stated that they held the property on trust for themselves as joint tenants. They paid the mortgage and household expenses jointly. In 2009 they separated. Upon separation, they had discussions in which H stated that he did not wish to retain an interest in the property. W thus remained in the property and paid all the expenditure in relation to it (including the mortgage).

W carried out minor works on the property in 2014 and eventually started divorce proceedings in 2015. Proceedings were not started earlier because neither party had enough funds to do so. Within solicitors’ correspondence H offered to transfer the property absolutely to W. However, bankruptcy proceedings were started against H in June 2018. W asserted there was a common intention trust arising from the post-separation discussions between H and W giving her the full beneficial ownership of the property. However, the trustees argued that there was no such trust and H’s beneficial ownership vested in them as trustees.

First instance

At trial, the judge decided that there was a common intention constructive trust and in the alternative there would be a claim for proprietary estoppel.

The appeal

The trustees’ appeal contained four grounds, the first of which holds the most importance.

Ground 1: A declaration of trust cannot be varied by a subsequent agreement which is informal, i.e. a common intention constructive trust, as it needed to comply with the requirements of the LPA 1925, i.e. to be signed and in writing.

The judge surveyed the law in this area and found:

• Per Baroness Hale in Stack v Dowden [2007] UKHL 17, [49], a declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel. Baroness Hale did not state what form a subsequent agreement had to take.
• Clarke v Meadus [2010] EWHC 3117 suggested that it is possible for a constructive trust to have arisen from assurances made after an express declaration of trust to displace the express trust: ‘Nothing in Stack v Dowden or Goodman v Gallant can be read as suggesting that this is not possible: it all depends on the facts.’ This was followed in Bahia v Sidhu [2022] EWHC 875.
• Re Iqbal [2024] EWHC 49 was a case very similar to the present case in that it involved an express declaration in a TR1 and subsequent conduct alleged to give rise to an equity. In that case, however, it was decided that the agreement varying the trust needed to be LP(MP)A 1989 compliant.

Held: an express declaration of trust could be overridden by a common intention constructive trust arising later. Stack made no mention of formal requirements being necessary. It would be nonsensical to suggest that a declaration of trust could be overridden by estoppel but not a common intention constructive trust. The case law makes no mention of that distinction and to add one would create an arbitrary dividing line. Ground one was dismissed.

Ground 2: The judge was wrong to find unconscionability on the basis that the detriment was minimal: W benefited from having a mortgage she would not be able to obtain on her own, and there was no causal link between the promise and detrimental reliance. James Pickering KC found that there was a clear causal link as well as detriment. It was not minimal that W had been paying the entire mortgage on the property and that she had foregone ancillary relief proceedings. Ground two was dismissed.

Ground 3: The judge was wrong to find that the assurances were enough to found a proprietary estoppel claim because H had merely made an offer to transfer. The trustees relied heavily on H’s offer in solicitors’ correspondence to transfer the property to W and the fact that her solicitors went on to advise her of the risks of remaining a joint tenant. Their argument was that this suggested that H still had a beneficial interest. James Pickering KC agreed with the first instance judge: the solicitors had effectively not understood the position and this would not affect the existence of a common intention. Ground three was dismissed.

Ground 4: If proprietary estoppel arose, it arose much later, when it became inequitable for H to renege on his assurances and this was when the improvements were made in 2014 not upon separation in 2009. It was at this point at which the transaction was at an undervalue and the judge should have ordered that a beneficial interest still vested in H. Again, James Pickering KC agreed with the trial judge. It became unconscionable for H to renege on his assurances when W took over the entirety of the mortgage (2009) and when she had foregone bringing ancillary relief proceedings. Ground four was dismissed.