The Nilsson & Anor v Cynberg (2024) case overview
This case revolved around a property owned by a couple, S and C, who had been in a relationship from around 2000 to 2009.
In 2001, they bought a property together and created a written declaration of trust, specifying their respective shares in a property by ticking box 11 of the TR1 (entitled Declaration of Trust) as legal and beneficial joint tenants.
When their relationship ended, S moved out of the property, following this they both had several conversations about their respective shares in the property. S made it clear that he didn’t wish to retain an interest in the property provided that C left the property to their two children on her death.
Following these conversations and understandings, C continued to pay for all property-related costs, made improvements to the home (installing new windows and a heating system), and treated the property as hers alone. Even though they hadn’t put anything in writing to change the original trust, the parties had an oral agreement.
In October 2018, S was made bankrupt and the trustees in bankruptcy sought to argue that S was still a legal and beneficial owner of the property and that his share of the property vested in them as his trustees in bankruptcy.
C issued a claim seeking a declaration that the beneficial interest in the property was held for her alone, which S did not oppose to.
The trustees however, argued that any variation to the declaration of trust must be made in writing, in accordance with the terms of the trust deed.
What was the legal issue in this case
The key legal issue in this case was whether an oral agreement could effectively alter the terms of the written trust deed, or if such a variation, to be effective, required a written document to comply with required formalities.
The court’s decision
The High Court ruled in favour of C, agreeing that the oral agreement validly varied the trust.
The court made several key points/observations:
- Nature of variation: The court distinguished between changing the legal title of the property (which requires formalities) and changing the beneficial interest, which can be varied informally, even by oral agreement.
- No requirement for written form: The court rejected the trustee’s argument that a written agreement was required for such variations, noting that equity allows for changes to the beneficial interest based on the parties’ conduct and mutual agreement, even if not formalised in writing.
- Intention and conduct: The court emphasised that the parties’ subsequent actions supported the existence of the oral agreement. Their conduct indicated that they had both accepted the variation in beneficial ownership.
- Flexibility in trust variations: The ruling confirmed that variations to the beneficial ownership of a trust can be made without written documentation, provided there is clear mutual consent and no evidence of undue influence or fraud.
What does this mean?
This ruling is significant because it clarifies that, while written formalities are generally required to create or vary trusts, changes to the beneficial interest in a trust can be validly made through oral agreements, as long as there’s a clear agreement between the parties. The case emphasises that mutual consent and supporting conduct can be enough to show that a change to the trust has occurred.
However, while the court allowed for the change to be made verbally, the ruling also serves as a reminder that it is always best to document changes in writing and this helps avoid confusion or disputes down the line.
If you wish to discuss anything mentioned in this case review or would like advice on disputes relating to properties, please get in touch with, please get in touch with Kathryn Clare or a member of our dispute resolution team.