Jessica Jarvis

 

In the recent case of Nilsson v Cynberg (2024 EWHC 2164 Ch), the High Court addressed a question of increasing relevance for those of us managing property and finances under Court of Protection orders: how can informal agreements, particularly those related to property ownership, coexist with or override formal express declarations of trust? For deputies and attorneys managing the affairs of vulnerable individuals, this case offers a valuable lens through which to consider the interplay between express and constructive trusts, especially when capacity and informal family arrangements are involved.

 

The Case in Brief

 The Nilsson v Cynberg case revolved around a dispute between Collette and Stuart Cynberg, a divorced couple who had jointly owned their matrimonial home. Upon separation, they reached an informal oral agreement whereby Stuart disclaimed his interest in the property, provided Collette left it to their children in her will. Collette assumed responsibility for all outgoings on the property, including the mortgage. However, years later, after Stuart was declared bankrupt, his trustees in bankruptcy sought to claim his 50% share of the property based on the express declaration of trust in the TR1 form made at the time of purchase.

Collette argued that a common intention constructive trust had arisen, giving her full beneficial ownership based on their post-separation agreement. The High Court ultimately ruled in her favour, finding that an informal agreement can displace an express trust, provided there is clear evidence of common intention and detriment.

 

Understanding Detriment

In trust disputes, detriment refers to the financial or personal sacrifices made by a party in reliance on an informal agreement or understanding. In this case, detriment took several forms. Collette not only invested in home improvements but also assumed full responsibility for the mortgage payments and forewent pursuing formal financial remedy proceedings.

The court found that this reliance on her husband’s assurances—particularly paying the mortgage, which only benefitted her by 50%—was a significant detriment. This detriment formed the basis for the court’s recognition of a common intention constructive trust, overriding the express declaration of trust.

 

Capacity and Informal Agreements

In the context of deputyship or attorneyship, the issue of capacity becomes a vital element. Many vulnerable clients under deputyship orders may have previously entered into informal agreements regarding property ownership, sometimes without fully understanding the legal consequences. It is crucial that deputies and attorneys recognise the potential impact of these agreements, especially when dealing with express declarations of trust.

For example, a vulnerable individual or their family members may enter into informal agreements at a time when capacity was unclear or fluctuating. As a deputy or attorney, it becomes your responsibility to assess whether such agreements reflect the vulnerable individual’s true intentions and best interests. If disputes arise later—such as a challenge by creditors or trustees in bankruptcy—clear documentation and a thorough understanding of the vulnerable person’s capacity at the time of the agreement will be crucial.

 This case prompts us to consider whether deputies and attorneys should proactively seek clarification or rectification of informal agreements, especially if the person they represent lacks the capacity to appreciate the legal nuances of express or constructive trusts. If an informal agreement was made at a time when the individual’s capacity was in doubt, the deputy or attorney may need to intervene to ensure that the agreement aligns with the vulnerable individual’s best interests.

 

Practical Implications for Deputies and Attorneys

For those managing property on behalf of vulnerable individuals, Nilsson v Cynberg highlights several practical considerations:

     1. Capacity: When managing property for someone who lacks capacity, it is essential to ensure that any informal agreements they entered into—especially regarding property ownership—are properly documented and legally sound. Deputies should consider obtaining court approval where informal agreements could give rise to a constructive trust or undermine an express trust.

     2. Documenting Family Agreements: While informal agreements can give rise to constructive trusts, it is far safer to ensure such agreements are formalised in writing. As deputies and attorneys, we should encourage families to document any understandings regarding property ownership or financial obligations to protect both the vulnerable person and their estate from future disputes.

     3. Assessing Detriment: In cases where informal agreements come into play, assessing detriment is key. For example, if a family member assumes financial burdens, such as mortgage payments or significant household expenses, in reliance on an informal agreement, this could be regarded as detriment. Deputies and attorneys must ensure that such actions are recorded and supported by documentation, particularly if there is a risk that these agreements may later be contested.

     4. Reconciling Formal and Informal Trusts: This case forces us to carefully balance formal legal obligations with the more flexible, personal agreements often found in family settings. Deputies and attorneys must ensure that informal family agreements do not conflict with express trusts in ways that could jeopardise the vulnerable individual’s financial security. Seeking legal advice or court approval to clarify such matters can help avoid future complications.

     5. Bankruptcy and Trusts: The interaction between bankruptcy and trust law is another crucial takeaway from this case. If a family member of a vulnerable individual under deputyship becomes bankrupt, trustees in bankruptcy may challenge informal agreements based on express declarations of trust. Deputies and attorneys must be vigilant in protecting the vulnerable individual’s interests, particularly where joint ownership is involved.

 

Conclusion

The Nilsson v Cynberg case highlights the complexities we can face as deputies and attorneys when informal family agreements collide with formal legal structures like express trusts. While express declarations have been considered final, this case shows that common intention constructive trusts—based on informal agreements—can still play a powerful role, especially when there’s clear evidence of reliance and detriment.

For those of us managing the affairs of vulnerable individuals, the key takeaway is to be proactive. Ensure that any family agreements are properly documented, and always keep capacity in mind when dealing with property and financial matters. Disputes can arise when informal understandings are left unaddressed, so it’s important to get clarity early on to protect both the vulnerable person and their estate. With the right approach, we can manage these complexities while safeguarding our clients’ best interests.