Are there any recent cases on 'Severance of joint tenancies'?

  • Author : Bill Stark - 21-08-2012

On 3 October 2011 and 15 February 2012 I posted blogs about 2 cases where one party sought to sever a joint tenancy and the other party resisted the application.

On 27 July 2012, Croft J handed down a further decision about the severance of joint tenancies in Mischel v Mischel Holdings Pty Ltd [2012] VSC 292.

Facts
The circumstances in that case were that the joint tenants agreed to sever the joint tenancy, and exchanged contracts to that effect; however, before the agreement could be brought into effect, one of the joint tenants died.

Croft J was called on to determine whether the death of the joint tenant resulted in the agreement being of no effect, due to section 42 of the Transfer of Land Act, 1958 (indefeasibility of title).


 

The decision
His Honour noted (at paragraph 38):
It is well established that the conveyance of property to parties  jointly does not of itself rebut the equitable presumption of a tenancy in common as a conveyance in this form does not identify the beneficial ownership of the conveyees— and the same applies to a transfer of land under the Transfer of Land Act 1958 (Vic).

and at paragraph 39:  
The [joint tenants] enjoyed indefeasible title as joint registered proprietors in fee simple under the provisions of the Transfer of Land Act 1958 (Vic). This position in terms of legal title does not, however, prevent parties agreeing a contrary position ... An agreement of this kind, if recognised in equity as relevant to the state of the title, would eliminate one of the “four unities” — possession.

His Honour then referred (in paragraph 40) to the:
"many authorities of long standing which reaffirm the dislike of joint tenancies in equity because of the arbitrary manner in which the right of survivorship operated. The position in this respect was discussed and reaffirmed by Gibbs CJ in Delehunt v Carmody in the context of a purchase of property where both purchasers contributed equally in the payment of the deposit and the instalments of purchase price:

    ... Equity had a dislike for joint tenancies, because their effect was to make the ultimate ownership of the property depend on the chance of survivorship, and, in the words of Snell’s Principles of Equity 28th ed (1982), at 37: “There is here no equality except, perhaps, an equality of chance.”

His Honour concluded that an agreement between the deceased before her death and the joint title holder:
"made in circumstances where [the deceased] provided full consideration for the purchase of her half interest in the premises would, in my view, provide a sufficient circumstance to indicate that it was intended that there should not be a joint tenancy because the result of such an agreement would be to eliminate one of the “four unities”, namely, possession.

In dealing with the death of the joint tenant before the contract was completed, His Honour noted (at paragraph 62):

Finally, mention should be made of the fact that [M] died prior to the settlement of the sale of the premises. Whilst the defendant sought to attach some significance to this fact, it does not, in my opinion affect the position argued for by the plaintiff. When an enforceable contract for the sale of land is entered into, the consequence, in equity, is that the purchaser acquires at that time the fee simple estate in equity, the vendor’s interest at the same time being converted into a lien over the land sold for the balance of the purchase price. Consequently, from the perspective of equity, [M]’s death occurred after the beneficial sale of the premises and, consequently, at a time when the agreement to apportion the sale proceeds had come into effect. This position is not affected by the passing of the legal estate in the premises by survivorship on her death because the holder of that estate, the defendant, does so subject to her beneficial interest in the proceeds of sale — now, of course, part of her deceased estate.


Severance of a joint tenancy
On the question of severance of a joint tenancy, His Honour noted as follows (at paragraphs 63 and following):

It is clear that a joint tenancy may be severed by agreement or by conduct. Although severance by conduct has been characterised merely as evidence of an agreement to sever, the “weight of authority supports [the latter] as having an independent existence”.

[64] I turn now, particularly, to severance by agreement. It is clear from the authorities that a joint tenancy may be severed in equity by agreement between all the joint tenants henceforth to hold as tenants in common. This includes a situation where the joint tenants agree that:

    (a) they each hold an equal, one-half share in the property (a moiety); and
    (b) the property is to be sold and the proceeds of sale divided accordingly.

It is the agreement between the parties to “split” their property that is determinative of an intention to sever, as emphasised by the Queensland Court of Appeal in Sprott v Harper.

[65] Equity regards the parties as tenants in common as soon as the agreement to sever is made, even though the legal title remains in them as joint tenants, and even though the agreement contemplates the occurrence of future events. For example, an agreement to sell and divide the proceeds of sale of the property between the joint tenants normally severs the joint tenancy in the absence of the actual sale or division of the proceeds. Thus, Professor Butt observes:

It seems not to matter that the contemplated events might never in fact occur; for example, an agreement between husband and wife joint tenants that each henceforth is entitled to “a one-half” interest in the property severs the joint tenancy immediately, even though the agreement provides for sale of the property only on the remarriage of either of them or on one giving the notice at some future time that a sale is required.

If a co-owner dies before the legal title is altered to reflect the changed status, the beneficial ownership, equity will compel the survivor to hold the deceased’s undivided interest on trust for the persons entitled under the deceased’s will. Where that interest has been sold, the proceeds of sale of that interest will be held on trust for the person beneficially entitled.
 ...

At paragraph 67 His Honour concludes:
The weight of authority now indicates, in my view, that an oral agreement to sever a joint tenancy will suffice.

The final decision of the court was that as at the date of her death, [M] was entitled to a half-share of the proceeds of sale of the premises either because she was, at the time she acquired an interest in the premises, a tenant in common in equity as to one-half share, or because any joint tenancy was severed by agreement or conduct prior to her death, with the result that she thereupon became beneficially entitled to the half-share of the proceeds of sale of the premises.

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Bill Stark

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