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Severance and Ending Co-

ownership
Cameron Stewart
Thanks to Jim Helman and
Shae McCrystal errors are
mine

(c) Cameron Stewart 2009


Severance of Joint
Tenancy
A joint tenant can change the nature of
their co-ownership from joint tenancy
to tenancy in common. This will not
terminate the co-ownership, (unless
the method used to change the nature
of the ownership involves divesting of
the interests) it will simply change the
nature of the co-ownership from joint
tenancy to tenancy in common.

(c) Cameron Stewart 2009


Unilateral Severance of
Joint Tenancy
The unilateral severance of the joint tenancy deprives the other
co-owners of the right of survivorship to the portion of the land
that is severed, but equally the severing co-owner loses the right
of survivorship with respect to a portion of the land now belonging
to the other joint tenants.
There is no duty not to sever- co-owners are not fiduciaries
In Public Trustee of the ACT v Hall [2003] ACTCA 27, a surviving
co-tenant (Hall) tried to argue that a unilateral severance
undertaken by his former wife in respect of their co-owned
property was ineffective because she had severed the joint
tenancy in breach of her obligations to him as co-joint tenant. In
effect, Hall argued that joint tenants were in a fiduciary
relationship and if one co-tenant tried to sever the co tenancy
without notice or consultation, they would be severing in breach of
that relationship. The ACT Court of Appeal unanimously rejected
that argument citing long established principles that joint tenants
are not in a fiduciary relationship and are entitled to unilaterally
pursue their own interests by severing the joint tenancy without
giving notice to, or getting permission from, their co-owner.

(c) Cameron Stewart 2009


Ways to sever
One joint tenant alienates his or her
share inter vivos, with or without the
consent of the other joint tenants.
They can do this by transferring their
interest to a third person, to
themselves, by declaring a trust over
their interest or by transferring the
interest to a trustee to hold on trust
for someone else or themselves.
(c) Cameron Stewart 2009
Ways to sever
Old System Land - s 30 of the Conveyancing Act
1919 (NSW) states that where a person causes
the unilateral severance of a joint tenancy in old
system land, notice of the unilateral severance
must be given to the other co-tenants as soon
as practicable, although a failure to do so will
not invalidate the severance.

Torrens Land s 97 of the Real Property Act


1900 (NSW) requires the Registrar General to
notify the other joint tenants of the lodgement
of a dealing that may sever the joint tenancy.

(c) Cameron Stewart 2009


Ways to sever alienation
to self
A simple way of unilaterally severing a joint tenancy is
to alienate the land to yourself. The CA s 24 empowers
a person to assume property to himself or herself.

In order to make this effective to sever the joint


tenancy, it must comply with the legal requirements
and equity WILL NOT perfect an incomplete severance.

Old System Land To alienate the land to oneself under


old system land, the severing joint tenant had to use a
valid deed.

Torrens To alienate land to oneself, the severing joint


tenant must register a transfer of the interest to
themselves.

(c) Cameron Stewart 2009


Ways to sever transfer and
settlement of trust
Corin v Patton (1990) 92 ALR 1: Mr and Mrs Patton were joint
tenants of Torrens title land, and Mrs Patton became
seriously ill. Anticipating her own death she decided she
wanted to benefit her children. She attempted to transfer
her interest as joint tenant to her brother, Mr Corin, to hold
the interest as trustee for the benefit of Mrs Patton. If this
was effective it would sever the joint tenancy enabling her to
pass her beneficial share of the property through her will.
Unfortunately there was no transfer registered before Mrs
Patton died, and so the issue was whether the transfer to her
brother as trustee for herself was effective in equity to sever
the joint tenancy. The High Court found that the gift was
ineffective because, while Mrs P had signed a transfer form,
she had not taken any steps to obtain the certificate of title
that was held by an unregistered mortgagee. Thus, on Mrs
Pattons death the survivor, Mr Patton, took the whole
interest.
Rule in Milroy v Lord

(c) Cameron Stewart 2009


Severance grant of mortgage
over share
A legal mortgage by the joint tenant under general law
constitutes alienation because the mortgage transfers the legal
title to the mortgagee. This has the effect of breaking the co-
ownership because the mortgagee becomes the owner. On the
other hand, a Torrens mortgage does not constitute alienation,
because a mortgage of Torrens title land operates as a charge
only and not as a transfer of the interest mortgaged.

Interestingly, if the mortgaging joint tenant dies before the


other, the charge ceases to be effective because the interest
over which the mortgage was granted has ceased to exist
(right of survivorship surviving JT takes all);

Alternatively - If the non mortgaging JT dies, the mortgage then


applies to the whole of the interest owned by the surviving joint
tenant. Ie the whole estate will then be encumbered by the
mortgage.

(c) Cameron Stewart 2009


Severance grant of mortgage
over share
In Lyons v Lyons [1967] VR 169 the Court considered
a claim by the executors of the estate of William Lyons
that they were entitled to an interest as tenant in
common with Hazel Lyons as a result of a severance
of the joint tenancy by the conduct of the applicant
and her late husband or by agreement or by William
granting a mortgage over his estate and interest in
the land to Adelaide Gray.
After considering the issues, the Court held that
where land is held under the Victorian equivalent of
the Real Property Act a joint tenancy is not severed by
a mortgage given by one of the joint tenants and the
mortgagees security in the land lapses if the
mortgagor dies before the surviving joint tenant.

(c) Cameron Stewart 2009


Severance grant of mortgage
over share
Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 Mr and Mrs Guthrie were
joint tenants in a fee simple of Torrens Land. Mr Guthrie gave a guarantee over the
indebtedness of a company he was involved in, and to secure the guarantee, he gave
the ANZ Bank a mortgage over his portion of the property. Subsequently, the Guthries
marriage broke down, and in the divorce proceedings it was determined that Mr Guthrie
would release his share of the property to Mrs Guthrie so that she would become the
sole owner. The question for the court was whether or not the charge over Mr Guthries
share in the joint tenancy survived the release of his share to Mrs Guthrie:
Where judgment is given against one of two joint tenants and afterwards that one
releases to the other before execution such release shall not bar the creditors
execution, whereas if the releasing joint tenant had died before the execution the
survivor holds the land discharged of any execution. The reason for the distinction is
that in the former case the releasee derives title from the release. (per Meagher J at
680)
So the answer is yes it did a mortgage will travel with an inter vivos release to the
other joint tenant.
In his judgment, Justice Priestley notes that this outcome was necessary to ensure that
a joint tenant would not have a simple mechanism to frustrate creditors giving
someone a statutory charge and defeating it simply by surrendering their share of the
property to their joint tenant.

(c) Cameron Stewart 2009


Severance lease
Whereas English authority favours the view that a
lease granted by one joint tenant constitutes
alienation, Australian authority tends to favour
the view that a lease suspends rather than severs
the joint tenancy. Here, the joint tenancy revives
upon the ending of the lease: Lyons v Lyons
Obiter Wright v Gibbons (1949) 78 CLR 313 per
Dixon J at 330: One joint tenant for an estate in
fee simple may grant a lease of his equal share
and during the lease the jointure is suspended
and there is a temporary severance.

(c) Cameron Stewart 2009


Ways to sever agreement
Where all of the parties to a joint tenancy agree between
themselves to sever the joint tenancy, equity will enforce
the agreement although it is ineffective to sever the joint
tenancy at law. In contract terms, each joint tenant agrees
to give up their right of survivorship in consideration for
agreement of the others to give up theirs thus all parties
have provided consideration for the agreement.
Agreement to sever a joint tenancy can appear in a formal
document, an informal document or an oral agreement.
The elements of specific performance do not have to be
present. As long as equity can distil an intention to sever
from the parties agreement, it will enforce the severance.
The necessary intention to sever from an agreement can
be found in agreed terms that demonstrate that the
parties were treating the property as if it had distinct and
divided shares which is inconsistent with a continued
right of survivorship.

(c) Cameron Stewart 2009


Ways to sever agreement
Gould v Kemp (1834) 39 ER 959 A and B
were joint tenants. B purported to dispose
of Bs interest in the estate under Bs will
(which would be ineffective to sever the
joint tenancy). However before B died, A
and B entered into and agreement that A
would, after B died, honour the terms of
Bs will. This would be an agreement
between the parties that demonstrates
that they agreed to treat the property as
if it had distinct shares.

(c) Cameron Stewart 2009


Ways to sever sale to each
joint tenant
Wright v Gibbons (1949) 78 CLR 313 three sisters, Olinda
Gibbons, Ethel Rose Gibbons and Bessie Melba Gibbons were
registered as joint tenants in land at Hobart. By a
Memorandum of Transfer Ethel Rose Gibbons transferred to
Olinda Gibbons her one- third share and Olinda Gibbons
transferred to Ethel Rose Gibbons her one-third share in the
land.
Upon registration the Certificate of Title was endorsed to show
that the three owners were registered as tenants in common in
equal shares. Bessie Melba Gibbons who survived both Olinda
and Ethel Rose, approached the Court for a declaration that
the Memorandum of Transfer did not sever the joint tenancy
and that she became solely entitled to the land as proprietor.
The matter came before the High Court on appeal and the
Court held that the Transfer did effect a severance of the joint
tenancy and that Olinda, Ethel Rose and Bessie Melba were
tenants in common upon registration of the Transfer.

(c) Cameron Stewart 2009


Severance by conduct
Course of conduct If you cant show an
actual agreement about severance, you may
be able to show a course of conduct which
demonstrates that all parties were acting on
a commonly held belief or assumption that
they had distinct shares in the property and
therefore they were tenants in common. You
have to show a course of conduct engaged in
by all of the joint tenants that intimates that
the interests of all were mutually treated as
constituting a tenancy in common.

(c) Cameron Stewart 2009


Severance by conduct
Butt gives the following examples:
Continuously dividing the income from jointly owned
property;
Division of the proceeds of the sale of the property
between the co-owners (before settlement has
terminated the jt)
The creation of mutual wills which devise the
interests in the jointly held property in an agreed
manner ie all co-owners make wills at the same
time, leaving the property to the same people. While
you have nothing to pass in your will if you are not the
final survivor, equity will enforce the agreement
evidenced by the mutual wills if the final survivor
changes his will after benefiting from the survivorship

(c) Cameron Stewart 2009


Severance by conduct
Williams v Hensman (1861) 70 ER 862, Sarah
Creak died leaving 4,000.00 to her trustee to
fund a legacy of 200.00 per year for a Mrs
Hensman and providing for the principal sum to
be divided between Mrs Hensman and eight
children on her death.
The question for determination by the Court
was whether the joint tenancy created by the
gift in the Will had been severed by the various
events that occurred following the death. Vice-
Chancellor Sir W. Page Wood found that parties
had entered into deeds and arranges their
affairs in ways which were not reconcilable with
a joint tenancy:

(c) Cameron Stewart 2009


Severance by conduct
Vice-Chancellor Sir W. Page Wood:
....there may be a severance by any course of
dealing sufficient to intimate that the interests
of all were mutually treated as constituting a
tenancy in common. When the severance
depends on an inference of this kind without any
express act of severance, it will not suffice to
rely on an intention, with respect to the
particular share, declared only behind the backs
of the other persons interested. You must find in
this class of cases a course of dealing by which
the shares of all the parties to the contest have
been effected, as happened in the cases of
Wilson v Bell and Jackson v Jackson.

(c) Cameron Stewart 2009


Severance by conduct
Burgess v Rawnsley [1975] 1 Ch 429 a property
was purchased by a Mr Honick and a Mrs
Rawnsley. While the property was purchased by
Mr Honick in his name, the purchase price was
paid by Mr Honick and Mrs Rawnsley equally.
The house consisted of 2 flats, an upstairs flat
and a downstairs flat, with Mr Honick occupying
the downstairs flat. It was Mrs Rawnsleys
intention that she would occupy the upper flat.
Shortly after the Contract was signed Mr Honick
instructed his solicitor to have the property
conveyed into the joint names of himself and
Mrs Rawnsley and this occurred.

(c) Cameron Stewart 2009


Severance by conduct
At this point the legal estate and the
beneficial interests were both held as joint
tenants. The following summary of the facts
is set out in the judgment of Lord Denning, M
R:
... In July 1968, being disappointed in his hopes
of marriage, Mr Honick wanted Mrs Rawnsley to
sell him her share in the house. He came to an
agreement with her, as he thought, to buy it for
750. He went to his solicitor and said to him
Mrs Rawnsley is not going to marry me, but she
has agreed to take 750 for her interest. He
handed the conveyance to the solicitor for him to
draw up the necessary document.

(c) Cameron Stewart 2009


Severance by conduct
The solicitor thereupon wrote to Mrs Rawnsley on July 1, 1968, this
letter:
Dear Mrs. Rawnsley.
re 36 Queens Road, Waltham Cross.
Mr. Honick called to see us today stating that you are agreeable to
convey to him your interest in this property for the sum of 750. Will
you please confirm that this is so and we will then finalise the matter
and ask you to call upon us to collect those moneys and to sign the
final deed.
Next day, however, Mrs Rawnsley went to the solicitors and said she
was not willing to sell. She was not satisfied with 750 but wanted
1,000. Mr Honick told his daughter that Mrs Rawnsley was going to
ask a thousand which he was not going to pay.
A few days later Mr Honick went to the solicitor and told him to leave
things as they were. He asked for the conveyance back and got it.
From that time onwards things went on as before, with Mr Honick in
his house alone, and she in hers; but both visited one another, being
quite friendly. He paid all the rates and outgoings of his house. This
went on for three more years until he died on October 26, 1971.

(c) Cameron Stewart 2009


Severance by conduct
Considering the law and earlier cases at some
length, Lord Denning came to the following
conclusion:
... I think there was evidence that Mr Honick and
Mrs Rawnsley did come to an agreement that he
would buy her share for 750. That agreement
was not in writing and it was not specifically
enforceable. Yet it was sufficient to effect a
severance. Even if there was not any firm
agreement but only a course of dealing, it clearly
evinced an intention by both parties that the
property should henceforth be held in common
and not jointly.

(c) Cameron Stewart 2009


Severance by court order
A court has no inherent jurisdiction to adjust
property rights, but it may effect a severance as a
result of a court order that affects the property:
clearest example is
eg Family Law Act 1975 (Cth); Property
Relationships Act 1984 (NSW). These orders are
generally made in the context of a breakdown in
family relationships and the courts exercise
statutory power to adjust property rights.
If one party dies before a court order can be given
legal effect through a transfer, equity will compel
the finalisation of the court orders as equity will
not permit a court order to be frustrated.

(c) Cameron Stewart 2009


Severance by operation of
law
Under the Bankruptcy Act 1966 (Cth),
the property of a bankrupt person vests
in the trustee-in-bankruptcy, and if the
bankrupt person holds property as a
joint tenant, the transfer of the
bankrupts notional share to the trustee-
in-bankruptcy, automatically severs the
joint tenancy and converts the co-
ownership to tenancy in common.

(c) Cameron Stewart 2009


Severance by merger
Severance also occurs where one of the
joint tenants acquires a further estate in
the land different from the existing
estate. This breaks the unity of interest.
ie A and B are joint tenants of a life
estate. If A subsequently acquires the fee
simple remainder of the estate, then As
life estate merges with the fee simple
remainder and there is no unity of
interest between A and B.

(c) Cameron Stewart 2009


Severance by unlawful
killing
If a joint tenant unlawfully kills another,
the perpetrator cannot benefit as a
survivor. This is an aspect of a broader
principle that a person may not benefit
from their crime. Thus if A and B hold
property as joint tenants, and A kills B,
then A holds legal title as survivor,
subject to a constructive trust in favour
of him/herself and Bs estate as tenants
in common

(c) Cameron Stewart 2009


Severance by unlawful
killing
Permanent Trustee Co Ltd v Freedom
From Hunger Campaign (1991) 25
NSWLR 140 that the public policy
rule was said not to disqualify the
killer from benefiting from the
victims property unless the killing
was done with the intent to bring
about a benefit.

(c) Cameron Stewart 2009


Severance by unlawful
killing
Troja v Troja (1994) 33 NSWLR 269, held that
irrespective of the mitigating factors, a person
who kills another should not benefit from that
crime. In this case a wife who killed her husband
while in a state of depression brought on by the
husband's conduct could not benefit from the
joint tenancy she held with her husband.
In response to this strict line taken by the courts
the NSW Forfeiture Act 1995 was enacted. The
legislation gives the Supreme Court power to
modify the effect of the forfeiture rule following
unlawful killing if justice so requires, but
murder (as opposed to manslaughter) is
excluded from the operation of the Act.

(c) Cameron Stewart 2009


Effect of severance on co-
ownership
Where there is more one joint tenant, severance by one joint tenant
will not affect the joint tenancy of the remaining joint tenants.
Instead the severing joint tenant will hold with the remaining joint
tenants as a tenant in common.

Let's look at some examples:


X and Y are joint tenants of land, and X transfers her interest to Z
The effect is that Z and Y become tenants in common of half shares

A, B and C hold as joint tenants and A transfers her share to D


The effect is that D holds a one-third share as tenant in common
with B and C, and B and C hold the two-thirds share as between
themselves as joint tenants. Thus the survivor of B and C would
take the whole of the two-thirds share, but B and C would be
unaffected by D's death, and D would be unaffected by the death
of B or C.

(c) Cameron Stewart 2009


Effect of severance on co-
ownership
A, B and C hold as joint tenants. A transfers her
interest to B and B transfers her interest to A. C
does not participate.
The effect of the first conveyance (from A to B) is
that B held a one-third share as tenant in
common, and B and C held the remaining two-
thirds share as joint tenants. The effect of the
second conveyance - B conveying to A the
interest that B held as a joint tenant with C - was
to sever the joint tenancy between B and C.
Thus A, B and C held equal shares as tenants in
common. These were the facts of Wright v
Gibbons (1949) 78 CLR 313.

(c) Cameron Stewart 2009


Bringing Co-Ownership
to an End
Co-ownership may be terminated in any one of the following
ways:
All but one of the joint tenants has died (or has been
murdered by another co-owner), possibly leaving the
surviving co-owner with the entire estate;
One of the co-owners may buy or otherwise acquire the
interests of all of the other co-owners;
All of the co-owners may transfer the property to a single
third-party;
All of the co-owners agree to divide the property into their
respective shares; or
If the co-owners cannot agree to divide the property into
their respective shares, there is a statutory procedure for
court ordered sale or physical partition of the land
involving the creation of separate titles to the land.
(Conveyancing Act 1919 NSW s 66G).

(c) Cameron Stewart 2009


Partition
Section 66G(1) which provides:
Where any property (other than chattels) is
held in co-ownership the court may, on the
application of any one or more of the co-
owners, appoint trustees of the property
and vest the same in such trustees, subject
to incumbrances affecting the entirety, but
free from incumbrances affecting any
undivided shares, to be held by them on
the statutory trust for sale or on the
statutory trust for partition.

(c) Cameron Stewart 2009


Partition
The scheme provides that the court may appoint trustees
over the property, and the property in the estate will vest
in the trustees for the purposes of partition or sale of the
property. In the vast majority of cases the court will make
an order for partition or sale on application by a co-owner
unless there is some reason in law or equity that suggests
that the sale is inappropriate (interest of a third party
would be prejudiced; applicants conduct raises an estoppel
etc). However the court will not refuse to order partition or
sale just because one co-owner does not want it to happen
or argues that it will cause them hardship or be unfair.
The presumption under the legislation is in favour of the
sale of the property (and a co-owner may be given a
chance to buy it) over partition because partition involves
physically dividing the land and creating new titles a
process that may be inconvenient or decrease the value of
the land overall.

(c) Cameron Stewart 2009


Partition
It is important to note subsection (1A). This
provides for proceedings to stay on foot even
if the co-owner who has commenced the
proceedings dies during the course of the
proceedings. The section is expressed to apply
despite, in the case of a joint tenancy, the
rule of survivorship.
Trustees for sale appointed by the Court have
certain obligations:
To sell at the best price possible, usually
after obtaining a valuation.
To sell the property expeditiously, given the
obligation to obtain the best price

(c) Cameron Stewart 2009