INTRODUCTION
3.1 In the previous chapter the Commission noted that more than one person simultaneously owning property may do so either as joint tenant or tenant in common. Property may be either real or personal.1 Personal property includes tangible movable objects (corporeal personal property or choses in possession) as well as intangible rights such as debts and shares in a company (incorporeal personal property or choses in action). In this chapter the Commission examines the existing methods of unilaterally severing a joint tenancy.
SEVERANCE BY ALIENATION
3.2 A joint tenant is free at any time to sell or transfer (alienate) his or her interest in the property, the subject of the joint tenancy, to a third person. Alienation operates to sever the joint tenancy because it destroys the unity of title. As a general rule, severance by selling or transferring a joint tenant’s interest to a third person does not require the consent or notification of the remaining joint tenant(s). Upon transfer, the transferee and the other joint tenant will hold equal shares as tenants in common.
3.3 It is instructive to examine the manner in which various forms of property may be alienated in order to gain an appreciation of the problems which can arise when unilateral severance is attempted by this method.
Alienation of real property
Old System land
3.4 This is the name given to land not yet brought under the Torrens Title land registration system. To transfer an interest under Old System Title at law the transferor must execute and deliver a deed of conveyance. Delivery by a party is constituted by any words or conduct expressly or impliedly acknowledging that he or she intends to be bound immediately and unconditionally by the provisions of the deed. Equity will recognise a transfer for consideration provided that it is in writing or evidenced by writing.
Torrens Title land
3.5 Under the Torrens system, no interest in land can pass at law until a transfer is registered.2 However even if there has been no alienation (and so no severance) at law, an effective alienation of the equitable interest by one of the joint tenants will result in severance of the joint tenancy in equity. Consequently, provided that there is consideration for a transfer, severance of a joint tenancy in equity will be immediately effective on exchange of contracts for sale of the interest notwithstanding that severance at law will occur only when the transfer is registered.
3.6 The position is more complicated where the transfer of land is by way of gift and the transfer has not been registered. This is discussed in more detail in Chapter 4. Essentially, alienation, and so severance, will occur in equity only where the donor has done everything which is necessary on his or her part to transfer the property. Generally this will require the donor joint tenant to have signed and handed to the donee a registrable form of transfer and to have done whatever is necessary to enable the donee to have access to the certificate of title so that the transfer may be lodged for registration.
Alienation of personal property
3.7 As a general rule personal property can be alienated by much less formal methods than those applicable to real estate. Under a contract for the sale of goods, legal title passes according to rules laid down in the Sale of Goods Act 1923. Chattels may be alienated by deed, with or without consideration, and with no requirements for delivery. However, a gift of corporeal personal property may also be made without deed or writing provided that the gift is accompanied by delivery of possession. Delivery consists of the handing over of the chattels themselves or of the means of access to them.
3.8 The requirements for the effective assignment of personalty not capable of physical possession are more onerous. At common law, choses in action were not assignable. Section 12 of the Conveyancing Act 1919 now authorises the absolute assignment of a debt or legal chose of action. In addition, various statutes permit the assignment of particular classes of choses in action provided that the statutory requirements are satisfied. Examples of choses in action which, by virtue of statute, may now be assigned include: bills of exchange; shares and debentures; copyright; patents and designs; trademarks; rights of entry; insurance policies and bills of lading. The efficacy of a deed of gift in relation to these particular items of personalty depends on whether the donor has done everything necessary to put the donee in his position having regard to their ordinary mode of assignment.
3.9 If the imperfect assignment is for value then pursuant to the maxim that “equity regards as done that which ought to be done” an equitable assignment may be effected without a deed or writing,3 no particular form of words being necessary so long as the intention is shown that the chose in action is to be transferred to the assignee.4 But an equitable assignment must be distinguished from a mere revocable mandate or direction by a creditor to a debtor to pay a third party.5
3.10 Though the position is far from settled, it appears that dispositions of equitable interests in personalty are caught by the provision in s 23C(1)(c) of the Conveyancing Act, and must therefore be in writing.6
SEVERANCE BY CONVERSION
3.11 Where a joint tenant wishes to sever a joint tenancy but retain an interest in the property and otherwise avoid the difficulties involved with alienation to third parties, conveyancers have sought to adopt the device of converting the interest by alienation back to the joint tenant who will then hold his or her interest as a tenant in common. Severance will occur provided that the conveyance is effective to pass an interest in the subject property either at law or in equity. This can be effected in either of the following ways:
- by conveyance to a third party to hold on trust for the transferring joint tenant;
- by direct conveyance from the joint tenant to himself or herself.7
Conveyance to a trustee
Real property
3.12 Where a joint tenant intends to create a trust of Old System land, the interest is passed when the deed of conveyance is delivered to the trustee. Nothing short of execution and delivery of a deed of conveyance will be effective to pass any interest in the property.
3.13 If the land is under Torrens Title there will be no vesting at law in the trustee, and so no severance at law, until registration of the transfer; but there will be severance in equity even before registration if the intending donor has done everything which it is necessary for him or her to have done to effect a transfer of the legal title.
Personal property
3.14 Trusts of legal interests in personalty may be created orally or in writing. However, where the subject matter of the proposed trust is an existing equitable interest in personalty, and the settlor proposes to transfer that interest to trustees, or to make such a declaration of trust as will divest the settlor of all further interest in the property, such transfer or declaration must, under s 23C(1)(c) of the Conveyancing Act 1919, be in writing.8
3.15 Where the severing joint tenant seeks to create a voluntary trust by assurance of property which is capable of being assigned at common law, then, as with real property, a form of assurance is necessary which will be effective to vest the legal title to the property in the proposed trustee. If the form of assurance is ineffective to pass any interest either at law or in equity then severance will not take place.
3.16 Equity will recognise an assurance to a trustee provided that the donor has done everything which, according to the nature of the property, was necessary to be done by him or her in order to transfer the property and which it was in his or her power to do.
Direct conveyance to self
3.17 This mechanism is only available where there is express statutory authority. At general law, except through the medium of a use, a person could not convey property to himself or herself.
3.18 Now, s 24 of the Conveyancing Act 1919 (NSW) provides that “A person may assure property to himself, or to himself and others”. Section 24 of the Conveyancing Act 1919 applies to property generally and this includes an assignment of personal chattels to oneself. By virtue of s 24 an assurance may now be effected directly in the manner prescribed for the property in question. It would appear that s 24 is used by joint tenants for the purpose of effecting a severance of the joint tenancy, but “extremely rarely”9.
3.19 There are no cases on s 24 of the Conveyancing Act in New South Wales. In Corin v Patton Mason CJ and McHugh J referred by way of obiter dicta to the use of s 24 as a means of severing a joint tenancy but declined to make a finding either way concerning the efficacy of this method.10
3.20 In Canada and New Zealand, where similar statutory provisions exist, a deed expressed to convey an interest in land from a joint tenant back to himself or herself has been held to be effective: Re Murdoch v Barry (1975) 64 DLR (3d) 222; Samuel v District Land Registrar [1984] 2 NZLR 697. However, the basis on which the court arrived at its decision in each instance differed slightly.
3.21 In the latter case the court held that severance was effected because the transfer destroys at least the unity of interest, or alternatively, s 49 (the New Zealand equivalent of s 24) provides a statutory exception to the rule that one of the four unities must be destroyed if a joint tenancy is to be severed.11
3.22 By contrast, in Re Murdoch v Barry the court held:
... the clear wording of the section [s 42 of the Conveyancing and Law of Property Act (Ont.)] is sufficient ground upon which to hold that a conveyance by a joint tenant from himself to himself of his interest in the property destroys the unity of title in that from the time such conveyance is deemed to have been delivered, he claims his interest in and title to the property under that deed and not under the deed or document which created the joint tenancy, in the same manner as a third person would have claimed his interest in such property if he had been named as grantee in such deed.12
SEVERANCE BY DECLARATION OF TRUST
3.23 A joint tenancy may be severed in equity by one joint tenant declaring himself or herself trustee of the interest for another, provided that there has been compliance with the statutory requirements in relation to declarations of trust.13
SEVERANCE BY COURT ORDER
Application for sale or partition
3.24 A joint tenant may apply to the Supreme Court for an order to sell or partition the property pursuant to s 66F-I of the Conveyancing Act, especially s 66G. Where the Court grants an application trustees are appointed and the property is vested in them upon either the “statutory trust for sale” or the “statutory trust for partition”.
3.25 Generally the Court will only refuse an application under s 66G in special circumstances, such as where the applicant is bound by agreement with the other co-owners not to do anything to sever the joint tenancy or not to act in relation to the property except with the consent of all the co-owners, or there are otherwise contractual or fiduciary obligations which the Court feels ought to be honoured.
3.26 Sections 66G does not apply to chattels. The relevant provision pertaining to chattels is found in s 36A of the Conveyancing Act. This section authorises the sale of a chattel in appropriate cases. Unlike s 66G, there is no provision for interposing trustees for sale.
Alteration of property interests under the Family Law Act
3.27 Acting pursuant to s 79 of the Family Law Act 1975 (Cth) the Family Court may order the severance of a joint tenancy. Section 79 empowers the Court to make an order altering the interests of the parties in the property (including personal property) in respect of which the proceedings are brought. An order under s 79 will not have the effect of severing a joint tenancy unless and until it is a final order.14
3.28 Property proceedings can only be instituted under the Family Law Act 1975 if they constitute a “matrimonial cause”. Since 1983 the definition of matrimonial cause has been expanded to include property proceedings arising out of the marital relationship.15 Accordingly an application under s 79 may be made at any time after the breakdown of the marriage (and even before the marriage has finally broken down) and the commencement of proceedings is not dependent on proceedings for the dissolution of marriage having been instituted.
3.29 Corresponding provisions with respect to property owned by partners in a de facto relationship are contained in the De Facto Relationships Act 1984 (NSW).16 An order adjusting property interests can generally only be made if the parties have lived together for at least two years.17
SEVERANCE BY UNILATERAL DECLARATION
Real property
3.30 It is clearly established that a unilateral declaration of intention to sever by one joint tenant is insufficient to sever the joint tenancy.18 In England, the general law position has been altered by s 36(2) of the Law of Property Act 1925 (UK) which allows severance of a joint tenancy in equity by written notice. In New South Wales, however, severance of a joint tenancy is governed by the general law. The courts have consistently rejected the proposition that a unilateral declaration is sufficient to effect a severance.19
Personal property
3.31 There is some authority to suggest that severance by notice of a joint tenancy in personal property is available at general law. In Burgess v Rawnsley20 Browne LJ stated that “the proviso to s 36(2) of the Law of Property Act 1925 seems to imply that notice in writing would, before 1925, have been effective to sever a joint tenancy in personal property.”21 Sir John Pennycuick said:
Perhaps in parenthesis, because the point does not arise, the language of s 36(2) appears to contemplate that even under the existing law notice in writing would be effective to sever a joint tenancy in personalty: see the words ‘such other acts or things’. The authorities to the contrary are rather meagre and I am not sure how far this point was ever really considered in relation to personalty before 1925.22
3.32 However, another line of authority clearly holds that severance of a joint tenancy in personal property by notice is not possible under the general law. For example, Walton J in Nielson-Jones v Fedden and others held that:
... since it is, I think, not in dispute that the methods of severance of a joint tenancy in personal estate before 1926 were precisely the same as the methods of severance of a joint tenancy in real estate the final effect of this subsection [s 36(2) of the Law of Property Act] is merely to add another method to the ways in which the severance of a joint tenancy in real estate may be effected. Why this highly convenient method of severance was not also extended to personal estate, I am at a loss to understand.23
3.33 In New South Wales, it would appear that the position adopted by Walton J prevails. In Abela v Public Trustee24, for example, part of the property in dispute was certain items of personalty, principally furniture. The personalty was purchased from a joint bank account. Upon separation the wife made claims in respect of the matrimonial home and also in respect of only part of the furniture.
3.34 Rath J made a preliminary finding that the evidence as to the purchase of the personal estate from the joint account and as to the contributions to the joint account pointed strongly to a joint tenancy in respect of the items claimed.
3.35 Rath J concluded that the wife’s claim (which was made in a letter from her solicitor to her husband’s solicitor) to part only of the furniture was not evidence of any agreement for severance or of a course of conduct showing an intention to sever. The principles of severance being the same in the case of personalty as they are in the case of realty the judge was satisfied that the joint tenancy in respect of the items of personalty had not been severed.
FOOTNOTES
1. For the purpose of this reference chattels real are dealt with as real property and not personal property.
2. Real Property Act 1900 (NSW) s 41.
3. No writing is necessary pursuant to the Conveyancing Act 1919 (NSW) s 23C(1)(c) because this section does not apply to equitable dispositions of legal interests in property.
4. See for example Row v Dawson (1749) 1 Ves. Sen. 331; 27 ER 1064.
5. Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614.
6. The authors of Equity-Doctrines and Remedies (3rd ed, Butterworths, Sydney, 1992) at paras [709]-[714] “hesitantly” state that the better view is that s23C(1)(c) applies to equitable interests in personalty as well as realty, but that it does not apply to equitable dispositions of legal interests in personalty.
The uncertainty arises because paras (a) and (b) of s 23C(1) are limited to dealings with interests in land but para (c) is not. Also, the section is located in a Division of the Act headed “Assurances of land”. However, the term “disposition” is defined to include dealings with personalty. Furthermore the House of Lords has held that the corresponding provision in the English legislation extends to dispositions of personalty (although in England, the provision is not placed in a context dealing exclusively with assurances of land). Interestingly, in the English cases which consider this point (Grey v IRC [1960] AC 1; Oughtred v IRC [1960] AC 206; and Vandervell v IRC [1967] AC 291) no argument was mounted that s 53(1)(c) (the equivalent provision) did not apply to personalty based on the definition of “equitable interest” contained in s 205 of the Act. This section provides that: “unless the context otherwise requires ... ‘equitable interests’ mean all the other interests and charges in or over land or in the proceeds of sale thereof ...” (s 205(1)(x)). The answer to this seems to be that s 53 is seen as a consolidation of certain sections (especially s 9) of the Statute of Frauds (which applied to all assignments), with the consequence that “the context otherwise requires”. However, in determining that the use of the word “disposition” in s 53(1)(c) was not the equivalent of the former words of s 9, but of broader application, Lord Radcliffe states that it is apparent that the sections [of the Statute of Frauds] are not just being re-enacted, but that alterations of more or less moment are in fact being made. “For these reasons I think that there is no direct link between s 53(1)(c) of the Act of 1925 and s 9 of the Statute of Frauds.” (Grey v IRC at 17). At no time did Lord Radcliffe question the applicability of s 53 (1)(c) to equitable dispositions of personalty though.
7. The common law considered a conveyance back to oneself a nullity, but s 24 of the Conveyancing Act 1919 recognises it.
8. R P Meagher QC and W M C Gummow Jacobs’ Law of Trusts in Australia (5th Ed, Butterworths, 1986) at para [704].
9. Letter from Land Titles Office to NSW Law Reform Commission dated 26 March 1993.
10. Corin v Patton (1990) 169 CLR 540 at 562.
11. [1984] 2 NZLR at 702.
12. (1975) 64 DLR (3d) at 226.
13. Conveyancing Act 1919 (NSW) s 23C. A declaration of trust by the holder of a legal interest in land must be in writing, but the holder of a legal interest in personalty may declare a trust orally.
14. Corry v Corry (1983) FLC 91-343.
15. Family Law Act 1975 (Cth) s 4(1), para (ca)(i).
16. s 20-25.
17. s 17.
18. Partriche v Powlet (1740) 2 Atk. 54.
19. Corin v Patton (1990) 169 CLR 540; (1990) 92 ALR 1; (1990) 64 ALJR 256.
20. [1975] 3 All ER 142.
21. at 151.
22. at 154.
23. [1974] 3 All ER 38.
24. [1983] 1 NSWLR 308.
