INTRODUCTION
5.1 A joint tenancy must be deliberately created.1 Although not well founded in law, it may often be the expectation of the parties that the consent of both is needed to change the nature of their interests, and without that mutual consent, on the death of one, the property will pass to the survivor.
5.2 It might be suggested that any move to simplify the requirements for unilaterally severing a joint tenancy should be resisted because joint tenancies deliberately created should not be too lightly destroyed. This chapter seeks to demonstrate that such objections are not well founded. The chapter then examines the reasons why reform is not only desirable, but necessary.
SEVERANCE AS A PRESENT RIGHT OF CO-OWNERS
5.3 Severance of a joint tenancy, even without the consent of the other joint tenant, is already possible. The form of co-ownership chosen is not immutable. Perceptions of joint tenancy as a permanent arrangement, if indeed such perceptions actually exist, are misconceived. As Peter Butt expressed it: “The layman’s commonly held belief that there is some ‘security’ in joint tenancy is a myth”.2 The Master of the Rolls in the case of Cray v Willis3 succinctly stated the position thus:
... the duration of all lives being uncertain, if either party has an ill opinion of his own life, he may sever the join tenancy (sic) by a deed granting over a moiety in trust for himself; so that survivorship can be no hardship, where either side may at pleasure prevent it. (emphasis added)
5.4 The development of new methods of achieving severance of the joint tenancy in response to a changing social climate is not a remarkable event, evidenced by the introduction of provisions in the Family Law Act enabling the Court to alter the property interests of the parties.
JOINT TENANCY AS A MECHANISM OF PROPERTY DISTRIBUTION ON DEATH
5.5 It was noted in Chapter 2 that the single most important incident of a joint tenancy is the right of survivorship, a concept inextricably linked with will-making power. The right of survivorship operates as a rule of law and cannot be overridden by the will of one of the joint tenants. This has potentially extremely harsh consequences for a joint tenant if the operation of the rule of survivorship no longer accurately reflects his or her wishes in relation to the property the subject of the joint tenancy. This is of particular significance if the joint tenants are husband and wife. The right of survivorship is appropriate for so long as the parties are happily living together. In these circumstances the notion that the surviving party will receive the common property in its entirety may be perfectly natural and will generally accord with the parties’ testamentary intentions.
5.6 However, the right of survivorship is generally inappropriate in the context of property owned jointly by estranged spouses. For example, in Abela v Public Trustee, Rath J said:
In the case of husband and wife, joint tenancy, in favouring longevity, is usually achieving the object for which it was created; but once the matrimonial relationship has broken down the original purpose of the joint tenancy is at an end.4
5.7 In 1988, amendments were made to the Wills Probate and Administration Act 1898 which had the effect of revoking any provision in a will in favour of a former spouse upon termination of the marriage.5 This amendment was made pursuant to recommendations made by this Commission.6 In LRC 47, the Commission recognised that a breakdown in the marital relationship had profound consequences in terms of property distribution. The Commission said:
Termination of marriage represents a fundamental change in a person’s life which, more often than not, renders inappropriate provisions in favour of the former spouse in wills made during the marriage7
5.8 These sentiments apply with equal vigour to married couples holding property as joint tenants. The Commission is not advocating automatic severance of a joint tenancy upon breakdown of marriage. It must be borne in mind, however, that a joint tenancy arrangement is a mechanism for distributing property upon death. Viewed from this perspective there is no reason why joint tenants should not be able to sever a joint tenancy with the same expedition and facility as is currently possible in relation to the making or redrafting of a will.
5.9 The central focus of this debate is, appropriately, joint tenancies existing between husbands and wives. It was in this particular context that the existing problems were brought to the Commission’s attention. However, joint tenancies do exist outside marriage and apart from certain exceptions (which will be discussed in Chapter 8) similar considerations apply in relation to these other classes of joint tenants.
WHY IS THE PRESENT LAW UNSATISFACTORY?
5.10 The only way to destroy the right of survivorship is to sever the joint tenancy. If only one of the parties wishes to sever then that joint tenant does have several options available to him or her to accomplish this. Unfortunately though, there are a number of obstacles to unilateral severance operating at present. The current methods of severance are either unnecessarily lengthy, complex, expensive or uncertain.
5.11 A severing joint tenant must either seek a court order with all the attendant costs and delays, or else effect a transfer to himself or herself, to a third party outright or to a third party as trustee. This process can be impeded by the inability to obtain the certificate of title and consequential delay while application is made for the production of the certificate of title to be dispensed with.
5.12 A detailed examination of the various problems which may be encountered by a joint tenant seeking to sever the joint tenancy unilaterally was made in Chapter 4.
WHY NOT SIMPLY ABOLISH JOINT TENANCIES?
5.13 Does a proposal to introduce a simplified means of unilaterally severing a joint tenancy, which does not require the destruction of one of the four unities, so fundamentally alter the nature of a joint tenancy that it becomes no longer logical to maintain joint tenancy as a separate form of co-ownership? The short answer to this is no. Joint tenancies have in the past, and continue in the present, to serve a useful function. Not the least, a joint tenancy is a convenient way to avoid the consequences of an intestacy in respect of a person’s most substantial asset. In view of the number of persons dying intestate, this expedient cannot be overstated. Furthermore a joint tenancy as a mechanism for distributing property on death has an added advantage over devolution of property by will in that the transmission of property in the former case can be achieved without having to obtain the grant of probate first. The costs and delays involved in settling a deceased’s estate are avoided in respect of real estate owned jointly. Arguably a further advantage of a joint tenancy is that since property held in joint tenancy does not form part of the deceased’s estate, then as a general rule such property cannot be applied in payment of the deceased’s debts or testamentary expenses.
CALLS FOR REFORM
5.14 The need for reform in the area of unilateral severance of joint tenancies, especially with regard to real property, has been highlighted by a number of commentators, each calling for the introduction of a simpler method.8
5.15 In DP 23, the Commission reached the tentative conclusion that the law should be altered and a speedy and inexpensive means of unilaterally severing joint tenancies introduced. Apart from one, all of the submissions received by the Commission which addressed the issue were in favour of such a course of action.
RESPONDING TO THE CRITICS
5.16 In its dissenting submission the Property Law Committee of the Law Society of New South Wales queried whether the provision of a speedy and inexpensive means of unilaterally severing joint tenancies “would open Pandora’s box”. The Committee expressed the view that the solution provisionally endorsed by the Commission in its Discussion Paper could “create other problems resulting in litigation in the Family Court or Supreme Court or both, and effectively circumvent[ing] the jurisdiction of the Family Court to make orders with respect to matrimonial property”9
5.17 These arguments fail to appreciate that the Commission is not proposing the creation of any new rights, merely the simplification of an existing right. The introduction of an additional method of severance, whereby severance can be effected cheaply and expeditiously does no more than facilitate a present right. Severance without the consent of the other joint tenant(s) is already possible. There is no inherent unfairness in the act of severance.
5.18 Problems anticipated by the Committee consequent to relaxing the requirements for severance could just as readily occur under the present law. In fact, the effect of a declaration of severance is in many instances less drastic than current methods which result in the passing of the legal estate to a third party and which could in certain defined circumstances result in the invocation by the other party of the Family Court’s jurisdiction under s 85 of the Family Law Act 1975 (Cth). A declaration of severance is a far simpler procedure than those which joint tenants are presently compelled to adopt. It also has an additional advantage over some of the existing methods in that, under the Commission’s proposal, notice of the severance must be given to the other joint tenant. Consequently there can be no severances behind the back of the other joint tenant.
5.19 The Law Society’s Property Law Committee submitted that any amendments to the existing law should be effected solely by enlarging the Supreme Court’s jurisdiction in partition, or the Family Court’s powers. The Commission is not persuaded by this suggestion. Such amendments would not eliminate the costs and delay associated with accessing the court system. Such action has the potential to exacerbate present difficulties by causing further congestion to already long court waiting lists.
5.20 The Property Law Committee had a number of other more particular concerns. These are addressed in Chapter 8.
CONCLUSION
5.21 The Commission’s conclusion is that there is a clear need for unilateral severance of a joint tenancy to be simplified.
FOOTNOTES
1. As noted in Chapter 2 there is a statutory presumption in favour of tenancy in common.
2. P Butt “Unilateral unregistered transfer by joint tenant to herself-Whether operated to sever joint tenancy” (1982) 56 Australian Law Journal 490.
3. (1729) 2 P. Wms 529; 24 ER 847.
4. [1983] 1 NSWLR 308.
5. Section 15A inserted by the Wills, Probate and Administration (Amendment) Act 1989.
6. New South Wales. Law Reform Commission Wills-Execution and Revocation (LRC 47, 1986).
7. at 129.
8. See for example (1988) 15 Brief at 31 where the writer calls for the enactment of a parallel provision to s 36(2) of the English Property Law Act. Also, S MacCallum in (1980) 7 Mon Law Review at 34 suggests that legislation should be introduced to provide that severance by declaration is an acceptable means of severing a joint tenancy.
9. Property Law Committee of the Law Society Submission (21 August 1992) at 4.
