Topic 4 - Co-Ownership - Co-ownership. Lectured by Maria Abertos PDF

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Co-ownership. Lectured by Maria Abertos...

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Friday, 25 October 2019

Topic 4 - Co-Ownership What is Co-Ownership!

- When two or more persons hold interests together in the same parcel of land! - HAS BENEFITS OF POSSESSION OF THE WHOLE! Joint Tenancy!

- JT owns the whole of the entire interest ! - Subject to only rights of other JT’s! - FOR JOINT TENANCY, must have 4 unities: - Possession (must have right to possess and enjoy property with JT’s)! - Interest (JT’s interest must be the same) ! - (e.g. can’t be fee simple+life estate, must be 2 halves, 3’s, etc.)! - Title (Must derive title from same instrument)! - Time (Interest must be for the same period)! - Right of survivorship (Jus accrescendi) - JT interest cannot be passed on after death! - Deceased JT interest is released! - e.g. A, B and C have joint tenancy, C dies, A and B will now have 1/2 share! - However, can transfer interest while living (Inter vivos)! - Presumption of survivorship, CA s 35.! - If JT’s die at same time, presumption that younger tenant survives over older! Tenants in Common!

- ‘Undivided fixed’ share - Identifiable portions! - e.g. A leaves property to B and C at 2/3 and 1/3 ! - Only requires unity of possession (others may be present)!

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- NO RIGHT OF SURVIVORSHIP - Distributed according to TiC’s will ! Creation!

- Can be created at law and in equity! - Law = formal title! - Equity = Beneficial ownership (trust)! - MUST CHECK IF JT OR TiC AT LAW AND EQUITY! Checklist:

- Start with legal interest! - Presumption of tenancy in common (s26(1) CA), unless expressly joint tenants (s26(2) CA)!

- Then work out equitable interest" ! - “Equity follows the law”." So whatever the tenancy is at law, it will also be in equity; UNLESS:!

- One of the three exceptions applies on the facts: ! - unequal contribution to purchase price, advance on mortgage, partnership assets! At Law: !

- Statutory presumption of tenants in common (s 26(1) CA)! - “In the construction of any instrument…a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants”!

- … Unless expressly states to take as joint tenants (s 26(2) CA)! - Section 26(1) does not apply where the instrument creating co-ownership expressly states that the persons are to take as joint tenants: !

- S 26 CA applies to law and equity (see Delehunt v Carmody)! At Equity:

- Same tenancy as Law unless:! - co-owners contribute unequal amounts to purchase price! 2

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- BUT if parties intend to be bound by JT, they can be (Cummins v Cummins)! - co-owners advance money on a mortgage (whether in equal or unequal shares) ! - Morley v Bird - e.g. R lends father 500k, C also lends father 500k. ! - At law, R and C JT’s of mortgage ! - In Equity, R and C TiC! - property is acquired by a partnership or joint business venture! - Irrespective of purchase price! - Then: Equity presumes TiC! EXAMPLE Rachel and Clare are registered as joint tenants, but Rachel paid 70% of the purchase price and Clare paid 30% of the purchase price." !

- At law: they are joint tenants because they are registered as joint proprietors.! - In equity: The sisters are tenants in common in 70/30 shares.! What happens if Rachel dies?" !

- Clare will be sole RP at law, but hold 70% of property on trust for Rachel’s heirs! Delehunt v Carmody (1986) 161 CLR 464

- Facts: Miss Delehunt and Mr Carmody (de facto relationship) contributed equally to purchase price. Mr Carmody on CT as RP. Mr Carmody died without a will." Property went to his divorced wife, Mrs Carmody. Mrs Carmody new RP." Miss Delehunt argued that equity presumed a joint tenancy when equal contribution to purchase price – ie that she held the entire beneficial interest by right of survivorship.!

- Issue: What was the effect of s 26 CA on equity’s presumptions! - Held: Miss Delehunt and Mrs Carmody are tenants in common. Ms C held 50% of property on trust for D.!

Co-Ownership and Torrens! Section 100(1) of the RPA: “Two or more persons who may be registered as joint proprietors of an estate or interest in land…shall be deemed to be entitled to the same as joint tenants”! 3

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- Not all features of common law of joint tenancy will necessarily be carried across to Torrens. !

- E.g. fraud by one joint tenant will not necessarily “infect” the registered title of another JT : Cassegrain v Gerard Cassegrain (2015)!

- s100(1) imports the laws of joint tenancy into torrens. It did not create a presumption of joint tenancy: Hircock v Windsor Homes [1979]!

Severance!

- Ends JT by converting it to a TiC - Occurs when one of the unities destroyed! - Severing co-owner’s right of survivorship is destroyed! - Other co-owners cannot prevent severance (unless through contractual/ equitable limitations)!

- Example: - Ned Stark expressly leaves Winterfell to all his children (Rob, Sansa, Arya, Bran and Rickon) as joint tenants when he dies." !

- Sansa sells her interest to Tyrion Lannister, severing the joint-tenancy (in respect of her share only).!

- Result: Tyrion holds an undivided fixed share of 1/5th as a tenant in common." Other Stark children hold the remaining 4/5ths as joint tenants as between themselves, each with a potential 1/5th share.!

- All entitled to possess the whole of Winterfell. ! METHODS OF SEVERANCE:!

- Unilateral act by one joint tenant - Transfer (alienation) to third party! - At law: Effective when the legal interest is registered under s 42 RPA.! - In Equity: Effective when JT enters into specifically enforceable contract to transfer to 3rd party (e.g. contract of sale under s 23(c) CA)!

- The result: the original JT will hold legal title on trust for the purchaser as a tenant in common: Wright v Gibbons (1949)!

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- Gift to third party?! - If no registration (TT) or no properly executed deed (OST), will there be severance under equity?!

- yes, when the gifted has done everything that only they can do to effect! - Corin v Patton (1990) ! - Facts: Mr and Mrs P registered JT’s. Mrs P executed 3 documents: memorandum of transfer in registrable form to C, deed of trust where C held property as TiC with Mr P for the benefit of Mrs P, will leaving her share to her kids. Mrs P wanted to transfer to her children (JT RofS will default to Mr P sole ownership). Mrs P dies before transfer to C is registered - no severance at law. !

- Issue: Was the severance (transfer gift) effective in equity! - Held: Must do all they can: Must have immediately registrable dealing, must have CT. Mrs Patton had not authorised CT, as it was with the bank. No severance at law, or equity. Mr Patton sole proprietor at law and in equity

- Transfer to self! - S 97 RPA! - Permits JT to convert interest to TiC! - No need to produce CT! - Notice is given to other tenants before registration of transfer! - If there is no registration, severance fails (in law and in equity)! - McCoy v Caelli [2008]! - Son owns property as JT with mother. Wants to leave his share to his son. Dies before transfer is registered. Court held: s 97 is a procedural transfer (no transfer to 3rd party), cannot hold on trust for yourself.!

- Registration or nothing. No fallback on equity. - Declaration of a trust! - Two ways:! - Declare someone else as trustee, and yourself as beneficiary! - For this to succeed, must be registered. If not registered, must do everything in power (see above Corin v Patton)! 5

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- Declare themselves to be trustee, holding land for beneficiary! - Declaration of a trust may effectively sever joint tenancy if it complies with s23C(1)(b) CA. i.e. must be in writing.!

- Applies to OST and TT! - Mutual Agreement by joint tenants - If all JT’s agree to hold as TiC's, the joint tenancy is severed in equity: Lysaght v Edwards (1876) !

- Can be in writing, or oral! - Section 54A CA; Lyons v Lyons; Burgess v Rawnsley! - Conduct by joint tenants - Must be conduct by ALL JT’s. ! - Discussions about how to sever will not amount to this: Magill v Magill (1997)! - Conduct must indicate that shows all JT’s agreed and assumed that each held an undivided proportionate share and no right of survivorship !

- Williams v Hendsman (1861) - Court order - May effect severance! - e.g. Family Law Act 1975 (Cth), the court has powers to make orders in relation to property, that may expressly or by implication sever the joint tenancy.!

- Power of court to end co-ownership under s 66G CA.! - Unlawful Killing - Forfeiture rule: ! - If JT1 murders JT2, JT1 will hold legal estate, but hold on trust for JT2’s heirs. !

- In cases of unlawful killing (but not murder), ss 4 and 5"of the Forfeiture Act give the Supreme Court power to vary the forfeiture rule if justice requires.!

- Bankruptcy - Bankruptcy of a JT will sever the joint tenancy! - At law: occurs when the JT’s property vests in the trustee (registration)! 6

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- s 58 Bankruptcy Act 1966 (Cth)! - At equity: severance from moment of bankruptcy: Re: Holland! Ending Co-Ownership! By action of the parties

- When one co-owner remains after death of other JT’s! - When one co-owner ‘buys out’ the shares of the TiC’s.! - When all co-owners transfer interests to third party! - By partition - dividing property physically to reflect their shares! By order of sale or partition by the court!

- Co-owner can apply to court asking court to hold their interests on statutory trust! - Proceeds of sale will be split with depending on proportionality in ownership! - Subject to adjustments: ACCOUNTING EXERCISE ! - S 66G CA: when one or more of the co-owners apply ! - E.g. R and C are co-owners. R enters into contract with L for sale, R dies before L registers. L has equitable interest (contract). L and C share equitable interest. She has right to bring application to court for sale.!

- Sale is primary remedy. Partition allowed only in special circumstances: Re Cordingley (1948)!

- When considering physical partition, financial factors outweigh hardship: Segal v Barel (2013) FACTORS TO CONSIDER WHEN ACCOUNTING ADJUSTMENTS:

Rights of owners inter se

- Right to possess/occupy the property! - Unity of possession: all co-owners entitled to possess the whole of the property: Thrift v Thrift!

- A co-owner occupying the property is generally not liable to pay an occupation fee to co-owners not in occupation: Forgeard v Shanahan

- Exceptions:

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- Agreement otherwise (e.g. co-owners agree to all pay rent, etc.)! - If one co-owner ousts another ! - If one co-owner wrongfully excludes (e.g. changes locks) another coowner, the ousted co-owner may bring claim in trespass to ouster!

- Liable to pay occupation fee for term of ouster! - To off-set claim for improvements (look at market rent [usually half])! - Right to be reimbursed for money spent on repairing or improving the property! - e.g. Occupying owner claims cost of improvements from other co-owners! - Common law: co-owner has no claim on recovering costs from other coowners: Leigh v Dickeson !

- In equity, can claim improvement, but not maintenance/repairs (Squire v Rogers; Ryan v Dries; Forgeard)!

- e.g. painting, insurance premiums ! - MORTGAGE PAYMENTS/COUNCIL RATES are improvements! - IMPROVEMENTS INCREASE PROPERTY VALUE! - Can claim lesser of; cost of improvements (at date of work) or increase in value of property (at date of claim): Boulter v Boulter!

- Rights to collected rent! - If one co-owner collects rent from a co-owned property, do they have to share with other co-owners? Yes!

- Equity sees one acting as agent for the others, and hence liable to account for rent received.!

- (Forgeard v Shannahan; Hutchins v Hutchins; Ryan v Dries)! - Rights to other income/profits from the property! - Co-owner does not have to account to others for profits they generate on the co-owned property!

- Accountable profits must come from the property itself, rather than service! - Case: Squire v Rogers

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Friday, 25 October 2019 EXAMPLE OF ACCOUNTING EXERCISE: Ryan v Dries (2002) 10 BPR 19, 497 !

- Facts: Parties: Joanne Dries and Gregory Ryan ! - In a relationship and bought a property together in 1990! - CT said Ryan held 6/7th share and Dries held1/7th.! - Purchase price of $200K funded as follows:! - 120K mortgage from NAB (in both names)! - 10K lent to Ryan by Dries’ mother! - 30K by Dries! - 40K by Ryan! - Ryan also paid costs associated with purchase (solicitors fees etc) totaling 9K! - Ryan paid all mortgage repayments, and used property as residence and business."!

- She lived there on weekends only! - Relationship ended in 1997! - Issue: What proportion of the property were each party entitled to?! - Held: There was a resulting trust in relation to the property ie: beneficial interest was held differently to the legal interest." !

- Issue: How to work out initial proportions in equity and then to adjust them for costs etc in the intervening years?!

- Held: equity, will look at the total cost of purchase to determine relative interests (applying McLelland J in Currie v Hamilton): per Holland JA at 19,509." !

- Result: Dries’ initial interest is 43% ! - ie: $30k + $60K (half mortgage) of a total of $209K (purchase price plus incidental costs of purchase).!

- Adjusting initial interests…. - Mortgage Repayments! - YES can claim mortgage repayments as improvements.!

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- Ryan discharged Dries’ 50% share in the mortgage, giving him a claim against her of $97,500 (50% of mortgage repayments, interest + principal)!

- Occupation Fee! - YES because Ryan claiming improvements, Dries can claim occupation fee of $55,900!

- So: Dries owes Ryan $97,500 less the occupation fee of 55,900 = $41,600 (plus some interest) !

- Final accounting: - Current value of property = $435,000! - Dries 43% share = $187,150! - Then adjust in equity for improvements + occupancy fees (and interest): ! - Minus $41,600 (+ interest of $12,480)! - = $133,070!

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