LAWS3112 Lecture 6

Types of Interests in Land

Overview of Co-ownership

  1. Types Of Co-Ownership – the features of joint tenancies and tenancies in common.
  2. Creation of joint tenancies and tenancies in common.
  3. Co-Ownership at Law and in Equity.
  4. Rights between Co-owners.
  5. Termination of Co-ownership.

Co-Ownership & Concurrent Ownership

  • Concurrent ownership is where more than one person has an interest in the same property at the same time.
    • In severalty.
  • Both kinds of co-ownership can exist at law and in equity.
  • Part V PLA ss 33-43
    • Common law modified by PLA

1. Types Of Co-Ownership

  • And the features of the different forms of co-ownership

s 33 PLA

Any property and any interest, whether legal or equitable, in any property may be held by two or more persons:
(a) as joint tenants, or
  • Tenant means joint co-owner

A. Joint Tenancy

  • Essential features of Joint Tenancy:

1. Four Unities
2. Right of Survivorship

1. Four Unities

Possession: Each co-owner has the right to possess, though not exclusively, the whole of the estate.
Interest: Each owner has the same kind of estate, for example a life estate or a fee simple.
Title: The title of all co-owners must created by one and the same instrument or have the same origin.
Time: The interest of each co-owner must vest at the same time.

2. Right of Survivorship

(ius accrescendi)

  • On the death of a co-owner the land vests in the survivor/s of the joint tenants.
  • Consider - in what circumstance s would parties hold title as joint tenants?
    • Married Couples
    • Business Partnerships
    • Trustees
    • Mortgagees (banks) favour joint tenancies.

B. Tenancy in Common

  • Essential features:

1. Unity of possession is the only essential feature.
2. No right of survivorship.

2. Creation of joint tenancies and tenancies in common

i. Pre-PLA: Presumption in favour of a joint tenancy unless:

  • One of the four unities was absent, or
  • A contrary intention was shown.
    • By using words of severance or
      • Words that indicate the share should be distinct and separate
    • By specifying that the parties were to take as tenants in common.
  • Re Barbour Deceased [1967] Qd R 10.
    • In this case the testator left the whole of his real estate to his sister and two brothers, to share and share alike as joint tenants. These words would normally be regarded as words of severance and the gift is as tenants in common. One brother pre-deceased the testator. Basically because this deceased brother’s share wasn’t provided for in the will and his share would have gone to 16 other people if the parties had taken as tenants in common. The real value of the land was for the use as a family farming property. If the words were construed to create a tenancy in common this would create an enormous amount of inconvenience. The court said that it is possible in these circumstances to look at contextual factors – it’s possible to look at the type of property involved and questions of convenience. In this particular case, the parties did take as joint tenants.
    • Re Rose Deceased [1962] QWN 4
      • The words were “in equal shares as joint tenants”. The parties did take as tenants in common.

ii. Post-PLA: Presumption in favour of a tenancy in common - s 35(1) PLA.

  • Exceptions:
    • Where a joint tenancy is expressly stated: s 35(2)(a).
    • Where executors, administrators, trustees and mortgagees hold property: s 35(2)(a).
    • Where property is held for partnership purposes: s 35(2)(b), 35(3).

Section 35 PLA

(1) A disposition of the beneficial interest in any property, whether with or without the legal interest, to 2 or more persons together beneficially, shall be construed as made to or for them as tenants in common, and not as joint tenants.

(2) This section does not apply:
(a) to persons who by the terms or by the tenor of the disposition are executors, administrators, trustees or mortgagees, nor in any case where the disposition provides that persons are to take as joint tenants…; and
(b) to a disposition for partnerships purposes in favour of persons carrying on business in partnership …

(3) A disposition for partnership purposes … shall, unless a contrary intention appears, be construed as:
(a) a disposition of the legal interest of those persons as joint tenants; and
(b) a disposition of the beneficial interest of those persons as tenants in common.

  • Therefore a tenancy in common will be created post-PLA where a transfer is made:

1. To two or more persons simpliciter (i.e. without any indication of how they are to hold the land).
2. In unequal shares or where any of the four unities (except possession) is absent.
3. If words of severance are used.

Land Title Act 1994 (Qld)

  • The LTA does not alter the principles as outlined above. It simply provides for registration of interests in Torrens land.
  • s 56(1) The registrar must register the parties as Tenants in Common or as Joint Tenants.
  • s 56(2) If it is not stated how the parties are to hold then they are to be registered as Tenants in Common.
  • s 57 If property is held as tenants in common then the Registrar may issue a separate title for the interest of each co-owner.
  • In Queensland the current practice is that if you don’t specify, your documents won’t be lodged.

3. Differences in Co-Ownership at Law and in Equity

  • Equity presumed a tenancy in common in three cases:
    • 1. Partnerships (Joint business or undertaking).
    • 2. Where there is an unequal contribution of purchase monies by the purchasers.
    • 3. Mortgagees.
  • Partnerships (Joint business or undertaking)
    • At law partners hold as joint tenants.
    • In equity partners hold as tenants in common. (So if one partner dies, the other partner inherits the share and holds it on trust for the deceased’s estate)
      • Lake v Craddock 24 ER 1011.
      • Spence v Federal C’ss Taxation (1969) 121 CLR 273.
        • Facts: Mr and Mrs Spence carried on business as partners. In the business of investing in property, improving it and selling it as a profit. They owned certain lands. Mr Spence died. The issue for the court was, Were they partners or co-owners? The Tax Act at the time didn’t impose a duty on property that a person got by a will, but it did tax the property acquired for profit making purposes. If joint tenants, Mrs Spence is liable for the tax of all of the profits. The parties are in partnership, if they’re tenants in common in equity, then Mrs Spence inherits the share because in the will she inherits all the property – in that case she’s only responsible for half of the tax.
        • The court held: recognises that they’re business partners, and therefore they’re tenants in common at equity (even though joint tenants at law) and she doesn’t have to pay tax for the whole of the land – only liable for half of the land. This position isn’t changed by s35 PLA.
      • s 35(3) PLA.
  • Where there is an unequal contribution of purchase monies by the purchasers.
    • The parties are presumed to hold in equity as tenants in common in shares proportionate to their respective contributions. This can be changed by a contrary explicit intention. Can also be changed by the presumption of advancement (between husband and wife and it exists if a husband purchases property in both names, then the law presumes that a gift is intended) – they will hold the property as joint tenants a law and this will be the same in equity. There is no presumption of advancement in de facto relationship – though these rules are changed by the Family Law Act.
  • Bull v Bull
    • In this case a mother and son purchased a home. The son contributed most of the purchase price and put the house in his name. Son wanted to throw the mother out.
    • The court held: the purchasers are tenants in common in equity in shares proportionate to their contributions. The son can’t throw the mother out because she’s entitled to concurrent possession as a co-owner.
  • Calverley v Green (1984) 155 CLR 242.
    • Facts: in this case 2 persons contributed money in equal shares. The property is bought in joint names. The court said that the purchasers held in trust themselves as tenants in common in proportion to purchase price contribution.
  • The Trustees of the Property of John Daniel Cummins, a Bankrupt v Cummins (2006) 227 CLR 278.
    • Facts: involves a barrister who doesn’t pay any tax – ATO went after him and bankrupted him. The property was purchased by husband and wife in 1970 as joint tenants. In 1987 the husband transferred his share to his wife. In 2000 husband went bankrupt. The trustee wants the bankrupt’s half share. The wife argued that she paid 75% of the purchase price, arguing Calverley v Green.
    • HCA said: C v G doesn’t apply to husband and wife. Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them it can be inferred that it was intended that each spouse has half interest in property, regardless of the amounts contributed by them. The court regarded it as the husband and wife having equal share and the wife had to transfer half of the house to the trustee in bankruptcy.
    • Unchanged PLA.
  • Mortgagees
    • s 35(2) PLA - mortgagees are presumed to be joint tenants.
    • Other circumstances?
    • In Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549 Lord Brightman considered that the situations where joint tenants at law will be presumed to hold as tenants in common in equity are not rigidly prescribed.

4. Rights between Co-Owners

A. Rights re occupation
B. Rights re profits and rents from the property
C. Rights re compensation for a contribution for improvements to the common property

A. Rights re occupation

  • Right to Occupy the Co-owned Property
    • Rule: Each Co-Owner is entitled to use and occupy the whole property subject to a similar right on the part of the other co-owners
    • This includes the right to bring a stranger on to co-owned property.
      • See Thrift v Thrift (1975) 10 ALR 332.
        • In this case the husband and wife both owned the property. Marriage broke down. Husband left. Wife moves mother and boyfriend into house. Husband objects. The court maintains the right to bring a stranger onto the co-owned property.
    • What is the situation where one co-owner leases his or her share of the co-owned property?
      • See Catanzarti v Whitehouse (1981) 55 FLR 426
        • It is possible for a co-owner to lease their share of the common property to a third party or a co-owner. Tenant gets exclusive possession, but the tenant’s right to exclusive possession is not to exclude the other co-owner.
  • Occuptation rent
    • Rule: A co-owner who exercises the right of occupation is **not liable to pay an occupation rent (Luke v Luke).
    • Exeptions:
      • A co-owner could be liable to pay an occupation rent:

1. If there is an agreement to pay rent.
2. A co-owner has to submit to an occupation rent if claiming a contribution for improvements: Teasdale v Sanderson.
3. Where there has been OUSTER excluded another co-owner from possession.

  • Ouster:
    • What amounts to being ousted?
      • Complete disposition of the property. It is a trespass by one co-owner of another’s rights to the property. A denial of possession and title of the ousted co-owner. The traditional view was that there had to be violents/threats. The more recent cases suggest that there doesn’t have to be violence, but an act that is totally inconsistent with the enjoyment of the property of the other party.
      • You can get an injunction to restrain other party from continuing the trespass. You can ask for the equivalent of an occupation rent.
      • Re Thurgood [1987] Q Conv 54-239.
        • The approach applied by the court was to ask whether it was reasonable to expect the excluded co-owner to exercise their right of occupation.
        • Facts: the defendant had problems with drinking and was asked to leave 4-5 times and the plaintiff threatened to call the police if the defendant returned. The court said that this conduct was that the plaintiff intended to exclude the defendant.
      • Biviano v Natoli [1998] NSWLR 695.
        • Man and woman living as defactos. The property is in the name of the woman. The parties have a trust deed saying that the woman was to hold the property in trust for both in equal shares. The relationship breaks down, woman gets an apprehended violence order against man. Court said the AVO isn’t ouster. The man had to leave as a result of the court order. The court noted that ouster did occur: the man wanted an order for a statutory trust of sale, woman says she’s sole owner. At this point there is ouster, because woman denies man’s interest in the property.
      • Beresford v Booth [1999] SASC 166.
        • One party changed the locks – depends on intention as to whether this is ouster.
    • What is the compensation for ouster/exclusion?
      • Dennis v McDonald [1982] 1 All ER 590.
        • Said that it would be compensation based on fair market rent for the whole of the house and then the respective share for dispossessed party.
      • Biviano v Natoli.
        • The court said no – there’s already someone possessing the house, you’re not likely to get fair market rental – amount would be less than fair market rental.

B. Rights to Profits

(i) Where property is let or used by third parties.
  • s 43 PLA: An action for account can be brought by one co-owner against another for receiving more than a 'just or proportionate share' of the profits
  • Each co-owner is entitled to a proportionate share of rents and profits
(ii) Where property is occupied by one or more co-owners.
  • Exception to s 43 PLA:
    • Where the profits result from a co-owner working the land himself/herself.
    • Henderson v Eason (1851) 17 QB 701.
      • Farming property – one co-owner in occupation (running farm), does he have to share profits? Court said no – return on capital and labour of the co-owner, they are profits…
(iii) Accounts can be ordered under a sale or partition suit under s 38 PLA.
  • See s 42(b) PLA.

C. Rights re compensation for a contribution for improvements to the common property

  • At law:
    • No right to recover compensation unless:
      • There was an agreement;
      • There was a joint obligation to make the improvement (Leigh v Dickeson).
  • In equity:
    • A co-owner is entitled to a contribution or compensation for improvements to co-owned property, from the other co-owners, when the co-ownership is brought to an end.
      • See Brickwood v Young (1905) 2 CLR 387.
        • Facts: Brickwood is the legal owner of property and has exclusive possession. Land is resumed. (NSW 1905) There had been a mistake in transfer of title earlier and there were three other people who had interest in the land – three children of a previous owner hold a three-quarter share. Question for court: how should those compensation monies be divided?
        • HCA: Brickwood entitled to compensation for improvements. Court noted that it didn’t matter that Brickwood hadn’t personally improved the land. The person who originally made the improvements was entitled to assert an equitable charge or lien on the land. That charge could be asserted for the value of the improvements and ran with the land. Court also noted that this right to compensation was enforceable as a defence of equity – that means it’s only available when the property is divided.
        • Brickwood gets ¼ outright and has a lien over the other ¾ for improvements. Also has to account for profits for the other three properties rents.
    • A co-owner seeking an allowance for expenditure may be required to pay an occupation rent.
      • Brickwood v Young
      • McMahon v Public Curator (1952) St R Qd 197.
  • Valuation of Improvements
    • A co-owner is entitled to the lesser of:

(a) the actual cost of the improvements, or
(b) the amount by which the improvements have increased the value of the land.
* McMahon v Public Curator

  • Compensation cannot be recovered for repairs in the nature or ordinary maintenance
    • Painting, etc.
    • Principle in Brickwood is limited to permanent improvements – not something like painting.
    • McMahon v Public Curator
  • Exceptions:
    • Agreement between the parties.
    • Common obligation to undertake the repairs.
    • If repairs are more than mere repairs/maintenance.
      • Forgeard v Shanahan (1994) 35 NSWLR 206.
  • Liability re outgoings
    • Rates – there’s a statutory obligation for owners to pay rates – if one co-owner pays them all they can ask for contribution.
    • Insurance & pest control – generally you can’t recover if you pay all the insurance. Only if there’s a joint obligation in the mortgage can you recover.
    • Mortgage repayments – yes, this falls in the same category as joint debts – you can get contribution.
      • Scapinello v Scapinello [1968] SASR 316.
      • Forgeard v Shanahan (1994) 35 NSWLR 206.
        • NSW decision – NSW does not have an equivalent of s43 PLA.
        • Facts: owned a house as joint tenants. Defacto couple – relationship broke down. House is sold and dispute as to distribution of proceeds. Shanahan wanted Foregard to make some sort of allowance because she’d paid most of the mortgage & outgoings. Foregard had been living there for a long time and should pay an occupation fee.
        • Court: they were joint debtors with regards to the mortgage and rates – Shanahan could get contribution for those repayments. No contribution for insurance/pest control monies paid. Shanahan was liable to pay an occupation rent. The amount of the rent would not exceed the allowance made to pay for the other improvements.

5. Termination of Co-ownership

A. Termination of a Joint Tenancy

A joint tenancy can end by:
1. Conversion into a tenancy in severalty (ie. where one person owns the land)
2. Severance (ie. by conversion into a tenancy in common).
3. Partition or sale: ss 37-42 PLA.

Termination of a joint tenancy by severance
  • Severance is conversion into a tenancy in common
  • Severance requires an act to destroy one of the four unities
Williams v Hensman (1861) 70 ER 862.
  • Three methods of severance:
    • By alienation.
    • By mutual agreement.
    • By course of conduct.
1. Severance by alienation
  • To sever by alienation the joint tenant must transfer his/her interest either:
    • At law or
      • Will always require a registered transfer
    • In equity
  • Corin v Patton
(a) A joint tenant can transfer his or her interest inter vivos and thus sever the joint tenancy:
(i) A joint tenant can transfer his or her interest to a stranger.
Corin v Patton
  • Mr and Mrs Patton are joint tenants of the land. Mrs Patton is terminally ill and she wants to sever the joint tenancy because she wants to leave her share to her children. She purports to transfer title of her interest to her brother Mr Corin as trustee on her behalf. She gives him a signed transfer but she doesn’t arrange for the certificate of title to be produced by the mortgagee.
  • Certificate of title: when registration occurs (in Qld you can ask for a printout of the certificate of title that’s encoded. Under old system there was always a duplicate certificate of title issued. The duplicate was the way you dealt with the land – the mortgagee usually held it) you get a certificate. Mrs Patton forgot to deal with the certificate – so they think the joint tenancy has occurred.
  • HCA: severance of joint tenancy will only occur if the transfer is registered or if the gift is complete in equity. There is no severance of the joint tenancy because the gift is not complete. A unilateral declaration made by one joint tenant of his/her intention to sever the joint tenancy is not sufficient to effect a severance.
Costin v Costin
  • The gift will be complete when the donor has given irrevocable instructions to a third party to produce the certificate of title.
    • Under s200 you need a transfer of registrable form with a clear instruction that a third party produce the certificate of title.
    • (v) A transfer to a trustee will sever the joint tenancy.

(b) Partial Alienation can result in severance.

  • Mortgage: Lyons v Lyons
    • Under old system title a transfer of a mortgage was a transfer of land to the mortgagee. Under Torrens system title it is not a severance of the joint tenancy – it is a charge on the title. Lyons v Lyons
    • Lease: Frieze v Unger.
      • A lease by one joint tenant of his/her interest does not effect a severance. The lease suspends the joint tenancy for the duration of the lease.
    • Bankruptcy
      • Yes. When a person goes bankrupt the property vests in the bankruptcy trustee. That destroys unity of title so there is severance of the joint tenancy.

(c) Severance under the Land Title Act 1994 (Qld).

  • s 59 (1) A joint tenant may unilaterally sever the joint tenancy by registration of a transfer signed by the owner.
  • s 59(2) The document of severance must be given to all other joint tenants.
  • s 59(3) On registration, the registered owner holds as tenant in common with the other registered owners. Thus, severance is effected on registration.
  • See:
    • Peldan v Anderson [2006] HCA 48.
    • Lennon v Bell [2005] QSC 286.
      • Mr and Mrs Lennon married, but separated. Talking about property settlement. Mrs Lennon goes into surgery and suffers unexpected complications. Mrs Lennon’s daughter has power of attorney. The transfer is done and registered after the death of Mrs Lennon.
      • Mullins J: Mrs Lennon didn’t register before she died. This doesn’t determine the matter – there wasn’t everything done.
2. Severance by mutual agreement

(a) A specifically enforceable agreement between all the joint tenants will sever the joint tenancy in equity.
(b) Formal agreements: eg court orders, will sever a joint tenancy: Re Pozzi.
(c) Informal agreements will generally be ineffective to sever a joint tenancy:

  • Corin v Patton; cf Burgess v Rawnsley.
  • Burgess: oral agreement between two tenants. One died. The court said there was severance. Not likely that the Qld courts will agree.
  • Sprott v Harper (2000) Q Conv R 54-545.
3. Severance by course of conduct
  • Where all the joint tenants agree that their interests are held in divided shares without the right of survivorship.
  • See:
    • Corin v Patton
    • Burgess v. Rawnsley [1975] Ch.429.
    • Magill v Magill (1997) NSW Conv R 55,795.
    • Sprott v Harper (2000) Q Conv R 54-545.
    • Lennon v Bell [2005] QSC 286.
    • Saleeba v Wilke [2007] QSC 298.
4. Severance by homocide
  • Rule of public policy: a person may not benefit from his or her crime
  • Therefore, if one joint tenant criminally kills another joint tenant, the killer cannot take any beneficial interest by survivorship
    • Re Stone; Rasmanis v Jurewitsch

B. Termination of tenancy in common

  • A tenancy in common can come to an end by:
    • 1. Conversion into a tenancy in severaltyl or
    • 2. Partition or sale: ss 37-42 PLA.
    • NB: No severance.

C. Termination of co-ownership by partition and sale

  • Partition or Sale
  • s 38 PLA: The Court may on the application of any one or more co-owners …appoint trustees of the property and vest the same in such trustees … to be held by them on the statutory trust for partition or sale.

Statutory Trust for Partition

  • s 38(1) PLA: A substantive application should be made to court for partition.
  • s 37B PLA: Function of trustees is to effect a physical division of the land
  • s 38(4) PLA: Despite Aan application for sale, the court may order partition if good reasons can be shown why the property should be partitioned and not sold (Pannizutti v Trask; Re Darby).

Statutory Trust for Sale

  • s 38(1) PLA: A substantive application should be made to court for sale.
  • s 37A PLA: The property is held on trust or sale
  • Issue: Does the court have a discretion under s38(1) to refuse an application for the appointment of statutory trustees?
    • General attitude is that a co-owner can apply to a court a co-ownership will be ended.
    • See Permanent Trustees Nominees v Coral Sea Resort;
      • May is not mandatory – limited discretion in the court. An agreement between the parties, but you have to give 12 months notice is not an ouster of the jurisdiction of the court.
    • Nullagine Investments Pty Ltd v WA Club
      • What if there are some contractual constraints for partition of sale – agreement that they would offer their share to each other first – limit of 10 years. The 10 years had run, so there was no issue.
      • Look at Brennan J’s comments: co-owners are in capable of bargaining away their rights except where there is an agreement between the parties that already provides for the termination. (Obiter, in dissent)
    • See also ss 39, 38(7), 40, 42(b) PLA.