Andersons Solicitors v Schigulski

[2004] SASC 21

ANDERSONS SOLICITORS v SCHIGULSKI
[2004] SASC 21

Civil

1. MULLIGHAN J                 The plaintiff is a firm of solicitors which performed legal services for the defendant in a solicitor and client relationship during the period from July 1996 until May 2000. Fees and costs due to the plaintiff by the defendant remain unpaid and were taxed by this Court pursuant to s 42 of the Legal Practitioners Act 1981.  An allocatur in the sum of $13,820.24 was issued on 6^th April 2001.  This amount has not been paid.

2. The defendant and Mr Schigulski are jointly registered as the proprietors of land at Blewitt Springs in this State being the whole of the land comprised in Certificate of Title Register Book Volume 5185 Folio 150 (“the land”).  The land is subject to two easements which are registered on the certificate of title and a mortgage to a bank which is also registered on the certificate of title.  The easements and the mortgage are of no significance for present purposes.

3. The application made by the plaintiff is that the joint interest of the defendant in the land be charged with the payment of the amount due, pursuant to the allocatur, interest accrued and occurring under the Supreme Court Rules 1987, costs and stamp duty, together with costs paid under future orders for costs, and the costs of registration and withdrawal of the charge at the Lands Titles Office. The plaintiff also seeks an order that the defendant be prevented from dealing with the land charged whilst the charge remains in force and various ancillary orders. The defendant opposes the application and contends that a charging order cannot be made in the circumstances.

4. The issue on this application is simply whether a joint interest in registered land may be the subject of a charging order.

5. S 8 of the Enforcement of Judgments Act 1991 (“the Act”) provides:

   “8(1) A court may, on application by a judgment creditor, charge property of a judgment debtor with a judgment debt or part of a judgment debt.”

   R 101.18(2) of the Supreme Court Rules 1987 provides that when an allocatur is signed in accordance with the Rules and sealed by the Court, it shall have the effect of, and be enforceable in the same manner as, a judgment of the Court for the amount of the allocatur. The plaintiff is a judgment creditor and the defendant is a judgment debtor pursuant to s 8(1). The question is whether the joint interest of the defendant in the land is property of the defendant.

6. “Property” is not defined in the Act but “land” is defined as including premises, as well as residential premises. In CP (Adelaide) & Ors v Hartford (Holdings) & Anor (No 9) (2002) 221 LSJS 46 Judge Lunn of the District Court held that “property” in s 8(1) in its ordinary meaning includes land and I agree with that conclusion. There is no reason to restrict the meaning of “property” by excluding real property. S 7 of the Act provides that the Court may issue a warrant of sale authorising seizure and sale of the real or personal property of a judgment debtor. However, there is no reason to conclude that because s 7 refers to real property, that type of property is dealt with exclusively in that section.

7. The plaintiff contends that the interest of the defendant in the land may be the subject of a charge and the defendant contends to the contrary.

8. A useful starting point is to consider the nature of a joint tenancy in land under the law.  In Bradbrook, McCallum and Moore, Australian Real Property Law (3^rd ed 2002), the learned authors commence their discussion of the nature of joint tenancy as follows, “A joint tenant has been described as one who totum tenet et nihil tenet, that is he or she holds the whole and yet nothing”: 340.  They go on to say each joint tenant is seised of the whole of the estate or interest.  The observation of Lord Millett in Burton v Camden London Borough Council [2000] 2 WLR 427 at 435, also reported in [2000] 1 All ER 943, is that each joint tenant is “already the owner of the whole”: [2000] 1 All ER at 950.

9. It is well established that the two principal features of the joint tenancy are the “four unities” and the right of survivorship.  These unities are well known as unity of possession, interest, title and time: see Australian Real Property Law at 341-342.  If one of the unities of interest, title or time is missing, or if there can be no right of survivorship, the co-owners are tenants in common.  If unity of possession is absent, there is no co-ownership at all because unity of possession is common to all forms of co-ownership.  The learned authors go on to say that even if all four unities are present, it does not necessarily mean that the co-ownership is capable of being a joint tenancy.  An important factor is the terms in which the land was conveyed to the co-owners:  see para 10.02.

10. In the present case, there is no question that the land is held by the defendant and Mr Fe Schigulski as joint tenants.  Consequently, I need only mention briefly the four unities.  Unity of possession means that each co-owner is entitled concurrently to possession of the whole of the land.  Unity of interest means that the interest of each joint tenant must be the same in nature, extent and duration.  Unity of title exists if the co-owners have derived their interests from the same document or act.  Unity of time exists if the interest of each co-owner vests at the same time and by virtue of the same event.  I mention the requirement of the right of survivorship.  Upon the death of a joint tenant, the interest of that joint tenant automatically transfers to the other joint tenant or tenants.  There is no issue about these principles.

11. Having considered the nature of joint tenancy, I turn to the contention that the interest of a joint tenancy may be the subject of a charge.

12. A charging order pursuant to s 8 does not create an interest in the property of the judgment debtor. It does no more than secure the judgment debt by the making of that order. Upon a charging order being made, the Court may make ancillary or consequential orders requiring registration of the charge, prohibiting or restricting dealings with the property subject to the charge, providing for the sale of the property and the application of the proceeds of sale or relating to any other incidental or consequential matters: s 8(2). In my view, these provisions support the contention that a charging order does not create an interest in property. If it did, that interest could be realised independently and specific orders under s 8(2) would not be required.

13. A charging order is to be distinguished from a mortgage which confers a legal interest in land on the mortgagee defeasible upon the performance of the terms of the mortgage by the mortgager:  Tyler, Young and Croft, Fisher & Lightwoods Law of Mortgage (Aust Ed 1995) at 1.1 and 1.5.  The learned authors of that publication at 2.1 define a charge as a security whereby “real or personal property is appropriated for the discharge of a debt or other obligation, but which does not pass either an absolute or a special property in the subject of the security to the creditor, nor any right of possession, but only a right of realisation by judicial process in case of non-payment of the debt”:  Stainbank v Fenning (1851) 11 CB 51; 138 ER 389 and Stainbank v Shepard (1853) 13 CB 418; 138 ER 1262 and Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 595.

14. In Wright & Anor v Gibbons (1948-1949) 78 CLR 313 Dixon J discussed the nature of the interest of a joint tenant in lands in the context of alienation. He said at 331:

    “‘The real distinction is, joint tenants have the whole for the purpose of tenure and survivorship, while, for the purpose of immediate alienation, each has only a particular part’; On Estates, 2^nd ed. (1820), vol. 1, p. 136.  An alienation by one joint tenant to a stranger might be made by the appropriate means of assurance and in respect of the aliquot share of the alienor the stranger would come in with the remaining co-tenant or co-tenants as a tenant in common.”

15. It may be seen that the joint tenants have an interest in land, namely the whole of the land.  It is only in the context of alienation that separate shares are considered.

16. In the present case, there is no suggestion of alienation.  Clearly both the defendant and his co-owner as joint tenants own the whole property, which I continue to refer to as land.  It is said that during the currency of the joint tenancy each of them has a potential interest in the whole of the land as the survivor, or a part interest in the land in the event of severance of the joint tenancy.  Both of them also have a potential interest in the proceeds of the sale of the land should that occur.  However, it is incorrect, in my view, to say that each of them only has a potential interest in the land.  They have the interest which has been described as the whole of the property.

17. As the defendant has such an interest he therefore has property as required by s 8(1) of the Act.

18. In National Westminster Bank Ltd v Allen & Anor [1971] 2 QB 718 a charging order was made on land owned by husband and wife jointly who were joint tenants and who both jointly owned a debt to the creditor. There was no issue that land held in joint tenancy could not be the subject of a charge.

19. As a charging order does not create an interest in land for the benefit of the judgment creditor, the order will not destroy any of the unities of the joint tenancy. It will not interfere with survivorship. The joint tenancy will remain which is in contrast with the position in bankruptcy where the property of the bankrupt vests in the Official Trustee: s 58 of the Bankruptcy Act 1966, with the consequence of a disposition of interest and severance of the joint tenancy: Re Holland; Ex parte Official Trustee in Bankruptcy (1985) 5 FCR 165 per Fisher J at 166.

20. It is also well established that a joint tenancy may alienate the particular part of the property which in such circumstances relates to them: see Wright v Gibbons op cit per Dixon J at 331.  Earlier in his judgment in that case, Dixon J gave various examples of alienation, with a consequence of severance of the joint tenancy: 330-331.  Such alienation destroys the joint tenancy, but without severance the joint tenancy remains.

21. I accept the contention of Ms Pertsinidis, who appeared for the plaintiff, that the charging order does not sever the joint tenancy although severance may occur if an ancillary or consequential order of sale and application of the proceeds of sale to the judgment creditor is made pursuant to s 8(2). The charging order merely protects the interest of the judgment creditor.

22. Mr Randle, who appeared for the defendant, referred to Irani Finance Ltd v Singh & Ors [1971] 1 Ch 59 as authority for the proposition that a charging order could not be made where the judgment debtor is one of the joint tenants. In that case two brothers acquired land as joint tenants with the aid of a mortgage. Separate orders were made against each of the brothers at different times changing their respective interests in the land. The mortgagee assigned the mortgage. Under English law there was a trust for sale imposed by legislation upon joint tenants. The judgment creditor sought to redeem the mortgage which was opposed by the party to whom the mortgage had been assigned, presumably to give effect to the charges upon the proceeds of sale of the land. The legislation giving power to make a charging order provided for a charge upon land or an interest in land. The question for the Court of Appeal was whether a charging order could be made on the debtor’s interest in the proceeds of sale of land. The Court held that the purpose of the trust for sale was to make sure, by shifting the equitable interests away from land and into the proceeds of sale, that a purchase of land is free from equitable interests. It was further held that joint owners holding the property or trust for sale and for themselves beneficially did not hold interests in land as required by the legislation. This decision cannot be regarded as authority for the proposition that a charging order cannot be made on the interest of a joint tenant in property.

23. Also, I was referred to the decision of His Honour Judge Lee in Australia & New Zealand Banking Group v Hurley (1996) 185 LSJS 50. I found His Honour’s reasons for judgment most helpful and I am indebted to him. He concluded that a charging order under s 8(1) may be made in relation to the interest of a joint tenant in land. I agree with his conclusion that registration of a charging order does not destroy any of the unities and severance does not occur at that stage.

24. The plaintiff is entitled to the order as sought and I make an order pursuant to s 8(1) charging the estate and interest of the defendant in the land with the payment of the total amount of the debt due by him to the plaintiff. I shall hear the parties as to the precise terms of the order to be made.