Brauch v Nelson
[2011] VCC 1227
•26 August 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
FAMILY PROPERTY DIVISION
Case No. CI-11-01751
| KURT KARL BRAUCH | Plaintiff |
| v | |
| WILLIAM NELSON and ROSEMARY NELSON | Defendants |
| as Executors of the Estate of ROSSLYNN GOYMER BRAUCH |
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| JUDGE: | HIS HONOUR JUDGE MISSO |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 15 August 2011 |
| DATE OF RULING: | 26 August 2011 |
| CASE MAY BE CITED AS: | Brauch v Nelson |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1227 |
RULING
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Catchwords: REAL PROPERTY – joint tenancy – joint tenants were husband and wife – both under administration pursuant to the provisions of the Guardianship and Administration Act 1986 – sale of real property – net proceeds of sale divided and kept in separate accounts by the administrator – requirement of s.53(3) for separate accounts – whether division of the net proceeds and deposit into separate accounts amounted to severance of joint tenancy – powers and duties of the administrator of represented person – whether the interests of the husband and wife were altered by the sale and separate accounting of the net proceeds of sale: s.48(1), 53(1) and (3)
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Isles | Judge & Papaleo |
| For the Defendants | Mr S Metaxas | Barnett & Barnett |
| HIS HONOUR: |
Background
1 Kurt Karl Brauch and Rosslyn Goymer Brauch were married for approximately sixty-three years. Rosslyn died on 15 July 2010. At the time of her death, Kurt and Rosslyn were the proprietors of a residential property at 991 Mount Dandenong Tourist Road, Montrose (“the property”). They were registered as joint tenants.
2 Unhappily for Kurt and Rosslyn, their advancing age created mental debility. Kurt was diagnosed as suffering with a cognitive impairment due Alzheimer's disease. FTL Judge & Papaleo ("FTL") was appointed his administrator on 22 October 2008 by order of the Victorian Civil and Administrative Tribunal.
3 Rosslyn's health went the same way. Her mental debility was also diagnosed as a cognitive impairment due to Alzheimer's disease. FTL was appointed her administrator on 30 October 2008 by order of the Victorian Civil and Administrative Tribunal.
4 No issue was raised by the defendants regarding the appointment of FTL as the administrator of both Kurt and Rosslyn, nor indeed in relation to the steps taken by FTL in the administration of the estate of both Kurt and Rosslyn.
5 FTL set about the administration of the estate of both Kurt and Rosslyn. It sold the property on 4 April 2009. The net proceeds of sale were placed into an account operated by FTL. Half of the net proceeds were placed into the account in the name of Kurt and the other half in the name of Rosslyn. Half of the net proceeds amounted to $199,108.04.
6 After Rosslyn died the defendants applied for and were granted probate of the will of Rosslyn's estate on 20 October 2010. Subsequently, the defendants demanded that the whole the money standing in the account of Rosslyn be paid to them for the purpose of the administration of her estate. FTL complied with that demand and paid to the defendants the sum of $201,994.40. It obviously included interest accrued on the original sum of $199,108.04.
The Issue
7 Mr J Isles of Counsel appeared for the plaintiff and Mr S Metaxas of Counsel appeared for the defendants.
8 Mr Michael Murphy Whittington, solicitor, was called to give evidence. In the course of his evidence, he said that the affidavit sworn by him on 8 August 2011 was true and correct, as were exhibits thereto. Mr Metaxas cross- examined Mr Whittington, however, the cross examination took up matters of law which were more appropriate for submissions.
9 The issue raised by Mr Isles was that because Kurt and Rosslyn were registered as joint tenants and that upon the death of Rosslyn, that Kurt was entitled to have her share in the property pass to him on survivorship.
10 The issue raised by Mr Metaxas was that the way in which FTL dealt with the proceeds of sale amounted to severance of the joint tenancy, and therefore, Rosslyn’s share could not pass to Kurt on survivorship.
Administrator’s Powers
11 The powers and duties of an administrator are contained in PART 5 and Division 3 and 3A of the Guardianship and Administration Act 1986 (“the Act“). Section 48(1) is the commencing point in understanding the extent of the powers which can be exercised by an administrator:
“(1) An administrator has the powers and duties conferred by this Division and such of the powers and duties referred to in Division 3A as the Tribunal may specify in the order.”
12 Paragraph 1 of the order made in favour of FTL on 30 October 2008 in relation to Rosslyn is in the following terms:
“FTL …be appointed administrator of the estate with all the powers and duties conferred by Part 5 and Divisions 3 and 3A of the Guardianship and Administration Act 1986."
13 The order in relation to Kurt was in the same terms and was subject to a reassessment. The reassessment occurred on 22 April 2009 and was made in the same terms; that is, providing the administrator with the same powers and duties under the same provisions of the Act.[1]
[1] Exhibits "MMW-1" and "MMW-2" to the affidavit Mr Whittington
14 The powers and duties conferred on the administrator by PART 5 and Divisions 3 and 3A are extensive. For example, in Division 3A, section 58B(2)(g) permits the administrator to:
“sell, exchange, partition or convert into money any property … .”
15 By section 48(3), any exercise of the powers and duties by the administrator are treated as if made by the represented person:
“Where a decision is made, action taken, consent given or thing done by an administrator under an order made by the Tribunal the decision, action, consent or thing has effect as if it had been made, taken, given or done by the represented person and the represented person had the legal capacity to do so.”
16 So the sale of the property was, by virtue of section 48(3), although undertaken by FTL as administrator, deemed to have been taken by Kurt and Rosslyn.
17 That brings me to section 53 of the Act which, by its heading, declares the position of the represented person in relation to that person's interest in property is not altered by the sale or disposition of that person's property.
18 Subsection (1) makes it very clear that, for instance, the sale by FTL of the property did not alter the interests of Kurt and Rosslyn in any respect in the property:
“(1) A represented person and her or his heirs, executors, administrators, next of kin, devisees, legatees and assigns have the same interest in any money or other property arising from or received in respect of any sale, mortgage, exchange, partition or other disposition under the powers given to an administrator by an order of the Tribunal which have not been applied under those powers as she, he or they would have had in the property the subject of the sale, mortgage, exchange, partition or disposition if no sale, mortgage, exchange, partition or disposition had been made.
19 It is abundantly clear that once FTL sold the property and received the net proceeds of sale, that, despite the liquidation of the property into cash monies, the effect of subsection (1) is to recognise that, as between Kurt and Rosslyn, their legal interest in the cash monies was to be determined by the interest they had in the property at the time it was sold. Their interest was as joint tenants, and so their interest in the cash monies remained as joint tenants.
The Conduct of the Administrators
20 It is abundantly clear that the powers and duties of an administrator are firstly governed by, and limited to, the powers and duties conferred by the order of the Tribunal and by the provisions of PART 5 and Divisions 3 and 3A of the Act.
21 Where a duty is imposed upon the administrator, then unless the provision of the Act provides for the exercise of a discretion, the administrator must undertake the powers and duties conferred strictly. One such duty is imposed by section 53(3):
“An administrator who receives money or other property under this section must keep a separate account and record of the money or other property."
22 Upon receiving the net proceeds of sale, FTL deposited into a general account operated by them, half of the net proceeds of sale in the name of Kurt and the other half in the name of Rosslyn.
23 Mr Metaxas submitted that the division of the net proceeds of sale in that way had the effect of severing the joint tenancy.
Whether Division of the net Proceeds and Deposit into Separate Accounts
Amounted to Severance of Joint Tenancy24 The law is settled that where, for example, two persons are registered as joint tenants, the death of one results in the interests of the deceased passing to the other joint tenant by the right of survivorship.[2]
[2] Eastgate v Equity Trustees Executors and Agency Co Ltd (1964) 110 CLR 275 per Kitto J at 282.
25 A joint tenancy can be severed in one of three ways. In Corin v Patton,[3] Mason CJ and McHugh J considered the question of severance, and the circumstances in which it can occur:
“It is convenient to begin by considering the various ways in which a joint tenancy can be severed. The starting point is inevitably the judgment of Page Wood V C in Williams v Hensman (1861) 1 J and H 546 [70 ER 862], in which his Lordship said, at 557-558 [867 of ER]:
‘A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund - losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested.’”
[3] (1990) 169 CLR 540
26 It is clear from the judgment of the Court in Corin that the law relevant to severance of joint tenancy is settled, and that the principles stated in Williams v Hensman are the applicable principles.
27 Mr Metaxas relied upon the principle stated in Williams v Hensman, submitting that the conduct of FTL in dealing with the net proceeds of sale by physically dividing those proceeds and depositing them in the name of Kurt separately from Rosslyn, amounted to severance, and he submitted that each of the ways in which severance can occur had occurred here.
28 Mr Metaxas submitted, firstly, that the conduct of FTL must be seen as the conduct of Kurt and Rosslyn, and, therefore, they alienated their share of the net proceeds of sale which amounted to an individual disposition of the interests, resulting in a severance from the joint fund.
29 Secondly, that the conduct of STL must also be seen as a mutual agreement by Kurt and Rosslyn to sever the joint tenancy.
30 Thirdly, that the conduct of STL, being the conduct of Kurt and Rosslyn, was conduct sufficient to intimate that there was a mutual treatment of the net proceeds consistent with severance.
Conclusions
31 The legislature was very careful to ensure that in whatever way an administrator called in and collected the estate of persons who were represented persons, for instance, as joint tenants, that the joint tenancy was not severed by the conduct of the administrator in exercising the powers and duties of administrator authorised by an order of the Tribunal and by the provisions contained in PART 5 and Divisions 3 and 3A.
32 That being so, how can it be said that the conduct of the administrator can ever be seen to defeat the registration of Kurt and Rosslyn as joint proprietors of the property?
33 The difficulty I have with the submissions made by Mr Metaxas is that it is the mere division of the net proceeds of sale and depositing of the same into separate accounts that amounts to severance. It denies the duty of FTL to receive the monies and to keep a separate account and record of the monies as required under section 53(3).
34 Furthermore, subsection (3), in my opinion, must be read in the context of subsection (1). I must treat the liquidation of the property by sale into cash monies as if the same had not occurred; in other words, in no matter what shape and form the cash monies might take after coming into the position of FTL as administrator, the same cannot lose its characteristic that it was borne of property of which Kurt and Rosslyn were registered as joint tenants. The subsection is not capable of being read in any other way.
35 The work subsection (3) is intended to do must be read in the context of subsection (1), and that is, it must have been the intention of the legislature that when a real property asset is liquidated, that the share of the represented person must be kept in a separate account, and the purpose in doing that is obviously so that the estate of the represented person can be managed for the benefit of the represented person. There is nothing novel in that proposition when the objects of the Act are scrutinised,[4] and regard is had to the powers and duties of an administrator contained in PART 5 and Divisions 3 and 3A.
[4] Section 4
36 In other words, subsection (3) must not be read in a vacuum as if disconnected from subsection (1). Therefore, the conclusion I have reached is that although the property was liquidated into cash monies, and those monies were divided equally as between Kurt and Rosslyn, and were deposited into separate accounts, the legislative demand was at all times that the cash monies bore the same characteristics as their source; that is, a property registered in the names of Kurt and Rosslyn as joint tenants.
Orders 37 I think the orders which I must make are:
(1)
I declare that the net proceeds of sale of the property at 991 Mount Dandenong Tourist Road, Montrose (more particularly described in Certificate of Title Volume 9130 Folio 077) registered in the names of Kurt Karl Brauch and Rosslyn Goymer Brauch, as joint tenants, are by reason of section 53(1) of the Guardianship and Administration Act 1986 to be treated as if no sale had been made so that Kurt Karl Brauch and Rosslyn Goymer Brauch would have an interest in the net proceeds of sale as joint tenants.
(2)
Therefore, the interest of Rosslyn Goymer Brauch in the net proceeds of sale passed to Kurt Karl Brauch upon the death of Rosslyn Goymer Brauch on 15 July 2010, and that Kurt Karl Brauch is entitled to have the interest of Rosslyn Goymer Brauch in the property at 991 Mount Dandenong Tourist Road, Montrose transferred into his name solely.
38
I will hear the parties on the form of the order and regarding any other orders that are required.
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