Hycenko v Hrycenko & Hrycenko
[2016] VSC 247
•24 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 04902
BETWEEN
| NICHOLAS HYCENKO | Plaintiff (Respondent) |
| and | |
| GEORGE HRYCENKO (in his personal capacity and in his capacity as Executor of the Estate of the late LUDMILLA HRYCENKO) | First Defendant (Appellant) |
| and | |
| LUDMILLA HRYCENKO | Second Defendant |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 May 2016 |
DATE OF JUDGMENT: | 24 May 2016 |
CASE MAY BE CITED AS: | Hycenko v Hrycenko & Hrycenko |
MEDIUM NEUTRAL CITATION: | [2016] VSC 247 |
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REAL PROPERTY – Joint tenancy – Severance of joint tenancy – Whether representations severed joint tenancy
PRACTICE AND PROCEDURE – Summary Judgment – Appeal from Associate Judge – Whether claim as to severance of joint tenancy has any real prospect of success.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Searle | Frenkel Partners |
| For the Respondent | Mr J D McEvoy | Kennedy Guy Lawyers |
HIS HONOUR:
Introduction
By summons dated 26 February 2016, the First Defendant (‘appellant’ or ‘George’), sought orders modifying an undertaking that had been given by his solicitor Jacob Okno (‘Okno’) to retain the net proceeds of sale of a property pending agreement or Court order (‘the Undertaking’). Application was also made for summary judgment in respect of part of the plaintiff’s (‘respondent’ or ‘Nicholas’) claim.
On 22 March 2016 orders were pronounced by Ierodiaconou AsJ dismissing paragraphs 1-4 (modification to undertaking and summary judgment) of the summons.
By summons dated 3 February 2016 George sought orders inter alia for the appointment of Okno as his Litigation Guardian and for moneys to be paid out of the trust funds held by Okno. The orders for the appointment of a Litigation Guardian were sought, it would appear, at the suggestion of the plaintiff.
On 14 April 2016, Ierodiaconou AsJ made the following orders:
1)The first defendant pay the costs of and incidental to the summons filed 3 February 2016.
2)The first defendant pay the costs of and incidental to the hearing on 22 March 2016.
3)The first defendant’s summons filed on 26 February 2016 be dismissed in respect of the applications made in paragraphs 1-4 and 6.
Pursuant to a Notice of Appeal dated 4 April 2016, George appeals the above orders.
Background
George is 92 years of age. He was married, for over 70 years, to Ludmilla Hrycenko (‘Ludmilla’). They had three sons, John (‘John’), Victor (‘Victor’) and Nicholas. Ludmilla died in December 2015. John is deceased.
George and Ludmilla purchased 82 Richardson Street, Essendon (‘family home’) in 2001, paying for it entirely themselves having sold the previous family home. Neither Victor nor Nicholas contributed money to the acquisition of the family home.
George and Ludmilla were registered as joint tenants of the family home. Upon Ludmilla’s death, George, as the survivor, is, or would ordinarily be, entitled to the entire estate. Pursuant to Ludmilla’s Will, George is the executor of her estate and the sole beneficiary.
Nicholas does not allege that he contributed any money to the purchase of the family home. By an Amended Statement of Claim filed in this proceeding, he alleges that consequent upon representations made to him by George and Ludmilla (‘the Representations’), he renovated the family home, carried out regular maintenance works to the family home and now George and Ludmilla hold a portion of the family property on trust for him or, alternatively, that he is entitled to an equitable lien over the proceeds of sale.
He also alleges that the joint tenancy that existed between George and Ludmilla was severed in equity at the time the Representations were made.
Nicholas’ claim does not exceed 50% of the net sale proceeds of the family home.
George denies the representations, denies that the family home or any part thereof was or is held on trust for Nicholas or that Nicholas is entitled to any lien over the proceeds of sale of the family home.
Following the sale of the family home, Nicholas lodged a caveat on the title to the family home. Settlement of the sale could not occur. A negotiated agreement was reached. Okno, the family solicitor for many years, would ‘hold the balance of proceeds of sale received at settlement less legal costs and disbursements and sale expenses in trust for our clients pending agreement by all parties as to disbursement of the funds or court order in the absence of agreement’.
Nicholas has also commenced proceedings (‘corporation proceeding’) in which George, Victor and Aniva Nominees Pty Ltd (‘Aniva’) are the defendants. Aniva is the trustee of the Hrycenko Family Trust. These proceedings are managed by me in the Corporations List.
The family home was sold for $2,950,000. Agent’s commission of $33,000 was paid. Adjustments and legal costs accounted for a further $8,834. The net sale proceeds were therefore $2,908,166.03. Nicholas’ claim is limited to 50% of the net sale proceeds, namely $1,454,083.015. However, he has, according to George, already received $100,000 and so the maximum amount of his claim pursuant to these proceedings is, it was contended, $1,354,083.015.
The total amount paid into Okno’s trust account was $2,361,166.03. An amount of $547,000 was paid to or for George’s benefit. Of the remainder, Nicholas’ claim (according to George) is limited to $1,354,083.015.
George is aged, frail and these proceedings, together with the corporation proceeding are taking their toll upon him. In the circumstances, he wishes to go into a nursing home and requires, it was submitted, the sum of up to $1 million for an accommodation bond and his ongoing day to day medical care and other needs. It was in these circumstances that the summonses were issued.
The Application below
The Associate Judge held that it had not been established that there was power to vary the private undertaking given by Okno and that Summary Judgment was not appropriate because the Plaintiff had a real prospect of success, that in the circumstances of the case, extended beyond his asserted half interest. This real prospect flowed entirely from a submission as to the severance of the joint tenancy because of the Representations. Costs followed the event.
Grounds of Appeal
The grounds of appeal are as follows —
1.The learned Associate Judge was wrong in finding that she was unable to partially relieve Mr Okno of his Undertaking or modify it.
2.The learned Associate Judge was wrong in finding that the requisite ‘special circumstances’ did not exist to allow her to partially relieve Mr Okno of his Undertaking or modify it.
3.The learned Associate Judge was wrong in finding that any partial release of Mr Okno from the Undertaking or any modification to the Undertaking would amount to a mandatory injunction.
4.The learned Associate Judge was wrong in holding that the first defendant’s concession that approximately $1.45 million was in dispute was of itself fatal to the first defendant’s application for summary judgment.
5.The learned Associate Judge was wrong in holding that the alleged severance of the joint tenancy was an issue that could of itself defeat the first defendant’s summary judgment application.
6.The learned Associate Judge was wrong in finding that the first defendant’s failure to apply for probate of the second defendant’s estate by the time the application was heard was a relevant factor to take into account in determining the summary judgment application.
7.The learned Associate Judge was wrong in finding that the first defendant did not have an immediate and unqualified right to the estate’s share of the net proceeds of the second defendant’s estate, particularly when there was no evidence of any debts of the estate.
8.The learned Associate Judge was wrong in finding that she could not be satisfied that part of the plaintiff’s claim of more than $1,350,000.00 had no real prospect of success.
9.The learned Associate Judge was wrong in failing to modify the Undertaking and distribute an amount not less than $180,000.00 to the first defendant in circumstances where the plaintiff did not object to that sum being so distributed to the first defendant.
10.The learned Associate Judge was wrong in failing to take into account the submission that the plaintiff had failed to swear an affidavit in support of his allegations despite being given the opportunity to do so.
11.The learned Associate Judge was wrong in finding that she could not distribute any sum to the first defendant in circumstances where the plaintiff’s claim was for no more than 50% of the net sale proceeds.
12.The learned Associate Judge failed to take into account the undertaking given by counsel for the first defendant that no point would be taken at the trial of the proceeding that the Joint Tenancy had not been severed such that the $1.45 million was in effect quarantined for the plaintiff in the event he was successful at trial.
Release or modification of Undertaking (Grounds 1, 2, 3, 9)
The Associate Judge noted that ‘neither party cited any authority as to whether or not a Court may release a lawyer from a private undertaking given in the course of a lawyer’s professional duties’ and concluded that ‘there does not appear to be any such authority’, that ‘there is no applicable principle which supports the proposition that the Court simply has the power to partially relieve Mr Okno of his undertaking or modify it’ and that ‘in the absence of a specific power to relieve Mr Okno from, or to modify the Undertaking, an order requiring Mr Okno to release the monies sought by the defendant would amount to a mandatory injunction’ which she concluded had not been sought and she did not have the power to make.
The appellant contended that the Court had inherent jurisdiction to vary the Undertaking in the peculiar or special circumstances or context of this case. It was submitted that Okno gave the Undertaking as part of and in the course of his duties as a solicitor and that, as an officer of the court, the Court had the power to release or vary the Undertaking.
In all the circumstances, it was submitted, that the Associate Judge was incorrect in determining that she could not and/or should not partially relieve Okno of his Undertaking, or modify the Undertaking, and that any Order that was made would amount to a mandatory injunction.
The respondent contended that although special circumstances were required to relieve or vary an undertaking given to the Court, private undertakings given to third parties were entirely different. They could be enforced as contracts and would not be varied by a court without a substantive determination of the underlying rights and obligations of the parties that relate to the undertaking.
I will defer consideration of these grounds until after dealing with the summary judgment application.
Summary Judgment application (Grounds 4, 5, 6, 7, 8 and 11)
The Associate Judge ultimately declined to grant the summary judgment application on the ground that she was ‘not satisfied that the part of the plaintiff’s claim of more than $1,350,000.00 has no real prospect of success’.
Nicholas’ case was put essentially on the basis that he had no claim above 50% of the net sale proceeds of the family home. Accordingly, her Honour’s reasons for refusing the summary judgment application must, it was submitted, be incorrect.
The Associate Judge erred, it was submitted, by considering whether the joint tenancy had been severed. The family home had been sold and the parties were now concerned with proceeds of sale, a divisible sum of money. Whether there is or was a joint tenancy or not, the money will ultimately be divided into the same sums and Nicholas can never, it was submitted, have a claim for more than 50% of the net proceeds of sale. Accordingly, any claim for an amount in excess of 50% of the net sale proceeds must fail.
The respondent submitted that the appellant was required to demonstrate error and that there was no error in the decision of the Associate Judge. The critical submission was that as a result of the severance of the joint tenancy, Nicholas had a claim essentially against each of the former joint tenants (now tenants in common) and although George could get the remainder of his share ($180,041 — see paragraph 32 below) the share of his mother, Ludmilla could only be dealt with as part of her estate. This analysis did not involve an assertion that Nicholas was entitled to more than $1,454,083, but was the recognition of the consequences of both severance of joint tenancy and the passing of Ludmilla.
I am, with great respect, unable to agree. First, the predicate for the submission, namely the severance of the joint tenancy, has no real prospect of success. Secondly, even if I am wrong, in the circumstances of this case it would not matter for the reasons set out below.
I consider that George, as defendant, was entitled to summary judgment for part of the claim made by Nicholas, because the claim by Nicholas effectively to the entire fund (save for a concession of $180,041.51) has no real prospect of success. The only real prospect of success is in relation to the sum of $1,454,083.[1]
[1]I will accept this amount for the purposes of the appeal. It is unnecessary at this stage to resolve whether Nicholas has received an amount of $100,000 as contended.
The claim by Nicholas that he is entitled to half the proceeds, but that the remainder, (save for $180,041) should not be distributed, is underpinned or predicated entirely on the contention that the Representations effected an immediate severing of the joint tenancy with serious consequences for the application made by George.
The figures, on the assumption that severance took place are as follows:
• Sales proceeds $2,908,166.03 • Plaintiff’s share $1,454,083.02 • Ludmilla’s share $727,041.51 • George’s share $727,041.51 - $547,000[2] = $180,041.51 [2]Amount advanced to George.
It was submitted that Ludmilla’s share was required to remain in her estate until distributed according to law. This was despite the fact that George was the sole beneficiary of her estate. It was submitted that there may be other claims on the estate and it needed to be preserved. Finally, it was submitted that Nicholas has an equitable interest in his mother’s share as a result of the severance of the joint tenancy.
If there was no severance of the joint tenancy, it is clear that Nicholas would have no claim to the ‘other half share’ or right to insist or require that it be retained and not distributed to George until certain things occur, for example the due administration of Ludmilla’s estate. George, as survivor, would have the entire interest and as a consequence probate (and other matters) in relation to Ludmilla’s estate would be irrelevant. In these circumstances summary judgment would be entirely appropriate in respect of any claim made in excess of $1,454,083.
In a forceful and able submission, Mr J D McKay of counsel submitted that I should proceed on the assumption that the severance of the joint tenancy issue was plainly arguable. As the pleading was not attacked, he assumed this was the case below and that both parties presumably proceeded on this assumption, with the consequences referred to.
Indeed, George’s main argument appears to have proceeded on an acceptance of the arguability of the severance point, but a contention that this was irrelevant in the circumstances, given the fact that a monetary sum sufficient to meet any claim was held pursuant to the Undertaking. It was then submitted that in any event Nicholas will not succeed in any claim on the other half. George was the sole beneficiary (and executor) of Ludmilla’s estate and as there were no creditors of any real concern, the remaining funds would go to George and certainly not to Nicholas. If Nicholas had no entitlement to the other half, so the argument went, how could it be the subject of any claim?
In my opinion Nicholas does not have any claim in excess of $1,454,083.02. So much is common ground. If Nicholas succeeds in the severance argument (and his claim) he would get no more. The sum is available and is subject of the Undertaking. If he loses the point, the doctrine of survivorship will preclude any claim on Ludmilla’s estate. He will, of course, still be entitled to claim one half of the proceeds from the net sale proceeds, which he has done. It is Nicholas that is effectively seeking an injunction restraining distribution of the amount that he contends are funds belonging to the estate. In my opinion it is relevant that there is a fund available to meet the claim. It is not necessary in the circumstances of this case to consider notional amounts in the fund held by Okno.
However, in my opinion, based on the pleading and absence of any evidence, and despite limited argument,[3] Nicholas has no real prospect of success in relation to the severance of the joint tenancy issue and for this, and other reasons as set out earlier and below, summary judgment is in these peculiar circumstances appropriate.
[3]Although the severance point was not the focus of the appeal, or even a specific ground of appeal (it being contended that the point was irrelevant), it was before the Court and a critical point that cannot be ignored by the Court. In any event, as I have found, it would not matter. (See also Supreme Court (General Civil Procedure) Rules 2015 (Vic), Rule 77.06 and in particular sub-rule (3)(b)).
The factual matters said to give rise to the severing of the joint tenancy are pleaded in paragraph 4 of the Amended Statement of Claim. Paragraph 4 is in the following terms —
4.On unknown dates in late 2000 and/or 2001, the Defendants made representations to the Plaintiff that the Plaintiff had acquired, or would in the future acquire, ownership of one half of the Property (‘the Representations’).
PARTICULARS
The Representations are constituted by, or arose from, the following facts and matters:
(a)In late 2000 or early 2001, the Plaintiff and the Defendants met at the property known as 2 to 10 Tasman Avenue, Strathmore Heights (‘the Tasman Property’).
(b)The Defendants were residing at the Tasman Property. The meeting was for a family dinner.
(c)The Plaintiff’s wife, Danka Hycenko (‘Danka’), and his brother, Victor Hrycenko (‘Victor’), also attended the dinner.
(d)John Hycenko (‘John’), who was the Plaintiff’s brother, and the Defendants’ son, had died in June 2000, leaving Victor and the Plaintiff as the Defendants’ only children.
(e)During the dinner, the First Defendant and the Plaintiff were discussing the finalisation of John’s affairs following his death.
(f)At the conclusion of this discussion, the First Defendant said words to the following effect: ‘I’ve sorted everything out with John’s family. The remainder of the family properties will go to you and Victor’.
(g)This statement was made in the presence of the Second Defendant, who did not indicate any disagreement with the statement.
(h)Several weeks later, and at another family dinner attended by the parties, and by Victor and Danka, the First Defendant told the Plaintiff and Victor that they wanted to sell the Tasman Property and find a smaller residence.
(i)After searching for a suitable residence, the Plaintiff ultimately located the Property, which was purchased by the Defendants in February 2001, with settlement occurring in or about early June 2001.
(j)Shortly after the settlement, the Defendants, the Plaintiff, Victor, and Danka met at the Property.
(k)The Plaintiff told the Defendants that he and Victor had agreed to renovate the Property. The Plaintiff described to the Defendants (in general terms) the nature of the proposed renovations.
(l)The Plaintiff then said that there were limited funds for the renovation, and that it would involve a large amount of work for himself and Victor.
(m)In response, the First Defendant said words to the following effect: ‘Well, the house will be yours and Victor’s’.
(n)This statement was made in the presence of the Second Defendant, who did not indicate any disagreement with the statement.
In a recent decision, the Court of Appeal has dealt with the principles applicable to the severing of a joint tenancy.[4] I gratefully adopt the comprehensive analysis contained in the decision. The authorities and principles set out below are largely taken from this decision.
[4]Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375.
Under the general law, there are two principal characteristics of a joint tenancy: (1) the so-called four unities which must be present for the creation of a joint tenancy and (2) the right of survivorship (the jus accrescendi). As Latham CJ put it in Wright v Gibbons:[5]
The interests of each joint tenant in the land held are always the same in respect of possession, interest, title and time. No distinction can be drawn between the interest of any one tenant and that of any other tenant. If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged.[6]
[5](1949) 78 CLR 313.
[6]Ibid 323.
The right of survivorship is perhaps the best known feature of a joint tenancy: upon the death of one joint tenant, his or her interest in the estate accrues to the surviving joint tenant(s). Accordingly, where a husband and wife hold an estate in land as joint tenants, the death of one spouse means that the survivor automatically becomes the sole owner of the whole of that estate.
In Williams v Hensman,[7] Page Wood VC said:
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.[8]
[7][1861] EngR 701; (1861) 1 J & H 546; 70 ER 862.
[8][1861] EngR 701; (1861) 1 J & H 546, 557-558; [1861] EngR 701; 70 ER 862, 867. See also Corin v Patton(1990) 169 CLR 540, 546-547 (Mason CJ and McHugh J).
In Abela v Public Trustee,[9] Rath J summarised the different ways in which a joint tenancy would be taken as terminated. This included termination by agreement and by a course of conduct which unequivocally evinced an intention to treat their interests as severed. Thus:
1.Severance is effected by agreement to sever the joint tenancy.
2. The agreement need not be specifically enforceable or even binding as a contract at law.
3.Subsequent repudiation of the agreement does not affect its operation of severance.
4.Severance may also be effected by conduct of the joint tenants not evidencing in an agreement to sever but showing a common intention that the joint tenancy shall be severed.[10]
[9][1983] 1 NSWLR 308.
[10]Ibid 315.
Rath J held that a consent order agreed between husband and wife, after negotiations for the distribution of matrimonial property, was evidence of their agreement that they no longer intended a joint tenancy with the result that the agreement automatically effected a severance whether or not the agreement was binding.
In Saleeba v Wilke,[11] Chesterman J said, in relation to severance by conduct, that the critical question was: ‘Was there a course of conduct inconsistent with a joint tenancy from which one would objectively infer an intention to hold property as tenants in common?’.[12] His Honour said:
What seems to underlie the reasoning in these cases is that the right of survivorship is an essential incident of joint ownership. A sale of their jointly owned property and a division of the proceeds destroys the possibility of survivorship. After the sale none of the co-owners can succeed to the interests of any others who might die. Accordingly an intention to sell has implicit within it an intention to destroy the co-owners’ right to survivorship which is essential to joint ownership. The agreement to sell is a manifestation of the intention to bring the joint tenancy to an end.[13]
[11][2007] QSC 298; [2007] ANZ ConvR 664.
[12]Ibid [38].
[13]Ibid [25]. (Where Chesterman J is reported as saying ‘[a]ccordingly an intention to sell has implicit within it’, the sense is plainly ‘an intention to sell and divide the proceeds has implicit within it’.)
The facts in Saleeba v Wilke are informative. Two Melbourne residents purchased a unit in Tewantin in Queensland. When the property was transferred to them in 1994, they were registered as joint tenants. It seems they had intended to live in the unit during the Victorian winter and, at other times to let it out to produce income. As it happened, each of them lived in different parts of the property for extended periods of time. In late 2001, the joint tenants engaged in correspondence with a view to separating their interests. However, nothing further was done. One of the joint tenants continued to reside in the property for another two years. He died in June 2004. His executrix brought proceedings seeking a declaration that at the time of his death the joint tenants held their respective interests in the home unit as tenants in common. Chesterman J surveyed the authorities and concluded:
The weight of authority favours the view that negotiations, which come to nothing, for the purchase of one co-owner’s interest, or its partition, or sale to a third party and the division of proceeds, do not amount to a course of dealing so as to satisfy the third rule. The correspondence does not amount to negotiations. There was a proposal which attracted temporary interest and then lapsed. There is nothing to show an intention to alter the nature of the co-tenancy.[14]
[14]Ibid [48].
In Allingham v Allingham,[15] Lowe J held that the mere entry by joint tenants into a contract to sell the property jointly owned was not, by itself, evidence of an intention to sever the joint tenancy. However, in Kingsford v Ball,[16] the joint tenants were paid a sum by way of deposit on the sale of their property. They agreed to divide the deposit ‘equally between them’. That was held to be a most effective way to sever the joint tenancy.
[15][1932] VicLawRp 66; [1932] VLR 469.
[16][1852] EngR 366; (1852) 2 Giff. App.1; 66 ER 294.
In Re Pozzi,[17] Thomas J held that the entry by a husband and wife into an agreement upon the dissolution of their marriage which included a provision that the wife should have sole use and occupation of the former matrimonial home and, on cessation of that right to occupation, that the home was to be sold and the proceeds distributed between them operated to sever their joint tenancy in the home.
[17][1982] Qd R 499.
In Calabrese v Miuccio (No. 2)[18] the Full Court held that an agreement between the former parties to a marriage that the proceeds of a bank account in their joint names should be divided between them in particular proportions operated to sever the joint tenancy notwithstanding that, subsequently, the husband withdrew his consent to the making of an order by the Family Court sanctioning the agreement. His former wife died when the bank account remained in joint names. The Court held that the enforceability of the agreement was a matter distinct from its effect upon the joint tenancy. Derrington J said ‘[t]he former depends on its terms and is subject to certain rules as to conditions and repudiation. The latter merely depends upon the consequences of the fact that a contract has been negotiated and made as going to demonstrate the intention of the parties as to the nature of the ownership, and is not dependent upon the precise terms of the agreement but only the underlying intention as to ownership which they reveal. That does not depend upon express agreement but rather on consensuality of the parties’.[19]
[18][1985] 1 Qd R 17.
[19]Ibid 26.
In Public Trustee v Pfeiffle,[20] the Full Court considered an agreement between husband and wife, which had been approved by the Family Court, to settle their respective property claims. In that agreement, each acknowledged that the other was legally and equitably entitled to a one half interest in each of their properties and that the properties should be sold upon the happening of specified events, and upon completion of the sale, the proceeds should be divided equally. The wife died before any steps were taken to sell the properties the subject of the agreement. The husband became registered as the proprietor of all the properties. The administrator of the wife’s estate conducted a proceeding, by originating motion in which declarations were sought that the husband held the title to the properties on trust for himself and the estate of his wife as tenants in common. The primary judge dismissed the motion. The Full Court allowed an appeal and made the declarations. Kaye J said:
[20][1991] VicRp 3; [1991] 1 VR 19.
... there is a line of authority which establishes the following ... : if joint tenants are agreed to a sale and division of the proceeds on the happening of a particular event, then the joint tenancy is immediately severed, notwithstanding that the event had never occurred.[21]
McGarvie J said:
Conscious that survivorship frequently operates unfairly, courts applying principles of equity have leant towards severance and have facilitated it by treating a mutual intention of the parties to sever as sufficient to effect severance in equity: ... . The mutual intention to sever may be an expressed intention ... (underlying intention revealed by agreement) or may be inferred from the conduct and dealings of the parties. ... The mutual intention to sever does not need to be expressed in an enforceable contract ... or in any contract ....[22]
Ormiston J said:
... I have no doubt that the parties intended to declare that their beneficial interests ... were to be held as tenants in common ... essentially because ... they expressed those interests to be several interests of a kind consistent only with a tenancy in common. It was sufficient for them to agree that “each” was entitled to a ”one half interest” in the two properties.[23]
[21]Ibid 24-25.
[22]Ibid 29-30.
[23]Ibid 35.
More difficult cases arise where an inchoate agreement has not been executed or, in any way, performed. In Burgess v Rawnsley,[24] Lord Denning MR said: ‘It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common. I emphasise that it must be made clear to the other party.’[25] However, this passage was disapproved in Corin v Patton,[26] in which it was held that a unilateral declaration of intention by one joint tenant was insufficient to sever a joint tenancy.[27] In that case, a wife and husband were registered joint proprietors of land under the Real Property Act 1900 (NSW). The wife had executed several documents by which she purported to transfer her interest in the land to her brother. She died before any transfer was registered. There was no evidence that her intention to sever the joint tenancy had ever been communicated to her husband. Mason CJ and McHugh J said:
Unilateral action cannot destroy the unity of time, of possession or of interest unless the unity of title is also destroyed, and it can only destroy the unity of title if the title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property. A statement of intention, without more, does not affect the unity of title. Thirdly, if statements of intention were held to effect a severance, uncertainty might follow; it would become more difficult to identify precisely the ownership of interests in land which had been the subject of statements said to amount to declarations of intention. Finally, there would then be no point in maintaining as a separate means of severance the making of a mutual agreement between the joint tenants.[28]
[24][1975] 1 Ch 429.
[25]Ibid 439.
[26](1990) 169 CLR 540, 547-8 (Mason CJ and McHugh J), 566 (Brennan J).
[27]In Victoria, as is the case in several other jurisdictions, statutory provision has been made for the severance of joint tenancies. See Property Law Act 1958(Vic) Pt IV Co-Owned Land and Goods. Part IV was introduced by Property (Co-ownership) Act 2005 (Vic). See also Victorian Law Reform Commission, Disputes Between Co-owners, Report 2002. Section 223 of the Property Law Act 1958(Vic) (which forms part of Part IV) provides: ‘Nothing in this Part affects or prevents the severing of a joint tenancy by any other means that exist under this Act or any other Act or law’. See also Law of Property Act 1925 (UK) s 36(2).
[28](1990) 169 CLR 540, 548.
In my opinion a statement to the effect that ‘the house will be yours and Victor’s’ (the high point of Nicholas’ case) is not sufficient to indicate any intention to sever the joint tenancy. It is entirely consistent with retention of the joint estate. It does not undermine or impact upon and is not inconsistent with the principle of survivorship. As the authorities suggest, more is required to divide or terminate the unity.
The Representations, which comprise the only conduct alleged, do not come anywhere near to suggesting that from the date they were made they manifested a clear mutual intention to destroy or sever the unity of estate. The fact that in the future (‘will’) the house was to devolve in a certain way (yours and Victor’s) does not in any way suggest that with immediate effect the unity of estate will cease. In fact the contrary is the position. Husband and wife were speaking with one voice in relation to what would happen to ‘their family home’. The discussion did not refer in any way to their holding or estate but rather what would happen to their ‘joint estate’. Finally, there is no evidence at all beyond the vaguely formulated pleading.
If, as I have found, the severance point has no real prospects of success, it follows that the funds held by Okno, subject to the Undertaking, are sufficient to meet the claim made by Nicholas.
Finally the matter may, and indeed in this case should, be approached in a manner that pays less regard to procedure, technical matters, and complicated legal principles, and more regard to the interests of justice, not of course in a vacuum, but within the framework of this case. The simple fact is that Nicholas is not entitled to more than $1,454,083.[29] If he wins he will get it. Okno will continue to hold this amount in accordance with the Undertaking. The source and notional allocation of the funds will be irrelevant. If there has not been a severance of the joint tenancy — which I have found has no real prospects of success — and Nicholas succeeds in his claim, the amount will, as noted, simply be paid out. If I am wrong and there has been a severance of the joint tenancy the position, in this case, is effectively the same. The same amount will be available for payment of the claim. The fact that part of the funds held by Okno may, in such event, be estate funds could in some cases be relevant, but not in this case. George is the sole beneficiary. I have been told that there are no liabilities of any significance, and no basis whatsoever has been suggested for any Part IV claim. The whole suggestion is hypothetical and unrealistic.
[29]I do not understand Nicholas to suggest that he is entitled to more or that somehow the equitable lien for suggested work done is in an amount of in excess of $1,454,083. I doubt very much that this is the case and of course there is no evidence to this effect but only a long list (the longest I have seen) setting out what work has been done. (The list proceeds from (i)-(cli)!)
In the result, I propose to allow the appeal. As Nicholas has no claim to an amount in excess of $1,454,083, the balance held by Okno is available to be released to, or for the benefit of George. The release is pursuant to a judgment and order of this Court and it is not necessary to vary or modify the Undertaking. It follows that it is not necessary to deal with the Appeal Grounds in this respect and I do not propose to do so.
I will hear from the parties as to the precise form of order and any other relevant matter.
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