McNamee v Martin as Financial Manager for John Boden McNamee

[2021] NSWSC 568

Supreme Court

New South Wales

Medium Neutral Citation:

McNamee v Martin as Financial Manager for John Boden McNamee [2021] NSWSC 568

Hearing dates:

11 May 2021

Date of orders:

11 May 2021

Decision date:

20 May 2021

Jurisdiction:

Equity - Expedition List

Before:

Sackar J

Decision:

See paras [65], [68], [70]

Catchwords:

PERSONAL PROPERTY — Co-ownership — Joint tenancy — Severance — whether unilateral severance of a joint tenancy by alienation to oneself is effective in relation to chose in action

PERSONAL PROPERTY — Co-ownership — Statutory trust for partition — Appointment of trustees — whether a debt is “property” within the meaning of s 66G of the Conveyancing Act or whether it is a “chattel” within the meaning of s 36A of the Conveyancing Act

Legislation Cited:

Conveyancing Act 1919 (NSW)

Real Property Act 1900 (NSW)

Cases Cited:

Abela v Public Trustee (1983) 1 NSWLR 308

Anderson v Anderson (2017) 94 NSWLR 591

Beale v Trinkler (2007) 13 BPR 25,225

Callahan v O-Neill [2002] NSWSC 877

Chalhoub v Chalhoub [2005] NSWSC 572

Commonwealth Bank of Australia v Macdonald (2000) 10 BPR 18,111

Corin v Patton (1990) 169 CLR 540

Costin v Costin (1994) NSW ConvR 55-715

De Lorenzo v De Lorenzo [2020] NSWCA 351

Dixon v Watiwat (2012) 16 BPR 31,251

DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431

Freed v Taffel (1984) 2 NSWLR 322

Lewin v Lewin (2019) 19 BPR 29,225

McCoy v Caelli (as executrix and trustee of the estate of Caelli) (2010) 15 BPR 28,735

McNab v Earle (1981) 2 NSWLR 673

Neilan v Neilan [2019] NSWSC 66

Mischel Holdings Pty Ltd (in liq) v Mischel (in his capacity as executor of estate of Mischel) [2013] VSCA 375

Pascoe v Dyason [2011] NSWSC 1217

Re Kevin McNamara & Son Pty Ltd (2014) 287 FLR 96

Re McKerrell; McKerrell v Gowans [1912] 2 Ch 648

Roberts v Wayne Roberts Concrete Constructions Pty Ltd (2004) 208 ALR 532

Russell v Scott (1936) 55 CLR 440

Segal v Barel (2013) 84 NSWLR 193

Shepherd v FCT (1965) 113 CLR 385

Williams v Hensman (1861) 1 J&H 546; 70 ER 862

Williams v Legg (1993) 29 NSWLR 687

Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685

Wright v Gibson (1949) 78 CLR 313

Texts Cited:

Butt’s Land Law (7th ed, 2017)

Category:

Principal judgment

Parties:

Margaret (known as Peg) McNamee (first plaintiff)
Stephen Edward Martin t/as Financial Manager for John Boden McNamee (first defendant)
Lorebray Pty Limited t/as in its capacity as the Trustee of the McNamee Property Trust (second defendant)

Representation:

Counsel:
D R Pritchard SC, A Macauley (plaintiff)

Solicitors:
Uther Webster & Evans (plaintiff)
Garland Hawthorn Brahe (defendants)

File Number(s):

2021/89882

Publication restriction:

n/a

Judgment

1. The Plaintiff in these proceedings is currently 96 years old. The First Defendant is her husband and is also 96 years old. On 3 December 2019, the Court made orders appointing a financial manager for the First Defendant. The Second Defendant is the family company, Lorebray Pty Ltd, which is the trustee of the McNamee Property Trust. The Plaintiff and First Defendant were directors of the Second Defendant until their resignation on 4 May 2020.

2. There is no dispute that the Second Defendant is indebted to the Plaintiff and First Defendant for a significant sum of money (“the Parent’s Loan”). The amount in the draft financial statements of the Second Defendant is put at $14,641,178 (CB33, CB98) and slightly smaller figures around $13 million appear in earlier general ledger entries for the company (CB124, CB137, CB157). Those figures are based on treating subsequent advances by the Second Defendant to the Plaintiff and First Defendant’s children as loans, contrary to the Plaintiff’s intention which had been for the advances to be gifts, in reduction of the Second Defendant’s indebtedness to her and her husband (which would lead to a figure of around $4.3 million (T.5/28-33, T.6/4-5)).

3. The Parent’s Loan was made to the Second Defendant by the Plaintiff and First Defendant, at law, as joint tenants. That is because, at law, there is ordinarily no tenancy in common in respect of a chose in action (De Lorenzo v De Lorenzo [2020] NSWCA 351 (“De Lorenzo”) at [21]-[25] per Leeming JA (see also [62]-[70] per White JA, Gleeson JA agreeing); Re Kevin McNamara & Son Pty Ltd (2014) 287 FLR 96 at [57] per Robson J).

4. Therefore, when either the Plaintiff or the First Defendant pass away, their interest in the Parent’s Loan will pass onto the other pursuant to the principle of survivorship (Re McKerrell; McKerrell v Gowans [1912] 2 Ch 648 (“Re McKerrell”) at 653 per Joyce J; Russell v Scott (1936) 55 CLR 440 at 448 per Starke J and 450-451 per Dixon and Evatt JJ).

5. The Plaintiff sought orders which would give effect to her severance from the Parent’s Loan from a joint tenancy to a tenancy in common. Further, and in the alternative, the Plaintiff sought an order that the loan be held on statutory trust for partition pursuant to s.66G of the Conveyancing Act 1919 (NSW) (“Conveyancing Act”) or, alternatively, that the Parent’s Loan be divided equally pursuant to s.36A of the Conveyancing Act.

6. The hearing for was conducted before me on 11 May 2021. I made orders that day granting the relief sought in prayers 1 to 3 of the Summons filed 31 March 2021, but not for prayer 4 (sought pursuant to s.36A of the Conveyancing Act. The reasons for that follow.

Background

7. The Plaintiff and First Defendant have seven children: Christine Liddy, William McNamee, Peter McNamee, John C McNamee, Sally Collignon, Phillipa Hardy and Stephen McNamee (“the McNamee Children”).

8. The Plaintiff, First Defendant and the McNamee Children have all been involved in litigation concerning their related trusts and companies, including the Red Hill Property Trust, Red Hill MCN Pty Ltd, and McMardi Pty ltd.

9. The draft financial records for the Second Defendant, in respect of the financial year ended 30 June 2019, record a number of loan accounts between the Plaintiff, related entities and family members. The balance sheet for the McNamee Property Trust (of which the Second Defendant is the trustee) records relevantly $14,641,178 owed by the Second Defendant to the Plaintiff and First Defendant (CB98). The Plaintiff asserted that the money advanced to the children are gifts so the amount owing should be around $4.3 million (T.5/28-33, T.6/4-5). In any event, it is a substantial sum owing to the Plaintiff and First Defendant.

10. The current directors of the Second Defendant are William McNamee, Stephen McNamee (two of the McNamee Children) and Brendan Miller (an independent director) (see CB40). On 16 December 2019, the Second Defendant commenced proceedings in the NSW Supreme Court against Christine Liddy seeking to recover the sum of $1,650,030.00 said to be a loan from the Second Defendant (2019/395533).

11. Further, there is an ongoing dispute between members of the McNamee family as to whether some or all of the loans recorded in the Second Defendant’s accounts are truly loans or actually gifts. The Plaintiff (who was formerly a director of the Second Defendant) insists that all monies paid by the Second Defendant to all children were simply gifts, intended to reduce the Second Defendant’s indebtedness to her and her husband for the monies advanced by them.

12. The Second Defendant therefore filed a judicial advice application (2020/297722), seeking assistance in determining whether it would be justified in continuing its claim against Ms Liddy. In that declaration, the Plaintiff was again insistent upon the characterisation of the payments to her children as gifts.

13. Since the commencement of the proceedings against Ms Liddy, the Plaintiff has sought to sever her interest in the Parent’s Loan as a joint tenant. On 26 August 2020, the Plaintiff’s solicitors wrote to the Second Defendant’s solicitors stating that she had instructed them “to give notice to the Trustee, Lorebray Pty Limited, through you, that she requires the loan which is a loan [from] her and her husband to be severed so that her interest is separately noted in the McNamee Property Trust Financial Statements” (CB107).

14. On 24 September 2020, Mr Martin, on behalf of the First Defendant, advised that the First Defendant’s barrister, Mr James Emmett SC, had expressed doubt as to whether the Plaintiff could sever unilaterally the joint tenancy over the Parent’s Loan.

15. On 17 December 2020, the plaintiff executed a Deed of Assignment (“the Deed”) (CB109-111). Notice of the Assignment was served on the Second Defendant on 18 December 2020, together with the Deed of Assignment CB112-113).

16. The Plaintiff and First Defendant own their matrimonial home in Dural, NSW (“the Matrimonial home”) as joint tenants. On 23 December 2020, the Plaintiff effectively severed the joint tenancy of the property so that it is now held as tenants in common in equal share.

17. On 2 March 2021, the Plaintiff’s solicitors wrote to the Second Defendant’s solicitors, requesting confirmation of the Second Defendant’s position regarding the severance of the Parent’s Loan (CB114-118). On 10 March, the Second Defendant’s solicitor (who is also the Financial Manager for the First Defendant) refuted the effectiveness of the Assignment and severance (CB119).

18. The Assignment (CB109-111) contains the following key terms:

1. it is expressed to be a Deed, and is executed and witnessed in accordance with s.38 of the Conveyancing Act;

2. recital B outlines that the Plaintiff wishes and intends to assign her interest in the Parent’s Loan as a joint tenant to herself on the terms provided in the Deed;

3. the assignment is for consideration of $100.00 (clause 2);

4. by clause 2(a), under the heading “Assignment”:

The Assignor assigns, transfers and sets over to the Assignee absolutely, and the Assignee accepts the assignment of, all of the Assignor’s legal and equitable rights, title and interest in the Loan, free from all encumbrances, as and from the date of the Deed.

5. by clause 3, under the heading of Assignment:

The Assignor irrevocably severs the joint tenancy in the Loan with and for the intent that hereafter, John Boden McNamee and Margaret McNamee only hold any interest in the Loan as separate and equal tenants in common.

6. by clause 4, under the heading of Assurances:

The Assignors shall, whenever requested by the Assignee, door cause to be done anything reasonably requested to further and more satisfactorily assure the Assignors’ obligations under this deed, or to perfect the assignments referred to in this Deed.

19. The Assignment assigns the Plaintiff’s right in the Parent’s Loan to herself “absolutely” and for consideration. The Deed is executed by the Plaintiff and witnessed by her solicitor. The first question to be determined is whether this was sufficient to sever the joint tenancy to which the Parent’s Loan is held.

Evidence

The Plaintiff’s Evidence

20. The Plaintiff filed two affidavits sworn on 30 March 2021 and 4 May 2021.

21. She also relied upon a series of further affidavits from other individuals. These included the affidavit of Monica Ross-Maranik sworn 19 March 2021 (regarding consent to act as trustee), the affidavit of Ian Robert Street sworn on 19 March 2021 (deposing to the fitness of Ms Ross-Maranik as proposed trustee), affidavit of Joseph Antoun of 7 May 2021 (regarding consent to act as trustee), the affidavit of Justine Taylor of 7 May (deposing to the fitness of Mr Antoun as proposed trustee), and the affidavit of Vivian Evans sworn on 6 May 2021.

22. The Plaintiff also tendered additional documents as evidence of their existence, rather than of any asserted fact therein. These were a Judicial Advice Statement filed by the Second Defendant on 15 October 2020 and the affidavit of Gavin Douglas Hilton sworn on 6 November 2020 (being the accountant of the Second Defendant and who sets out matters concerning the preparation of financial accounts).

The Defendants’ Evidence

23. The Second Defendant has, in effect, put in a submitting appearance. Stephen Edward Martin, solicitor, did not wish to put in submissions (T.3/22-27), although he appeared at the hearing before me.

24. (Stephen Edward Martin, solicitor, filed appearances on behalf of himself as the financial manager for the First Defendant and on behalf of the Second Defendant. No substantive evidence has been filed in response to the Summons. The sole affidavit filed is that of Brendan Miller of 6 May 2021 relating to internal events concerning the Second Defendant.)

25. A number of the children, who are represented by Mr Allsop, solicitor, were made aware of the proceedings and chose not to be heard or joined (Annexure A to the affidavit of Brendan John Miller sworn 11 May 2021; T.10/36-T.11/13).

Legal Principles

26. The four unities of a joint tenancy are time, possession, title and interest (Wright v Gibson (1949) 78 CLR 313 at 323 per Latham CJ; Corin v Patton (1990) 169 CLR 540 (“Corin v Patton”) at 572 per Deane J).

27. The meaning of each of these four unities was explained in Mischel Holdings Pty Ltd (in liq) v Mischel (in his capacity as executor of estate of Mischel) [2013] VSCA 375 at [58]:

Unit of possession occurs where each co-owner is as entitled to the possession of the estate as each of the other co-owners. Unity of title is only achieved where each of the co-owners derives his or her title from the same act or instrument. Unity of time means that the interest of each of the co-owners vested at the same time. Unity of interest means that the interest of each of the co-owners must be identical in extent, interest and duration.

28. A joint tenancy can be severed in one of three ways. First, by unilateral severance of one party, second, by mutual agreement, and lastly, by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common (Corin v Patton at 546-547 per Mason and McHugh JJ citing Williams v Hensman (1861) 1 J&H 546; 70 ER 862 (“William v Hensman”) at 557-558; 867 per Page Wood VC).

29. Each party to a joint tenancy is entitled to the right of unilateral severance and able to exercise this right in their own interest at any time (William v Hensman at 557-558; 867 per Page Wood VC; Wright v Gibson at 349 per Dixon J; Anderson v Anderson (2017) 94 NSWLR 591 at [61] per Leeming JA (Basten JA and Sackville AJA agreeing). Alienation will effectively sever a joint tenancy by extinguishing unity of title (Freed v Taffel (1984) 2 NSWLR 322 (“Freed v Taffel”) at 325 per Helsham CJ in Eq).

30. McCoy v Caelli (as executrix and trustee of the estate of Caelli) (2010) 15 BPR 28,735 (“McCoy v Caelli”) established that execution by a joint tenant of a transfer to themselves does not sever a joint tenancy at law and equity. In this case the plaintiff and her son were joint tenants in land. Prior to his death, the son signed a transfer to himself to sever the joint tenancy, however, died before the transfer was lodged for registration. The transfer was lodged after he had died and subsequently his name listed for the debt was lodged and held.

31. A gift is completed in equity when “the donor has done all that is necessary to place the vesting of the legal title within the control of the donor and beyond the recall or intervention of the donor” (per Deane J in Corin v Patton at 582-3). As White J noted in McCoy v Caelli (at [42]), “Corin v Patton established that a joint tenancy may be severed by way of a completed gift of a joint tenant’s interest to a third party prior to and without registration.” This rule, however, was held not to apply to a transfer to oneself. In McCoy v Caelli, the son’s acts “did not alienate his interest at law or in equity. Those acts may be characterised as a unilateral declaration of intention to sever the jointure, and…that does not effect severance” (per White J at [46]).

Submissions

32. The Plaintiff makes three main submissions. First, that the effect of the Assignment of 17 December 2020 is that the joint tenancy in the Parent’s Loan was ended, thereby validly alienating her interest. Therefore, it was submitted that the Court should make the declaration sought in prayer 3 of the Summons.

33. Secondly, irrespective of whether the Assignment effectively severed the joint tenancy over the Parent’s Loan, for the avoidance of doubt the Court should order the Parent’s Loan be held on statutory trust for partition pursuant to s 66G of the Conveyancing Act as “property (other than chattels)”.

34. Thirdly, and in the alternative to the second submission, the Court should order that the interest in the Parent’s Loan be divided equally pursuant to s 36A of the Conveyancing Act as a “chattel”.

Effect of the Assignment

35. The Plaintiff submitted that because she was both Assignor and Assignee, the Assignment is a unilateral severance of the joint tenancy by alienation to oneself, as allowed by s.24 of the Conveyancing Act (Freed v Taffel (at 324 per Helsham CJ in Eq; Costin v Costin (1994) NSW ConvR 55-715 at 60,101 per Santow J. The plaintiff cited the judgment of Helsham CJ in Eq in Freed v Taffel (at 324) as support of this submission, in which his Honour found that an assignment to oneself could be effective to sever a joint tenancy in the same way conveyance to a third party is capable of doing so. This decision has been cited with approval by the High Court in Corin v Patton (by Mason and McHugh JJ at 547 and Deane J at 584). In McCoy v Caelli at [28], White J also approved of Freed v Taffel, noting that unilateral severance is possible through assignment to oneself provided there is “an actual alienation of the property interest at law or equity”.

36. The Plaintiff submitted that while the Assignment concerned a chose in action rather than real property “[t]he incidents of joint tenancy in personalty and the principles of severance are the same in the case of personalty as they are in the case of realty” (Abela v Public Trustee (1983) 1 NSWLR 308 at 316 per Rath J; see also McNab v Earle (1981) 2 NSWLR 673 at 675-676 per Needham J).

37. The Plaintiff noted that there are some differences between unilateral severances of joint tenancy in real property as compared to personal property. The registration of a transfer to oneself is effective to sever a joint tenancy in respect of Torrens system property (s.97(1) Real Property Act 1900 (NSW) (“Real Property Act”)). In McNab v Earle, Freed v Taffel, and McCoy v Caelli, jointure was not effectively severed because the transfers were not registered. The reasoning for this result in McNab v Earle was that a transfer is not operative prior to its registration and therefore revocable at that time (per Needham J at 677). In Freed v Taffel, Helsham CJ in Eq found that because of the operation of s.41 of the Real Property Act, which denotes that dealings are not effectual until recorded in the Register, the actions of the deceased were insufficient to pass any estate at law (at 325).

38. This is reflected in the reasoning of Professor Edgeworth in Butt’s Land Law (7^th ed, 2017) at [6.620] where it is asserted that in order for an alienation to oneself to be effective, the assignment must be effective at law, as contrasted with transfers to third parties, where the alienation only need be effective at law or in equity. Therefore, where a system of registration exists, registration of the transfer is necessary as it alone conveys legal title.

39. The Plaintiff argued that on one view, by parity of reasoning, it would appear that Professor Edgeworth would find that in respect of choses in action, the item must either be validly assigned at law (if capable, such as a crown debt or bill of exchange) or pursuant so s.12 of the Conveyancing Act (although not applying to part of a debt (Shepherd v FCT (1965) 113 CLR 385)). The Plaintiff, however, submitted that this proposition should be questioned for a number of reasons. First, it does not accord with the statements of White J in McCoy v Caelli at [28] and [45] (“the real question…is whether there was an actual alienation in equity of Mr Caelli’s interest”), and neither is such a principle evident from McNab v Earle or Freed v Taffel.

35. Secondly, the Plaintiff noted that the authority relied on in Butt’s Land Law in support of the proposition is DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 442, 434-463 and 473. That case holds that a person cannot hold property on trust for oneself, which Professor Edgeworth extends to justify the idea that an alienation to oneself in equity is nonsensical. The Plaintiff submitted that this is not, however, how equity binds the conscience of a person. The Assignment is a validly executed deed pool, pursuant to which the Plaintiff had assigned her interest in the Parent’s Loan to herself and renounced her right of survivorship. Therefore it was argued to be an effective alienation in equity as a court of equity would enjoin the Plaintiff from asserting any right of survivorship by reason of the Assignment. The Plaintiff therefore could be said to hold her former right of survivorship on trust for the First Defendant.

36. The Plaintiff also highlighted the decision of Barrett J in Roberts v Wayne Roberts Concrete Constructions Pty Ltd (2004) 208 ALR 532 (“Roberts v Wayne Roberts Concrete Constructions. In that case, the plaintiff and her husband were the only shareholders of the defendant. The plaintiff and her husband had made a loan to the company and the plaintiff was subsequently made bankrupt. Upon discharge of bankruptcy, the plaintiff sought to wind up the company and claim her interest in the loan. Barrett J found that while the plaintiff and her husband were originally joint creditors under the loan upon bankruptcy, their joint tenancy in the loan was severed and they became entitled in equity to the loan as tenants in common in equal shares. His Honour held (at [24]):

At common law, co-obligees are thus treated as having a joint interest in the debt with the incident of survivorship. The joint entitlement is susceptible to severance (at least in equity) by destruction of the unity of title, time and interest, as in a case where one of the co-obligees alienates his or her interest.

42. His Honour also expressed (at [24]) that the above position may only apply in equity, considering the opinion “expressed by Joyce J in Re McKerrell that, apart from the Judicature Act, it is clear that there could not have been a tenancy in common of a legal chose in action.” This, however, was contrasted by the Plaintiff who highlighted recent commentary by Leeming JA in De Lorenzo at [21]-[35], where his Honour stated (at [30]) that he was “persuaded that the proposition that a chose in action cannot be held by tenants in common is not universally true.”

43. Therefore the Plaintiff submitted that the Assignment is capable of constituting an effective alienation at the very least in equity, thereby effecting severance of the joint tenancy. The Assignment (being a deed) was said to be highly different from an unregistered transfer in that it had legal effect upon execution.

Section 66G of the Conveyancing Act

44. The Plaintiff also sought an order that trustees be appointed pursuant to s.66G(1) of the Conveyancing Act to hold, on statutory trust for partition, the Parent’s Loan.

45. Section 66G allows a co-owner of property (other than children) to apply to the Court for an order appointing trustees for partition of that property. The term “co-ownership” for the purposes of s.66G is defined in s.66F(1) to mean: “ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common”.

46. The “property” to which s.66G applies is defined in s.7 of the Conveyancing Act as including “real and personal property, and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest.”

47. The Plaintiffs submitted that because her interest in the Parent’s Loan is “a debt or any thing in action”, it is “property” within the meaning of s.66G.

48. Section 66G allows the Court to make an order for partition or sale of property. The Plaintiff submitted that if one co-owner applies for partition, in the absence of a counterclaim for sale, the sole question for the Court is whether there should be a partition (Segal v Barel (2013) 84 NSWLR 193 at [25] per Barrett JA (McColl JA and Preston CJ of the LEC agreeing)).

49. The Plaintiff noted Black J’s summary of the principles applying to s.66G(1) of the Conveyancing Act in Pascoe v Dyason [2011] NSWSC 1217 at [5] and [8], as approved by Stevenson J in Dixon v Watiwat (2012) 16 BPR 31,251 at [20]. They were stated to be the following:

1. As a general rule, any co-owner holding at least 50% of a parcel of real property is entitled to an order for partition or sale under s.66G (e.g. Callahan v O-Neill [2002] NSWSC 877).

2. It is only in situations where it would be inequitable to permit such an application, including cases where there has been a contract not to make an application, that the order may be refused (e.g. Williams v Legg (1993) 29 NSWLR 687).

3. Although the Court has discretion whether to make an order under s.66G(1) or not, the grounds on which the Court will ordinarily refuse to make them are limited. For example, if it is inconsistent with a proprietary right, or a contractual or fiduciary obligation. There is no general jurisdiction to refuse to grant such an order on the basis of hardship or unfairness (e.g. Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 (“Woodson (Sales) v Woodson (Aust)”)).

4. It is for the Defendant, who denies the Plaintiff’s entitlement to relief, to establish that there is some reason why the Court should decline to appoint statutory trustees (Chalhoub v Chalhoub [2005] NSWSC 572 at [17]-[18] per McLaughlin J).

50. The Plaintiff noted that while most cases under s.66G commonly use the power in respect of the statutory trust for sale over real property, the Plaintiff seeks a statutory trust for partition over the Parent’s loan, being a chose in action. She proposed that this was not an issue as this item meets the definition of “property” in the Conveyancing Act.

51. The Plaintiff submitted that while there appear to be no published decisions regarding statutory trust for partition or sale over a jointly-owned debt, there are cases relating to other choses in action, such as shares or intellectual property, which are sufficiently similar.

52. For instance, in Lewin v Lewin (2019) 19 BPR 29,225 (“Lewin v Lewin”), Darke J considered an application under s.66G for the appointment of trustees for sale in respect of shares in a company title unit. His Honour held the shares fell within the meaning of s.66G and the Plaintiff had made out a case for relief. Darke J held (at [26]) that the definition of “co-ownership” for the purposes of s.66G(1) “requires an entitlement to be in possession of the property” and that in that scenario, where the plaintiff and defendant held the shares as tenants in common in equal shares, “they are entitled to possession of the shares in the sense that they are presently entitled to the rights that are attached to the shares”.

53. Darke J also referred (at [28]) to the decision of Santow J in Woodson (Sales) v Woodson (Aust) in which his Honour (at 14,718) was satisfied that relief pursuant to s.66G could be granted in respect of jointly owned trademarks.

54. The Plaintiff also highlighted the case of Commonwealth Bank of Australia v Macdonald (2000) 10 BPR 18,111 (“Macdonald”), concerning shares in a company that entitled the owners to occupation of certain units over which the company held a lease. In that case, Young J commented (at [26]) that the legislature had used the word “property” in s.66G in a wide sense such that “any right which is capable of being held in co-ownership and capable of being vested in trustees is property within the meaning of s.66G.” The shares and accompany right to occupy a unit were found by Young J to be “property” (see [27]-[28] and [32]), although ultimately his Honour refused to make the order under s.66G, because the defendants held their shares separately, rather than as tenants in common (at [51]).

55. The Plaintiffs therefore argued that although there is no decided case law over the same type of interest in the Parent’s Loan, the definition of “property” for the purposes of s.66G is a wide one and does encompass such interest.

Section 36A of the Conveyancing Act

56. As an alternative to the above, the Plaintiff sought relief pursuant to s.36A of the Conveyancing Act that the Parent’s Loan be divided equally to the effect that they each own 50% of the Parent’s Loan as tenants in common.

57. Section 36A grants the Court power to direct division of chattels and is in the following terms:

Where any chattels belong to persons jointly or in undivided shares, the persons interested to the extent of a moiety or upwards may apply to the court for an order for division of the chattels or any of them, according to a valuation or otherwise, and the court may make such order and give any consequential directions as it thinks fit.

58. The Plaintiff submitted that this alternative only arises if the Court finds that her interest in the Parent’s Loan is better characterised as a “chattel” and therefore excluded from the definition of “property” for the purposes of s.66G.

59. The Plaintiff pointed to tension in authorities as to whether or not the nature of a debt (or chose in action) is properly characterised as a chattel for the purposes of the Conveyancing Act. For instance, in Roberts v Wayne Roberts Concrete Constructions, Barrett J (at [25]) stated in obiter that a chose in action is better approximated as a chattel. This was contrasted with the comments of Darke J in Lewin v Lewin, who noted (at [28]) that there are several cases in which the Court had made orders under s.66G relating to choses in action (including Woodson (Sales) v Woodson (Aust) and Macdonald).

60. This was contrasted again with the decision of Ward CJ in Eq in Neilan v Neilan [2019] NSWSC 66 in which her Honour ordered shares in a corporation be sold pursuant to s.36A of the Conveyancing Act. In that case, the plaintiff and defendant jointly owned shares in a corporation which was the registered proprietor of a unit. Although proceedings had originally been commenced under s.66G, Ward CJ in Eq made the orders under s.36A, noting (at [15]) that the former provision “is not applicable in circumstances where the application relates to shares in the company and not the property”.

61. The Plaintiff submits that while the better view is that s.66G of the Conveyancing Act is the appropriate grounds for relief, the tension in the authorities mentioned led to the proposed alternative ground under s.36A.

62. Further, the principles which apply to an application under s.36A of the Conveyancing Act are applied by analogy to the principles under s.66G (Beale v Trinkler (2007) 13 BPR 25,225 at [14]-[16] per Brereton J). The Plaintiff submits

Consideration

63. In my view although Assignor and Assignee, the Plaintiff’s assignment by a validly executed and delivered deed poll of the chose in action on 17 December 2020, was sufficient to sever the joint tenancy. The result of that assignment was to release and relinquish the right of survivorship previously inuring to her. She could no longer assert her prior right of survivorship.

64. At the very least this would in my view be the effect “in equity” and thus by the execution of the assignment, for consideration she alienated her interest in the chose in action the subject of the joint tenancy.

65. On the above basis alone I would be prepared to make the declaration sought in prayer 3 of the Summons.

66. Because there may be some doubt about the above and in particular the solicitor for the Second Defendant refutes the effectiveness of the Assignment and severance, appropriately the Plaintiff seeks relief pursuant to s.66G of the Conveyancing Act.

67. The effect of the order sought on this ground would be for the appointment of trustees pursuant to s.66G(1) of the Conveyancing Act (irrespective of the relief granted under prayer 3) to hold the Parent’s Loan on statutory trust for partition.

68. The Plaintiff as one of two joint tenants clearly has standing to make application. Here, all that is sought is for the partition of the relevant property. In other words she is a co-owner for the purposes of s.66F(1) Conveyancing Act. In addition, the chose in action falls squarely within the definition of “property” for the purposes of the Act, see s.7. The only question is the appropriateness of such an order.

69. The co-owner is almost as a right entitled to apply for partition. Of course a court may not wish to make an order if it was otherwise for some reason inequitable to do so. For example, if such an order was inconsistent with some contractual right or fiduciary obligation. Hardship or unfairness might also qualify as reasons to refuse the application.

70. This case is somewhat unusual as the common type of case involves real property. Here the property is the Parent’s Loan. That said it is in my view clearly property for the purposes of the Act.

71. There are cases involving other choses in actions, such as shares, and there is in my view no reason to read down given the definition in s.7 of the Act which is very wide incorporating, “…any thing in action, and any other right or interest”. These latter words are a clear reference to any species of chose in action.

72. So far as s.36A of the Conveyancing Act is concerned given my views expressed above it is strictly unnecessary for me to deal with this provision. This is largely if not entirely driven by the very wide definition of “property” in the Act. Further there is a legitimate debate in my view as to whether a chose in action, here a debt, conforms with the notion of chattel for the purposes of s.36A. In any event by reason of the course I have adopted the point in this case is moot.

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Decision last updated: 20 May 2021