Singh v Kaur Bal [No 2]
[2014] WASCA 88
•24 APRIL 2014
SINGH -v- KAUR BAL [No 2] [2014] WASCA 88
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASCA 88 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:147/2011 | 19 FEBRUARY 2014 | |
| Coram: | PULLIN JA NEWNES JA MURPHY JA | 24/04/14 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Cross-appeal allowed in part | ||
| A | |||
| PDF Version |
| Parties: | SARDUL SINGH TEESHALDIP KAUR BAL MAN MAHAN SINGH |
Catchwords: | Joint tenancy Husband and wife Matrimonial property Sale at undervalue Voidable disposition by husband Joint interest in proceeds of sale Extent of prejudice to creditors of husband |
Legislation: | Property Law Act 1969 (WA), s 89 |
Case References: | Abela v Public Trustee [1983] 1 NSWLR 308 Burton v Camden London Borough Council [2002] 2 AC 399 Corin v Patton [1990] HCA 12; (1990) 169 CLR 540 Costin v Costin (1997) 7 BPR 15,167 Cummins (trustees of) v Cummins [2006] HCA 6; (2006) 227 CLR 278 Delehunt v Carmody [1986] HCA 67; (1986) 161 CLR 464 Director of Public Prosecutions for the State of Victoria v Le [2007] HCA 52; (2007) 232 CLR 562 Ex parte Railway Commissioners for NSW (1941) 41 SR (NSW) 92 Fadden v The Deputy Federal Commissioner of Taxation [1943] HCA 20; (1943) 68 CLR 76 Fodare Pty Ltd v Official Trustee in Bankruptcy [2000] FCA 1388 Guthrie v ANZ Bank (1991) 23 NSWLR 672 In Re Allingham [1932] VLR 469 Magill v Magill (1996) 7 BPR 14,996 Minter v Minter [2000] NSWSC 100; (2000) 10 BPR 18,133 Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565 Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635 Perks v Perks [1950] 2 WWR 189 Public Trustee of the ACT v Hall [2003] ACTCA 27 Public Trustee v Grivas [1974] 2 NSWLR 316 Re Commonwealth Bank of Australia [2009] NSWSC 81; (2009) 14 BPR 26,819 Re Francis; Ex parte Official Trustee in Bankruptcy [1988] FCA 198; (1988) 19 FCR 149 Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 Scott v Scott [2009] NSWSC 567 Singh v Kaur Bal [2011] WASC 303 Sistrom v Urh (1992) 40 FCR 550 Sprott v Harper [2000] QCA 391; [2002] ANZ ConvR 54 Williams v Hensman (1861) 1 J&H 546; (1861) 70 ER 862 Wright v Gibbons [1949] HCA 3; (1949) 78 CLR 313 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SINGH -v- KAUR BAL [No 2] [2014] WASCA 88 CORAM : PULLIN JA
- NEWNES JA
MURPHY JA
- Appellant
AND
TEESHALDIP KAUR BAL
First Respondent
MAN MAHAN SINGH
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : BEECH J
Citation : SINGH -v- KAUR BAL [2011] WASC 303
File No : CIV 1009 of 2005
Catchwords:
Joint tenancy - Husband and wife - Matrimonial property - Sale at undervalue - Voidable disposition by husband - Joint interest in proceeds of sale - Extent of prejudice to creditors of husband
Legislation:
Property Law Act 1969 (WA), s 89
Result:
Cross-appeal allowed in part
Category: A
Representation:
Counsel:
Appellant : Mr G J Carter
First Respondent : In person
Second Respondent : In person
Solicitors:
Appellant : Butcher Paull & Calder
First Respondent : In person
Second Respondent : In person
Case(s) referred to in judgment(s):
Abela v Public Trustee [1983] 1 NSWLR 308
Burton v Camden London Borough Council [2002] 2 AC 399
Corin v Patton [1990] HCA 12; (1990) 169 CLR 540
Costin v Costin (1997) 7 BPR 15,167
Cummins (trustees of) v Cummins [2006] HCA 6; (2006) 227 CLR 278
Delehunt v Carmody [1986] HCA 67; (1986) 161 CLR 464
Director of Public Prosecutions for the State of Victoria v Le [2007] HCA 52; (2007) 232 CLR 562
Ex parte Railway Commissioners for NSW (1941) 41 SR (NSW) 92
Fadden v The Deputy Federal Commissioner of Taxation [1943] HCA 20; (1943) 68 CLR 76
Fodare Pty Ltd v Official Trustee in Bankruptcy [2000] FCA 1388
Guthrie v ANZ Bank (1991) 23 NSWLR 672
In Re Allingham [1932] VLR 469
Magill v Magill (1996) 7 BPR 14,996
Minter v Minter [2000] NSWSC 100; (2000) 10 BPR 18,133
Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565
Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538
Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635
Perks v Perks [1950] 2 WWR 189
Public Trustee of the ACT v Hall [2003] ACTCA 27
Public Trustee v Grivas [1974] 2 NSWLR 316
Re Commonwealth Bank of Australia [2009] NSWSC 81; (2009) 14 BPR 26,819
Re Francis; Ex parte Official Trustee in Bankruptcy [1988] FCA 198; (1988) 19 FCR 149
Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91
Scott v Scott [2009] NSWSC 567
Singh v Kaur Bal [2011] WASC 303
Sistrom v Urh (1992) 40 FCR 550
Sprott v Harper [2000] QCA 391; [2002] ANZ ConvR 54
Williams v Hensman (1861) 1 J&H 546; (1861) 70 ER 862
Wright v Gibbons [1949] HCA 3; (1949) 78 CLR 313
1 PULLIN JA: I agree with Murphy JA.
2 NEWNES JA: I agree with Murphy JA.
MURPHY JA:
Introduction
3 This matter involves only a cross-appeal by the first and second respondent, the principal appeal having been discontinued. For convenience, the cross-appeal will be referred to in these reasons as 'the appeal'. Similarly, where the first and second respondents are referred to collectively, they will be referred to as 'the appellants' in that 'appeal'.
4 The appeal concerns a decision by the learned primary judge to the effect that a transfer of property was an alienation voidable under s 89 of the Property Law Act 1969 (WA) (PLA): Singh v Kaur Bal [2011] WASC 303. It involves a dispute between family members. Section 89 of the PLA provides:
89. Voluntary conveyances to defraud creditors voidable
(1) Except as provided in this section, every alienation of property made, whether before or after the coming into operation of this Act, with intent to defraud creditors is voidable, at the instance of any person thereby prejudiced.
(2) This section does not affect the law of bankruptcy for the time being in force.
(3) This section does not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.
5 Section 7 of the PLA provides that 'property' includes 'real and personal property and any estate or interest therein and anything or chose in action'.
6 The proceedings in the court below, involving the claim for relief under s 89 of the PLA, were brought by one Sardul Singh against, relevantly, his brother, his brother's wife and his brother's daughter. Sardul Singh was a judgment creditor of his brother. The relevant background, taken from the findings of the primary judge, is set out below.
7 (All references to paragraph numbers in these reasons are references to paragraph numbers in the primary judge's reasons, unless otherwise indicated).
Background
8 The relevant property had been purchased in Kinross by Man Mahan Singh ('the husband') and his wife, Satwant Kaur ('the wife'), in about 1999. They became registered owners as joint tenants. They acquired the property using mortgage finance from Bankwest. They built their home on the property [9].
9 The husband's brother, Sardul Singh (who I will refer to as 'the claimant') sued the husband pursuant to an assignment of a claim (the details of which are irrelevant) in the District Court. The District Court proceedings were commenced (originally by the assignor) in 2002; the claim the subject of the proceedings was assigned to the claimant in September 2003; and the claimant obtained judgment against the husband in the sum of approximately $173,000 (plus costs and interest) in October 2004. The District Court judgment remained unsatisfied [12] - [17].
10 In July 2003, the husband and the wife transferred the Kinross property to their daughter, Teeshaldip Kaur Bal (the daughter) [19]. The judge defined this event as 'the Kinross Transfer'.
11 In July 2003, the Kinross property was worth $250,000. The daughter paid the sum of $200,000 to acquire the property [41].
12 The daughter borrowed the sum of $200,000 from ANZ Bank [41].
13 Out of the payment of $200,000, $82,000 went to discharge the mortgage debt owed by the husband and wife to Bankwest, and the balance was paid into a joint account held by the husband and the wife with Bankwest [41], [59].
14 The transfer to the daughter for the payment of $200,000 arose in circumstances where:
(a) at least in her dealings with ANZ, the daughter treated the purchase price for the property as $250,000 [51(a)];
(b) ANZ Bank lent $200,000 to the daughter to fund the acquisition of the Kinross property [51(b)];
(c) the daughter and the wife had agreed that the wife would treat $50,000 as a gift by the wife to the daughter out of what was described as the wife's half-share of the proceeds [51(c)];
(d) the husband was not a party to the agreement in (c) above, but the agreement was 'reported to him' [52];
(e) the daughter, the husband and the wife agreed that the daughter would pay the husband and the wife the sum of $200,000, and not $250,000, in return for the Kinross property [51(d)];
(f) the transfer instrument stated that the consideration for the purchase was $200,000 [53].
15 There was no agreement between the husband and the wife that each would be entitled to half of the proceeds of sale of the Kinross property [58].
16 The application of the purchase moneys to discharge the joint mortgage debt and the payment of the balance into the joint account, did not evince a common intention which was inconsistent with the continuation of the joint tenancy [59].
17 In July 2003, the assets of the husband were or may have been insufficient to meet his debts, including the contingent debt to the prospective judgment creditor in the District Court action [62].
18 The above primary findings of fact are not disputed in this appeal, although, as I will later discuss, the true import of the findings is the subject of some debate.
19 Prior to the transfer of the Kinross property, the husband was jointly entitled, with the wife, to the Kinross property worth $250,000. After the transfer, he was jointly entitled to the proceeds of sale in the sum of $200,000 [61]. The effect of the Kinross transfer was to reduce the pool of the husband's assets available to meet his debts by $50,000 [61] - [63], and to prejudice the husband's creditors to the extent of $50,000 [64], [85].
20 These findings were made in the context that in the court below, the husband, the wife and the daughter:
(a) conceded that in alienating his interest in the Kinross Property, the husband had an intent to defraud his creditors within the meaning of s 89 of the PLA;
(b) stated that the daughter did not rely on s 89(3);
(c) said that the daughter did not rely on her registered title to the Kinross Property as a defence to the claim;
(d) stated that, consequently, the only issue regarding liability for the s 89 claim about the Kinross Transfer was whether the claimant was prejudiced by the alienation [27].
The judge's statement of the question for resolution and the judge's final orders
21 The question for resolution stated by the judge was whether the claimant was prejudiced by the alienation of the husband's interest in the Kinross property [28], [40]. The judge approached the resolution of that question on the basis of whether the alienation reduced the husband's pool of assets available to meet the demands of his creditors, including the claimant [62]. There is no challenge in this appeal to that general approach. The judge said, again without objection in this appeal, that the claimant's claim did not involve any issue as to whether any subsequent application of the sale proceeds from the joint account, following settlement, involved any prejudice to creditors or was voidable under s 89 [47], [61], [62]. The judge assessed the extent to which the husband's creditors were prejudiced by reference to the extent to which the sale was at an undervalue, ie, in this case $50,000. His Honour, at [48] and [64], applied the observations and reasoning of Hamilton J in Huynh v Helleh Holdings Pty Ltd [2001] NSWSC 1162 [34] - [37].
22 His Honour said that interest on the sum of $50,000 since July 2003 was $25,000, giving a total figure $75,000 [88].
23 His Honour ordered that:
1. The transfer of the [husband's] interest in [the Kinross property] … was an alienation of property by the [husband] with intent to defraud his creditors and is voidable at the suit of the [claimant] under s 89 of the Property Law Act 1969.
2. The [daughter] pay the sum of $75,000 to the Official Trustee as trustee in his capacity as trustee of the bankrupt estate of the [husband] and that [the daughter's] interest in the Kinross property be charged to secure payment of that sum.
The grounds of appeal and the appellants' case
24 The 'appellants' in this 'appeal' (ie the respondents in the cross-appeal - see [3] above), are the husband and the daughter. The 'respondent' (ie, the party who is the appellant in the principal appeal) is the claimant.
25 The appellants were self-represented, although they were assisted by a 'McKenzie friend'. The court was informed that the McKenzie friend was a member of the family who had a Masters Degree in law from an Australian university, who was a member of the Malaysian bar, who had lectured in law at an Australian university and who had done the legal research for the appellants in this appeal (ts 38).
26 The appellants' case as filed comprises four grounds of appeal, each with various 'particulars', prefaced by a 'summary' of the appeal, together with the appellants' lengthy submissions which conclude with a 'summary of submissions'. With respect, the appellants' case in these documents was not particularly easy to follow. The four grounds of appeal were in the following terms:
1) That His Honour erred in law and equity in mistakenly finding at [54] - [60] that there had to be a mutual severance of the joint tenancy between the [husband] and [wife] to establish their equitable half interests in the Kinross Property or the proceeds of sale of that property.
2) That His Honour erred in equity in finding at [58] that in effect the evidence of the [husband] and [wife] 'involved an assumption or assertion that each was entitled to a half share of the proceeds' when His Honour ought to have rightly ruled that although the [husband] and [wife] held the title of the Kinross Property as joint tenants in law, they nevertheless were, in the absence of evidence to the contrary, tenants-in-common in equity of the said property and therefore the [husband] and [wife] were right to assume and assert that they had 50% interest in the Kinross Property or $125,000 of the sale price of $250,000 (before repayment of their respective half-share of the joint mortgage on the property).
3) That even if the [husband] and [wife] had to prove severance of their joint tenancy, His Honour erred in mixed law, equity and fact in finding at [55] that a 'sale by joint tenants of property does not, of itself, sever the joint tenancy' and at [58], that there had to be 'evidence of an agreement to that effect' before severance of the joint tenancy of the Kinross Property could be established, when these findings are not supported by decided authorities.
4) His honour erred in mixed law, equity and fact in failing to recognise that the [wife] had an aliquot share in the Kinross Property when he held:
(i) At [61] that 'the effect of the Kinross Transfer was to reduce [the husband's] assets';
(ii) At [63] that it thereby 'prejudiced [the husband's] creditors by reducing the pool of his assets available to meet his debts'; and,
(iii) At [65] that 'the elements of [the claimant's] claim under s 89 of the Property Law Act have been made out'.
(1) in the absence of evidence to the contrary, joint tenants at law are taken to be tenants in common in equity;
(2) the judge erroneously thought that a joint tenancy could only be severed by agreement, and he failed to appreciate that joint tenants could individually and unilaterally deal with their respective shares in the property so as to create a tenancy in common in equity;
(3) the judge found, in effect, that the wife individually and unilaterally disposed of her potential aliquot share in the Kinross property in equity by entering into an agreement, separate from the husband, to sell her share to the daughter for $125,000, and then voluntarily releasing $50,000 of such purchase price, with the voluntary release becoming effective upon settlement or at some unspecified time prior to settlement;
(4) alternatively to (3), the judge found, in effect, that the husband and wife agreed to sell the property to the daughter for $250,000 and the wife thereafter severed her interest in the right to receive the sale proceeds of $250,000 and thereby obtained a beneficial interest in the sum of $125,000, out of which she gifted $50,000 to the daughter, leaving $75,000 for herself; and
(5) accordingly in equity, under (3) or (4) above, the husband had a beneficial entitlement to $125,000 from the sale of the property and his creditors were not prejudiced.
28 There was also an application made toward the end of the hearing of the appeal to amend the appellant's case by adding a new ground 5. It is convenient to deal with that matter separately, later in these reasons, as it proceeds on an entirely different basis from grounds 1 to 4. Proposed ground 5, in effect, assumes the correctness of the judge's findings with respect to joint tenancy, but contends that the final orders made by his Honour were erroneous based on those findings.
Legal principles - Grounds 1 to 4
29 I have read all the authorities referred to by the parties. Rather than attempt to address each legal proposition in the manner and order in which it was raised, it is convenient to set out more generally my understanding of the relevant principles.
30 Relevantly, co-ownership of property consists of tenancy in common and joint tenancy. In each case there is a 'unity in possession' in that each co-owner has the right to occupy the whole of the property in common with the others: Butt P, Land Law (6th ed, 2010) [1408]; Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635, 643 - 644.
31 A tenant in common has a distinct share in the property, albeit that it is an 'undivided' share, that is, one which has not been divided amongst the co-tenants: Nullagine (643). In other words, each has an existing 'aliquot' portion of all the rights that together make up the ownership of the whole, and seisin is 'distributed' amongst all the co-owners: Nullagine (644), Butt [1402].
32 For example, in the case of two tenants in common, each is seised of and holds, on his or her own behalf, an estate in fee simple in one half share of the parcel of land. Accordingly, neither of two tenants in common can sell the entirety of the property, although each can sell his or her own separate share either to a third party or to his or her co-owner: Nullagine (643 - 644); Burton v Camden London Borough Council [2002] 2 AC 399, 408. If the tenants in common do concur in a sale to a third party, each must convey his or her own share to the purchaser, who purchases a single estate in fee simple in the whole of the land: Nullagine (644).
33 Unlike tenancy in common, where seisin is 'distributed' amongst the co-owners, in the case of joint tenancy there is no 'distribution' of seisin, as each joint tenant, along with each other joint tenant, is fully seised of the whole estate or interest in land; Butt [1402] - [1404]; Hargreaves & Helmore, An Introduction to the Principles of Land Law (New South Wales) (1972) (86 - 87).
34 Accordingly, any joint tenant who wishes to 'transfer' his or her 'interest' to another joint tenant has, strictly speaking, nothing to convey to the other joint tenant, because the other is already seised of the whole and every part of it, and at common law the appropriate way to effect such a result was by way of 'release': Wright v Gibbons [1949] HCA 3; (1949) 78 CLR 313, 323 - 324, 331; Butt [1404].
35 Similarly, when one joint tenant dies, the whole of the land remains with the surviving joint tenants (or surviving joint tenant if there is only one other joint tenant) as the joint tenants have always been seised of the whole and the totality of their seisin cannot be affected by the death of one of their number: Butt[1410]; Hargreaves & Helmore (87). This right of survivorship or 'jus accrescendi' is a fundamental feature of a joint tenancy.
36 When all the joint tenants combine to sell the estate of which they are joint holders, the purchaser acquires the whole of that estate. In that circumstance, the sale itself, does not, unless something more appears, sever the joint tenancy, and the joint tenants, in effect, convert their joint tenancy of real property (the land) into a joint tenancy of personal property (the proceeds of sale): InRe Allingham [1932] VLR 469, 472; Public Trustee v Grivas [1974] 2 NSWLR 316, 320; Abela v Public Trustee [1983] 1 NSWLR 308, 314; Scott v Scott [2009] NSWSC 567 [59] - [60]. See also Ex parte Railway Commissioners for NSW (1941) 41 SR (NSW) 92, 95; Re Commonwealth Bank of Australia [2009] NSWSC 81; (2009) 14 BPR 26,819 [13] - [15].
37 On the other hand, joint tenants are not confined to joint alienation. Despite the joint nature of their interest, a joint tenant may severally alienate his or her 'interest', with the result that the joint tenancy is severed as between the alienor and the other joint tenants, and a new relationship of tenancy in common arises. Professor Butt explained the point thus:
We have seen that a joint tenant cannot defeat the operation of survivorship by purporting to leave his or her 'interest' by will. Nevertheless, during his or her lifetime, a joint tenant can defeat the operation of survivorship by converting the interest held as joint tenant into one held as tenant in common. By this process, the joint tenancy is 'severed' as regards that interest. The right to sever is inherent in a joint tenancy. It is recognised at common law and in equity, and is endorsed by statute. Severability is the 'escape hatch' available to each joint tenant. The other joint tenant(s) cannot prevent a severance, unless they can invoke a contractual or equitable limitation.
Strictly speaking, joint tenants do not have proportionate shares in the land. It might therefore be asked how a joint tenant can convert his or her 'interest' into a proportionate share held as tenant in common. But for the purpose of severance this logical conundrum is ignored, and a joint tenant is regarded as having a potential share in the land commensurate with that of the other joint tenants. Where there are two joint tenants, that potential share is one-half; where there are three joint tenants, it is one-third; and so on. This potential share the joint tenant can deal with unilaterally during his or her lifetime. By so dealing with it, that share may be 'severed' from the other shares and converted into an 'aliquot' undivided share held in common, not jointly. In the result, the (former) joint tenant's risk of loss through failure to survive the other joint tenants is avoided - but so too, of course, is the prospect of gain through surviving the other joint tenants [1458]. (emphasis added)
38 The passage emphasised above was referred to with approval by the High Court in Cummins (trustees of) v Cummins [2006] HCA 6; (2006) 227 CLR 278 [56].
39 Such a transfer by one joint tenant would not make the transferee a joint tenant with the remaining joint tenants because there would no longer be any unity of title, or time, as between the original joint tenants and the transferee: Wright v Gibbons (323).
40 Alienation by a joint tenant of his or her interest in the property is, accordingly, under the general law, effective to sever the joint tenancy, without the need for consent or even knowledge of the other joint tenants: Corin v Patton [1990] HCA 12; (1990) 169 CLR 540, 546 - 548; Public Trustee of the ACT v Hall [2003] ACTCA 27 [51]; Perks v Perks [1950] 2 WWR 189 [9]. Alienation will be effective in equity by an agreement for valuable consideration to alienate: Wright v Gibbon (327). Alienation will also be effective in equity by gift if the gift is 'complete': see Corin v Patton (558), (563 - 570), (582 - 583); Costin v Costin (1997) 7 BPR 15,167; Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 8 BPR 15,565, 15,572.
41 However, a mere declaration of intent, or a desire on the part of one joint tenant to no longer hold in jointure, even where communicated to the other joint tenants, does not itself effect a severance: Corin v Patton (548), (565 - 566), (584), (591); Magill v Magill (1996) 7 BPR 14,996; Minter v Minter [2000] NSWSC 100; (2000) 10 BPR 18,133 [61].
42 Generally speaking, a joint tenancy may be severed in three ways. The first is by an act on the part of one of the joint tenants operating upon his or her own share so as to create a severance of that share, such as alienating his or her own interest. The second is by way of mutual agreement, and the third is by any course of dealing sufficient to indicate that the interests of all were mutually treated as constituting a tenancy in common: Williams v Hensman (1861) 1 J&H 546; (1861) 70 ER 862; Corin v Patton (546 - 547); Sprott v Harper [2000] QCA 391; [2002] ANZ ConvR 54 [7].
43 Severance of a joint tenancy may also arise by involuntary alienation of the 'interest' of one joint tenant. Thus, bankruptcy severs a joint tenancy in equity so that thereafter the co-owners become, in equity, tenants in common: Re Francis; Ex parte Official Trustee in Bankruptcy [1988] FCA 198; (1988) 19 FCR 149, 153 - 154; Cummins v Cummins [14]. The severance by bankruptcy of Torrens title land is not operative at law until the trustee in bankruptcy registers his or her interest: Sistrom v Urh (1992) 40 FCR 550, 556. After severance by bankruptcy and until the trustee's interest is registered, the joint tenants on the title (joint tenants at law) hold the land as trustee for the trustee in bankruptcy and the other co-owner as tenants in common in equal shares. If the bankrupt joint tenant then predeceases the other joint tenant and the other joint tenant, the survivor, becomes the sole registered proprietor, the registration merely vests the legal estate in the survivor, but the trust continues and the survivor holds the estate on trust for the trustee in bankruptcy, and himself, as tenants in common in equal shares: Sistrom v Urh (557 - 558).
44 Where parties hold as joint tenants at law, and there is nothing in equity (including through the operation of any relevant presumption) to regard their interests as tenants in common, the equitable title follows the legal title and is 'at home' with the legal title: see Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 547 - 548; Delehunt v Carmody [1986] HCA 67; (1986) 161 CLR 464, 471 - 473.
Disposition - Grounds 1 to 4
45 Having set out the relevant principles, I will address each of the five propositions referred to in [27] above which appear to be central to grounds 1 to 4 of the appeal.
46 The first contention is incorrect. Absent anything which points to a tenancy in common, equity will follow the law and the equitable title will be 'at home' with the legal title.
47 I would reject the second proposition. In the passages of the judgment complained of, the judge was dealing with a submission by the claimant that the joint tenancy had been severed by agreement [56]. Moreover, the judge expressly recognised that a joint tenancy can be severed in ways other than by agreement [59].
48 The third and fourth contentions raised, primarily, an issue as to the proper construction of the judge's reasons.
49 In relation to the third contention, I am unable to accept that the judge found that the wife individually disposed of her share in the Kinross property by separately agreeing to sell her aliquot share to the daughter for the consideration of $125,000. There is no basis on the judge's findings to conclude that the wife and the daughter entered into a separate agreement whereby the wife agreed to sell her share in the Kinross property for $125,000.
50 As to the fourth contention, the appellants contended in substance (as I understood it), that the judge had expressly recognised at [42(a)] that their case (presumably alternatively to the third contention) involved the fundamental proposition that the husband, the wife and the daughter had agreed at the outset that the daughter would buy, and the husband and the wife would sell, the Kinross property for $250,000. The appellants contended that the judge made a finding of fact to that effect at [51] - [52]. They further contended, in effect, that his Honour then made the following additional findings of primary fact in connection with that sale agreement entered into between the three parties for $250,000:
(a) the wife and the daughter then agreed that the wife would accept $50,000 less from the daughter, with such sum to be deducted from the wife's half-share of the sale price of $250,000;
(b) the agreement between the wife and the daughter was communicated to the husband prior to settlement of the sale agreement for $250,000; and
(c) the wife also wrote to the daughter's bank, the ANZ, and informed the bank that she was, in effect, gifting $50,000 to the daughter from her share of the proceeds of sale of $250,000.
51 The appellants next contend, as best I understood it, that in light of the above findings of primary fact, the judge should have found that:
(a) in writing to the ANZ Bank in the terms that she did, the wife thereby unilaterally effected a severance of the joint tenancy in that she thereby 'gifted' $50,000 to the daughter, which gift was 'perfected' at settlement;
(b) alternatively to (a), by the husband participating in the settlement involving the payment of $200,000 in the knowledge that the wife had agreed to gift the daughter $50,000 from her half-share of the total consideration of $250,000, the husband and the wife thereby impliedly agreed to sever the joint tenancy;
(c) by either (a) or (b), a tenancy in common in equity was created with respect to the sale proceeds, of $125,000 each.
52 The claimant disputes the appellants' construction of the judge's reasons. The claimant says that the judge's reasons at [51] - [52] do not, properly construed, constitute findings to the effect that there was an agreement between the husband, the wife and the daughter for the sale of the land in the sum of $250,000. Accordingly, the claimant contends that there was no basis for his Honour to find in relation to any such sale, that the husband and the wife subsequently, impliedly, agreed to divide the proceeds of sale of $250,000 between them. The claimant also points to the judge's express finding at [58] to the effect that there was no agreement (express or implied) whereby the husband and the wife agreed that as between them, each would be entitled to half of the proceeds of the sale of the Kinross property. He also contends that the wife's communication with the ANZ Bank was not in itself capable of constituting a 'gift' to the daughter which was 'perfected' at settlement.
53 I would accept the claimant's submissions in this regard. As I understand his Honour's reasons, and in particular the matters which I have summarised at [14] - [16] above, his Honour found as follows.
54 Initially, the desire was to sell the Kinross property for $250,000 but the daughter could not raise more than $200,000. At that point, when a sale was still contemplated, but not agreed, the wife indicated that she was prepared to 'gift' the daughter $50,000 from her share of the proceeds of any sale of the property for $250,000. That was reported to the husband, but at that time it was merely a declaration of an intention to make a future gift to the daughter out of a then possible sale of the property for $250,000.
55 Despite the originally contemplated sale for $250,000 and the related intended gift, the husband, the wife and the daughter in fact agreed that the daughter would purchase from the husband and the wife their interest in the Kinross property in exchange, only, for the payment of $200,000. The husband and the wife executed a transfer instrument showing the consideration for the purchase price as $200,000. At settlement, the daughter paid the purchase price of $200,000, and the husband and the wife directed that $82,000 be paid to discharge their joint debt to Bankwest, and the remaining $118,000 be paid into their joint account. When his Honour found that the husband and the wife were 'jointly entitled to the proceeds of sale of the Kinross property' [60], I understand his Honour to be finding that the Kinross property was sold by the husband and the wife for a consideration of $200,000 and that it was that sum in respect of which they had a joint entitlement.
56 The wife's intended gift was dependent upon there being a severance of the joint interest in the Kinross property by a separate sale of her interest for $125,000, or, if there was a sale for $250,000 of the joint interests, by a subsequent severance of the joint right to receive the sale proceeds of $250,000. On the judge's primary findings of fact, no severance of either kind occurred, and the intended gift did not materialise as it was overtaken by subsequent events.
57 Accordingly, I would reject the third and fourth contentions.
58 The fifth contention is reliant on the success of the third or fourth contentions, which I have rejected.
Proposed ground 5
59 The appellants applied to amend their grounds of appeal to include a fifth ground of appeal to the following effect:
Alternatively, that his Honour erred in fact and in law and equity in not finding that the $50,000 reduced the joint fund of the second and fourth defendants to the extent of $25,000 each.
60 In that proposed amended ground, the reference to 'the $50,000' is a reference to the $50,000 under-sale found by his Honour, and the reference to the 'second and fourth defendants' is a reference to the husband and the wife respectively.
61 By the proposed amendment, the appellants contend that if there was a joint tenancy in the sale proceeds of $200,000, as his Honour found, the value or quantum of the husband's aliquot share was $100,000, compared with the value or quantum of the husband's aliquot share in the Kinross property prior to sale of $125,000. Accordingly it is contended that on his Honour's findings, any prejudice to the husband's creditors from the voidable disposition was $25,000. The appellants contend that they should be granted leave to amend on the basis that the point was argued below (eg ts 540); the point raised a question of legal characterisation based on the judge's findings of fact, and that no further evidence was required or might be relevant; that, as litigants in person, they would be prejudiced if leave were not granted; and that in all the circumstances it would be in the interests of justice to grant leave.
62 The claimant resisted the application for leave. The claimant submitted that it is not in the interests of justice to grant leave in this instance because it is exceedingly rare for a party to be given an opportunity to seek leave to add a ground of appeal during the hearing of an appeal; a precedent of this kind would undermine the efficacy of hearings, and the rules of court and the interlocutory processes of a court which seek to ensure that litigants are well-apprised of grounds well before a hearing; and that such a 'precedent' would undermine the principle of finality of litigation. The claimant also alleged that whilst purporting to deal with a matter raised in an exchange between the bench and the parties at the hearing of the appeal, viz the basis upon which his Honour found that the whole of the undervalue constituted prejudice to the husband's creditors, proposed ground 5 does not squarely raise that point. The claimant did not dispute that the point had been raised below, nor did he contend that the point could not be decided on the trial judge's findings of primary fact.
63 This is one of those exceptional cases where it would be in the interests of justice to grant leave (cf Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 [53]). The point was raised below, and it does squarely reflect a matter raised during the hearing of the appeal. It can be decided on the judge's primary findings of fact without prejudice to the claimant. The claimant has had the opportunity to make written submissions on the merits of the proposed ground and, in all the circumstances of this case, it would be in the interests of justice to grant leave.
64 As to the merits of ground 5, in finding that the relevant prejudice was co-extensive with the full amount of the undersale, his Honour relied on the decision of Hamilton J in Huynh v Helleh Holdings Pty Ltd [37]. In that case, the alienor was a single entity, a company, which had transferred the land for an undervalue of $140,000. Hamilton J held, in effect, that it was the extent of that undersale which reflected the prejudice to the company's creditors. However, as the alienor in that case was a single entity, it was appropriate to take the full extent of undersale as a measure of the prejudice. That case did not involve a consideration of the position where there was a voidable alienation by a joint tenant.
65 In this case, prior to the alienation, the wife and the husband held their matrimonial property in Kinross as joint tenants. The total value of their home was $250,000. There was no reason to suppose that the value or quantum of the beneficial interest of each joint tenant in their property was other than 50%, ie, $125,000: Cummins v Cummins [56] and [71] - [72]. See also Fadden v The Deputy Federal Commissioner of Taxation [1943] HCA 20; (1943) 68 CLR 76, 84; Fodare Pty Ltd v Official Trustee in Bankruptcy [2000] FCA 1388 [21]. Similarly, there is no reason, on the judge's findings of fact, to suppose that the quantum of the joint interest that each had in the settlement proceeds of $200,000 was other than 50%, ie, $100,000.
66 As noted earlier, any order for bankruptcy would have severed the joint tenancy with the result that creditors of the husband would only have had recourse to the value of the husband's 50% share of the property. Also in Wright v Gibbons, Dixon J said:
Execution on a judgment for debt against one joint tenant bound his aliquot share and continued to do so in the hands of the survivor if the execution debtor afterwards died (331).
67 To similar effect are the observations of Kirby and Crennan JJ in Director of Public Prosecutions for the State of Victoria v Le [2007] HCA 52; (2007) 232 CLR 562 [100]. With reference to Dixon J's observations in Wright v Gibbons, Meagher JA in Guthrie v ANZ Bank (1991) 23 NSWLR 672 said:
A judgment creditor, or a secured creditor of one joint tenant may execute against that joint tenant's aliquot share … and when that happens a severance of the jointure must be effected (680).
68 In my respectful view, the judge erred in finding, in effect, that the husband's assets against which his creditors could have executed following the sale of the Kinross property, had been reduced by the sum of $50,000 [88]. In my opinion, the quantum of the relevant diminution was $25,000.
69 Accordingly, I would uphold ground 5.
Other matters
70 Two other matters should be mentioned. One is that the claimant sought leave to file and serve a supplementary green book, to which there was no objection by the appellants. Leave should be granted in that regard, although in the end nothing turns on that material. Secondly, the Trustee in Bankruptcy, who had been appointed to the husband's estate (in the period, apparently, February 2006 - February 2009) and in whose favour the primary judge's orders were made, was apprised of, but did not participate in, this appeal.
Conclusion
71 The application for leave to amend should be granted and the cross-appeal should be upheld with respect to ground 5 only. The parties, and the trustee if he wishes, should be heard on the question of appropriate orders.
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