Hall v Public Trustee for the ACT [2003] ACTSC 35 (16 May 2003)

Last Updated: 20 May 2003

COLIN GEOFFREY HALL v PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY AS ADMINISTRATOR WITH THE WILL ANNEXED OF THE ESTATE OF THE LATE CHRISTINE MARY HALL and ST GEORGE BANK LIMITED (ABN 92 055 513 070) and THE AUSTRALIAN CAPITAL TERRITORY [2003] ACTSC 35 (16 May 2003)

REAL PROPERTY - joint tenancy - severance - registration of transfer by one joint tenant to herself as tenant in common - Certificate of Title produced by mortgagee without the knowledge or consent of other joint tenant - transfer registered - whether notice required to sever joint tenancy in equity - whether production of Certificate of Title by mortgagee involved breach of trust owed to other joint tenant - whether breach of trust procured by party seeking severance sufficient to give rise to personal equity - whether plaintiff entitled to maintain equitable interest in balance of proceeds of the sale by reason of survivorship.

Family Law Act 1975, s 79(8)

Real Property Act 1900 (NSW)

Williams v Hensman (1861) 1 John and H 546; 70 ER 862

Hulme v Schaecken (unreported) NSWSC 1291 (17 December 1999)

Burgess v Rawnsley [1975] Ch 429

Corin v Patton [1990] HCA 12; (1990) 169 CLR 540

Thames Guaranty Ltd v Campbell & Ors [1985] QB 210

Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32

No SC 564 of 2002

Judge: Crispin J

Supreme Court of the ACT

Date: 16 May 2003

IN THE SUPREME COURT OF THE )

) No. SC 564 of 2002

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: COLIN GEOFFREY HALL

Plaintiff

AND: PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY AS ADMINISTRATOR WITH THE WILL ANNEXED OF THE ESTATE OF THE LATE CHRISTINE MARY HALL

First defendant

AND: ST GEORGE BANK LIMITED

(ABN 92 055 513 070)

Second defendant

AND: THE AUSTRALIAN CAPITAL TERRITORY

Third defendant

ORDER

Judge: Crispin J

Date: 16 May 2003

Place: Canberra

THE COURT ORDERS THAT:

1. the parties have leave to bring in short minutes giving effect to the findings contained in the reasons for judgment.

1. The present case involves a dispute as to whether a joint tenancy in residential property at 2 Cleary Place, Gilmore in the ACT was validly severed by action which was taken by the late Christine Mary Hall (the deceased) shortly before her death.

2. The plaintiff and the deceased were married on 30 June 1979. They purchased the property on 18 October 1985 and subsequently constructed a house on it. On 2 March 1994 they mortgaged the property to the second defendant which thereupon assumed custody of the title deeds.

3. The deceased and the plaintiff separated on or about 14 August 1997.

4. Sadly, the deceased was diagnosed with cancer in about September 2001 and died on 15 February 2002.

5. The plaintiff had been unaware that her illness was likely to prove fatal until after her death.

6. On 9 January 2002 the Family Court of Australia issued a decree nisi for the dissolution of the marriage.

7. On 6 February 2002 a number of events occurred. The deceased made her last will leaving the whole of her estate to her brother and sister. She signed a transfer of her interest in the property from herself as joint tenant to herself as "tenants in common in equal shares" (sic). The ACT Revenue Office assessed the duty payable on the transfer and this was promptly paid. The deceased's solicitors, Ann Maree Proctor & Associates, requested the second defendant to produce the Title Deed to the Registrar General. The second defendant complied with this request and the transfer was registered.

8. The plaintiff was not informed that such a transfer was contemplated and did not authorise the second defendant to produce the Certificate of Title to the third defendant for the purpose of registering such a transfer.

9. The deceased's solicitors advised the plaintiff of the transfer by letter dated 8 February 2002, adding that he and the deceased "now hold your interest in the property as tenants in common in equal shares".

10. It appears that the plaintiff had paid the bulk of the mortgage payments and that if he had been aware of the proposed transfer he would have opposed it or sought orders in the Family Court of Australia for a more substantial interest in the property. It should be noted that s 79(8) of the Family Law Act 1975 provides that proceedings with respect to the property of parties to the marriage may be continued against the legal personal representative of a party should he or she die prior to their completion.

11. As the early case of Williams v Hensman (1861) 1 John and H 546; 70 ER 862 establishes, a joint tenancy may be severed in three ways: unilaterally; by mutual agreement; or by a course of dealing sufficient to make it clear that the interest of all parties were mutually treated as constituting a tenancy in common. See also Hulme v Schaecken (unreported) NSWSC 1291 (17 December 1999) per Austin J. In Burgess v Rawnsley [1975] Ch 429 at 439 Lord Denning MR expressed the opinion that a unilateral severance could be effected by one party making it clear to the other that he or she desired that their shares be no longer be held jointly but in common. However, this proposition was rejected by the High Court of Australia in Corin v Patton [1990] HCA 12; (1990) 169 CLR 540. In that case Mason and McHugh JJ said, at 548, that unilateral action could destroy the unity of title only if the title of the party seeking unilateral severance were transferred or otherwise dealt with or affected in a way which resulted in a change in the legal and equitable estate in the property. A statement of intention, without more, is insufficient. See also the judgments of Brennan J at 565, Deane J at 574 and Toohey J at 587.

12. In the present case, of course, the transfer was registered. Mr Constance, who appeared for the first defendant, submitted that, as a consequence, severance of both the legal and equitable interests had been validly effected and that the absence of any prior notice to the plaintiff was legally irrelevant.

13. Mr Meagher, who appeared on behalf of the plaintiff, conceded that the legal estate had been effectively severed upon registration of the transfer but maintained that the plaintiff retained a co-extensive equitable interest in the property. He argued that, in equity at least, one person could not effectively diminish or change the property interests of another without that other person's knowledge. Whilst holding that notice was not sufficient, the High Court in Corin v Paton did not address the issue of whether it was required and neither counsel were able to direct me to any authority directly on this point. Having considered the competing submissions, I am inclined to accept Mr Meagher's contention that an equitable interest would arise, if only because the covert nature of the transaction would almost inevitably involve a breach of an obligation of fiduciary obligation.

14. In the present case, Mr Meagher pointed out that in instructing her solicitors to request the second defendant to release the Title Deed to the Registrar General, the deceased had acted in a manner calculated to procure a breach of trust. As Mann J observed in Thames Guaranty Ltd v Campbell & Ors [1985] QB 210 at 211, joint owners of a legal estate are jointly entitled to custody of title deeds relating to that estate and the trustees can only act with unanimity. Hence, one party is not entitled to part with the Certificate of Title without the consent of the other. Furthermore, in Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 the New South Wales Court of Appeal held that the registration of an instrument under the Real Property Act 1900 (NSW) could be set aside when there was a personal equity enforceable under the general law. In that case, such an enforceable personal equity was held to have arisen when a mortgagee had produced a Certificate of Title without the authority of a registered proprietor and in breach of its obligations in relation to its possession and custody. As Mahoney J observed, at 49, the company entrusted with the Certificate of Title had held it for the purposes only of the mortgage and subject to the obligation not to permit it to be used for any other purpose.

15. In the present case the second defendant acknowledged that it produced a Certificate of Title without reference to the plaintiff. Its solicitor sought to justify this conduct, asserting that the change in joint ownership "does not effect the obligations of the mortgagors to the bank and thus there was no reason to seek (the plaintiff's) consent to the production of the Certificate of Title". The solicitor added "we can see no obligation on a mortgagee to advise the co-owner of those actions". I am unable to agree that a financial institution which holds a certificate of title as security may ignore their fiduciary obligations on the basis suggested. It was, in my opinion, a breach of the trust which the second defendant owed to the plaintiff for it to have produced the Certificate of Title without his knowledge or consent.

16. That breach was procured by the deceased in breach of her own duty to the plaintiff. Furthermore, it was procured for the purpose of using the certificate of title to effect a transaction that would be of benefit to her estate and of corresponding detriment to his interests. In these circumstances, I accept Mr Meagher's submission that a personal equity arose in favour of the plaintiff sufficient to impugn the disputed transaction in equity even if effective at law.

17. It is entirely understandable that a dying woman should have wished to ensure that her brother and sister had the benefit of her interest in her home and equally understandable that she may have wished to avoid becoming involved in litigation during the last days of her life. However, retrospective sympathy for her plight can offer no answer to the plaintiff's claim to enforce an equitable entitlement arising from the circumstances which I have described.

18. In the circumstances of this case, it is unnecessary for me to consider the position of third parties or to determine whether there might otherwise have been adequate grounds for ordering that the register be rectified.

19. The plaintiff has demonstrated an equitable entitlement to the balance of the proceeds of sale. However, I have no information as to the amount of those proceeds nor as to the terms under which they are being held pending the resolution of this dispute. Accordingly, the only order that I will make at this stage is one granting the parties leave to bring in short minutes of orders reflecting the findings I have made.

20. I will hear counsel as to costs.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Associate:

Date: 16 May 2003

Counsel for the plaintiff: Mr B Meagher

Solicitor for the plaintiff: Tetlow Jansen & Doyle

Counsel for the 1^st defendant: Mr J Constance

Solicitor for the 1^st defendant: Sneddon Hall & Gallop

Date of hearing: 9 May 2003

Date of judgment: 16 May 2003