Co-ownership problem question
In December 2000, Burton, Henry and Lester purchased Number 7, Clarendon Park Lane, Leicester, where they all lived with Lester’s daughter Alison. Burton provided 90 per cent of the purchase price and Henry and Lester each provided 5 per cent. The house was conveyed to the three of them as “as joint tenants in law and equity”.
Last Tuesday evening, a heated argument broke out over whose turn it was to wash the dishes. Burton announced that he couldn’t bear to live with the others a moment longer and offered to buy out Henry and Lester. Henry agreed to this immediately and promised to visit his solicitor about this the next morning. Lester replied that he didn’t want to move and would rather buy out Burton himself. Burton rejected this idea and another heated debate ensued. Around midnight they retired to bed leaving the matter unresolved. The next morning, Burton and Henry were found dead in their beds.
The police are investigating the deaths and suspect that Lester may have murdered Burton and Henry. Burton and Henry both willed all their property to their friend Jean. Jean believes she is entitled to a 95 per cent share in Number 7 and would like the house to be sold, in order that she can pay off various debts. Lester believes he is now the absolute owner and has no intention of selling the house.
Discuss.
ANSWER:
· A trust of land arises where there are concurrent interests in land (i.e. where more than one person holds interests in the land at the same time). Accordingly, the persons holding the interests are co-owners. Today, for practical purposes, there are two types of co-ownership – joint tenancy and tenancy in common. In cases of co-ownership it is vital to distinguish between ownership at law and ownership in equity.
· Since 1 January 1926, the legal estate in the case of co-owned land must be held on a joint tenancy – s.1(6) LPA 1925. Here, the legal estate will be so held by Burton, Henry and Lester
· Although the legal estate in co-owned land must always be held on a joint tenancy, the equitable interest can be held on either a joint tenancy or a tenancy in common. In determining how the equitable interest is held, the general rule is that a grant to two or more persons without words of severance (words in the grant which show that the tenants are each to take a distinct share in the property) creates a beneficial joint tenancy. To this rule there are two qualifications:
· First, there are certain circumstances in which equity will presume that a TIC was intended unless there was an express indication to the contrary. Second, a JT cannot exist without the presence of the four unities – time, title, interest and possession. On the facts there are no words of severance here.
Unequal contributions:
· One of the circumstances in which equity may presume a TIC was intended is where, as here, the co-owners purchasing the property have put up the purchase money in unequal contributions. Here, we are told Burton provided 90 per cent of the purchase price and Henry and Lester each provided 5 per cent – thus, each made different financial contributions. The presumption in such circumstances is that they intend to take interests in the property proportionate to their contributions.
· HOWEVER, this presumption can be rebutted is there is an express indication to the contrary. Here, there IS such an indicatation – we are told that the house is conveyed to Burton, Henry and Lester as “joint tenants in law and equity”. This was confirmed in the case of Goodman v Gallant. Here, the Court held that such an express statement was conclusive and it was irrelevant whether the contributions were unequal or whether there were other factors which would suggest a tenant in common. Accordingly, on the facts the beneficial interest is held on a joint tenancy.
· The aforementioned conclusions about the legal estate and the equitable interest can be represented diagrammatically as follows:
Severance:
· One of the hallmarks of a joint tenancy is the principle of survivorship. In the case of Harris v. Goddard, this was described as “…a process of separating off a share of a joint tenancy, so that co-ownership continues, but the right of survivorship will not apply.” On the death of one joint tenant his interest in the land passes to the other joint tenant by the right of survivorship. This right takes precedence over any disposition made by a joint tenant’s will.
· It is possible to sever the equitable joint tenancy without disturbing the joint tenancy of the legal estate. However, in view of the principle of survivorship such severance must be done during the joint tenant’s lifetime. Severance is clearly relevant here. It must be remembered that only an equitable joint tenancy can be severed. A legal joint tenancy cannot – s.36(2) LPA 1925.
· There are four methods of severance of an equitable joint tenancy in land. Three of them are contained in Williams v Hensman. Although that was a case of personalty, the three methods were made applicable to land by s.36(2) LPA 1925. The three methods are as follows:
1. An act of any one of the persons interested operating on his own share;
2. Mutual agreement; and
3. Any course of dealings sufficient to intimate that the interest of all were to be mutually treated as constituting a tenancy in common.
· A fourth method was added by s.36(2) LPA 1925 where “any tenancy desire to sever the joint tenancy in equity, he shall give the other joint tenancy a notice in writing of such desire’. The words following ‘or do such other acts or things as would, in the case of personal estate, have been effectual to sever the tenancy in equity’ apply the methods of Williams v Hensman to land.
BURTON AND HENRY:
· Firstly, we are told that Burton offered to buy out Henry (and Lester). It is stated in the facts that Henry agreed to this immediately and promised to visit his solicitor about this the next morning.
· Therefore, this scenario requires a discussion of severance by mutual agreement. The leading case here is Burgess v Rawnsley. Here, an oral contract between two beneficial joint tenants was entered into for one to buy the other’s share in the house. Although the agreement was unenforceable because of non-compliance with s.40 LPA, it was held that there was severance of the beneficial joint tenancy.
· Therefore, in our scenario, it is arguable that there has been severance by mutual agreement. This can be supported by the fact that Henry “agreed to this immediately” and promised to visit his solicitor the next morning.
BURTON AND LESTER:
· As well as offering to buy Henry’s share, we are also told that Burton offers to buy out Lester. However, here the position in less clear as a final agreement is lacking. In the facts, we are told that Lester rejected Burton’s offer and would rather buy out Burton himself – a notion which was also rejected. Ultimately, we are merely told that after arguing over the issue during the evening we are told that the parties retired to bed leaving the matter “unresolved”.
· Obviously, in circumstances, it is clear that there has been no severance by mutual agreement. This is because the negotiations cast doubt on whether there has actually been an agreement.
· However, it is necessary to discuss if there has been a sufficient indication of severance through a course of dealings. In Burgess v Rawnsley, Pennycuick LJ made it clear that, in his view, “negotiations which, although not otherwise resulting in an agreement [may] indicate a common intention that the joint tenancy should be regarded as severed”. Therefore, where the parties discuss severance but do not come to any conclusions then it could be sufficient evidence of a course of dealings for severance.
· However, it is not always easy to see if that point has been reached and an illustrative case is to be found in Gore and Snell v Carpenter.
· In this case, the agreement fell short of mutual agreement because there was no evidence of an agreement, merely agreement in principle. Here, a couple jointly owned two houses. Their relationship broke down and they discussed whether each party should own one of the two houses. The husband later committed suicide. It was held that there had been no severance at common law; there had been discussions but there had never been agreement.
· Blackett-Ord J found that there had been negotiations but point out that ‘negotiations are not the same thing as a course of dealing’. This judgement is in direct contrast to Rawsley where that had been agreement that Mr R would sell to Mr H but the price was not settled.
· Therefore, it seems difficult to come to any sort of absolute conclusion. However, both possible outcomes will be discussed in relation to Jean’s claim in the property.
DEATH OF BURTON AND HENRY
· Subsequently, we are told that Burton and Henry are both found dead. It is stated in the facts that the police “suspect” that Lester may have murdered the other joint tenants.
· A further means of severing a joint tenancy is where one joint tenant kills a fellow joint tenant. This has the effect of severing the joint tenancy and through forfeiture the murderer is prevented from profiting from the unlawful killing. This allows the victims share to pass under will. The effect, then, is the legal estate is held on trust for the murderer and the victim’s estate as tenants in common.
· Therefore, if it was the case that Lester did kill the other joint tenants, then there would be severance by homicide.
ISSUE OF SALE:
· Jean is not a trustee but merely a beneficiary. The powers of dealing with the land are vested in Lester as trustee (s.6 TOLATA). He must, however, in exercising the powers conferred upon him under s.6, have regards to the rights of the beneficiaries: s.6(5).
· However, Jean may apply to the court for sale under s.14 TOLATA 1996, and in considering any such application the court must have regard to the matters listed in s.15 TOLATA. The most relevant factor here would be s.15(1)(b): ‘the purposes for which the property subject to the trust is held’.
· In this case, the original parties purchased the house with the intention of living together at university. Two of the members are now dead and it is arguable that the original purpose has now gone. Bearing in mind s.15(1)(b) TOLATA 1996 and the pre-1996 cases in which the courts tended to order sale when the original purpose was no longer existence (e.g. Jones v Challenger), Jeans application for an order for sale standards a good chance of being successful, even if it opposed by Lester.
CONCLUSIONS:
· The final part relates to the division of the proceeds of sale. Firstly, the position will be considered if Burton and Lester HAD successfully severed the joint tenancy through a course of dealings.
· If this was the case, such a conclusion about the legal estate and equitable interest could be represented as follows:
· However, if it was the case that was NO severance between Burton and Lester, and that Lester had not committed homicide the situation would be:
· Finally, the last variation which may be possible would if Lester did, in fact, murder the other joint tenants. If this was the case then:
