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General, joint tenancy, Land Transfer Act, Relationship Property

A cleft in the armour of joint ownership?

When two people own a property jointly, what is legally referred to as being joint tenants (as distinct from tenants in common, where each party owns only a set percentage of an asset), and where one of the two joint owner dies, the survivor inherits the interest of the other joint tenant. There is no remaining asset forming part of the deceased’s estate.

So, what happens when there is a claim under the Property (Relationships) Act 1976 (PRA)?

In the recent case of Hau v Hau, Mrs Hau lived with her husband in a house for over 21 years. The house had previously been owned by the husband with a former wife. When the marriage came to an end, it was agreed that Mr Hau would buy out her interest in the property and he did so with the assistance of his brother, the two owning the house as joint tenants. After Mrs Hau and Mr Hau married, they lived in the house with the brother and his family. At the time of his death, the jointly owned home was Mr Hau’s only significant asset.

Subsequently Mrs Hau fell out with the brother’s family and had to leave the house. She went to the Family Court claiming that the joint tenancy ought to be treated as a tenancy in common with Mr Hau’s interest passing to his estate. The brother disputed that there was any basis for such a claim.

In the Family Court it was decided that Mrs Hau had failed to elect Option A under ss 61 and 62 of the PRA within the required 6 month time limit and so it did not have jurisdiction to hear her claim. The Family Court also considered that s 61 of the Land Transfer Act 1952 concerning the right of survivorship by joint tenants, effectively “trumped” the application of the PRA.

Mrs Hau appealed to the High Court. Duffy J outlined the issue that needed to be surmounted. Section 88 of the PRA permits a surviving spouse to seek orders under s 25. Section 25(3) permits the Court to make orders regarding land as it sees just, but it must first determine that the land is relationship property. What this means is that the Court has a clear ability to make orders converting joint tenancies to enable divisions in cases of inter vivos relationship separations, but the law is not so clear with respect to survivorship claims.

Duffy J opined that the scheme and purpose of the PRA aims to treat couples at the end of a relationship much the same regardless of whether the relationship came to an end because of separation or death. The problem, then, is the lack of specific provisions for the specific situation Mrs Hau found herself in. If she and her husband had separated while he was alive, it was common ground that Mrs Hau could have brought a claim. Duffy J then made determinations concerning the two issues. She found that the time limit of 6 months applied only to small estates but that in all other cases the limit is 6 months after the grant of letters of administration. In the present case letters of administration could not be granted until such time as the size of the estate was determined – in other words, until the present case was decided. With respect to relationship property Mrs Hau recognised that she was not in a position to seek orders under the PRA; only to determine the respective shares of each spouse in relationship property and for that she was not time barred.

Finally, Duffy J also found that s 61 of the Land Transfer Act did not have the effect found by the Family Court. Not only should it not be read as expressly excluding the application of the PRA, but it should not be read as preventing the Court from enquiring whether equitable or beneficial entitlement to land is held as a tenancy in common. She considered that the statute does no more than create a rebuttable legal fiction that deems registered owners to be joint tenants. She cited a number of instances where courts have overridden the presumption of a joint tenancy, including after death (Cameron v Smith).

Many Torrens system purists might well throw their hands up in horror at the notion that inheritance of a joint interest by survivorship might be challenged, since at one level this amounts to a challenge to orthodoxy and to the application of indefeasibility of title in joint tenancy situations, although Duffy J demonstrates that the situation is not unique.

Even so, there is a contrary argument that if the PRA cannot be applied in such situations, there might be scope for abuse of the joint tenancy concept in relationship property cases: therefore some people owning property used as family homes (the major asset of many families), not held in trust but also not wanting their spouses or partners to be able to claim an interest in the home, might use joint tenancies with other family members (or friendly persons, effectively as bare trustees?) with intent to defeat the application of the Act. Far-fetched? Maybe, or maybe not.

The claim by Mrs Hau has now survived one jurisdictional challenge, and it appears the case may now be heard in the High Court. While the case may be somewhat unusual in its specific facts, the outcome will be of interest.

 

Reference

Hau v Hau [2018] NZHC 881

Cameron v Smith (1910) 13 GLR 193 (SC)

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