In the context of recent posts, it is an important estate planning issue to understand that where an asset owned on title records as joint tenants is a partnership asset it will be deemed to in fact be effectively owned as tenants in common.
If this deeming rule applies then the death of a partner essentially causes the value of their interest to pass under their will, and not by survivorship to the other owners.
The Partnership Acts in most states codify the rules in this regard. These rules generally state that unless the contrary intention appears, property bought with money belonging to the partnership is deemed to have been bought on account of the partnership and is considered partnership property.
The rules in this area were perhaps best explained in the case of Spence v FCT [1967] HCA 32. As usual, if you would like a copy of the case please let me know.
In this case it was relevantly held:
“It is … a mistake to say she got it simply by virtue of her joint tenancy. The legal estate devolved in accordance with the joint tenancy.The ‘old rule’ reference in the quote above comes from cases such as Lake v. Craddock (1732) 3 P Wms 158; 24 ER 1011. Again, if you would like a copy of the case please let me know.
To that extent the maxim which was mentioned – ‘ius accrescendi inter mercatores locum non habet' – does not apply: see Lindley on Partnership, 11th ed. (1951), p. 428.
But it is applicable in equity; partners who hold as joint tenants in law hold beneficially as tenants in common.
That is an old rule.
It is more exactly stated today in terms of the Partnership Acts (the relevant provisions are ss. 30 and 32 in the Western Australian Act) the legal estate devolves according to its nature and tenure but in trust so far as necessary for the persons beneficially interested; and as between partners land which is partnership property is to be treated as personal estate.”
** for the trainspotters, another classic song from Pearl Jam this week, namely ‘Not for you’.