Tuesday, September 21, 2021

No debate** - Can shares be owned as tenants in common?


Recent posts have considered various aspects of the rules in relation to assets owned as joint tenants.

Another aspect of the rules in this area that continues to cause debate relates to the manner in which shares in a company may be owned.

Often a constitution of a company will mandate that shares registered as owned by 2 or more people may only be owned as joint tenants. Often the constitution will also state that the name first listed on the share register will have all voting rights in relation to the shares.

Where a constitution of a company does not set out that joint share owners must own as joint tenants the issues are more complex if a will does not distribute a discrete number of shares to separate people. That is, instead of (say) giving 100 shares to A and B, giving 50 shares to A and 50 shares to B.

Despite there being a number of conflicting cases, it appears as though the long standing decision in McKerrell [1912] 2 Ch 648 continues to apply. In that case it was held that despite a will stating that the recipients of the gift of shares were to take as tenants in common – ‘That is not possible. At least, it is not possible that a chose in action, such as shares, can be held as tenants in common at common law’.

In other words, the only assets that can be owned as tenants in common at law are real property and chattels. This means, as one example, bank accounts in joint names are deemed to be owned as joint tenants. This is because there is essentially a chose in action, being the contractual right of the account holders against the bank, for recovery of a ‘debt’ (being the balance from time to time in the bank account).

Another example in this regard is the well known case of Equititrust Ltd & Anor v Franks [2009] NSWCA 128, where it was held in relation to a debt (and related mortgage), that the common law presumption of a joint tenancy applied despite the deeming provisions under legalisation that would have otherwise seen the parties hold as tenants in common.

As usual, if you would like copies of any of the abovementioned cases please contact me.

** for the trainspotters, the title today is riffed from the Breeders song ‘Lord of the thighs’. View hear (sic):

Tuesday, September 14, 2021

Assuming makes an a%& of you and me ... presumptions** and jointly owned assets


Last week’s post considered various aspects of the rules in relation to assets owned as joint tenants.

At law there is a presumption that where property is gifted to two or more people, they receive that property as joint tenants (subject to any contrary intention).

A number of jurisdictions have also enacted legislation confirming this outcome, including Western Australia, South Australia and Victoria.

In New South Wales and Queensland however there is legislation that ‘flips’ the position at law.

This means that where real property is gifted to two or more people in those jurisdictions it will be deemed to pass to the parties as tenants in common, in equal shares.

** for the trainspotters, the title today is riffed from the Midnight Oil song ‘Blot’. View hear (sic):

Tuesday, September 7, 2021

The youngest, modern-est**, most beautiful-est ... and 'wealthiest'


Previous posts have considered the distinction between owning an asset as joint tenants compared to tenants in common.

One aspect of the rules in relation to joint tenancy that can arise in tragic circumstances is where two (or more) people die in the same incident, or indeed in unrelated incidents, and it is not possible to determine the order of deaths.

In these circumstances, in all Australian states other than South Australia, there is legislation deeming the deaths to have occurred in order of oldest to youngest. This means the youngest person will be entitled to 100% of the assets formerly owned as joint tenants.

These rules apply where the court determines that the order of death is uncertain (for example, see Re Comfort; Re Tinkler; Equity Trustees Executors & Agency Co Ltd v Cameron [1947] VLR 237).

South Australia also has a unique approach (in Australia) in relation to perpetuity periods, having essentially abolished the rule against perpetuities (which is generally 80 years) and allowing trusts to potentially last indefinitely.

The decision of In the Estate of Graham William Dawson (Deceased) and Teresa Veronica Dawson (Deceased) [2016] SASC 89, arguably best summarises the position in South Australia where multiple joint tenant owners of an asset die.

While acknowledging that the law in this area has essentially been ‘frozen’ for over 100 years, the court held that the existing rules continued to apply because no legislation had been introduced in South Australia changing the position. This meant the assets owned as joint tenants passed undivided into the respective estates for the 2 owners.

Interestingly, again due to legislation in states other than South Australia, companies can also own assets with other parties as a joint tenant.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the Silverchair song ‘Young modern station’. View hear (sic):