Suggested Answer to Exercise 10.3 (Part 3)
A Detailed Answer Plan
Highlighted text indicates that further details are available by selecting it.
Since 1 January 1997, whenever two or more people own land concurrently there will be a trust of land as defined by section 1 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). The rights of ownership are divided between the legal owners (the trustees) and the beneficial owners, even when they are the same people.
There are two types of co-ownership of land:
- joint tenancy – all of the joint tenants own the whole
- tenancy in common – each tenant in common owns a share in the land (albeit undivided from the other shares)
Consequently, when a joint tenant dies, the remaining joint tenants continue to hold the whole title by survivorship, but when a tenant in common dies, her share passes according to her will or the rules of intestacy.
Joint tenancy requires the four unities of possession, time, title and interest. A tenancy in common requires only unity of possession, although the other unities may be present.
Since 1 January 1926 the trustees can only hold the legal estate as joint tenants (LPA 1925, s 1(6)). However, beneficial interests can be held as joint tenants or as tenants in common.
A beneficial joint tenancy can be ‘severed’ to convert it into a tenancy in common, but it impossible to sever a joint tenancy at law (LPA 1925, s. 6(2)).
The Original Status of the Beneficial Owners
If the five friends were all parties to the purchase the house in a single transaction, it seems probable that the four unities of possession, interest, title and time are present. The purchase of the house in joint names by the three friends will automatically create a trust of land, with the three friends holding the legal title as joint tenants for themselves as beneficiaries (LPA 1925, ss 34, 36; TOLATA, s 1).
The five friends may hold the beneficial interest in the land either as joint tenants or as tenants in common. The normal rule is that equity follows the law, with the beneficial interest being held as a joint tenancy (Stack v Dowden  2 AC 432; Jones v Kernott  1 AC 776). However, a beneficial tenancy in common can be created:
- expressly, or
- by the use of words that indicate that the beneficial interest is to be divided into shares
(Barclay v Barclay  2 QB 677). The question contains no information about the wishes of the parties on this point.
In the absence of evidence to the contrary, equity will assume a tenancy in common where the parties:
- contribute unequally to the purchase price (provided that they are not cohabiting partners: see Stack v Dowden and Jones v Kernott; compare Laskar v Laskar  1 WLR 2695); or
- are business partners; or
- are lending money on a mortgage (Malayan Credit Ltd v Jack Chia-MPH Ltd  AC 549) – not relevant here.
The friends contributed equally to the deposit and mortgage liability. It is not clear whether the purchase of Techno House was a business partnership, but it seems more likely to have been an arrangement of convenience as the three friends ‘work independently’. There is a reference to ‘our partnership’ in the note written by Uri and Val, but even if the term is being used in a technical sense, it may not be evidence of the nature of the relationship at the (earlier) date when the property was purchased.
Has the Beneficial Joint Tenancy Been Severed?
A beneficial joint tenancy may be severed by:
- one of the three methods listed by Page Wood V-C in Williams v Hensman (1861) 1 John & H 546 (referred to indirectly in section 36(2) of the LPA 1925):
- ‘an act of one of the parties interested operating on her own share’;
- mutual agreement;
- ‘course of dealing’ which shows a common intention to sever.
- notice in writing of immediate severance (created by section 36(2) LPA 1925); and
- the unlawful homicide of one joint tenant by another joint tenant.
Neil’s departure from the house does not in itself sever the beneficial joint tenancy. His entitlement to possession has not changed. He has merely decided not to exercise his right to occupy the house.
Neither does the making of Neil’s will sever the beneficial joint tenancy (see Gould v Kemp (1832) 2 My & K 304).
Is Uri and Val’s note written notice with section 36(2) of the LPA 1925? Probably not:
- does the not demonstrate an intention to sever at all?
- even if it does, it is not sufficiently immediate.
(see Re Draper’s Conveyance  1 Ch 486 and Harris v Goddard  1 WLR 1203).
Neil’s note might constitute written notice under section 36(2) LPA 1925: the term ‘share’ (if used in its technical sense) is inconsistent with Neil being a joint tenant. IF not, however, do the events constitute severance under any of the Williams v Hensman methods?
- Acting on his own share – unlikely: there is no contract with or transfer to Val – the terms are still to be finalized;
- Mutual agreement – is there sufficient meeting of minds? are the terms still to be finalized fundamental to the nature of the agreement (Burgess v Rawnsley  Ch 429)? In any event there is no mutuality – Uri is not a party to the arrangement.
- Course of dealing – unlikely: have all the parties made clear their intention to end the joint tenancy (Greenfield v Greenfield (1979) 38 P & CR 570)?
The Car Accident
The wording of the question suggests that the accident was Uri’s fault. If Neil was culpable it is not clear how the beneficial interest would be divided: does the doctrine of severance apply or is there some form of constructive trust? In any event these may be circumstances in which the court would exercise its discretion under the Forfeiture Act 1982.