JOINT TENNANCIES A NEW APPROACH FOR CONTESTED ESTATES - June 2011

Author: David Cossalter

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CHALLENGE TO THE CONCEPT OF JOINT OWNERSHIP

Karayannis v Smith (2004) NSWSC 667

This is a claim brought on behalf of two children of the late Leoni Robin claiming that they had not been sufficiently provided for out of the estate of their late mother.

One of the issues before the court as identified in paragraphs 31 to 49, was the issue of notional estate and whether property that is held in a joint tenancy can be included in this notional estate. As a general rule, where property is in joint tenancy, the property automatically transfers to the surviving owner and until this decision it was believed that such an interest would not form part of the notional estate.

In Karayannis, it was determined that the failure of a person to severe the joint tenancy constituted a prescribed transaction for the purposes of the legislation. Essentially, it was determined that the surviving joint tenant was receiving a 50% benefit of which they did not pay consideration. Accordingly in these circumstances, it was determined that failure to sever the joint tenancy is a prescribed transaction.

Once it was determined that it was a prescribed transaction, and thus notional estate, the Court was required to consider the following:

FAMILY PROVISION ACT 1982 - SECT 27
Designation of property as notional estate-matters to be considered
27 Designation of property as notional estate-matters to be considered
(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered:
(a) the importance of not interfering with reasonable expectations in relation to property,
(b) the substantial justice and merits involved in making or refusing to make the order, and
(c) any other matter which it considers relevant in the circumstances.
(2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to:
(a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person,
(b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration,
(c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be,
(d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income, and
(e) any other matter which it considers relevant in the circumstances.

These considerations have been transferred into current legislation, the Succession Act 2006 (NSW) through Sections 74 – 90.

When considering this, the Court was required to determine whether the initial estate of the deceased was able to meet the claim made on the estate by the children. In the event the claim could not be met, particular reference would be given to subsection (a) through to (c) above.

In the circumstances of this claim, it was determined that it was necessary, reasonable and, in the interests of justice, to determine that the failure to severe the joint tenancy created a notional estate, as to the value of the deceased person’s share. Accordingly an award was to be made to the Plaintiffs.

What this means for potential family provisions claims or succession act claims, is that where it was previously believed that properties that transferred pursuant to a joint tenancy where unattainable this is no longer the case, and potential pools of assets may be larger than previously expected.

This enables a larger number of persons to claim on estates which were previously believed to have no value.

This is opening the door for claimants who have been left out of a will or where the assets of an estate do not seem to be able to meet the bequests within the will.

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