Attempting to sever a joint tenancy by relying on a Power of Attorney

If you are appointed as a substitute attorney under a Power of Attorney, ensure that you are validly entitled to act if the first appointed attorney is unable or unwilling to so act, and that you are acting within the scope of your designed power.  These issues, and more, were considered by the Supreme Court of New South Wales in 2016 in the case of Anderson v Anderson regarding a property at Sans Souci.

Background facts

The claim arose in the context of the death of Norrie Anderson, who was a joint owner of a property at Sans Souci, in southern Sydney, with his former wife, Miriam Anderson (aka Minnie).

In 2012, Norrie’s daughter, Natalie, acting as Norrie’s substitute Attorney pursuant to a Power of Attorney, executed a statutory declaration for and on behalf of her father, with the effect of transferring his interest in the property as a joint tenant back to himself as a tenant-in-common, thereby severing the joint tenancy.

Norrie’s wife’s claim

A family provision claim was made by Marilyn Anderson, Norrie’s wife at the time of his death:

• If the said transfer was effective, then Norrie’s estate would, at the very least, consist of his interest in the property as a tenant-in-common.
• If not effective, then Norrie interest in the property upon his death would have automatically reverted to his former wife pursuant to the “right of survivorship” held by the joint tenants. Therefore there would be no estate as such on which to make a claim.

Norrie's son’s claim

A family provision claim was also made by Stephen Anderson (as the executor Minnie’s Will) against Marilyn (as first defendant) and Natalie (as second defendant), and a declaration sought that Natalie was not authorised to execute the Statutory Declaration in support of the transfer which severed the joint tenancy, such that the property would have fallen to Minnie upon Norrie’s death, and therefore be available for distribution to Stephen as a beneficiary.

The 1970 agreement

Interestingly, Norrie and Minnie had entered into an agreement in 1970 in the context of their separation and divorce, by which they agreed not to sever the joint tenancy and for the ownership of the property to pass to the survivor of them.  In the 80s and 90s, various attempts were made by Norrie to discontinue the joint ownership, whether by severing the joint tenancy or selling the property.  Minnie’s response was to refer to the terms of the arrangement whereby she was permitted to remain living in the house, and maintain the status quo, until she entered into a new relationship, or died.  This culminated in Minnie registering a caveat on the property’s title in 1996.  Minnie moved into a nursing home in 2010.

The 2006 Will

In 2006, Norrie left a Will by which he gifted his interest in the Sans Souci property evenly between his wife, and the balance to his children.  The Court noted that at the time of his Will, Norrie knew that he and his former wife owned the Sans Souci property as joint tenants, and the operation of the right of survivorship.

The terms of his Will provided for 3 possible alternatives:

1. He might become the sole owner of the property by survivorship;
2. The joint tenancy might be severed and he would own ½ of the property; or
3. He might not survive his former wife and she would become the sole owner of the property.

Decline in health

It was accepted that over the period 2006 to 2012, Norrie’s medical and mental condition deteriorated, and the Court concluded that by about 2007, he was not likely to have had capacity to give instructions to sever the joint tenancy of the property, and was also unlikely to have been able to comprehend the steps that the defendants took to sever the joint tenancy in 2012.

The daughter’s position

The subject Power of Attorney was dated 28 March 2006.  The date of the daughter’s signature on the POA, to accept the appointment, was the same date – although the Court concluded that it was likely that the POA was signed later, and backdated to be the same date.  The Court considered a number of facts in support of this – in particular the fact that a certified copy of the POA which was created in April 2006 did not include the daughter’s signature.  Whilst the actual date of her acceptance did not impact the legitimacy of the appointment, it certainly brought the daughter’s character into question.

In cross-examination, the daughter admitted that she was aware that by severing the joint tenancy, she would receive a share of that property as part of her father’s Estate once he passed, although she denied that her interest in the Will motivated her to sever the tenancy.

The severance of the joint tenancy

The Court was of the opinion that the daughter knew that the co-owner was no longer living at the premises at the time of severance, and therefore knew that there was a chance that the co-owner would not have received the notice of the proposed severance when it was mailed by the Court.

The issues to be determined

Was there an agreement to not sever the joint tenancy?

The Court considered that if there was an agreement between Norrie and Minnie not to sever the joint tenancy, then the severance by the daughter would have been in breach of that agreement and would have been void.  It was for the plaintiff (the son) to establish that agreement – and the Court found that there was no mention in the “Terms of Settlement” document prepared at the time of the separation to any agreement of the type relied upon by the son, nor were there any contemporaneous notes made regarding that greement.  Rather, the Court determined, the agreement reached was intended to protect Minnie’s right of residence in the property for as long as she wished to reside there.  Nothing in the agreement dealt with what would occur if she ceased to live there.

Interestingly, the Court referred to the conventional test for the existence of an implied term as stated in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1910] ArgusLawRp 71; (177) 16 ALR 363:

“For a term to be implied, the following conditions (which may overlap) must be satisfied:

•  It must be reasonable and equitable;
•  It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
•  It must be so obvious that ‘it goes without saying’;
•  It must be capable of clear expression;
•  It must not contradict any express term of the contract.”

The Court concluded that none of these conditions were satisfied, therefore there was no such implied agreement between the deceased and Minnie.

The Power of Attorney

A core feature of a Power of Attorney is that the attorney cannot gain a personal benefit, unless expressly authorised to do so.  The Court looked at the effect of the severance of the joint tenancy on the daughter’s position and noted that there was no direct benefit to either her or her mother.

Whether the mother, as first appointed attorney, was “unable or unwilling to act”

In the absence of a definition as to when someone is either unable or unwilling to act, the Court concluded that it needs to be something more than just a temporary, or a passing, situation, during which the specified attorney is unable to act.  Also, there should be documentation to evidence the vacation of office by the specified attorney and the appointment of the substitute when the vacancy occurs.  The burden fell with the mother and daughter to prove that the mother was unable to act.

The Court held that the mother was both willing and able to act, but chose not to because it was inconvenient for her to do so. Therefore the daughter did not have the power to act as the substitute attorney at the time that she signed the documentation for the severance of the joint tenancy.

Ratification

The defendants argued that in that case, Norrie ratified (or approved) the severance of the joint tenancy.  The Court noted that it required evidence of “clear adoptive acts” and the conduct must be unequivocal.  Considering Norrie’s medical and mental condition in 2012, and the fact that it was unlikely he regained capacity, the Court found that it was unlikely he ratified the severance.

Severance

The Court considered the circumstances in which a joint tenancy could be severed, including unilateral severance (that is, by one party through its actions). It was held that it was sufficient for the notice to be sent by the Registrar-General to the property, as Minnie’s last known address.

Fraud

After reviewing the daughter’s actions in knowing that Minnie no longer lived at the premises, the Court held that her failure to make further enquiries was not fraud, as opposed to wilful blindness as to the existence of fraud, which is fraud.  The Court’s attention then turned to the lawyer who prepared the documentation, that he had not turned his mind to the terms of limitation of the Power of Attorney.  The Court held that the daughter did not have it in mind to dishonestly mislead the Registrar-General in any material respects, and therefore was not fraudulent.

Final decision

The Court held that the joint tenancy was effectively severed.

Lessons from this case

If you have an agreement with a co-owner not to sever the tenancy arrangement, then ensure that this agreement is made in writing, and also ensure that the agreement covers all potential future scenarios, such as the death of either owner, the right to reside in the property, the need for the resident to move into aged care and so on.

If you are acting under a Power of Attorney, then ensure that you are validly acting, particularly if you are a substitute attorney and it is unclear whether the first appointed attorney's position is no longer current.