The scope and relationship of severance by mutual agreement and a course of dealings (the topic of parts 2.3.3 and 2.3.4) arose for consideration in the Supreme Court of Queensland in a case that is discussed by Conway “Joint Tenancies, Negotiations and Consensual Severance” [2009] Conv 67. The case, Saleeba v Wilke [2007] QSC 298, concerned a property which had been purchased by two friends as beneficial joint tenants. Their intention was to use the house as a shared home in the winter and rent it out for the summer. In the event, the house became the home of one of the friends, Mr Hedke, while the other, Mr Wilke, stayed there on occasion. Prompted by Mr Wilke, the parties negotiated a possible sale of the property and equal division of proceeds, with Mr Wilke indicating that he would apply for a court order for sale if no agreement was forthcoming. Mr Hedke indicated his agreement to a sale, but no further action was taken and the parties continued to use the property as before. Three years later Mr Hedke died. His executrix argued that the parties’ negotiations gave effect to a severance so that his estate was entitled to an equal share. The case therefore raised the question, highlighted in part 2.3.4, as to when negotiations that fall sort of an agreement constitute severance. The court accepted (as we have seen in part 2.3.4) that mutual agreement and a course of dealings are two separate heads of severance; the former is not merely a sub-category of the latter. Mutual agreement failed on the facts as the parties had not reached an agreement, either express or implied. Mr Wilke had offered to sell and Mr Hedke had been mindful to do so and had counter-offered a sale on his terms. The fact no further action had been taken was open to interpretation that they were content with the status quo.  Severance by a course of dealings failed on the facts as the parties had not dealt with the property in a manner that was consistent only with them being tenants in common.  The parties’ negotiations showed “a proposal which attracted temporary interest and then lapsed”. The fact neither party acted as though they had agreed to sever was considered to be a “powerful indication” that there was no common intention to do so. Mr Hedke had been advised by his solicitor of the consequence of remaining a joint tenant. The fact he failed to take steps to sever (for example, unilaterally by statutory notice) was seen as being at least as persuasive of an indication of his intention to remain a joint tenant as his previous “lethargic assent” to the proposed sale had indicated an intention to sever.  As a result, the parties were joint tenants on Mr Hedke’s death and through survivorship Mr Wilke became sole owner.

As we have seen in part 5.2, section 6 of TOLATA confers on the trustees “all the powers of an absolute owner”.  However, under section 6(5), in the exercise of their powers, the trustees are directed to “have regard to the rights of the beneficiaries”. The interpretation of this subsection is considered by Ferris and Bramley “The Construction of Sub-Section 6(5) of the Trusts of Land and Appointment of Trustees Act 1996: When is a ‘Right’ not a ‘Right’” [2009] Conv 39. The authors argue that read in isolation the subsection appears meaningless. If it is intended to enact the trustees’ duty of loyalty to the beneficiaries, then it is otiose; it is beyond doubt that the courts would enforce this duty.  Further, a “duty” to “have regard” to “rights” appears an odd provision as the duty is the necessary corollary of those rights.  Therefore, the authors argue that the provision should be construed in light of the other provisions of the Act.  In their view, it operates as a counterpart to section 15 (extracted in part 5.5).  That section lists factors for the court to take into account in determining applications made under section 14 in relation to the trustees’ exercise of their powers. Ferris and Bramley suggest that beneficiaries have “incidental rights” which arise (amongst other ways) from factors listed in section 15.  For example, these incidental rights may arise from the intentions of the trustees in acquiring land and from the intentions of the original settlor of the trust. The specific nature of these incidental rights is that they give rise to a duty on the part of the trustees, when making a decision, to consider the right; this is a weaker duty than the duty to honour rights that the beneficiaries enjoy merely through their status as beneficiaries (i.e., rights that are not merely incidental). Through this interpretation, Ferris and Bramley argue that section 6(5) ensures that when trustees make decisions they take into account the same factors that the courts are directed to consider under section 15.  As the authors note, it would be a nonsense if the trustees, in exercising their powers, were prevented from taking into account factors that the courts are required to consider.  This would give rise to the prospect of the trustees, taking into account factors A, B and C reaching a different decision than would be reached by a court that could also look at factor D.  In other words, it would require an application to the court for factor D to be considered.  However, whether section 6(5) fills this gap (or was envisaged as doing so) is debatable.  As Ferris and Bramley acknowledge, their interpretation of the provision is not its’ obvious meaning. 

In part 5.5 we consider applications to court for sale of land brought by one of the co-owners under section 15 of TOLATA.  The operation of section 15 is analysed by Hopkins “Regulating Trusts of the Home: Private Law and Social Policy” (2009) 125 LQR 310 in the context of a discussion of the courts’ different approaches to regulation of the home. This is relevant to chapters 18-21 and is further discussed in the online materials that accompany chapter 18.