Case: Re Francis; Ex parte Official Trustee in Bankruptcy (1988) 82 ALR 335
Outcome: discussed
It was held by the Full Court of this Court in Re Francis; Ex parte Official Trustee in Bankruptcy (1988) 82 ALR 335 that the bankruptcy of one of two joint tenants severs the joint tenancy with the interest of the bankrupt vesting in the Official Trustee or a registered trustee under s 58 of the Act, and the remaining co-owner becoming a tenant in common with the Official Trustee or trustee. The Court said (at 339): "When the estate of the male bankrupt in the land in question became vested in the Official Trustee, the unity of title was immediately destroyed, in that the respective interests of the Official Trustee and the female co-owner in the land did not derive from the same act or document. Nor is there any unity of time between the two estates. The unity of interest also does not exist because the interest of the Official Trustee is impressed with his responsibilities under the Bankruptcy Act 1966 and may, and very likely will, be of less duration than that of his co-owner. The fact that upon the later bankruptcy of the female bankrupt the Official Trustee succeeded to her interest in the land as well, cannot recreate a joint tenancy out of what has become on severance a tenancy-in-common, if for no other reason, because the unities of title and time are not present. Finally on the matter of principle, it could hardly be said that, if the female bankrupt had died after the male bankrupt's bankruptcy but before she herself became bankrupt, the Official Trustee would have succeeded to her estate and interest in the land by survivorship." Later in its reasons, in commenting on Re Boots; Ex parte Official Receiver (1976) 26 FLR 320 (discussed below) where a husband and wife with jointly owned non-partnership assets became bankrupt at the same time, the Court observed (at 340) that "[i]n those circumstances no question of severance of joint tenancies arose". 21 The question in Boots' case was whether, because the husband and wife were "joint debtors" (in consequence of their conduct of the partnership business), their jointly owned real property, though not partnership property, was to be included in their "joint estate" under s 110(1). In holding that that property was part of the joint estate, Riley J clearly proceeded on the premise that no severance of the joint tenancy resulted from the contemporaneous bankruptcy of the joint tenants. The dictum quoted above from Re Francis endorsed the correctness of that premise. In this matter I am being asked to deal directly with whether the Full Court's dictum and the premise of Boots' are correct. 23 There is now a significant body of Australian case law in addition to Re Francis to the effect that the bankruptcy of a joint tenant severs the joint tenancy at law (if the land in question is old system land) or in equity (if the land is held under a title registration system), the involuntary alienation worked by s 58 of the Bankruptcy Act effecting the severance in either case: see generally Sistrom v Urh (1992) 40 FCR 550; Re Holland; Ex parte Official Trustee in Bankruptcy (1985) 5 FCR 165; Re Prestia [2001] FCA 792 at [23] - [24] . As Re Francis indicates, that involuntary alienation severs at least two of the "unities" (i.e. of interest and of time). 24 When one turns to where joint tenants are made bankrupt at the same time as joint debtors, a somewhat more complex state of affairs exists. Section 110(1) in express terms contemplates that, in such a case, a joint estate does come into existence. I consider the section envisages that where jointly owned property is alienated to the Official Trustee or trustee by s 58 that property retains that character in the Official Trustee's or trustee's hands. And it does so because as between the joint tenants no act was done by, or to, either or both of the bankrupts other than the bankruptcy itself and its s 58 consequence which could require that the property no longer be considered as joint property to be applied in the payment of their joint debts. To say that the very act which makes the joint property of both available to be utilised under s 110 (i.e. the joint bankruptcy) has the effect of severing what was joint property until that moment is to negate what I consider to be the manifest purpose of s 110. I do not consider that the section requires that construction, hence my agreement with the dictum in Re Francis . 25 Having reached this conclusion I would have to say, though, that I have some difficulty in seeing a principled operation for the right of survivorship of a joint tenant were one of the bankrupts to die during the course of the administration either before or after the jointly owned property was sold. 26 Accordingly, I would direct that the interests of Colin and Marlene as joint tenants in both the Bordertown and Hayborough properties be allocated to the joint estate of Colin and Marlene, this being the only joint estate of which they alone are joint debtors. While they are also joint debtors for the purposes of the partnership estate, the joint debtors for that particular estate are not limited to them alone. They include Colin as well.