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Bankruptcy and Joint Tenancy News September 2008
The High Court of Australia has confirmed that a severance of a joint tenancy in a property is not void against the Trustee in bankruptcy when one of those joint tenants later becomes bankrupt.
In Peldan v Anderson[2006] HCA 48, a case involving a husband and wife joint tenancy, the High Court found that upon bankruptcy, the unity of title which is created in a joint tenancy is severed upon a bankruptcy.
In this case, the husband and wife held a property as joint tenants. The husband transferred his one half share as a joint tenant in the property to himself as a tenant in common. Therefore the wife's interest converted to a tenant in common. The husband subsequently was made bankrupt.
The Trustee in Bankruptcy claimed that the transfer of property from joint tenant to tenant in common was a transfer which was void against the Trustee because it could have become part of the husband's estate available to creditors if the transfer had not occurred under s.121 (1)(a) of the Bankruptcy Act 1966 (Cth). The High Court found that all that belonged to the bankrupt estate, was the husband's interest in the property, as a tenant in common. As such, the court ruled that the trustees were unable to claim all of the proceeds from the sale of the property, only those of the bankrupt's share.