Can legal tenants in common create an equitable joint tenancy?

Introduction

Is it possible for legal tenants in common to create an equitable joint tenancy?

If a couple own a flat as legal tenants in common, can they declare that they hold the title to the flat on trust for themselves as joint tenants?

Each tenant in common has a share which is legally distinct from the share of the other tenant in common. How can tenant in common A declare a trust over the share of tenant in common B?

If tenants in common want to create a joint tenancy, do they need to assign the property to themselves as joint tenants?

These were the questions facing the Court of Appeal in Tam Lan Chi Lorche v Chan Siu Mui ([2023] HKCA 1326).

Facts

Mr. and Mrs. Tan were tenants in common of a flat. They executed a declaration that they held the property on trust for themselves as joint tenants.

Mr. Tan died. Mrs. Tan claimed to be the sole beneficial owner by virtue of the right of survivorship.

This was met with the argument that the deed of trust was ineffective.

The analysis in the judgment

Hon. G Lam JA held that the declaration of trust was effective.

While it is true that each tenant in common has a separate share ([18]), the effect of the declaration of trust was that each tenant in common created a trust in respect of their share.

While the form was a single declaration of trust, there were, in substance, two declarations: ‘Strictly speaking there are two trusts, each set up by a different settlor and with a different trustee, but with the same two beneficiaries’ ([19]).

Under the trusts declared, each tenant in common declared that they held their share on trust for both legal tenants in common – Mr. and Mrs. Tan – as equitable joint tenants ([19]).

The declaration was an effective way of creating an equitable joint tenancy.

‘Should one predecease the other, by the right of survivorship which is a characteristic of joint tenancy, the survivor would become solely beneficially entitled under both trusts, in that under one trust the deceased’s estate (or rather, his or her personal representative) would hold the deceased’s half share at law for the survivor in equity, and the other trust would come to an end as the survivor would hold his or her half share for himself or herself absolutely’ ([19]).

An assignment to themselves as joint tenants would be an effective, but not the only, route to beneficial joint tenancy ([21] – [22]).

Wasn’t the declaration of a legal tenancy in common conclusive?

The Court of Appeal also considered the argument that an assignment to the couple as tenants in common was conclusive (relying on Whitlock v Moree [2017] UKPC 44).

Express declarations concerning ownership are conclusive (as between the parties to the deed) as at the date of the deed.

This does not mean, however, that the parties cannot subsequently agree to change the ownership arrangement ([15]); here the declaration of trust changed the ownership arrangements.

It seems reasonable to think that a subsequent enforceable contract could do the same. Presumably, a common intention constructive trust could also bring about a change of ownership.

Michael Lower

Tags: co-ownership, declaration of trust, joint tenancy, Michael Lower, tenants in common