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There is obviously a significant amount of real property in Australia that is owned by more than one person; the iconic example being the family home held as joint tenants. But what happens when one co-owner no longer wants to be a ‘co-owner’ with the other?
This is a not uncommon problem, particularly in long running family disputes.
When the parties cannot agree, the most common solution is an application to the court to appoint a trustee (or ‘statutory trustee’) for the sale of the co-owned property. In Queensland, that application is made under s.38(1) of the Property Law Act 1974 (Qld) (the PLA).
But what about a situation where one of the co-owners wants to keep part of the land? They can of course buy the land from the statutory trustee but if they can’t afford to do that, or don’t want all of the land, a co-owner may apply under s.38(1) of the Act for the appointment of a statutory trustee to partition.
Section 38(1) of the PLA provides:
Where any property (other than chattels personal) is held in co-ownership the court may, on the application of any 1 or more of the co-owners, and despite any other Act, appoint trustees of the property and vest the same in such trustees, subject to encumbrances affecting the entirety, but free from encumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
The right to sell property is an inherent right of ownership and it has been said that “there is practically speaking no defence” to an application under s.38(1) of the Act. However the court does have a discretion to refuse an order in appropriate circumstances.
One example of circumstances where the court might exercise this discretion is where the application is made by a trustee in bankruptcy of one of the co-owners but another co-owner has a claim to ownership of the whole of the property or a charge over the bankrupt’s interest. Another example is where the sale of the property by statutory trustee would be contrary to some pre-existing agreement between the parties, such as an agreement for the sale of assets on dissolution of a partnership.
An application to appoint a statutory trustee for sale is a relatively common place application and the legal principles are well known. An application for partition is less common.
What does partition mean?
Unfortunately, the PLA does not define ‘partition. Section 66G of the Conveyancing Act 1919 (NSW) (CA) is in substantially the same terms, as is s.40(1) of the Law of Property Act (NT) for present purposes, but neither of those Acts define partition.
The Land Valuation Act 2010 (Qld) defines ‘subdivide’ as dividing land into parts, which may relevantly be done by “sale, conveyance, transfer or partition”. That a partition would be a division would appear obvious but a partition contemplated by s.38 of the PLA is not merely any division of the co-owned land. So what is it?
 In the Comptroller of Stamps v Christian and Another, the following definition from Halsbury was quoted:
“When The Laws of England was first published by the Earl of Halsbury … it contained the following passage, para 1512: ‘The legal term “partition” (a) is applied to the division of lands, tenements and hereditaments belonging to co-owners (b) [the co-owners may be joint tenants, tenants in common or co-parceners] and the allotment among them of the parts (c), so as to put an end to community of ownership between some or all of them (d).”
 There are several notes to that. One note, which is (c), reads:
“Thus if three persons are co-owners, tenants in fee simple, of Blackacre, Whiteacre, and Greenacre, the transaction by which one of them becomes the sole owner tenant in fee simple of Blackacre, another of Whiteacre and a third of Greenacre, is a partition.
The note to (d) reads: ‘Thus in the example just given ... a transaction by which one person becomes sole owner of Blackacre, while the other two remain co-owners of Whiteacre and Greenacre, is a good partition.” (Without footnote references.)
Her Honour also noted that the decision of Comptroller of Stamps (Vic) v Christian was also cited in Segal v Barel in which Barrett JA, when considering the function of a trustee “to partition the land”, held that in the absence of the legislation defining ‘partition’:
 …[t]he expression must therefore be given the meaning it has had at least since 1539 and 1540 when the Statutes of Partition (31 Hen 8 c 1 and 32 Hen 8 c 32) made joint tenants and tenants in common of any estate of inheritance(2013) 84 NSWLR 193 at 201compellable to make partition between them in the way the common law allowed for tenants in coparcenary. The common law action by writ of partition was similar to, but probably not derived from, Roman law’s action communi dividundo. Although the statutes of Henry VIII referred expressly to common law courts, the Court of Chancery quickly developed a similar jurisdiction.
After referring to the same passage from Comptroller of Stamps (Vic) v Christian, Barrett JA continued:
 The effect of partition, as described by Brennan J in Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 650, is “the termination of the existing co-ownership and the passing of full title to an owner who, without requiring the concurrence of a co-owner, can occupy and use the land as he sees fit or determine its further disposition”.
 Where, as in this case, there are two co-owners, partition of their land entails the division of it into two parts followed by action causing each person to become the sole owner of one of those parts. If possible, the two parts must conform, as to value, to the proportions in which the parties hold in co-ownership. In some cases of enforced partition, inconvenience arising from physical features of the land cannot be avoided. In Turner v Morgan (1803) 8 Ves 143; 32 ER 307, for example, Lord Eldon confessed himself unable to make a better partition for parties holding a house in the proportions two-thirds to one-third than one that saw one take a part containing all the chimneys and fireplaces and the only staircase while the other took the remainder of the building devoid of such facilities. Where division reflecting, as to value, the parties’ proportionate co-ownership is impracticable, financial adjustment will be necessary.
 It is of the essence of enforced partition between two co-owners that the divided parcels passing to them severally should represent, in their aggregate, the whole of the co-owned land. No part of the original parcel may remain in co-ownership; nor may any part be put into the ownership of someone other than the co-owners. These propositions are inherent in the nature of enforced partition as a process by which persons who are in a relationship of co-ownership that one wishes to quit should neither be compelled to continue in that or any like relationship nor, viewed together, lose any part of their original parcel.
Barrett JA, with whom McColl JA and Preston CJ of LEC agreed, relied on this definition in finding that a proposal to strata title co-owned land was not a partition for the purposes of s.66G of the CA because the co-owners would retain a form of common ownership of that part of the land that became common property.
So in essence, the partition of co-owned land is the division of that land into separate portions with the result that each co-owner then holds a separate title to a portion that is proportional to their original interest and no part of the land remains in common ownership.
Where it is not possible to partition the land in a way that reflects the co-owners’ exact proportional interest, an additional financial adjustment may be necessary.
Who may apply?
Any “co-owner” as defined by s.37 of the PLA, no matter how small their interest in the property, can apply under s.38(1) of the PLA for an order appointing a statutory trustee to sell or partition co-owned land.
A co-owner for this purpose is not just the legal owner but also includes an encumbrancee of the interest of a joint tenant or tenant in common. Co-ownership is defined under s.37 of the Act to mean “ownership whether at law or in equity in possession by 2 or more persons as joint tenants or as tenants in common.”
So provided the property is owned by 2 or more people, whether at law or in equity in possession, anyone holding a legal interest or equitable interest in possession in property, or anyone holding a charge or lien of that person’s interest, may apply to the court for an order appointing a statutory trustee for partition of the property.
In Coshott v Prentice, the Full Court considered the interests in a property purchased by a husband and wife as joint tenants where the husband was subsequently made bankrupt. It was submitted that the trustee in bankruptcy was not a co-owner for the purpose of s.66G of the CA because his interest only vests at law when he is registered on title by virtue of s.58(2) of the Bankruptcy Act 1966 (Cth), which had yet to occur, even though it had vested in equity. In their joint judgment, Siopis, Katzmann and Perry JJ held:
 The appellants’ submission must be rejected. It overlooks the fact that the definition of co-owner in s 66F(1) of the Conveyancing Act includes ownership “whether at law or in equity in possession” (emphasis added [in original]). In so far, therefore, as the submission assumes that the co-owner must have possession in law, it is contradicted by the clear words in s 66F(1). It is sufficient for the co-owner to have ownership in equity in possession and therefore if “each co-owner is as of right as much entitled to possession of any part of the property as the others“: Commonwealth Bank of Australia v MacDonald (2000) 10 BPR 18,111 at  (Young J) (in equity). No argument was put that the trustee did not have a right to possession in this sense.
There is potentially a curious outcome from the inclusion of an encumbrancee as a co-owner; there is no express requirement for the encumbrancee to be entitled to enforce its encumbrance. Therefore a mortgagee may be able to apply for an order appointing a statutory trustee for sale or partition in circumstances where it was not entitled to exercise its power of sale under the mortgage.
In Bunnings Group Ltd v Asden Developments Pty Ltd, Margaret Wilson J (with Muir and Gotterson JJA agreeing), held:
 Sections 37A and 38 must be read together. The entirety is to be sold, and the net proceeds are to be held to give effect to the rights of its former co-owners.
 There is nothing to suggest that the Legislature intended that the interests of an encumbrancee of an undivided share should be defeated by the appointment of statutory trustees for sale. Indeed, such an encumbrancee’s position is expressly protected by the definition of “co-owner” in s 37: a co-owner includes an encumbrancee of the interest of a tenant in common. In its report which recommended the introduction of the Property Law Act, the Queensland Law Reform Commission described the purpose of this inclusive definition as being “to enable a mortgagee of the interest of a co-owner to apply for an order which will result in sale of the property and the realisation of his security”.
 Thus, the statutory trustees are to hold the net proceeds of sale not only to give effect to the rights of a former tenant-in-common, but also to give effect to the rights of an encumbrancee of that tenant-in-common’s undivided share in the land. 
[Without footnote references.]
This passage indicates two intentions; one being to allow a mortgagee of the part-interest of one co-owner to be able to realise its security and the other to ensure that the trustee gives effect to the rights of an encumbrancee of a part-interest upon the sale. The encumbrancee would presumably be in a position to realise its security, but for the unencumbered interests, in the former instance but not necessarily in the latter.
Therefore it would seem that an encumbrancee need not necessarily be in a position to enforce its rights in order to make an application under s.38 of the PLA. However the fact that the encumbrancee is unable to realise its security under the encumbrance (or put another way, has agreed it cannot or will not do so except in circumstances that have not arisen) would presumably be a significant factor taken into account by the court in deciding whether to exercise its discretion, as discussed below.
When is it available?
Provided the land is co-owned, any one or more co-owners can apply to appoint a statutory trustee for partition at any time. However, it may not be quite so straight forward in practice.
As is the case with appointing a statutory trustee for sale, any partition will be subject to the encumbrances affecting the whole of the land. The sale of the property the subject of a mortgage is an everyday occurrence; the division of that property into two or more portions, each with a different owner, while maintaining that mortgage, is not.
S.37B of the PLA states:
Property held upon the statutory trust for partition shall be held upon trust—
(a) with the consent of the encumbrancee of the entirety (if any) to partition the property and to provide (by way of mortgage or otherwise) for the payment of any equality money; and…
Therefore any partition will be subject to obtaining the consent of the encumbrancee of the whole of the property (as opposed to an encumbrance over only a part-interest).
Another issue is whether the property is capable of being partitioned. S.40(3) of the Law of Property Act (NT) provides:
While there is no equivalent provision in the PLA or CA, the property would still need to be capable of being divided in a way that allows separate titles to be issued. There are obvious potential difficulties in an application to partition a small residential block of land for example. The trustee would not be able to perform the terms of the trust.
Sale v Partition
While s.38(1) allows an application for the appointment of a statutory trustee for either sale or partition, they are not equal alternatives.
S.38(4) of the PLA provides:
If, on an application for the appointment of trustees on the statutory trust for sale, any of the co-owners satisfies the court that partition of the property would be more beneficial for the co-owners interested to the extent of upwards of a moiety in value than sale, the court may, with the consent of the encumbrancee of the entirety (if any), appoint trustees of the property on the statutory trust for partition, or as to part of the property on the statutory trust for sale, and as to part on the statutory trust for partition, but a purchaser shall not be concerned to see or inquire whether any such consent has been given.
In Segal v Barel, Barrett JA considering the effect of s.66G(4) of the CA in materially the same terms:
 But it is important to pay attention to the way the statute works. If one co-owner applies for partition and there is no counter-claim for sale, the only question the court will have occasion to consider is whether or not there should be partition. No question of sale will arise; nor will any question of “preferred remedy”. Likewise, if one owner seeks the appointment of trustees for sale and is not met by a counter-claim for partition, the question of termination of co-ownership by sale will be the only question to be decided and there will be no issue of “preferred remedy”. If, however, there are competing claims — one for the appointment of trustees for sale and the other for the appointment of trustees for partition — the position will be that, having regard to s 66G(4), the claim for partition will not succeed unless the person pressing that claim satisfies the court that partition is, in the sense referred to in s 66G(4), “more beneficial” than sale. The co-owner who advances the competing claim for sale, by contrast, is not called upon to show that that remedy is “more beneficial” than partition.
So if the owner seeking partition fails to satisfy the court that partition is more beneficial in the sense referred to in s.38(4) of the PLA, an order appointing a statutory trustee for sale is the only remedy available.
Conversely, satisfying the court that partition is more beneficial in the relevant sense does not mean that the order must be made or that an order for sale is then unavailable. His Honour went on to say:
 If, however, the co-owner claiming partition does satisfy the court that partition is more beneficial than sale, it does not follow that the court must order partition. The court still retains a discretion to choose the remedy of partition over sale.
 Because of the additional onus that an applicant for the appointment of trustees for partition must always discharge when pitted against an applicant for the appointment of trustees for sale, the situation is not in truth one of choice between two equally available alternatives.
 Once that onus is discharged, however, the court is in a position to choose between the two outcomes according to the justice of the case... 
This passage was cited in Fleming v Fleming, as part of a longer quotation, with apparent approval.
So what is the “relevant sense” referred to by Barrett JA? S.38(4) states that partition must be “more beneficial for the co-owners interested to the extent of upwards of a moiety in value than sale” but what does this mean?
Beneficial to whom?
The phrase “interested to the extent of upwards of a moiety in value” is adjectival. It qualifies “the co-owners”. It directs attention to what is beneficial to a majority of the co-owners.
However this is not a majority by number but rather a majority by value of their interest. In Dunston v Dunston, Master Cohen (as he then was) said:
The next consideration is to what is meant by "upwards of a moiety" when dealing with the interest of co-owners. It seems clear that "upwards of" must mean “more than” and therefore it has to be shown that it would be more beneficial for persons having a share greater than one half in the subject land…
So in the event of a contest between partition and sale, the person seeking partition must show that it is more beneficial to co-owners holding more than 50% of the total interest. Therefore where there are only two equal co-owners, partition will need to be more beneficial to both co-owners. In Pannizutti v Trask, Kirby P held that s.66G of the CA:
…requires consideration of what is beneficial to the co-owners' majority interest. Where there are two equal co-owners, it may nonetheless be possible for one co-owner to establish to the satisfaction of the court that it is objectively beneficial for both of them that the property be partitioned rather than sold. 
Beneficial in what way?
The partition must be shown to be more beneficial than a sale, but beneficial in what way? In Re Darby, White J said:
 As Kirby P. (as his Honour then was) observed in Pannizutti v. Trask (1987) 10 N.S.W.L.R. 531 at 540 when considering the New South Wales analogue of s. 38(4), the subsection directs attention to what is beneficial to a majority of the co-owners and is to be determined not exclusively by the co-owners’ wishes but by the assessment of the court. What is “beneficial” appears primarily to be addressed to economic benefits but emotional and other considerations might be relevant, Pemberton v. Barnes (1871) L.R. 6 Ch.App. 685 at 693.
While allowing for the possibility, White J does not appear to have formed a concluded view on whether non-economic considerations where relevant:
 There are allegations and denials between the parties which it would take many days to canvass in evidence. It is unnecessary and undesirable to do so. It is sufficient that personal co-operation has not been forthcoming and refusal to communicate except through solicitors makes any reliance upon consensual access through the other’s property unwise. I accept Mrs Miller’s evidence that if the land is partitioned in the way proposed by Mr Farren, irrespective of the personal difficulties between the parties, she will not obtain a sufficient balance of the land to enable her to run her cattle and she will be disadvantaged. This is supported by Mr Bartholomew’s opinion. Any other more equitable partition would involve considerable expenditure referred to by Mr Farren and is, in the overall interests of the parties, to be avoided.
 I am not satisfied that partition would be more beneficial for Mrs Miller than sale. If there is any residual discretion which Mr Morrow seemed to suggest, I would not exercise it in favour of partition. This is a co-ownership which calls to be severed by sale and not partition. 
The question of whether the benefit must be a financial one was not argued in Pannizutti v Traskbut Kirby P said:
What is “beneficial” must be established according to an objective standard. The meaning of “beneficial” has not, apparently, been elaborated. It would appear primarily to be addressed to economic benefits, having regard to the subject matter of the subsection. But the references in the cases, including in the passage from Lord Hatherley LC's speech in Pemberton, suggest that emotional and other considerations might be relevant to the discretion being exercised.
However in Segal v Barel, the NSW Court of Appeal held that financial considerations are the only factors to be taken into account. In coming to this conclusion, Barret JA discussed the references to Pemberton v Barnesin the judgments ofPannizutti v Trask and Re Darby:
 The primary judge was of the view that the ability to have regard to non-financial considerations was supported by the express reference by Kirby P and White J to Pemberton v Barnes (1871) LR 6 Ch App 685. That, however, was a case arising under s 4 of the Partition Act (Imp), not s 3. Section 4 dealt with the situation where co-owners interested to the extent of one moiety or upwards requested the court to order sale rather than partition. In such a case, the court was required to order sale “unless it sees good Reason to the contrary”. The judicial task there was quite unlike the s 3 task of deciding what was “more beneficial for” relevant co-owners. The speech of Lord Hatherley LC contained a passage (at 693) quoted by Kirby P (and obviously referred to by White J), as follows:
“… that is to say, the onus is thrown on the person who says that the Court ought not to order a sale, to shew some good reason why it should not do so; otherwise, the Court is bound to order it. The scope of the enactment appears to me to be this: there being, as I have said, reasons which may induce some of the part owners to wish for a partition, and others to wish for a sale and a division of the proceeds, the Legislature says that if the votes are equally divided, one half of the persons interested in the property desiring a sale and the other half a partition, then the half requiring the sale shall have the preponderating voice, and the Court shall be bound to give them a sale wholly irrespective of the 3rd section [providing for partition]. But still there is a certain discretion left to the Court, so that the Court can refuse a sale where it is manifestly asked for through vindictive feeling, or is on any other ground unreasonable.”
 In that passage, the Lord Chancellor was not discussing the “would be more beneficial” test in s 3 of the Partition Act (Imp). He was concerned wholly with the “good Reason to the contrary” question posed by s 4; and it was natural for him to canvass issues much wider than the confined issue to which s 3 directed attention. For this reason, I am of the view that Lord Hatherley’s observation, as quoted by Kirby P and relied on by White J, provides no assistance in interpreting the criterion in s 66G(4) defined by the words “partition of the property would be more beneficial for the co-owners interested to the extent of upwards of a moiety in value than sale”. 
In overturning the decision, his Honour identified a list of “extraneous or irrelevant” factors considered at first instance that he found to be “of a sentimental, emotional or psychological kind foreign to the analysis that the court is required to undertake”.
That’s not to say such factors are wholly irrelevant, they are just irrelevant to whether partition is more beneficial. However if the court is satisfied that partition is more beneficial, it then remains for the court to exercise its discretion.
While not expressly endorsed on this point by Ann Lyons J in Fleming v Fleming, her Honour’s reasons are consistent with the decision in Segal v Barel. In finding that partition was more beneficial for the co-owners, her Honour referred only to financial considerations, with non-economic factors only being considered in relation to the exercise of discretion once that condition was satisfied:
The issue which remains is whether the discretion should be exercised. In determining whether to exercise the discretion, it seems that the court needs to choose between the two outcomes in the justice of the case. The discretion is at large, but there are a number of factors which have been identified in a series of decisions, including whether partition would result in hardship to a minority co-owner as well as emotional considerations of the co-owners. Those factors were both considered in Hayward v Skinner and in Segal as outlined above. 
It may not always be possible to partition the property such that the proportionate value of the separate partitions precisely matches the proportionate interests of the co-owners. In that event, ‘equality money’ is paid by the person receiving the windfall to compensate the person receiving the smaller share.
As was discussed in Segal v Barel, the concept of equality money is not limited to merely the difference in proportionate value caused by the partition. It can also be used more broadly to redress any beneficial advantage to one party over another based on equitable principles. This may involve a detailed examination of the conduct of the parties in relation to the property; such as an accounting of payments made towards the purchase price, capital repayments, or maintenance of the property. It may also involve compensating a co-owner for the devaluation of the property caused by the actions of another co-owner.
Pursuant to s.37B of the PLA (quoted above), any property held on the statutory trust for partition is held to partition the property and to provide, by way of mortgage or otherwise, for payment of any equality money.
It would be expected that the parties, in seeking a partition, would seek orders concerning the payment of equality money. The trustee must hold the property on trust for the provision of any such equality money.
Partitioning will not be a genuine alternative to sale in every case but it is an alternative relief that is commonly overlooked. Particularly in circumstances where there is emotional attachment to the land by at least one co-owner, partitioning may allow all parties to achieve a satisfactory outcome, whether that is financial outcome or something more personal.
Goodwin v Goodwin  QCA 50
Official Trustee in Bankruptcy v Cameron  QSC 089
Re Boulis  2 Qd R 165.
S.40(1) of the Law of Property Act 2000 (NT) is expressly subject to s.40(3), which requires consent for partition to be given under the Planning Act 1999 (NT) before an order vesting the property in the trustee can be made.
Schedule to the Land Valuation Act 2010 (Qld).
 QSC 215.
Ibid, at  to  her Honour noted the definition and repeated it “because it was of assistance”.
 QSC 215 at -.
 2 VR 129.
(2013) 84 NSWLR 193.
His Honour was considering s.66F(3)(a) of the CA, which is in similar terms to s.37B(a) of the PLA.
 Segal v Barel (2013) 84 NSWLR 193, at 200-201.
Ibid, at 201-202.
Ibid, at 195.
Ibid, at 217.
Ibid, at 210-211.
See the definitions on encumbrance and encumbrancee in Schedule 6 of the PLA.
S.37 of the PLA.
(2014) 221 FCR 450, at -.
 1 Qd R 493
 Ibid, at .
See also s.66F(3) of the CA.
Being to partition the property and then to assuring the several portions to the persons entitled – see s.37B of the PLA.
 Segal v Barel (2013) 84 NSWLR 193, at 200.
Ibid, at 200.
 Fleming v Fleming  QSC 215, at -.
 Edelman v Badower  VSC 427, at .
 (1987) NSWLR 531.
 Ibid, at 540.
 Supreme Court of NSW, Cohen M, 14 September 1983, unreported.
 Ibid, at pp.5-6.
 Pannizutti v Trask (1987) NSWLR 531, at 541.
 2 Qd R 350.
Ibid, at 353
Ibid, at 353
 (1987) NSWLR 531, at 541 per Needham A-JA.
Ibid, at 540.
 Segal v Barel (2013) 84 NSWLR 193, at 207.
 (1871) LR 6 Ch App 685.
 Segal v Barel (2013) 84 NSWLR 193, at 205-206.
Ibid, at 207.
Ibid, at 208.
Fleming v Fleming & Anor  QSC 215, at -.
Ibid, at  referring to Haywood v Skinner (1981) 1 NSWLR 590 and Segal v Barel (2013) 84 NSWLR 193.
 Segal v Barel (2013) 84 NSWLR 193, at 202-203.
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