A Brief Account of a Recent Case
The First-tier Tribunal ((Parveen Chadda and Others v HMRC [2014] UKFTT 1061 ) recently found that a joint tenancy held between a married couple, Mr and Mrs Tobin, had been severed despite no-one being able to locate the written record of the notice of the severance. The result was that property could pass into a nil rate band trust on the death of Mr Tobin in accordance with the terms of his Will rather than passing by survivorship to Mrs Tobin. Hurrah !!!
Mr and Mrs Tobin had been married for several years and owned their matrimonial home as joint tenants until the joint tenancy was severed. To sever a joint tenancy requires one tenant to give notice to the other but the signed severance by Mr and Mrs Tobin could not be located … though it was believed that it had been signed.
The tribunal found on the ‘balance of probabilities’ that the necessary notice had been served. This conclusion was based on the evidence presented which included a draft notice, a statement from their daughter who witnessed the signing of the notice and inheritance tax accounts which had been prepared on the basis of a severance having occurred.
The tribunal went on to say that either ‘mutual agreement’ or by ‘mutual conduct’ were also indicative of a severance.
A Few Thoughts on the Implications
Perhaps the most interesting aspect of the Chadda case is what the judges said about the evidential requirements.
“HMRC’s submission that there is some minimum level of proof required, however probable the event, must be rejected in the light of the comments made by both Lord Hoffman and Baroness Hale in Re B. I agree with Miss Brown that if something inherently improbable requires strong evidence it follows that something less probable requires less evidence.”
It is an interesting idea that less evidence should be required when dealing with a very or highly probable event. Could this have other applications ?
In any event, the tribunal in Chadda helpfully pointed out that a written notice of severance (under LPA 1925, s 36(2)) was only one of four possible bases of severance. The other three are: (1) an act of any one of the persons interested acting on their own share (following Williams v Hensman [1861] 70 ER 862); (2) mutual agreement; and (3) any course of dealing sufficient to intimate that the interests of all the joint tenants were mutually treated as constituting a tenancy in common (i.e. ‘mutual conduct’).
Despite the conclusion that a signed notice of severance was held to exist in the above case ( even though it could not be located ), the tribunal still concluded that Mr and Mrs Tobin demonstrated a mutual agreement to sever the joint tenancy, and also that the joint tenancy was severed by their mutual conduct.
However, for the avoidance of doubt I would suggest that it will generally be good practice to use a signed notice of severance, and to keep the signed notice in a safe place so that it can be produced later on, in order to demonstrate how the property was actually held between the joint owners.
