INTRODUCTION TO PROPERTY AND COMMERCIAL LAW NOTES

Transcription

1 INTRODUCTION TO PROPERTY AND COMMERCIAL LAW NOTES THE CONCEPT AND FUNCTION OF PROPERTY AND INTRODUCTION TO REAL PROPERTY When dealing with property rights, there are three basic questions to ask: 1. What sort of right is it? 2. How was it created? 3. What priority does it have? Things to remember Requirements for creation of proprietary interests Essential/substantive requirements What bundle of rights does grantor seek to invest in grantee? Is this something recognised by the law? Based on intention of grantor Formal requirements Does law require intention to be manifested in a particular way? E.g. in document (e.g. deed), can it be granted orally, need specific words Distinction between legal and equitable interests Concept of possession Must be physical control Need intention to control What is property? The person s ownership of the thing is the property, the house is the subject matter Legal relationship/bundle of rights with respect to object is property (not object itself) If one person has a right, other people may have a duty to comply with that right Owner has negative right to stop people interfering with their enjoyment of the property Property is a right, not a thing Because it is a right, property is a relationship between people Difference between property and contractual rights Contractual rights Sphere of enforceability Parties of the contract against other party privity Potential content: Governed by terms of the agreement parties can agree on anything desired infinite possible array of contractual rights Property rights Sphere of enforceability: Right to enforce of owner against the whole world no doctrine of privity as it relates to property generally rights in rem Potential content: Come in particular form as enforceable against everyone, so unfair to expect people to comply with novel forms of proprietary rights 1

2 But role of equity in bridging the divide Maxim: Equity regards as done that which ought to be done Equity may at times treat a contractual agreement to grant an interest in property as if it had been performed Lysaght v Edwards; Walsh v Lonsdale The essential characteristic of property rights A property right always relates to, and depends upon existence of, some particular thing Property right enforceable not just against specific persons, but against wide range of persons Right to: Use and enjoy Exclude Alienate/transfer Enforceability: the obligation which corresponds to a property right is owed by other members of society; each have a duty not to interfere Existence of some thing: property rights relate to things that separate and apart from ourselves Alienability: property rights can be sold or given away to others Excludability: the holder of a property right is able to exclude others from making use of the thing subject to that right Value: most, but not all, property rights have value, but it is not an essential characteristic Definitions of property Property: actually refers to rights which people have to things, rather than things themselves Property right: a right to a thing which can be enforced generally against other members of society and not just against specific persons Assignable rights: property means any right that can be transferred from one person to another Distinction between personal rights and property rights is based on their enforceability Rights in rem: depends upon continued existence of the thing to which the right relates Legal fee simple: an interest in a freehold estate which is potentially of infinite duration only comes to an end when current holder dies without will or next of kin Gives exclusive possession, doctrine of tenure, right to transfer/alienate inter vivos (s36 imperial acts application act) Legal life estate: freehold estate and exclusive possession for duration of uncertain period, being the duration of the measuring life (usually life of grantee, or duration of third party s life) Can be alienated inter vivos (but still only for duration of original grantee s life) Can be passed in will if it is a pur autre vie Historically: fee tail, automatic descent to heirs of dedicated class Legal remainder: right now to enjoy land in the future; vested interest Legal contingent remainder: contingent upon a certain event happening (death of another doesn t count because that will happen anyway) that stands in the way of the right E.g. to A for life and then to B when B graduates from law at USYD Passes within 80 years if event contingent doesn t happen 2

3 If contingency never occurs, it goes back to the person who granted the interest E.g. A dies without B graduating within 80 yr period, goes back to original owner Seisin: possession of land pursuant to a freehold interest; overtime action in ejectment easier than real actions. If have fee simple and lease land to X, still have seisin. An old system mortgage: mortgagor grants legal fee simple in writing by deed to mortgagee (s 23B); mortgagor retains contractual right. Mortgagor retains equitable interest A torrens mortgage: system of land ownership from 1860s, whereby legal title is recognised through its registration. RPA s 52(1) Torrens mortgage only takes effect by security. Easement: two parcels of land dominant land which has benefit of easement, and the servient land which is burdened by the easement. Do not need to be adjacent, but need to be in reasonable proximity. Easement must benefit dominant land (not just owner) Two types: positive and negative. Law more prepared for positive easements to exist in novel situations. Reticent to extend negative (only four types) Positive: dominant owner can do certain activities on servient land e.g. land-locked, have right of way to road through servient land. Cannot enjoy dominant land without Profit a prendre: allows person to enter servient land and remove anything naturally occurring or growing on land e.g. berries, land etc Anything the profit of human industry cannot be a profit because taking something other than occurring naturally Variable meaning of property Yanner v Eaton (1999) HC: Facts: Yanner aboriginal man used traditional harpoon to hunt crocodiles and share meat with other members. Charged with taking crocodile without license. Yanner pleaded defence under Native Title Act gives indigenous people exercising rights the right to take game even without license otherwise required by state law. Issue: does this amount to property rights? Held: Police argued doesn t have defence as any native title he had was extinguished by provisions of Fauna Conservation Act all fauna property of crown HC articulated their understanding of what property means Usually involves right to use, enjoy, exclude, alienate etc Sometimes the law gives a more expansive meaning to property Property doesn t have a constant meaning, is flexible Can be applied to many different relationships with subject matter If it was absolute ownership, then police correct in saying native title rights extinguished But majority said that it did not mean absolute ownership, it meant a less substantial set of rights which could co-exist with Yanner s native title act HC said property vested in crown no more than aggregate of various rights by executive that legislation created When act says property vested, all that was vested was those specific rights Property is used as an aggregate of legal relations between the crown and fauna King v David Allen and Sons, Billposting Ltd [1916] UK: Agreement between King and Billposting Company created a licence, it did not create an interest in land Contract between King and Billposting company creates nothing but a personal obligation 3

4 King s defence: agreement granted proprietary interest in the land, enforceable against third parties, not in breach HOL said: agreement between King and the company gave rights in contract only created licence agreement enforceable against King but not against third parties Implied term that King would not put out of his power to ensure the right was given effect to impliedly promised company could do what King said could do The agreement (between the licensor and licensee) did not give the licensee an interest in land (in rem) which would be enforceable against anyone (like the other company), but merely created a personal obligation on the part of the licensor to allow the licensees the use of the wall. The rights can only be enforced against the licensor. Liable in damages for breach of contract. Only proprietary rights are enforceable against third parties. However, an interest is not proprietary simply because it is enforceable against third parties Requirements for creation or transfer of a particular proprietary right Essential/substantial requirements cannot do without What package of rights has the grantor/transferor intended to create in the grantee/transferee? Do those rights intended to be granted fall within one of the recognised categories of property? o Fee simple (exclusive possession forever) o Life estate (exclusive possession for duration of measuring life) o Lease (exclusive possession for certain term) o Easement (right, accommodating dominant land to use, or restrain use of, servient land in a manner not inconsistent with servient owner s continuing ownership e.g. no easement in King v David Allen o Chattel ownership (exclusive ownership forever) o Bailment of chattel (delivery of exclusive possession with an obligation to redeliver) Formal requirements o How must the intention be manifested? o E.g. must a document be used, if so what type, in a particular form of words required? Basic taxonomy of property rights Property: real property and personal property 4

5 Tenure The legal regime under which people own land in Australia is called tenure, which means that the Crown is (at least formally) the owner of all land and all private owners are tenants of crown The crown is not the owner of all land in Australia, but has the power as sovereign, to grant land to others or take land for itself Termed radical title Crown has radical title subject to the property rights of indigenous inhabitants The assertion of sovereignty, without more, did not entitled the crown to prevent the holders of existing property rights from exercising those rights All land owners are tenants in chief Owners only have estates in the land, but crown real owner Doctrine of tenure does apply in Australia Crown ultimate owner, grants of estate to tenant (usually fee simple), performance of services and incidents Fee simple is equivalent to ownership in land Decline of tenure Tenures Abolition Act 1600 ish Estates People do not own land itself, but have estates in land It is a right to possess land as a tenant for a period of time Estates in land have four dimensions: width, length, height, and time An estate is the right to possess a volume of space, defined relative to the surface of the earth, for a period of time Estates are classified according to how long they last Two main categories: freehold estates and leasehold estates Freehold estates: last for indefinite periods measured in lifetimes Leasehold estates: last for definite periods WA v Ward: The doctrine of estates reflected the idea that a person should be able to have an interest in land giving rise to a present right to possession, while at the same time other persons would also have interests in the land giving them future rights to possession Decline of tenure abolition of Crown s right of escheat Termination of fee simple when die with no will or heirs, goes back to the crown Probate and Administration Act 1898 NSW Doctrine abolished and land treated like personal property, goes back to the crown under doctrine of unowned goods Succession Act 2006 NSW s 136 Freehold estates A person who has a freehold estate is said to be seised of that estate Right to possession is called seisin Three kind of freehold estates: fee simple, fee tail, life estates Fee simple: Greatest right to land recognised at common law Fee means that the estate is inheritable and simple means that it is not qualified in any way 5

6 Equivalent to ownership Created by a grant of land to a tenant and their heirs Lasts as long as the tenant or heirs survives Fee simple estate would not come to an end when the tenant died, as long as it passed to a beneficiary of their will Fee tail: Restricted to the tenant s lineal descendants Almost extinct in Australia A grant to a tenant and their heirs now creates a fee simple In NSW all fee tails converted to fee simple estates Life estate: For the duration of a person s life On that person s death, right to posses land returns to owner of the fee simple Holder of the life estate (life tenant) may grant it to someone else, but the estate still comes to an end on the death of the original life tenant Called a life estate pur autre vie Leasehold estates Hybrid of estate and contract Measured in definite blocks of time Tenant of a lease has possession Relationship between landlord and tenant: Most landlords hold the fee simple estate, but is possible to create lease from a life estate Tenant has the right to possess the land and the landlord has a right to possession when the lease comes to an end Leasehold covenants: Landlord and tenant have rights/obligations arising from their leasehold covenants to each other Landlord allowed to enter to view state of repair, tenant allowed quiet enjoyment Possession The right to possession is what separates estates from all other property rights to land Language used by the parties is the most important cue to the right intended Nature of the right to use land depends on the intentions of the persons who created it Future interests The grantor of a life estate has a right in reversion right will come back to them It is also possible to create a new estate in which the right to possession will not arise for the first time until the future E.g. life estate granted to X, with remainder to Y fee simple estate already subject to life estate Contingent remainders: E.g. if identity of person is not known at date of grant Remainder is vested in interest if the identity of the remainder person is known and there is nothing postponing the right to possession except natural termination of a prior estate A remainder may be contingent even though the remainder person is named in the grant Occurs when there is some condition attached to the grant 6

7 Rule against perpetuities: Common law invalidated grant of contingent remainder if could remain contingent for too long Permitted if contingency resolved within a period of time known as the perpetuity period At common law, contingent remainder void ab initio if can vest outside perpetuity period Valid only from the start if could be shown at the date of the grant that: 1. The contingent remainder would vest in interest 2. It would become certain that the contingent remainder would never vest Remainder must vest within the lifetime of someone alive at the date of the grant plus 21 years plus a gestation period In NSW, the perpetuity period is now 80 years Equitable rights Property rights are either legal or equitable Three sources of property law: common law, statute and equity Three aspects of equity important: order for specific performance, injunction, and trust Specific performance: Court of equity can order specific performance of contract obligations Injunctions: Court can order injunction to stop someone interfering with rights of other Nature of equitable property rights: The essential difference between legal and equitable property rights concerns the things to which those rights relate Legal property rights relate directly to things Equitable property rights operate indirectly as parasites attached to other rights Equitable property rights are often no different in substance from their legal counterparts Any sort of right can be subject to equitable property rights Equitable property rights are never carved out of legal property rights, but impressed upon them Trusts A trust exists when a person has some right and is required by equity to use it for the benefit of another person or for a particular purpose The person with the right is called the trustee The right is the subject of the trust Trustees are normally expected to exercise care and skill to preserve the trust assets from loss and when making investment decisions They must consider only the proper purposes of the trust and not let their own interests or other duties influence their decisions Called fiduciary duty Mortgages Mortgage evolved from a lease into a conveyance of the fee simple (coupled with a promise by the mortgagee to reconvey the title if the debt was repaid within a fixed time) Equity of redemption is no longer just the equitable right to redeem the land, but refers to the totality of the mortgagor s equitable beneficial ownership of the land A mortgage is not a trust Mortgagees are entitled to act selfishly in their own best interests They owe duties of good faith toward the mortgagor Mortgagees need not place their mortgagors interests ahead of their own in the way that trustees must favour the interests of their trust beneficiaries 7

8 Torrens mortgage Substantial rights of the parties are the same regardless of the form of mortgage The Torrens mortgagor s right to discharge the legal encumbrance is equivalent to the common law mortgagor s right to obtain reconveyance of the legal ownership At common law mortgagee has a right to possession as legal owner of mortgaged estate The common law mortgagee s right to possession can be limited contract or statute, and it is normal for mortgagees to wait until the mortgage goes into default before they exercise their right to possession A Torrens mortgagee does not receive a legal estate, but only a charge on an estate The mortgagor, as owner of the estate, holds the right to possession The mortgagee s right to possession does not arise when the mortgage is made, but only when the mortgagor fails to pay the debt secured by the mortgage Non-possessory rights to land Five categories: 1. Profits a prendre: rights to take things from another person s land 2. Easements: rights to make limited use of a neighbour s land 3. Restrictive covenants: rights to prevent neighbours from using their own land in certain ways 4. Pastoral rights: rights to use land for agricultural purposes 5. Mineral rights: rights to explore for or remove minerals from another person s land Profits a prendre Not right to things that may be taken, but property right to land from which things may be taken Granted by the crown or the holder of an estate The estate subject to the profit is called the servient tenement The profit holder has the right to enter that land and take away certain things Profits a prendre are restricted to the taking of the natural produce of the land, which are (1) soil and minerals, (2) natural vegetation, (3) wild animals Land owners have the right to use the water on their estate and can grant an easement to their neighbours to allow them to use that water Profits a prendre cannot be granted with respect to the fruits of industry, such as farm crops, garden vegetables, or domestic animals regarded as the products of human labour and not of the land itself Easements An easement is a legal right to use a neighbours land without possessing it e.g. right of way to travel across A feature is that normally they must provide some benefit to nearby land Land subject to an easement is called the servient tenement Land benefitted by an easement is called the dominant tenement The benefit to the dominant tenement is called accommodation The easement is a right taken from one estate and grafted onto a neighbouring estate Normally it cannot exist separately from the dominant tenement Don t benefit the grantee personally, must benefit the grantee s land 8

9 Proximity of the dominant tenement: The dominant tenement need not be adjacent, however it must be nearby Benefit to the land: The benefit must be connected to the normal use and enjoyment of that land A purported easement might fail to accommodate a dominant tenement if the exercise of the right is not limited to purposes which benefit the dominant tenement Clapman v Edwards: Facts: Defendant leased petrol station and right to use wall next to it for advertising Held: did not create an easement as the right to advertise was not limited to purposes connected with the use of the land leased Easement in gross: At common law, an easement cannot exist without a dominant tenement However statutes make this possible e.g. statutory easements for utility services Easement without dominant tenement called easement in gross Possession of even part of an estate can be an easement at common law Native Title Rights range from right to use land for specific purposes up to rights to permanent possession Yanner v Eaton: native right to hunt crocodiles Mabo 2: native right to permanent possession Mabo No 2: Brennan J definition of Native Title The interests and rights of indigenous inhabitants in land, whether communal, group or individual, possessed under the traditional laws acknowledged and the traditional customs observed by the indigenous inhabitants Why recognise native title? Mabo: to refuse to recognise native title would destroy the equality of all Australian citizens before the law. The common law would perpetuate injustice if it were to continue to embrace the notion of terra nullius and to persist in characterising the indigenous inhabitants as too low to be acknowledged as possessing rights and interests in land Equalise rights of inhabitants of settled and conquered colonies Recognition of HC performing some form of balancing act, different views about where balance should be struck Attributes of native title Native title has its origin in and is given its content by the traditional laws acknowledged by and the traditional customs observed by the indigenous inhabitants of a territory Rights cant be transferred, but can be surrendered to the crown May be proprietary or personal and usufructuary in nature and possessed by a community, a group or an individual Subject to being extinguished by an interest granted by the crown Rights to land or waters Native title is always a right to land or waters and never to chattels or intangible things Mabo: native title effective against the state of QLD and against the whole world 9

10 Traditional laws and customs Yanner v Eaton: content of native title provided by varying laws and customs Must ask what rights to land or waters are held under the traditional laws/customs and to what extent and how are those rights protected under common law and statute Indigenous inhabitants of Australia Only Aboriginal Australians or Torres Strait islanders can hold native title People can only hold it if they observe traditional laws/customs Communal, group, or individual rights Whole community may have property right to land Requirements for existence of native title Physical connection with the land Must be given a normative meaning under the traditional laws and customs of the particular indigenous group If a connection originally exists but is washed away by the tides of history even if outside of control of traditional indigenous group then native title lapses Once title has lapsed, cannot be revived for contemporary recognition, and crown s radical title blossoms into full title Must be continuing group that acknowledges practices and customs over land Then can assert an exclusive right to occupy the land and have proprietary interest Proof of native title Difficult Cannot exist now unless existed when crown acquired sovereignty Must prove: Hold property rights today according to their traditional laws and customs Same property rights held when crown acquired sovereignty Acquired rights from those indigenous people Must identify land and nature of rights Claimants must show observe traditional laws and customs Courts willing to draw inferences on basis of circumstantial evidence Courts may assume necessary continuity if can be shown that indigenous people were using the land in similar fashion pre-colonisation and claimants are biological descendants WA v Ward: relied on oral histories and archaeologist, linguist Native title and tenure Native title is less durable, less transferable and more likely to be owned by a community than other property rights Even though the holders of native title have a common law right to permanent possession, the crown retains a sovereign power to grant inconsistent property rights to the same land Wik Crown can no longer use title to grant inconsistent rights without first expropriating right Extinguishment of native title If have lost connection with land or no longer observe traditional laws Yorta Or if crown lawfully exercises sovereignty to grant inconsistent rights to itself or others Sovereignty carries the power to create and to extinguish private rights and interests in land within the sovereigns territory On a change of sovereignty, rights and interests in land become liable to extinction by exercise of new sovereign power 10

11 In addition to passing legislation, can extinguish native title through granting of an interest by virtue of doctrine of tenure and through exercise of plenary power of crown Yorta Yorta: Indigenous group physically dispossessed from land, could not carry out traditional customs Was held to extinguish native title Extinguishment of native title though doctrine of tenure: Grant of freehold and common law leases give right to exclusive possession, which means there is no room left for native title Fundamentally inconsistent with continuing existence of native title Extinguishment of native title though exercise of plenary power: Crown sets aside land for use by the crown Whether extinguishes native title depends on the use for which the land is to be put Permanent works e.g. schools etc will extinguish native title as rights which attach to such uses are inconsistent with continuation of native title Where land appropriated for use e.g. as a national park, does not require crown having such control as to extinguish native title Mabo (No 2): Facts: Merriam people occupied Murray islands before European contact. 1982: plaintiffs sought declaration that Merriam people held native title over islands. 1985: QLD enacts QLD Coast Islands Declaratory Act following their annexation in 1897 the islands were vested in the crown in right of QLD freed from all other rights, interests and claims Issues: Mabo (No 1): HC held that if native title existed at the time of the enactment of the Racial Discrimination Act 1975 the QLD Act was invalid to extent purported to extinguish native title Mabo (No 2): did native title exist at the time of enactment of the RDA? Held: Recognition of radical title of the crown is consistent with the recognition of native title to land, for crown title is merely a logical postulate require to support the doctrine of tenure (when the crown has exercised its sovereign power to grant an interest in land) and to support the plenary power of the crown when it has exercised its power to appropriate land within territory Unless the sovereign power is exercised in one of those ways, there is no reason why territory within crown land should not be subject to native title Native title not extinguished by acquisition of sovereignty Concept of Native Title Brenann J: Sufficient to state that Common Law of Australia rejects notion of crown having total ownership and accepts antecedent rights and interests in land possessed by the indigenous inhabitants of the territory These rights and interested burden the radical title of the crown Wik Peoples v Queensland (1996) HC: Facts: Proceedings were brought by Aboriginal peoples who claimed to hold native title. They claimed that their title was not extinguished by the granting of pastoral leases but coexisted with the interests of the pastoral lessees. The Aboriginal peoples asserted that the pastoral lessees did not acquire a right to exclusive possession of the two areas and that, even if they did, it was not the right to exclusive possession but only its exercise that excluded the holders of native title. Issue: Did pastoral leases granted under the Land Act 1962 QLD confer exclusive possession on grantees so as to completely extinguish the native titles of the Wik peoples to traditional lands Held: NO 11