COURSE STRUCTURE 4 TOPIC 1: (A) THE CONCEPT AND FUNCTION OF PROPERTY AND (B) INTRODUCTION TO REAL PROPERTY 4

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1 COURSE STRUCTURE 4 TOPIC 1: (A) THE CONCEPT AND FUNCTION OF PROPERTY AND (B) INTRODUCTION TO REAL PROPERTY 4 Recurring Themes 4 What is Property? 5 Difference between contractual and proprietary rights 5 Rights usually associated with property 5 Variable meaning of property 5 Contractual v Proprietary rights 6 Requirements for creation or transfer of a (particular) proprietary right 7 Taxonomy of property interest 7 Real Property (LAND) 8 A) Feudal Property (Previously ) 8 Decline of tenure 9 B) Capitalist Property (Today ) 9 C) Doctrine of Tenure and Native Title 9 Why recognize Native Title??? 10 Native titlemabo v Queensland (No 2) 10 D) Formalities for Creating/Transferring Interests in Land 13 Legal and equitable interests Chambers Continue formalities for creating/transferring interest in land 14 E) Characteristics of Old System and Torrens Title 20 Old System title 20 Torrens title 20 Doctrine of Fixtures 21 TOPIC 2 CHOSES IN POSSESSION Taxonomy of Personal Property 25 A) General Law classification of chattels personal 25 B) Personal Property Securities Act Taxonomy: PPSA s 10 definitions Identifying legal interest in choses in possession 26 A) Ownership 26 B) Possession Engaging in dealings in choses in possession 28 A) Concept of delivery: Games Motor Centre 28 B) Transferring ownership through losing and finding 28 Rights and obligations of the finder and occupier 29 C) By gift: Inter Vivos 29 3 essential elements of a valid gift (in absence of deed or declaration of trust): 29 D) By Gift: Donatio mortis causa 30 E) Transferring ownershipby sale (under Sale of Goods Act 1923) 31 i) Is the contract a contract for the sale of goods? 31 ii) When does property pass under the contract of sale? (ss2125 A) 33 F) Transfer of possessionby bailment 36 i) When do I have a bailment? 36 ii) Is there a subbailment? 38 1

2 ii. Extent of liability of a bailee 39 TOPIC 3 CHOSES IN ACTION 40 A. Property that cannot be dealt with Bare rights to litigate 40 Exceptions: Contractual Prohibition on Assignment Personal Service Contracts Public Pay 44 B. Equitable choses in actionà Trust 44 Creating a Trust: Requirements Certainty of Intention Certainty of Subject Matter 45 Right of Beneficiary à Proprietary or Personal Right? 45 A) Trust v Debt 46 B) Trust v Contract 47 a) Contracts for the benefit of 3 rd party 48 b) Trust for benefit of voluntary covenants 49 C) Trust and equitable charge 50 D) Trust and Agency 50 C) Equitable Chose in Actionà Succession: Livingston Rights 52 D) Bankruptcy 54 TOPIC 4 ASSIGNMENT AND DISPOSITION OF INTEREST Legal Interest in Legal Property 55 Assignment of choses in action Equitable interest in Legal Property 55 a) For Voluntary Assignment 55 b) For Value Assignment 57 i) Immediate consideration 58 ii) Promise to pay consideration 58 Failed assignment of legal choses in action Equitable Property 60 a) Declaration of trust 60 b) Agreement to create trust 61 c) Assignment in equity 61 d) Future Property 65 i) In Law: Cannot assign future property 65 ii) Equity: Future property for value can be recognized 67 TOPIC 5 (A) PRIORITY REGIME Priority rules under the Sale of Goods Act 1923 (NSW) 69 a) Estoppel exception 70 b) Sale by a mercantile agent s 26 (2)(a) 71 c) Sale under voidable title s d) Seller in possession s 28(1) 72 e) Buyer in possession: s 28 (2) General Law Priority Rules 74 2

3 General Law Priority Rules alternate ordering of the rules 75 A) Prior equitable interest v later legal interest 75 B) Prior mere equity v later equitable interest 77 C) Prior legal v subsequent legal 77 D) prior legal v subsequent equitable 77 E) Prior equitable v subsequent equitable 78 TOPIC 5 (B) COMMERCIAL DEALING AS SECURITY INTERESTS OVER PROPERTY Does a Security Interest exists? 81 A) An in substance security interest (s 12 (1)) 81 B) An in substance security interest (s 12 (2)) à confirms relevant example of s 12 (1) 82 C) A deemed security interest (s 12 (3)) Nature of security interest When is a security interest effective? 83 A) Attachment ( s 19) 83 B) Enforceability against 3 rd party (s 20) 83 C) Perfection (s 21) 84 3

4 Course Structure MID SEM AND FINAL EXAM: Problem based and open book LEVEL A: Nexus between physical nature of the subject of the property right and substantive law Topic #1: Land constitutes territory of a political or cultural community (doctrine of tenure; native title) enduring (doctrine of estates) attachment of things (law of fixtures) [vertical as well as horizontal boundaries (airspace and subsoil trespass etc): not examinable] Topic #2: Choses in possession (goods, chattels) primacy of possession (delivery; bailment; security) can be lost and found [can be joined/mixed/changed (accession; confusion; specification) not examinable] Topic # 3: Choses in action (intangibles, e.g. debt/shares) lack of physicality crossing the personal/proprietary membrane emphasis on assignability unassignable choses in action: public policy (e.g. right to litigate/some personal rights) Level B: Topic #4: Assignment and disposition of interests differing formalities for creation and transfer of interests in land, choses in possession and choses in action (some material considered in Topics #1 and #2 nuances within categories (legal v equitable; voluntary v value) Level C: Priority of interest and interests as security interests Topic #5: how do we decide which interest has priority when inconsistent interests have been created? (Topic #5A) when is the purported creation of a personal property security interest effective? (Topic #5B) Topic 1: (A) The Concept and Function of Property and (B) Introduction to Real Property Recurring Themes 1. Requirements for the creation or transfer of Proprietary Interest a. Essential/Substantive requirement: Intention of grantorà has grantor intended to vest in grantee a particular bundle of property rights (defines what the proprietary interest is) b. Formal requirements: Whether or not law requires the intention of guarantor to be manifested in a particular form, e.g. particular words/documents 2. Legal interest (recognized by CL) vs. Equitable interests (recognized by equity courts) 3. Concept of possession : you possess something if you have the ability to exclude others from it, and you manifest intention to exclude others from it 4

5 What is Property? Property: The relationship between the owner of the property and the subject matter of the property right. Property is a right not an object Because it is a right, it is a relationship between people. It is a relationship between the owner and other people (exclude them from interfering) Difference between contractual and proprietary rights Contractual rights o Sphere of enforceability: Parties to the contractà promise can enforce right against promisor (doctrine of privity) o Potential content: Range of contract are virtually endless (except for those that are illegal/against public policy) Property rights o Sphere of responsibility: Owner can enforce right against the whole world. o Potential content: Rights arising only from Common Law (occasionally altered by statute) o Numerous clausus (Closed class of proprietary interest) But role of equity in bridging the divide o Equity regards as done that which ought to be done o Lysaght v Edwards; Walsh v Lonsdale Rights usually associated with property Characteristics of property à first two essential characteristics separating from personal rights, rest overlapping indicia not set or conclusive. o Enforceability: generally against other persons in society, the right not to interfere with your property and your obligation not to interfere with theirs o The Existence of Some Thing: must relate to things which are separate and apart from ourselves o Alienability: can be sold or given away to others o Excludability: ability to exclude others from making use of the thing subject to the right o Value: not always necessary. o Transferrable/assignable: is it personal to right holder or can be transferred to another? o Possession: or physical control in re corporeal hereditaments o Enjoyment and use: property rights are use rights but not necessarily vice versa just because you have the right to enter a national park you don t own Economic justification for property o Efficient allocation of resources (measured by willingness to pay) and so maximize total wealth of society o Right to use and exclude provide incentive to put resources to their most productive use o Right to alienate allows resources to move to more highly valued uses through mutually beneficial exchange However, property rights can vary from context to context, depending upon the ends we want property to serve Variable meaning of property Yanner v Eaton (1999) 201 CLR 351 Quotes: The word "property" is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, "property" does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of "property" may be elusive. Usually it is treated as a "bundle of rights.... 5

6 Facts: "Property" is a term that can be, and is, applied to many different kinds of relationship with a subject matter. It is not "a monolithic notion of standard content and invariable intensity".... Because "property" is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter. To say that person A has property in item B invites the question what is the interest that A has in B? The statement that A has property in B will usually provoke further questions of classification. Is the interest real or personal? Is the item tangible or intangible? Is the interest legal or equitable?... (Gleeson CJ, Gaudron, Kirby and Hayne JJ, [17], [19] [20] ) D was member of aboriginal tribe. He hunted and killed 2 juvenile estuarian crocodiles. He was charged under Fauna Act for hunting sans license/certificate under the Act D said s211 of Native Title Act applied. Law doesn t restrict native title holders from carrying out a class of a class of activities sans permit. P said native title extinguished in face of Fauna Act. D said Fauna Act created legal regime inconsistent with rights of native title holders in Queensland Judgment Property is bundle of all rights, saying that the Act makes property belong to the Crown doesn t mean anything in itself. Property doesn t equal ownership. It can also mean any of the lesser sets of rights. Ownership is the biggest bundle of right (i.e. it is a grouping of every possible right/privilege) Here, property conferred on Crown is not full, beneficial or absolute ownership o Difficulty in identifying fauna owner by Crown (migratory birds passing) o Difficulty defining full beneficial or absolute ownership in relation to fauna Property here not constantly exclusive in like with private property. The sections in question fall short of conferring complete ownership on Crown: o Just rights to possession AND o Right to collect royalties off fauna taken o Right to prohibit taking except where taker has license Contractual v Proprietary rights King v David Allen and Sons, Billposting Ltd [1916] 2 AC 54 (*Rights need to fall into one of the recognized categories of rights) Facts: King owned land on which a picture theatre was to be erected. King agreed with David Allen and Sons, Billposting ( Billposting Company ) that the Company would have the sole right to affix posters and advertising on the walls of the proposed theatre for a period of 4 years for a specified yearly payment. Subsequently King leased the land to a third party (Lessee). Under the lease the Lessee was obliged to erect a theatre, which it did. The lease did not refer to the agreement between King and the Billposting Company. When the theatre was erected the Billposting Company attempted to post their bills on the wall of the theatre, as contemplated by its agreement with King, but the Lessee refused to allow this. The Billposting Company sued King for breach of contract. King unsuccessfully argued that the agreement with the Billposting Company created an interest in land that was enforceable against the Lessee and therefore that King was not in breach of the agreement. Judgment: The agreement between King and the Billposting Company created a license; it did not create an interest in the land. (Lord Buckmaster LC, 60; Earl Loreburn, 62) There is a contract between [King and the Billposting Company] which creates nothing but a personal obligation. It is a license given for good and valuable consideration and to endure for a certain time. But I fail to see...that there is any authority for saying that the document creates rights other than I have described.... [I]t is 6

7 unreasonable to attempt to construct the relationship of landlord and tenant or grantor and grantee of an easement out of such a transaction... Lord Buckmaster LC, 61) The agreement contained an implied term that King would not disable himself from carrying out his contractual obligation. King breached that condition and was liable in damages to the Billposting Company. (Earl Loreburn, 62) N/B: Licenseà right to perform an act which would otherwise be unlawful. Only binds grantor/grantee No proprietary interest because a) Easement: Right must benefit the land not the personà Not in this case; b) Lease: must have right to exclusive possession over the land Requirements for creation or transfer of a (particular) proprietary right 1. Essential/substantive requirements (what package of rights has the grantor/transferor intended to create in the grantee/transferee?) a. Fee simple à exclusive possession forever b. Life estate à exclusive possession for duration of measuring life c. Lease à exclusive possession for certain term d. Easement à 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. I own building on my land, but I need a pathway from your land to enter my land) e. Profit a prendre à right to enter servient land and remove the soil or its natural produce f. Chattel ownershipà exclusive possession forever g. Bailment of chattel à delivery of exclusive possession with an obligation to redeliver 2. Formal requirements a. How must that intention be manifested? b. E.g. must a document be used; if so, what type; is a particular form of words required Taxonomy of property interest Property Real Property (Interest in land, other than lease) Personal Property (everything else) Corporal Hereditaments (e.g. fee simple) Chattels Real (Lease of land) Chattes Personal/ Pure personalty (other than land) Incorporeal Hereditaments (e.g. easement) Chose in possession (e.g. car, book) Chose in action (e.g. debt, copyright) **Hereditament: Descendants to heir; Corporal: exclusive right 7

8 Real Property (LAND) Doctrine of tenure All land is owned by the Crown. The Crown acquired ownership when it gained sovereignty over the land. Crown grants estate, and in return, tenant has to perform certain services for the Crown (History below) o Nature of Feudal Services Satisfaction of Human needs Security Knight service Splendour Serjeanty Soul Frankalmoign Sustenance Socage o Crown grant land to tenant in Chief, who will grant it to Mesne Lord, who will then grant it toz tenant in demesne (1) who can pass it to tenant in demesne (2) with consent [substitution] The land law of England is based on the doctrine of tenure. In English legal theory, every parcel of land in England is held either mediately or immediately of the King who is the Lord Paramount; the term tenure is used to signify the relationship between tenant and lord..., not the relationship between tenant and land.... It is arguable that universality of tenure is a rule depending upon English history and the rule is not reasonably applicable to the Australian colonies. The origin of the rule is to be found in a traditional belief that, at some time after the Norman Conquest, the King either owned beneficially and granted, or otherwise became the Paramount Lord of, all the Land in the Kingdom. It is not surprising that the fiction that land granted by the Crown had been beneficially owned by the Crown was translated to the colonies and that Crown grants should be seen as the foundation of the doctrine of tenure which is an essential principle of our land law. It is far too late in the day to contemplate an allodial or other system of land ownership. Land in Australia which has been granted by the Crown is held on a tenure of some kind and the title acquired under the accepted land law cannot be disturbed. Mabo v Queensland (No 2) (1992) 175 CLR 1, (Brennan J) Doctrine of Estate A subject could hold land only as a tenant, directly or indirectly, of the Crown.... The estate which a subject held in land as tenant was itself property which was the subject of ownership both in law and equity. The primary estate of a subject, the estate in fee simple, became, for almost all practical purposes, equivalent to full ownership of the land itself. Nonetheless the underlying thesis of the English law of real property remained that the radical title to (or ultimate ownership of) all land was in the Crown and that the maximum interest which a subject could have in land was ownership not of the land itself but of an estate in fee in it. The legal ownership of an estate in land was in the person or persons in whom the legal title was vested. Under the rules of equity, the legal estate could be held upon trust for some other person or persons or for some purpose. Mabo v Queensland (No 2) (1992) 175 CLR 1, (Deane and Gaudron JJ) Whereas the doctrine of tenure recognised that a number of persons could have a proprietary interest in the one piece of land at the same time, by relying on duration, the doctrine of estates allowed for the creation of successive interests, present and future, in the same piece of land. In essence, 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. Western Australia v Ward (2000) 170 ALR 159 (FCA), (North J) Types: o fee simple o fee tail (extinct in NSW: Conveyancing Act 1919, ss 19, 19A). o life estate o contrast other interests (no exclusive possession): e.g. lease, easement, profit a prendre A) Feudal Property (Previously ) CB Macpherson, The meaning of property Tenant s right to the land is conditional on performance of social obligation Limited (concurrent interests) 8

9 Not freely alienable (need consent from your Lord to transfer) Link between property and vision of a proper social ordering; entrench power in particular families Decline of tenure 1. Statute of Quia Emptores 1290 Allow tenants to transfer their interest in land without the consent of their Lord Prevents further subinfeudation (Mesne Lordà Tenants) Imperial Acts Application Act 1969 (NSW), s 36 o Land held of the Crown in fee simple may be assured in fee simple without licence and without fine and the person taking under the assurance shall hold the land of the Crown in the same manner as the land was held before the assurance took effect. 2. Tenures Abolition Act 1660 Abolished most feudal incidents (i.e. services) Conversion of knight service to socage tenure [later: quit rents] Imperial Acts Application Act 1969 (NSW) s 37 o All tenures created by the Crown by way of the alienation of an estate in fee simple in land after the commencement of this Act shall be taken to be in free and common socage without any incident of tenure for the benefit of the Crown. o i.e. Tenant no longer owe any obligations to the Crown. Owe fees etc to the Crown not as owner of the land, but merely because statute requires so, 3. Abolition of Crown s right of escheat Formerly Probate and Administration Act 1898 (NSW) s 61B(7) o In default of any person taking an interest under ss (2) to (6), the estate shall belong to the Crown as bona vacantia, and in place of any right to escheat. Succession Act 2006 (NSW) s136 o If an intestate dies leaving no person who is entitled to the intestate estate, the State is entitled to the whole if the intestate estate. B) Capitalist Property (Today ) Unconditional on performance of a social function Unlimited interest (no one else above you in the chain, you have substantive property right) Freely alienable rights Land ownership is receptive to allocation by market (purely economic) C) Doctrine of Tenure and Native Title Mabo v Queensland (No 2) (1992) 175 CLR 1 Mabo s case can be seen as an extension of the decline of the doctrine of tenure. HC rejects notion that native title was extinguished because of the doctrine of tenure. Recognition of the radical title of the Crown is quite consistent with the recognition of native title to land, for the radical title, without more, is merely a logical postulate required 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 the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown s territory). Unless the sovereign power is exercised in one or other of those ways, there is no reason why land within the Crown s territory should not continue to be subject to native title. It is only the fallacy 9

10 of equating sovereignty and beneficial ownership of land that gives rise to the notion that native title is extinguished by the acquisition of sovereignty. (Brennan J, 5051) o Conclusion: The fact that Crown has sovereignty over the land doesn t gives it beneficial ownership of the land. Native title can be extinguished by the Crown in its sovereignty, but mere acquisition did not extinguish native title Why recognize Native Title??? To refuse to recognize native title would destroy the equality of all Australian citizens before the law. The common law of this country would perpetuate injustice if it were to continue to embrace the enlarged notion of terra nullius and to persist in characterizing the indigenous inhabitants of the Australian colonies as people too low in the scale of social organization to be acknowledged as possessing rights and interests in land. (58) Equalize rights of inhabitants of settled and conquered colonies (57) Native titlemabo v Queensland (No 2) Meriam people occupied the Murray Islands (Mer, Dauar & Waier) long before European contact 1879: Islands annexed to Colony of Queensland 1982: plaintiffs sought declaration that Meriam people held native title over Islands 1985: Queensland enacts the Queensland Coast Islands Declaratory Act 1985 (Q): following their annexation in 1879 the Murray Islands were vested in the Crown in right of Queensland freed from all other rights, interests and claims. Mabo (No 1): HCA held that if native title existed at the time of the enactment of the Racial Discrimination Act 1975 (Cth), the Qld Act was invalid to the extent that it purported to extinguish that native title. Mabo (No 2): did native title exist at time of enactment of the RDA? o Queensland argument: NT did not exist at the time of enactment of Racial Discrimination Act because it has been extinguished when the Crown applied sovereignty (English doctrine of tenure> William the Conqueror obtained radical title and beneficial titleà ownership of the land) o Judgment: It is sufficient to state that, in my opinion, the common law of Australia rejects the notion that, when the Crown acquired sovereignty over the territory which is now part of Australia it thereby acquired the absolute beneficial ownership of the land therein, and accepts the antecedent rights and interests in land possessed by the indigenous inhabitants of the territory survived the change in sovereignty. Those antecedent rights and interests thus constitute a burden on the radical title of Crown. (57) Under Australian law, radical title does not automatically confer beneficial title of the land, native title survived as a burden on the radical title of the land. o Attributes of Native Title (Brennan J) Vary from context to context depending on what the laws/customs of the particular indigenous group of people are. 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. The nature and incidents of native title must be ascertained as a matter of fact by reference to those laws and customs. (58) However, native title cannot 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. (61) Subject to being extinguished by an interest granted by the Crown o Requirements for Existence of Native Title (Brennan J) Where a clan or group has continued to acknowledge the laws and (so far as practicable) to observe the customs based on the traditions of that clan or group, whereby their traditional connexion with the land has been substantially maintained, the traditional community title of that clan or group can be said to remain in existence.... However, when the tide of history has washed away any real acknowledgment of traditional law and any real observance of traditional customs, the foundation of native title has disappeared. A native title which has ceased with the 10