LAWS3111 L1, 2011

LAWS3111 Property A, Lecture 1
Note: Those of us not doing Trusts should do some extra reading to our trusts/equity knowledge up to spec. Chapters 13, 21, and 29 all seem to look at trusts and equitable interests, so they’re probably good starting points.

Case Study 1: Rainwater on Roof/Lake or river on property – do we own the water?

  • Mere entry onto property is not sufficient to create a property right (eg. if I leave a book in your house, you do not become the owner)
  • Product of your labour (I built the roof, I built the water tank – or at least paid for someone else to do it for me) is not sufficient, or you could chop a tree down in someone’s yard and claim that you now own it.
  • The fact that it had no prior owner, and that nobody else has a better claim to it is more likely to be sufficient.
  • In the case of water, common law traditionally held that you had a right to use, but not to diminish the resources (eg. can’t simply drain a lake adjacent to your property)
  • More recently (19th century) the rights were vested in the crown, and the crown granted water licenses permitting specific amounts of usage. Currently controlled under the Water Act 2000
  • Licences sold on the open market, with government keeping sufficient control to allow them to provide subsidised water to households – water being a necessity to live.

Michael McKenzie, 'Water Rights in NSW: Properly Property?' (2009) 31 Sydney Law Review 443

  • Suggests that water rights CAN amount to property, though ultimately it’s aiming for a commercial outcome (sale/trade) rather than a legal one (ability to support rights in court)
  • Questions what are the factors/indicators that make rights into property?
  • Rice Holdings Case (2001) identified some as:
    • Value
    • Renewability
    • Transferability
    • Well defined
    • Stable
  • Also proposes others, including:
    • Exclusivity
    • Divisibility

What are the effects/implications of using land as the cornerstone for property rights as opposed to water?

  • Land – permanence, excludability
  • Water – Fluidity, flexibility – possibly more reasonable/open?

Property can be:

  • Private (owned by an individual/corporation, but rights still subject to statutory limitations)
  • Collective/State property (Managed by a group, but no specific owner)
  • Commons (Owned by no-one. Renowned for tragedy)

Types of property rights (rights ‘in rem’ as opposed to personal):

  • Chattels Real (Land/Realty – see Property B for more info)
  • Chattels Personal (Personal Property – anything that isn’t land)
    • Choses in Posession (Tangible items) – personal goods
    • Choses in Action
    • Documentary – representative of property (eg. share certificate)
    • Pure intangibles – patents, copyrights, etc.

Why is debt a form of property?

  • Has value (eg. if you owe me $50, that debt has a value of up to $50)
  • Is Transferrable (I can give/sell that $50 of outstanding debt to others)

Money as property

  • Store of value (Can retain value after a sale and before purchasing something else)
  • Medium of exchange (Valuable to everyone, so none of the issues involved in barterting where you may not want anything the other person has to offer)
  • Tradable in its own right (Can trade in different currencies, currency futures markets, etc.)
  • Special rules on money, however – treated differently from normal property (eg. bankruptcy rules)

Interests in Property

  • Common law
    • Ownership (greatest interest)
    • Possession (factual control + the intention to exclude)
    • Note: Cannot ‘possess’ intangibles, only own them
  • Equitable Interests
    • Equitable ownership
    • Equitable charges and liens
    • Equity of Redemption
    • Mere equities (eg. right to rescind/recover property if contract rescinded via equity) – personal rights capable of granting proprietary interests

Special factors of Equitable Interests

  • More easily established (fewer formal requirements necessary – eg. no signed contracts)
  • More easily set aside/overridden (can be defeated more easily, particularly if someone else has a legal (common/statute law) interest.

Taxonomy

  • Beneficial Rights: Provide benefits to holders (eg. hiring a car grants you various rights to use it)
  • Security Rights: Ensure/encourage performance of an obligation (eg. pawning property as security for a debt, taking out a mortgage on the house)
  • Managerial Rights – Managing on behalf of others (trustee, storing friend’s property)
  • Remedial rights – ‘mere equities’

What is Property?

  • Definition changes and evolves with society – remains an important legal question
  • Relational – it’s the RIGHT to use a thing, not the thing itself
  • Applies to both tangibles and intangibles
  • One object can have multiple rights with different people holding different ones. If they directly conflict, the stronger right extinguishes the weaker one (eg. book has an owner and a copyright holder – copyright extinguishes the right to photocopy/distribute the books content)
  • Property can have social implications (eg. tragedy of the commons)
  • Possession is NOT synonymous with ownership

Identifying Property

  • Bundle of rights approach: Includes various elements, none of which are necessarily essential, such as:
    • Enforceability against others
    • Physical existence
    • Alienable
    • Transferrable
    • Of value

Yanner v Eaton [1999] HCA 53

  • Aboriginal man caught and ate juvenile crocodiles with a spear – traditional hunt, with totemic tribal significance
  • Charged under Fauna Conservation Act 1974 for hunting without a license
  • Charges failed, due to the existence of native title rights
  • S 7(1) held that all fauna was the ‘property of the crown’, but the HC said it was ‘relational and elusive’, a ‘bundle of rights’, and that the term ‘property’ as used there didn’t have its traditional legal definition, as that would contradict the rest of the act – since it’s difficult to identify any form of beneficial rights over wild animals.

Property: The Right to Exclude

  • Traditional definitions are circular, extrapolating from what is accepted as being property to define new property
  • Simpler to define it using control and excludability
  • Property rights tend to only be limited by unexcludability or morality/necessity (Gray (1991) 50 Cambridge Law Review 252)
  • The right to exclude is necessary, and perhaps even sufficient, to define property (Gray)
  • Mossof takes it further – stating that the rights to exclude, use, AND dispose are all required

National Provincial Bank Ltd v Ainsworth [1965] AC 1175

  • Husband left wife, wife granted custody and rent free maintainence in home
  • Husband used home as collateral, defaulted, bank tried to seize it
  • Held that the wife had no property rights in the home – they were not ‘definable, identifiable, able to be assumed by third parties and stable’ – too vague and poorly defined to bind third parties
  • Note: Decided at a time when deserted wives had little or no interest in “their husband’s property” – merely equitable rights that were easily discarded. Obviously the circumstances could not possibly occur in this day/age

Case Study: Debt as Property

  • Debt is assignable, transferrable, and item of value, and traded on markets
  • It’s less valuable than money – commonly coupled with some form of security interest when borrowing money (eg. chattel mortgage – bank owns the chattel, borrower retains possession, and right of redemption when repaid)
  • Traditionally an illiquid asset – hard to convert to currency quickly
  • Third party markets can buy/sell debt to enable it to be converted quickly
  • Securitisation – process by which security backed debt is turned into a securitised product/asset for division and resale. Attractive to investors looking to diversify (eg. Own 1% of 100 mortgages rather than owning 1 Mortgage)
  • More complex it becomes, the more difficult to determine the actual value of the debt – can be wholly illusory if the debtor/security turns out to be worthless (eg. housing bubble bursting)