Basic Concepts

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This topic introduces key themes in the areas of property law and equity:

  • Property:
    • The distinction between ownership in a physical sense (I am holding a pen) to legal ownership, whereby one has the bundle of rights.
      1. Right to use or enjoy.
      2. Right to exclude others.
      3. Right to alienate.
    • The distinction between personal rights and proprietary rights:
      • Personal - enforceable against a specific person.
      • Proprietary - enforceable against anyone in the world.
    • Licenses are contracts which allow a person to use another's land without committing trespass. Licenses confer personal rights and not proprietary rights (which are necessary to sue in others trespass).[1]
    • Numerus Clauses principle - there is a defined list of what sort of proprietary rights one can have (ie leaseholder, life tenant, fee simple).
  • Equity:
    • Equity was created to correct deficiencies caused by the rigidity of the common law.
    • By the power of the royal prerogative, it recognised things the common law didn't and allowed remedies which the common law didn't.
    • Firstly based on conscience, it evolved into a comprehensive and parallel system of law, making use of precedents.
    • Eventually, the existence of two parallel systems caused problems. Today the courts of common law and equity have 'fused' in the sense that they are tried by the same courts and the same judges, in the same room.[2]
      • However, the 'bodies of law' have not fused. Common law issues remain common law issues, and equity remains equity.[3]

This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 1-7 [1.1-1.11] (skim read); 15-23 [1.24-1.31]

Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012, pp. 3-5 [1.1-1.6]; 8-11 [1.8-1.21]

Introduction

[4] The main dichotomy is between property as a physical thing to which various legal rights are attached, and the legal interest pertaining to a physical object. The latter is the current preferred view in legal academia.

The legal meaning of property has three aspects, which is known as the bundle of rights. None of them are pre-requisites – and all of them can be subject to qualifications:[5]

  1. The right to use or enjoy.
  2. The right to exclude others.
  3. The right to alienate.

Right to Use

Self explanatory. This is very fundamental, but can be subject to restrictions such as:

  • Zoning laws and building regulations restricting the use of a fee simple.
  • Restrictions by agreement, such as negative covenants or easements:
    • Negative covenants: a contract between two bits of land (as opposed to people) – the owner of Block A will contract with owner of Block B not to do something with his or her land; even if the land is sold later on, the new owners are still bound by the covenant and cannot build on B until the covenant expires.
    • Easements: definition from the textbook required.

Right to Exclude

In basic terms, the right to prohibit others from using something.

  • This right is protected/facilitated by property torts (i.e. claims for trespass, conversion and detinue).
    • It applies even though a trespass does not interfere with the owner’s enjoyment of his property[6]
    • An exception to this rule is when plane fly over property (at a high enough height).[7]
  • This right is also restricted by agreements such as negative covenants or easements.

Right to Alienate

In basic terms, the right to sell, gift or otherwise assign proprietary rights (selling one’s right, not the thing itself).

  • The extent of one’s right to alienate depends on the nature of one’s interest:
    • Fee simple - biggest interest in land, can sell the rights completely.
    • Leasehold - a leaseholder can only sell the rights that he has (ie, he can only sublet).
    • Life tenant (family & personal trusts: A gives property to B as life tenant; when B dies, their interest in property extinguishes; passes to C the remainderman; if B passes interest to D, when B dies, D’s interest passes to C – called a pur autre vie)
  • S 51 (xxxi) of the Constitution: the Commonwealth can take property on just terms, as long as compensation has been adequate

Rights In Rem and Rights In Personam

[8] When a person has legal rights, they can be either:

  • Rights in personam: rights against a person.
    • For example, rights arising from a contract can only be enforced against the other person in the contract.
    • A license is an example of right which is in personam - because it belongs to a specific person.
  • Rights in rem: these are rights which are assignable and enforceable against the whole world.
    • For example, when one has a leasehold, he has a right to the house which is enforceable against anyone in the world who trespasses, not just the landlord with whom the contract is signed.
    • Problems arise when dealing with shares – right to dividend, right to vote, right to excess capital in case of liquidation, but they look more like rights in personam.

Licenses and Third Parties

[9] A license is a permission for the licensee (license holder) to do an act on the licensor's (person giving the license) land which would otherwise constitute a trespass.[10]

  • A license is really a contract - ie, buying a movie ticket means you enter a contract, and receive a license to watch the movie and not be trespassing.

As mentioned, property rights are enforceable against the whole world whilst licenses are contractual rights that are enforceable against specific persons. However, property rights can often arise from such personal (contractual) rights.

  • Thus, the licensee has some limited property right in the contract.
  • However, this does not confer a full proprietary interest: the correct measure is whether the proprietary interest is independently enforceable against third parties.
  • If the license is so enforceable, it has assumed a concrete proprietary identity.

This is discussed in King v David Allen & Sons Billposting Ltd:

  • A license does not qualify as a proprietary right. This is because it delivers insufficient control over the land. 
  • Only proprietary rights are enforceable against third parties. However, an interest is not proprietary simply because it is enforceable against third parties. 
  • A proprietary interest could have been created through clear wording in the contract as a lease – shows importance of construing the document. 

And in Georgeski v Owners Corporation Strata Plan 49833:

  • A licensee (as opposed to a lessee) does not have a right of possession.
    • Where the licence also has a ‘grant of interest’ (e.g. a ' profit a prendre '[11]), then the licensee may – because of the interest – sue ‘in trespass for direct interference with the subject matter of the grant’. 
    • However, the remedy is based on that interest, not the contractual right.
  • In other words, a license only grants a right in personam which means a licensee can only sue the person who gave him that right if his right is breached. He cannot sue the rest of the world for trespassing etc, (he would need to have a lease, or a right in rem to do that). If one wishes to exclude others, he needs to do it on the basis of an interest.

Numerus Clausus Principle

[12] Landowners cannot simply create new 'types' of rights - if a person receives a type of right, it must be one of the (a ‘closed list’) of established categories (ie, lease, life tenancy etc - cannot create any more 'types').

  • This is in contrast to contract law, which allows parties full freedom in designing the contract per their purposes. Property law, by contrast, is very restrictive, mostly because of its potential to affect third parties.
  • Categories of property law that qualify as an ‘interest’ enforceable as property include:
  1. Possession: fee simple, the life interest, and the leasehold.
  2. Servitudes: easements, profits, restrictive covenants.
  3. Security interests: mortgages and other charges.
  • Notice that things like licenses do not fall within this ambit (no proprietary rights).

Reasons for the restrictive approach to interests in land:[13]

  1. Maximise uses for land (a result of 19th century free market economic climate).
  2. Minimise difficulties for 3rd parties to purchase land (economic reasons).
  3. Protecting the integrity of the ‘science of the law’ and stopping whimsical creation of property rights (systematisation of common law).

Property Rights Do Not Inhere In All Things

Not everything can be owned - there are things over which a person cannot claim property rights. Examples include:

  • Corpses.[14]
  • Spectacles (like a horse race).[15]
  • Human stem cells.[16]

Equity

[17] Common law and equity were brought together under the Judicature Act 1873 (Imp). Before this, equity was a distinct body of law consisting of specific remedies invented by Chancellors to ameliorate perceived deficiencies of the common law.

  • While the common law supposedly existed since ‘time immemorial’, equity had a clear origin and cause.
  • It is necessary to consider its history prior to 1873 in order to ascertain the present scope of its operation. The following is a brief history of its development.

Equity is discussed in the course LAWS1052 - Introducing Law & Justice. To view the discussion from that course, click here (redirect to an article in ).

Medieval Origins

[18] In medieval times, when applicant were unhappy with or unable to enter the common law system (usually because of the technicalities of the forms of action (LAWS1052 - Introducing Law & Justice topic)), they could appeal directly to the King to rule on the base of morality or conscience. This informal practice grew in popularity until it was formally delegated to the Lord Chancellor.

  • Equity remedied things which were technically legal, but unfair. Examples include contracts signed as a result of duress or undue influence, trust relationships which were violated etc.
    • Trusts relationships for example, were not recognised by common law, but were recognised by the Chancellor through equity.
  • Equity had different remedies (as opposed to just monetary damages offered by common law). These were usually an injunction or specific performance, and were possible because the Chancellor was exercising royal prerogative power.
  • Eventually, the equitable jurisdiction developed into a concrete body of law with its own system of precedents.
  • It did not displace the common law - the two systems were operating side by side to correct one another.
  • At the time of the Tudors (16th Century), the convention of drawing Chancellors only from legal backgrounds emerged.

Dispute Between Common Law and Chancery: 1613-16

During the time of the Stuarts and the civil war, Common lawyers believed that equity is too close to the royal prerogative, and were based on whims (arbitrary conscience) rather than sound law.

  • The argument was headed by Sir Edward Coke, then Chief Justice of the Court of King’s Bench, against the Chancellor, Lord Ellesmere.
  • The dispute came to a head in The Earl of Oxford’s case[19] and Courtney v Glanvil (1615). Eventually, James I stepped in to assert the rule, which still stands, that where rules of common law and equity are in conflict, equity should prevail.
  • It was reenacted in the Judicature Act 1873 (Imp) s 25(11), and adopted in all Australian jurisdictions.

Emergence of the Modern Equitable Jurisdiction

Thus, the rules of equity were settled into a rigid system bound by precedent. Equity’s jurisdiction came to include:

  • Property.
  • Contracts.
  • Deceased estates.
  • Procedure.
  • Guardianship & lunacy.
  • Commercial matters.

This created a nightmare for anyone wishing to litigate. Litigants had to go to both common law and equity courts due to their rigid jurisdiction (the courts were physically different courts, in different places in the city/country). This was fixed, to an extent, with the Judicature Act 1873 (Imp), which brought the common law and equity together.

Today, there are three equitable jurisdictions:

  1. Exclusive (exclusive to equity).
    • Trusts and fiduciary obligations.
  2. Concurrent (both equity and common law).
    • Estoppel.
    • Misrepresentation.
    • Cases of overborne will (duress at common law, undue influence in equity).
  3. Auxiliary (equity aids operation of common law).
    • Jurisdiction in aid of common law where common law remedies are inadequate[20].

The Reception of Equity in Australia

[21] The Supreme Court of New South Wales originally had jurisdiction to hear both common law and equity matters, decades before the Judicature Act. However, due to procedural restraints, this was in practice impossible.

  • In 1840, the Administration of Justice Act (NSW) undid this arrangement and provided for the appointment of a judge for equitable matters.
  • Until the Supreme Court Act 1970 (NSW), common law and equity matters were heard in separate courts in NSW.  :*Interestingly, NSW was the last state in Australia to combine common law and equity. However, even though courts can exercise both jurisdictions, the legal bodies have not been ‘fused’.[22]
    • This means that whilst they are tried in the same court, issues are still distinguished as common law issues and equity issues, and only the appropriate remedies can be awarded (ie, no equitable remedies to common law issues).

Maxims of Equity

There are 'maxims of equity', which are broad underlying principles which determine how equitable rules and remedies will be applied, but they are not in themselves equitable rules. However, there are many exceptions to these rules, and the maxims of equity is no longer part of the LAWS2381 - Property, equity and trusts 1 course.

The maxims include the principles that:

  1. Equity will not suffer a wrong without a remedy.
  2. Equity follows the law.
  3. He who seeks equity must do equity.
  4. He who comes to equity must do so with clean hands.
  5. Equity assists the diligent and not the tardy.
  6. Equity looks at intention rather than form.
  7. Equity regards as done that which ought to be done: e.g. gifts.
  8. Equity will not assist a volunteer (i.e. a person who has not paid something).

End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. King v David Allen & Sons Billposting Ltd (1916) 2 AC 54; Georgeski v Owners Corporation Strata Plan 49833 (2004) NSWLR 534.
  2. Judicature Act 1873 (Imp).
  3. Harris v Digital Pulse [2003] 56 NSWLR 56.
  4. Gray & Gray, 'The Idea of Property in Law', in Bright and Dewar eds, Land Law: Themes and Perspectives, Oxford University Press, 1998 in Property Textbook, pp. 4-5 [1.6-1.7].
  5. Property Textbook p. 5 [1.8], quoting Milirrpum v Nabalco (1971) 17 FLR 141, 171.
  6. Bendal v Mirvac Projects (1991) 23 NSWLR 464: the scaffolding of Mirvac’s building was projecting into Bendal’s airspace – Bendal successfully sought an injunction for Mirvac to pay for its airspace.
  7. Baron Bernstein of Leigh v Skyviews and General [1978] QB 479.
  8. Textbook, pp. 8-9 [1.15].
  9. Property Textbook, pp. 15 [1.24].
  10. Property Textbook, p. 9, quoting Thomas v Sorrell (1673) 124 ER 1098.
  11. The right to take away produce from land owned by another. See s 88AB Conveyancing Act 1919 (NSW).
  12. Property Textbook, p. 21, quoting Edgworth, 'The Numerus Clauses Principle in Australian Property Law', (2006) 32 Mon LR 387.
  13. Property Textbook, pp. 22-3 [1.31E].
  14. Hayne’s Case (1614).
  15. Victoria Park Racing and Recreation Grounds v Taylor (1937) 58 CLR 479.
  16. Moore v Regents (an American case).
  17. Equity Textbook, pp.
  18. Equity Textbook, pp. 4-9[1.1-1.14].
  19. [1615] 1 Ch R 1, 6.
  20. For example, Dougan v Ley (1946) 71 CLR 142.
  21. Equity Textbook, p. 11 (1.20).
  22. Harris v Digital Pulse [2003] 56 NSWLR 56.
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