MEANING, PURPOSE AND THE CONCEPT OF

• Sometimes property can change from being to being and vice versa. For example - trees growing on land are real property but once cut down become personal property; an - bricks, mortar and timber are personal property but once affixed to land as a house become real property. The concept of property and its classification:

Thing v interest in a thing

• Property has 2 meanings: - A object, item or thing which is capable of being owned by a person eg: land and a car are each examples of property in this sense. - The proprietary rights (rights of ) to an object or a thing. In other words, the interest that a person has in a thing. We can therefore speak of the ‘property’ (meaning rights of ownership) in the land and the car being vested in a person X.

• Sir William Blackstone defines property as; ‘the sole and despotic dominion which one man claims and exercises ever the external things of the world, in total exclusion of the right of any other indicia in the universe.’

• Property can be divided into two categories: 1. Real property (Realty) 2. Personal Property (Chattels) Common Terms: • Interest: The conventional term for the which a person has in an object. • Ownership: - "The general right of ownership embraces subsidiary rights such as exclusive enjoyment, to destroy, to alienate or to alter, and, of course, the right to maintain, and to resume and recover from other persons” - Knapp v Knapp 1944. - Ownership indicates the relationship between a person and a corporeal or incorporeal legal object. - It confers a bundle of rights to enjoy, use possess, dispose of and alienate a "thing" as well as the capacity to ward of any encroachment on the thing. - Ownership can be limited by other rights but is not dependent on other rights. - Ownership is therefore the subsidiary right that is left when all other interests in the property have been taken away. • : Title is the measure of the strength of an interest. It provides a yardstick to measure the strength of competing claims of interests in property. • Possession: - "Possession connotes a relationship between a person and some material object. It is a relation subsisting in fact. The ‘right’ of the possessor to the chattel arises out of the factual situation" – Button v Cooper [1947]. - There are two necessary elements: Control and intention.

Types of interests in real property - Doctrine of tenure and :

• 2 fundamental doctrines: - The doctrines of tenure - which indicate the terms and conditions (known as services and incidents) upon which land is held. - The doctrines estates -which indicates the duration of a persons interest in the land. • The doctrine of tenure (or tenures) is a system of land holding. • We now hold land directly of the Crown. Technically, we don’t own land but rather own an interest (i.e. estate) in the land. • The tenure (i.e. terms and conditions on which we hold the land) is ‘’ (called socage tenure in feudal times), which means free of services. • The doctrine of estates flows from the doctrine of tenure. • The word ‘estate’ comes from the Latin word ‘stare’, which means ‘to hold’. • There are now two types of estates: - a freehold estate – which is of indefinite duration; and - a – which is of a certain duration. • Freehold: - There are now 2 types of freehold estate: 1. the (also called estate in fee simple); and a) The fee simple is the most absolute form of ownership. The fee simple can be freely disposed of by sale, or will. ‘Fee’ indicates that it is an inheritable interest while ‘simple’ indicates that it descends without qualification. 2. the . a) The life estate is granted to a person for the duration of their life or the life of another person. It can be created by sale, gift or will. The holder of this estate (called the life tenant) is entitled to occupy the land and receive rents and profits. Ownership and possession of land:

• A person can acquire an interest in land through ownership or possession. • Ownership is the stronger interest. • However, a person in possession of the land can defeat the interests of the owner through . This involves maintaining possession and an intention to possess (i.e. excluding all others including the true owner) for a continuous period of 12 years. • The law governing acquiring title through adverse possession is a mixture of and statute. • Common law determines the required nature of possession. • Statute determines the required duration of possession. Statute prescribes that, at the end of the required duration, the documentary owner’s title is extinguished (s 65 Limitation Act 1969 (NSW)).

Co-Ownership:

• Two or more persons can hold concurrent interests in land. The two types of co-ownership are: - joint tenancy; and - tenancy in common. • This is a horizontal division because they own the same interest in the land. • Each joint tenant owns an equal undivided interest in the whole property. • The four unities must exist to create a joint venture. These are unity of possession, unity of interest, unity of title and unity of time. • A feature of a joint venture is the right of survivorship – that is, on the death of one joint tenant their interest automatically passes to the survivors. • Tenants in common do not need to own the property in equal shares. There is no right of survivorship.

Systems of title:

• There are 3 main title systems to land in NSW: • ‘Old system’ title (also called ‘common law’ title) - Applies to all land in NSW granted before 1/1/1863, unless later converted to - Some land is held under old system title. Ownership is traced back to the original grant or a ‘good root of title’. Land is transferred by which are registered. • ‘Torrens’ title - Commenced on 1 January 1863 - Most land in NSW is Torrens title - This includes: • qualified title • limited title • strata title - This is title by registration – i.e. registration cures most defects in title. • ‘Crown land’ title - Mainly applies to rural land - Rights in the above land are also recognised under native title. This involves looking at the and customs of the people who have a connection with the land. Native title can be extinguished. • There are different ways of dividing interests in unit blocks and other subdivisions: • Some are held under company title – which means the company owns the land and each ‘unit owner’ owns shares in the company. • Most are held under strata title. This involves dividing the land and airspace into separate strata units (each owned by the relevant unit owner) and common property (owned by the body corporate). As stated above, strata title is registered under Torrens title.

Legal and equitable interests:

• You can have various legal and equitable interests in land which exist at the same time. • Legal interests are those recognised by the principles of common law and equitable interests are those recognised by the principles of equity. • There are various rules which determine the priority between competing legal and equitable interests in land. • However, it is also necessary to be able to identify when a legal or equitable interest arises. Present and future interests, reversions and remainders:

• Fee simples, life estates and leasehold estates are all present interests because the holder has a right to immediate possession. • There are also future interests - which arise when a person is granted an estate which does not allow immediate possession but allows possession in the future - a is still a presently existing interest, it is just a possession that occurs in the future. • A future interest can be a (when granted by someone else) or a revision (when granted by themselves). • If A holds a fee simple in land and grants B a life estate thens A’s interest is called a . • A reversion is also called a reversionary interest, estate in raven or estate in dee simple in reversion. • A reversion is the interest remaining in a person who has granted away less than the whole of his to he interest in the land. • It is not an estate in possession because A does not have possession. • But it is presently existing estate, carrying with it the right to seisin (possession) at some fire time (when the interest granted away comes to an end). • A reversion can be disposed of by sale, gift or will. • If A holds a fee simple in land and in the one instrument grant a life estate to B and the remainder of A’s interest to C then A cease to hold an interest, B holds a life estate and C’s interest is called a remainder. • REMAINDER: For example, a person, D, gives ("conveys") a piece of real property called "to A for life, and then to B and her heirs". A receives a life estate in Blackacre and B holds a remainder, which can become possessory when the prior estate naturally terminates (A's death). However, B cannot claim the property until A's death. • If A holds a fee simple in land and grants a life estate to B via one instrument and what is left of A’s interest to C via a later instrument then A has transferred it reversion to C. • For example: A grants an interest to B for lift, with remainder to C for life - this results in B holding a present right to possession once B and C have died.

Vested and Contingent Interests: • If A grants B an interest I land which includes an immediate right to possession then we say that B’s interests has ‘vested in interest’ and ‘vested in possession’. • Sometimes an interest in land which includes a future right to possession thence say the B’s interest has ‘vested in interest’ but not ‘vested in possession’. • Sometimes an interest is granted subject to a contingency (eg getting married or turning 21). - Eg: To B if B attains the age of 21 - if that contingency has not yet occurred then we say that B’s interest has not yet vest in interest and not vest in possession. • The rule against perpetuities (state of quality or lasting) is a rule against remoteness of vesting • It imposes limitations on get which have not yet vested by requiring the gift to vest within the perpetuity period to remain valid. - Relevant to drafting wills and trust deeds. • You can also have a continent remainder: To A for life, remainder to B in fee simple if B attains the age of 21.

Distinction between ownership and possession:

• A person has possession of an object at law if he or she has control of it and intends to retain that control. • Ownership and possession can co exist but can also vest in different persons. • Possession confers a right to retain control of an object against any other person except the person who has rights of ownership in the object. • That is, possession is good against all the world except the true owner - (Armory v Delamire 1722).

Armory v Delamire 1722 - A chimney sweeps boy found a jewel and offered to sell it to a jeweller. The jeweller refused to pay the price or return the jewel to the boy. - It was held that the jeweller was liable to the boy for the value of the jewel. - Pratt CJ said that ‘the finder of a jewel, though he odes not by such finding acquire an absolute property our ownership, yet he such a property as will enable him to keep it against all but the rightful owner. Types of interest in personal property:

• Under common law only two kinds of interest have been recognised in person property: 3. Ownership (ie: Absolute ownership); and 4. Possession • Those interests in personal property are legal interest. • It is also possible to create limiteds or successive interests (eg: to X for life and then to Y) in personal property by: - Will; or - Through creating trusts (equitable interests) • In the case of a chattel, the absolute owner can lease the chattel for a term that does not interfere with theatre of absolute ownership but rather limits the owners entitlement to possession by conferring that entitlement on someone else for a specified period.

Characteristics of Property:

• In 1765, Sir William Blackburn defines propert as:

Property is that sole and despotic dominion which one main claims and exercises over the external things of the world, in total exclusion of the right any other individual in the universe.

• The above identifies 3 basic elements in a property right: 5. Dominion: being a bundle of legally enforceable rights associated with control over an object, which rights are concentrated in one or more specific persons. 6. External things: Being tangible things, land, and intangible things. 7. Exclusion: Being the right to exclude others from enjoying those rights or from interfering with those rights. • Property is a matter of law in a sense that it concerns rights which are legally enforceable. • An additional basic element of a property right is the right to transfer the thing. • Frank Snare identified the set of rules which must be present for ownership to arise: 1. A has the right to use P. 2. Others may use P, and only if A consents. 3. A may permanently transfer the rights under 1 and 2 to other specific persons. 4. Punishment rules, which detail way may happen to B if he or she wrongfully interferes with A’s use of P. 5. Damage rules, which require B to pay compensation if D damages P without A’s consent. 6. Liability rules, which specify that A’s use of P result in damage to other then A will be held responsible.

• A M Honore defined 11 elements that may form the basis of a property right: 7. The right to possess – i.e. exclusive physical control. In the case of non-physical things, control means the right to reap the rewards of using the thing. 8. The right to use. 9. The right to determine who may use (also called the right to manage). 10. The right to the value generated by the thing (i.e. the right to income). 11. The right to consume, or destroy (i.e. the right to capital). 12. The right to exclude others (i.e. the right to security). 13. The right to transfer to others (i.e. the power of transmissibility) – either inter vivos (during one’s lifetime) or on death. 14. The right to enjoy indefinitely (i.e. the absence of term). 15. The duty not to use in a manner that interferes with the property or personal rights of others (i.e. the prohibition of harmful use). 16. The liability to have the thing taken away to satisfy debts (i.e. the liability to execution). 17. Rights governing the entitlements of other persons to the thing when present ownership has lapsed (i.e. residuary rights).

Effect of the PPSA:

• In summary, prior to the PPSA, a person’s right to personal property depended on title and possession and you could not receive from a person a greater title to the property than they had. • The Personal Property Securities Act 2009 (Cth) (PPSA) is a federal piece of legislation which seeks to unify the law relating to security interests taken over personal property in Australia. • The PPSA presents a fundamental shift in the law. Under the PPSA, title is irrelevant insofar as priority is concerned, that is, regardless of who holds title to property encumbered by a security interest, priority is determined in accordance with the rules of the PPSA. • In the context of a business transaction, this concept can be illustrated by way of the following example: - Party X is a technology specialist who leases high performance computer systems to small business groups involved predominately in large scale data processing. - Each computer system is worth into the tens of thousands of dollars. - Party X leases four computer systems to Party Y under one commercial lease agreement for a term of three years. - Embedded in the agreement is an option for Party Y to purchase each computer system at a discounted value upon expiry of the lease term. - Party Y, in direct violation of the lease agreement, sells each of the computer systems to a different third party and exhausts the funds received before Party X becomes aware of the breach. - Party X, upon failing to receive rent due on the computer systems, discovers the breach and invests in tracking down their computer systems. - Party X finds all four third parties and brings a legal action against each of them for the recovery of their computer system. - Party X argues that at no point did Party Y have legal title to the goods and thus had no authority to on-sell the computer systems. • Under the pre-PPSA position, in the absence of other facts, this argument would generally stand on grounds that the applies — that is, ‘no one [can] give what one does not have’. Title being a determinative feature of the common law approach to securities law, thus Party X would prevail. • Under the PPSA however, priority is determined not by title but by the Act itself. The first requirement of the Act asks whether the relationship is one governed by the PPSA, that is, is it a security interest or an interest deemed by the Act to constitute a security interest. • Leases for a term of more than one year come within the scope of the PPSA by definition (s 13). However, even in the absence of this, the option to purchase at the end of the lease term gives the lease a ‘security financing’ feel which may be interpreted by the court to constitute a security interest: s 12. • Therefore, assuming the PPSA applies, the PPSA requires secured parties to perfect their security interest either by registering an interest, possessing the collateral (i.e. the secured property), controlling the collateral or through the temporary operation of the statute: s 56.