Part I - Common Law Property PROPERTY – In law, property is the legal recognition attributed to people with respect to a thing; i.e. a right. Blackstone defines property as: “That sole and despotic dominion which one person claims and exercised over the external things of the world in total exclusion of the right of any other individual in the universe.” Blackstone describes property not as a thing, but the exercise of a “dominion”. This definition is limiting on the basis that it considers property as being claimed by a single person. Also, what things can be the objects of property? What about things internal to human conscience – like intellectual property? The notion of total exclusion suggests that subjects of the right are isolated; this is a claim about what we can do with things to which we have a property right. A person does not always have sole ownership of property, since an eminent title may exist. Private property may be rationalized for reasons of: Economic maximization (“tragedy of the commons”, reward for research and development/input of labour vs. who could use the property to its most efficient state); Establishes boundaries around things, to avoid uncertainty of tender, which could lead to violence; Recognition of the acquisitive nature of the human personality; God has recognized the fundamental nature of property; Private property is related to autonomy or freedom of the person. People will express themselves through the material world – which depends on private access over things in the world. We have to consider the limits of the reach of the notion of property. Some things are not property either because they are inherently incapable or being appropriated or commodified or because they should not be appropriated due to ethical questions. For example in International News Services v. Associated Press, the court held that news (the words of the newspaper) was not susceptible to appropriation under the first category. International News Services v. Associated Press Reasoning: Knowledge of the facts of events in the world is not protected by copyright law. The news lacks the element of exclusivity, which denies the possibility of appropriation by a person. The addition of labour and capital is not enough to make an object property. Had the court granted an injunction in this case because news is property, the news could be copyrighted and made exclusive. Perhaps, nothisng is inherently incapable of appropriation; rather, the law refuses to recognize the possibility of appropriation. The legislature must determine whether the news represents property. Caratun v. Caratun (1992) Ont. C.A. Facts: A marriage breaks up, and the wife claimed that her husband’s dental license represents part of the marital property. Issue: Is the license property? Held: No. Reasoning: In order for something to be property, it must be transferable and alienable. A license is extremely valuable, because the husband can obtain great benefit. However, the court can award support based on likely income and need. The license was produced as a result of personal efforts by the licensee. Work to be performed in future does not qualify as assets for division. The license is worthless if not used by the licensee. The law cannot consider the time and effort expended into obtaining the license as part of the creation of property. Instead, it must treat potential earnings as a result of employment as a consideration. Therefore, the solution of a constructive trust does not work, because the license is not property (and therefore the court required a one-time payment instead). Rationale: A professional license does not constitute property. The court had to find an equitable solution to the problem. The plaintiff was entitled to compensation that included costs related to lost opportunity. Note that courts have also held that pension is property and therefore those assets are divisible, per Clarke v. Clarke. Victoria Park v. Taylor (1937) Australian High Court Facts: The owner of a racecourse claimed that his neighbours interfered with his property right. One neighbour built stands to view the races. Another provided commentary and another broadcast the race. Issue: Was the course entitled to a legal remedy? Are there property rights to a spectacle that are open to public view? Held: No. Reasoning: The owner made three claims to protect its property: 1. Incursion onto the claimant’s property - The viewing amounted to a nuisance or an unlawful interference with the spectacle, 2. Taking the claimant’s property - The spectacle belongs to the claimant and therefore, by broadcasting it, they are taking the property, 3. Misuse of the defendant’s property - The neighbours are unnatural users of their own property to benefit from the racecourses. The neighbour has the prerogative to build a higher fence to make the course more exclusive. The law could have made it exclusive by granting the injunction. This may be problematic, by taking property rights too far toward the protection of private interest by interfering with what is commonly accessible. Rationale: A person can only claim a property right to something that is appropriable. Analysis: Gray explains that since the spectacle was available to all persons, it must be “common property”. The “owner” cannot exclude others from enjoyment. MacPherson explains that common property means that no one is excluded.1 Moore v. Regents of the University of California We can consider the appropriateness of self-ownership and ownership of others or parts of others. In Moore v. University of California, the plaintiff wanted a property interest in his cell line. Moore sued under the TORT OF CONVERSION for return of the cells or its value (but a successful claim requires a personal right in the object taken) – Moore is deprived of the economic rewards generated from his cell line. Moore could sue on the basis of fiduciary obligation or tort of battery (lack of consent), but not under conversion. The Court of Appeal treated the cells as “objects” over which Moore had dominion. This decision is consonant with the principle that people are in possession over their bodies (as expressed by the common vernacular). The Supreme Court of California held that based on Locke’s “labour added” theory, the cell line belonged to the university. The patient loses control over his cells once they leave his body. Both holdings make claims to human dignity. The Supreme Court of California held that it is an affront to human dignity to consider parts of the human body as property. The state criminalizes possession of those parts. There is also a danger if the courts accept the language of control and ownership of body parts, because this imports a market-model when people’s bodies are at issue. However, consider the case of a bloodsoaked handkerchief. Who owns the blood from a dead person? Without recourse, a prior possessor may face an attack for that object (i.e. social order argument). Who can exercise a property right vs. who is entitled to exercise that right. The person who is dead may have had a proprietary right in the blood. Now that the person is dead, the estate would have the right. Perhaps the state has a right to the property, or the owners of the handkerchiefs (since This can lead to the “tragedy of the commons.” If property belongs to everyone and no one, then no one will regulate the resource and the property can become overused. Whereas “state property” is held on behalf of everyone but is regulated by the state. This can avoid the tragedy, if property is properly managed. 1 they exercise their labour or initiative to acquire a right, or through artificial accession). Classification of Property The major division in the common law, as in the civil law, is real property (realty) and personal property (personalty). Real property was the subject of a real action, which meant that the action could lead to the recover of the object itself.2 A personal action does not necessarily result in the recovery of the object. Unlike the civil law, ownership in the common law is not absolute in its application to real property, as the state has the highest form of ownership (“eminent domain”). Real property is divided into corporeal and incorporeal hereditaments. Incorporeal hereditaments are not tangible; they are akin to “servitudes” in the civil law. A CHATTEL is the common law term for movable property. A CHATTEL REAL is a leasehold in land. PURE PERSONALTY is also divided into CHOSES IN POSSESSION, which are tangible movables, while CHOSES IN ACTION, which are not tangible.3 The common law is complicated by the nature of ownership in the common law. In this system, two kinds of ownership exist: legal and equitable. Additional Notes: _______________________________________________________ _______________________________________________________ _______________________________________________________ _______________________________________________________ _______________________________________________________ _______________________________________________________ 2 For example, an heirloom is an example of real property, while a lease in land is personal property. Today, the court has obviated the distinction between real and personal actions. 3 A share, like money, is a chose in action. It represents a debt owed by a corporation or a bank. The right holder has a right of action against the holder. Fixtures and Realty A FIXTURE is a chattel that by virtue of becoming annexed has lost its character as personalty and has become realty. Biss v. Saskatchewan Government Insurance Office (1981) Facts: The plaintiff filed an insurance claim for damage to a pool tarp. The defendant claimed that the tarp was either a fixture, or “outdoor equipment” per the insurance contract and therefore not covered. Issues: Was the tarp a fixture? Holding: No. Reasoning: The following test is used to assess whether a thing is a chattel or a fixture (re Holland v. Hodgson): Is the thing attached to the ground (is it a fixture)? 1. Articles attached to the land by their own weight are presumed not part of the land, unless the circumstances show that they are intended to be part of the land. 2. Whereas, an article which is affixed to the land is presumed to be part of the land, and the onus is on the person claiming it is a chattel to establish it as a chattel. 3. Assuming that the object is attached, to overcome the presumption in number 2, the court will consider the circumstances that show the degree and purpose of annexation (objective inquiry). 4. Assuming that the object is not attached, to overcome the presumption in number 1, the court will consider the degree of “annexation” as opposed to “attachment”, and the purpose of the object. Is the object on the land for the fulfillment of the object as a chattel or land? The tarp was attached for a temporary purpose and therefore it is covered. The degree and object of attachment rebutted the presumption. Rationale: Where the degree of annexation is temporary and limited, the object continues to be a chattel. Royal Bank of Canada v. Beyak et al. (1981) Facts: The mobile home in question has a deck, it is resting on blocks, it is connected to a septic tank, it is landscaped, and it has access to power. Issues: Is a mobile home a chattel? Can Royal Bank recover its security for the chattel mortgage? Holding: Yes, when it lacks the degree of attachment to the land. Reasoning: The mobile home lacks a foundation, which represents the connection to the ground. The mobile home was not placed on the ground for permanent use, and the owner of the land and trailer were different. The trailer was only attached to the ground by weight. Addition to the trailer was intended to make the trailer more usable as a mobile residence, but it did not intend to make the trailer part of the freehold. Rationale: A mobile home is a chattel unless attached with permanence to the ground. Critique: The circumstances in this case may have influenced the judge’s decision. Since Royal Bank had a security in the mobile home as a chattel, the judge held that the mobile home was a chattel to realize the security. Chelsea Yacht & Boat Co. Ltd. v. Pope (2001) Issues: Is a houseboat a chattel or a fixture? Holding: No. Reasoning: The houseboat is a converted D-Day landing craft placed inside a barge and is attached to the wall of the river by hooks and to the bed of the river by an anchor. The boat rests on the land at low tide. The court applies the Holland test and determines that it is a chattel. The court equates the boat to a trailer – which rests by its own weight on the ground. A houseboat, the court claims is not a dwelling-house and therefore cannot be the object of a lease. Rationale: Temporary attachments to the land that can be easily removed makes the object a chattel not a fixture. Critique: The nature of the difference in ownership of the land is different. Presumably, the yacht is a fixture to the bed or the wall. If the boat becomes a fixture to the land, the Chelsea would lose ownership, because the land-owner – the state – would own the fixture. The parties treated the boat as land in the tenancy agreement, since they signed a tenancy agreement for real property. The court, however, rejects this argument. The terms of the agreement could not create the terms of annexation. Intention can only be inferred based on the objective realty of the attachment (condition #4). This is inconsistent with Canadian authority, see North York below. North York Hospital Foundation v. Armstrong (2004) Facts: The owner of the land and immovable above are different. Issues: Can the parties agree that a fixture ordinarily is a chattel? Can the parties agree that the owner of the fixture and land is different? This seems to contradict the principle as articulated in Chelsea Yacht. Holding: Yes. Reasoning: The parties have agreed by contract that the buildings are not considered part of the estate. The Kiwanis test considers this when: 1. There must be express intention and agreement, 2. The contract must give the tenant complete control over the house without interference with the use or enjoyment, 3. The tenant has the right to remove the house at the end of the term. Rationale: The parties in contract can render a construction on realty, personalty, for the purpose of separating ownership. Perhaps the parties in contract can treat a fixture as a chattel and viceversa in a private agreement. Parties cannot affect the rights of those not in privity of contract. Once, however, a third party is introduced, the objective test applies (see Ziff at 107). North York governs Ontario law, not Chelsea Yacht. Third parties may not be aware of the contractual arrangements of the parties in contract. Additional Notes: ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ Personal Property and Possession At the root of the concept of possession are the concepts of: 1. 2. animus possidendi (intention to possess and therefore, the intention to exclude others, see Keefer), and factum (physical control). Possession is an important aspect in the law. Recall Carol Rose’s article: a fox is res nullius, and two people compete for occupation of the fox – the person who is about to catch the fox, or the person who shot it? Possession can be the origin of property rights (simply by taking possession). A possessor can displace a title-holder through adverse possession (acquisitive prescription). The law can vindicate possessory rights; it is an independent basis for property rights. Why give recognition to mere possession? There is an argument for efficient use of resources, if others do not use property. Additional rights provide support of the state to avoid conflict between potential possessors (brute force would govern property relationships, see Popov v. Hayashi). Possession may give notice of ownership. Possession involves the expenditure of labour and therefore rights are based on desert or merit. CONSTRUCTIVE POSSESSION – a legal fiction that exists when an intention to possess exists with a low level of subjective awareness. ADVERSE POSSESSION – a person who retains control over an object without legal title. That person can obtain an “inversion” of title once the limitation period in statute has expired. The rules reward a squatter who uses the property (avoidance of waste). A TORRENS system – a system of land registration – has led to the abolition of adverse possession claims; however, boundary errors can still quiet titles. Elements of Possession The “Tubantia” (1924) Facts: Both the plaintiffs and defendants allege that they have rights over a sunken ship and the treasure within it. The plaintiff did not have continuous physical control. The plaintiffs are suing on the basis of TRESPASS – an interference with possession. The owners of the ship are not present at the litigation. Issue: The issue is not who owns the wreck, but who has possession? Holding: The plaintiffs established that the defendants were trespassers. Reasoning: The ship and its contents are “derelict or abandoned” because the owners are not in possession or control of it. The plaintiffs marked the area around the wreck with buoys and they had employed vessels to do the salvage work. 1. Total control over the object was difficult, if not impossible, because the object was buried, and because of the weather. The court realized that the wreck was deeply buried and that the defendant could not exercise the same degree of control over it without violence to the plaintiff. The plaintiffs were doing what was reasonably possible to exercise control (and therefore, control is relative and not absolute). 2. As for intent, the plaintiffs had intended to work on the wreck as a whole, but the weather prevented them from accessing certain parts of the ship. This, however, should not preclude possession of the ship. Rationale: Physical control over a chattel is not a requirement, where the possessor evidences a degree of control such that others would have to use force to remove the possessor. Popov v. Hayashi (2003) Facts: The plaintiff and defendant disputed possession over Barry Bond’s 73rd homerun ball. Popov catches the ball, but is assailed by bandits. Mr. Hayashi picks up the ball and walks away. The cause of action is conversion. Issues: Does Popov have rights to support an action in conversion? Assuming Popov demonstrated intends, did Popov have control? Holding: The value of the ball was “equitably” divided. Reasoning:4 The ball belongs to MLB, but MLB abandons the ball once it leaves the field. The court accepts Prof. Gray’s test – when incidental contact knocks the ball loose, the person who picks it up acquires possession (and ownership). However, in this case, Popov suffered an assault by a “gang of bandits” and the contact is not incidental. The court states a rule for this scenario: if the effort is interrupted by the wrongful activities of others while possession is incomplete, the possessor has a pre-possessory interest. Popov did not have legal possession, but a “pre-possessory interest”. One of the objectives of the law is deterrence of anti-social behaviour. The court also discusses “equity” – what is intuitively fair. Hayashi should not be penalized, because it is uncertain whether Popov could hold on to the baseball. 4 Perhaps in terms of the motion of the baseball and its high velocity, the court might consider the factors that warrant control. Is stopping the baseball sufficient to exercise control? Does a person have to catch the baseball in his glove? This is the debate between Prof. Gray and Bernstein. Note: Had this been the law at the time of Pearson v. Post, supra, the chaser, and not the shooter, would have a pre-possessory interest, because he has “taken significant but incomplete steps to take possession.” Keron v. Cashman (1896) Facts: Crawford found a stocking filled with money. The other boys played with it without examining the contents. The stocking breaks and the money is discovered. The title-holder is absent. Issues: Who has possession? Holding: All of the boys in common. Reasoning: Physical control is not an issue in this case. The boys treated the stocking as a toy, and therefore, none of the boys intended to appropriate the contents (intention was incomplete). It was at the point the sock erupted did the intention crystallize. Since the discovery of the money occurred during the play by all of the boys, all of the boys “found” the money in common. Rationale: The period at which the “intent” was formed is relevant to consider who is in possession of an object. In this case, Crawford did not have a pre-possessory interest because he did not intend to appropriate the contents of the container. Keron v. Cashman presents a rule for appropriation of contents: 1. The court does not consider the premise that intention to appropriate the container means that the requisite intent to appropriate the contents is presumed. 2. The nature of the container is also relevant: a person does not normally find money inside a sock. The “Tibantia” was also a container. The plaintiffs in that case made an effort to appropriate the contents of the container. What makes this case interesting is the “weight” in the sock. Crawford could have argued that the sock and money are 1 object. Possession and Ownership The Wilson case raises the point of jus tertii – the right of a third party in disputes over possession. Wilson v. Lombank (1963) Facts: A finance company provided financing to a party for a car (no title). Possession of the car is transferred without title. The plaintiff acquires possession of the car and takes it for repair. The defendant, however, paid for the car, but the defendant found the true owner and returned the car to it. Both the plaintiff and defendant have paid for the car. Issues: Is the plaintiff entitled to damages? Holding: Yes. Reasoning: The defendant interfered with the possession of the plaintiff, and therefore the defendant committed a trespass. Although the garage owner was the bailee of the chattel (because he was doing the repairs and because he had the car in his possession), because the plaintiff paid the owner monthly for repairs and the plaintiff could recover the chattel at any time. We could say that the plaintiff had prepossessory rights to the car. Rationale: A court will vindicate possession even when someone returns the item to the title-holder. Note: The court should not reward the stupidity of the plaintiff and defendant, who paid for an item without acquiring title to it. The decision is aimed to prevent a chaotic situation. The decision gives a possessor some legal recourse to protect random taking of objects. Critique: In this case, problems in the legal reasoning does arise: 1. The garage has actual possession of the car, and the plaintiff transferred possession to the garage (therefore no constructive possession either). The plaintiff has no right to possession, because the plaintiff has not paid for the car. The garage has a mechanics’ lien. 2. In the alternative, the jus tertii defence applies. Since the third party has a “better right” the plaintiff should be precluded from filing an action for trespass. 3. Can the garage and the plaintiff both exercise possession at the same time when they are not joint-possessors? Either one or the other has control over the object. The jus tertii plea is generally unavailable, because the claim in trespass does not depend on infringement of title, per se, but on possession. The claim is available when: 1. The plaintiff has actual possession (not constructive possession), and: a. The defendant is defending the claim for the owner, b. The defendant “recapted” the item for the owner. The Wilson case rejects the defence of jus tertii when: c. The defendant returned the chattel to the owner. The Wilson case also rejected the defence, when the plaintiff has no actual possession, only a “right to possession” and the true owner had a better title. In Wilson, the defendant returned the item to the true owner, but the court found in favour of the plaintiff. The distinction between the points in Salmond’s test are minimal and semantic. Either way, the lawful owner receives his property back – the only difference is the owner’s knowledge of the process of the return by the defendant. Note: that the Real Property Limitations Act, S.O. 2002, c. 24 will have an effect on the ability of a true owner to use his title to reclaim possession of his land. Once the limitation period expires, so will the validity of the title against an adverse possessor. Finding Lost Property Armory v. Delamirie (1722) The finder’s rights vs. the rights of a trespasser Facts: A boy found a jewel and brought it to a goldsmith for examination. The goldsmith’s apprentice kept the jewel. Issues: Does the boy have a right of action (in trover)? Holding: Yes. Reasoning: The Armory test reads as follows: The finder does not acquire ownership, only a claim against all but the owner. 1. Confirms the action against the master for act of apprentice. 2. The finder is entitled to a claim to the highest value of the object against the defendant, if the defendant does not return the item. Note: If the goldsmith lost the jewel to another person, the goldsmith would have a possible claim in trover (but not against the finder, the finder’s master, or the true owner, who would have better claims). Parker v. British Airways (1982) The finder’s rights vs. the rights of an occupier Facts: Parker found a bracelet on the floor of the terminal. British Airways kept possession of the object, claiming that Parker found the object on its property. Issues: Is Parker entitled to the bracelet? Holding: Yes. Reasoning: A finder does not have a possessory right in an object that he finds when trespassing on someone’s land. In this case, Parker was an invitee. The court relied on the rule from Bridges v. Hawkesworth.5 In Bridges v. Hawkesworth, a traveller found a small parcel on the defendant’s shop floor that belonged to neither of them. The court awarded the contents of the parcel to the finder, and not to the storeowner. 5 The bracelet was not in the custody of the defendant. The bracelet was an “unknown presence” that was removed by the plaintiff. As for the argument of attachment, the bracelet lay loose on the land and it was not placed there for the purpose of becoming a fixture. Therefore, it would fail the Holland test. Rights and Obligations of Finder 1. Finder acquires no rights unless the chattel is abandoned and finder takes it into its care and control. 2. Rights are very limited if the finder is a trespasser. 3. The right is superior to all others, except for the true owner or anyone who can assert a prior claim. 4. A servant who finds a chattel in the course of employment does so on behalf of its master. 5. Obligation on the finder to locate the true owner and care for the chattel in the interim. Rights and Liabilities of Occupier 1. Occupier has superior rights over the finder, when the object is attached to the realty, whether the occupier is aware of the attachment or not. Therefore, if the occupier can treat the object as a fixture, the occupier will have a superior claim. 2. Where no attachment, the occupier has superior rights when the occupier has an intention to exercise control over the things in the building. How do we consider the manifest intent? Consider the nature of the place. For example, a bank vault or a private house is an example of a place where the occupiers intend to exercise control. Consider the indicia of control. For example, a sign, a routine to search for lost items, or a lost and found system. 3. Obligation, therefore, to take reasonable measures to acquaint the true owners with their lost property. 4. Ships, cars, and planes are the same as buildings for this test. Rationale: The nature of the place is sufficiently public and the procedures are inadequate to demonstrate exercise of control on the part of the occupier. The Parker case raises some important questions: I. Was the finder permitted on the land? If the finder is a trespasser, then presumably the finder should have a lesser right than the occupier, because otherwise, the law might encourage trespass. II. What is the relationship between the thing and the land? If the thing is a fixture, then it is realty and title vests with the owner. If the thing is attached, but not a fixture (embedded in the land) then the occupier has a better claim. One rationale is that the chattel is an integral part of the realty that is incapable of being lost. Lord Donaldson envisages a situation where the thing is not a fixture (i.e. Is this a quasi-fixture or intermediary category?). If something is incapable of being lost, it is therefore incapable of being found. Otherwise, the finder would receive a better right, even though the finder might have interfered with the realty or damaged it to obtain possession. A licensee without permission to remove something from the land will not have a better right than the occupier, unless the license permits the licensee to remove objects. Giving a license does not always mean that the occupier has a prior right, only if the object is attached. III. What if the finder is an employee? Found possessions of employees in the course of the employment is treated as possession of principal. IV. A land occupier will have a better right only if the occupier has a manifest intent to exercise control over. Consider a case of the Manitoba Court of Appeal referenced in Parker. In Kowal v. Ellis, 76 D.L.R. (3d) 546, the finder finds a pump on the land. The Court of Appeal presents a test: the finder is deemed to be acting for the true owner. The occupier can only assert a superior right if he is a bailee of the object or if the true owner has abandoned the object. 6 Have the claimants become bailees for the property for the true owner? Therefore, the test that would give the occupier a superior right appears to be more burdensome for the occupier. However, these tests are the same, if manifest intent to take control, is the same as bailment for an unidentified object. The term “bailment” tends to involve consent on the part of the true owner. Per the reasoning of the Manitoba Court of Appeal, the court creates a legal fiction whereby the true owner of a lost object gives implicit consent to the bailment (either by the land-owner or the finder). This can establishes that consent is not a condition of a bailment.6 We can critique this approach because bailment requires a sufficient act of transfer of possession. In Heffron, the process of analysing the relationship between the plaintiff and defendant shows that simply because the defendant was in possession of the car did not mean that it was the bailee. The holding in Kowal is more consistent with a “license” – such that the finder is prevented from suit in trespass by the true owner, but the occupier should still have the right to possess. In conclusion, the Parker case assumes that the finder derives his rights from possession, and not from the true owner. In Kowal, the rights derive from possession, but under a legal fiction of consent from the owner. Relate this to Keron v. Cashman the finder must have an intent to possess. The court will not always presume a constructive possession, but constructive possession must be established by showing that the occupier has intended to take control over the object. Moffat v. Kazana (1969) The finder’s rights vs. the rights of the owner Facts: The defendant purchased a bungalow belonging to the plaintiffs. Three years after the purchase, a workman of the defendant discovered a tin of money, who brought it to the police. The police returned the money to the defendant, but the plaintiffs sued. Issues: To whom does the money belong? Holding: The plaintiffs. Reasoning: Under the Parker test, the occupier has a manifest intent to possess the objects in the house. The workman was also an “employee” of the occupier, and the workman found in the course of employment. Thirdly, the object could have been attached to the building. With respect to the true owner, the court determined that the true owner never “abandoned” the tin, but that he merely forgot about it (see definition of abandonment below). The true owner never sold or divested himself of the rights to the object (even though moving out of the house might appear to indicate a divestment of the property inside) and therefore the court held that the property belonged to the true owner.7 Rationale: The true owner was entitled to a right of reception, as the sale of the house did not include the sale of lost items found within it. ABANDONMENT – intention on the part of the owner to divest itself of the property and a significant act of divestment. By conferring title upon the finder, the finder receives an award for returning the property to social use. Otherwise, with not conference of title, people would compete for title. The Kowal test makes the burden on the occupier more difficult because the finder’s right derives from possession transferred from the true owner. 7 The court might have decided this case differently if the plaintiff was merely a previous possessor and not the true owner, because as a prior possessor, that person would no longer have the requisite intent to possess. Additional Notes: Containers – Appropriation of the Contents 1. 2. 3. Keron v. Cashman determined that there is no presumption that appropriation by possession of a container leads to the appropriation of the contents. The possessor must show requisite intent, although the burden may be very low, see The Tubantia. Possession of a container can mean constructive possession of its contents (see Heffron v. Imperial Parking). Delivery of a container creates a reasonable inference of delivery of the contents inside (see Heffron, supra). __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ Bailment (applies only to chattels) The BAILOR is the lawful owner of the chattel, while a BAILEE has lawful possession of the personalty. The bailee owes a duty of care to the bailor with respect to the property in the bailee’s possession. In Fairly & Stevens, the judge provides a definition for bailment. Note that an employee in possession of his employer’s property is not in bailment of it, but is in custody only. A bailment is a transfer of possession from one to another for a limited time and purpose. 1. Gratuitous bailment for sole benefit for bailor (i.e. storage) sole benefit for bailee (i.e. borrowing) 2. Contractual bailment with benefits for both parties. Bailor pays for the bailment (i.e. storage agreement) Bailee pays for the bailment (i.e. rental agreement) A bailee can recover possession from a third party that adversely possesses a chattel if the bailee can establish that it had a “right to possess”, rather than actual possession. Whereas a bailor can file a claim against a third party that has caused damage to the chattel for permanent injury to it, a bailee can file a claim for less serious injury (see Mears v. London and South Western Railway).8 Heffron v. Imperial Parking (1974) OCA Facts: The plaintiff parked his car in the defendant’s lot. The parking ticket contained an exculpatory clause. The lot required its clients to leave the keys in their cars. Issues: Was the garage in bailment of the car? Was the garage liable for damages? Holding: The garage was a bailee. The garage was liable for damages. Reasoning: Estey J.A. determined whether the garage was in bailment or in license. Under a bailment, the garage has a positive duty to safeguard the property: a higher obligation than a licensor (the garage) owes to licensee (the plaintiff). If it is a license relationship, the licensee must show conditions for negligence. Under a bailment, however, the court presumes that the bailee exercises care and has an obligation to return the object in reasonable condition. Estey JA reasons that the relationship was a bailment – has the bailor delivered possession to the bailee? 8 A LICENSE is a grant of authority to another to enter upon property for an agreed period that would otherwise be a trespass. If applied to Heffron, the garage would have issued a license to the plaintiff to leave his car on the lot. Delivery of keys signified a change of control from owner to attendant, Surrender of the ticket was required for recovery of the vehicle, The attendant performs a function beyond collecting money, Assumed responsibility for car after hours, and keys were stored at end of day. Estey also held that some tools, clothing, and radio could all be constructively included in the possession, because it would not be unreasonable for a person to have such objects in a car. This is a container-contents issue, see Keron v. Cashman. The exculpatory clause did not apply because the garage was in fundamental breach of the contract (and because the parties were of unequal bargaining power). Rationale: The (contractual) relationship will determine the responsibility of the bailee for the object in its possession. Relationships can change from bailment to license. Perhaps when a bailment ends (such as a car is ready for pick up), the bailee becomes the licensor and therefore, a higher burden on is on a potential plaintiff to attribute responsibility to the defendant. Liability for Damage of Bailed Goods Fairly & Stevens v. Goldsworthy (1973) NSTD Facts: The defendant, a prospective purchaser, damaged an automobile owned by the plaintiff, dealer. He drove it during a blizzard and flips the car. The plaintiff and defendant had come to a prospective agreement, subject to the approval by the defendant’s wife. Issues: The dealership wants to recover the value of the car. Was the defendant liable for damages? Holding: Yes. Reasoning: The plaintiff and defendant are in a bailment relationship. The standard of care owed to the bailor will vary with the nature of the benefits afforded to each party. The factors that the court will consider are: gratuitous nature of the contract, the nature of the object, its portability, its value, and the choice of bailee. The judge recognized that the courts have moved away from gross negligence, nevertheless, the judge considered the type of bailment at issue to choose the appropriate standard of care. Although the relationship appears to be a gratuitous bailment (“a test drive” to facilitate the sale of the car), the defendant took control of the car so that his wife could approve of its purchase (the reward). The bailee also gets to use the car to see how it performs. The bailment, the judge argues, was for mutual benefit. In obiter, the court found gross negligence on the part of the defendant, so that even if the bailment was gratuitous, the defendant would be liable. Rationale: The standard of care owed to the bailor will depend on the relationship and benefits afforded to the parties. However, the court will be able to find mutuality even when one party appears to possess the property gratuitously. Note: The dealership might have argued that the parties completed the contract once the buyer’s wife fulfilled the condition precedent. Perhaps the defendant breached the bailment agreement. The defendant owed a duty to return the car to the plaintiff. Recall that a bailment is a transfer of possession for a limited purpose and time. After the defendant’s wife accepted, the bailment was complete. Perhaps, liability should be strict if the defendant did not follow the terms of the bailment. Liability of Third Parties to Bailor and Bailee The “Winkfield” (1902) England CA Facts: Mail is lost. Customers of the Post Office (title-holders) bail their mail to the Post Office. The Post Office arranges for the mail to be sent by ship, the “Mexican”, as a sub-bailment. The “Mexican” collides with the “Winkfield” and the “Winkfield” is at fault. The Post Office sues the “Winkfield”. The “Mexican” has possession and not the plaintiff. The Post Office only has a right to possession. Issues: Can a sub-bailor/bailee recover against the third-party wrongdoer? What limits are there on the right of the bailee to sue? Holding: Yes. Reasoning: The defendants did not plead that the plaintiff was not in “actual” possession. The Court of Appeal proceeded as if the Post Office was the bailee. We can therefore forget about the “Mexican”. The court rejected the holding in Claridge. The bailee can only sue third parties only if the bailee liable to bailor. A bailee is not an insurer, and therefore, the bailee is liable only if he is negligent. The bailee in this case is not responsible for the loss to the bailor. 9 Rationale: The court holds that the bailee’s right to sue arises from 9 Like Kowal, the right of a finder arises from the original owner as a bailor. This means that we can question the holding in Kowal, because right derive from possession and not necessarily from the true owner. possession itself. T he bailee does not get to keep the damages, since the bailee had a contractual obligation to return the item to the bailor. This is an incident of the suit against the third party, and not a condition. Had the Post Office been unable to recover, the customers could not recover from the Post Office, because the Post Office was not negligent. The damages in Winkfield are a substitute for the goods bailed. Additional Notes: Normally, the bailor is not liable to third parties with regard to injury caused by its property. There are exceptions: (1) the bailee acts as the bailor’s agent, (2) the bailor provides negligent operating instructions, (3) the bailor provides a defective product. ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ Real Property and Possession Asher v. Whitlock (1865) Facts: The true owner of the cottage is a Lord, who is absent from the picture. The testator - possessor - builds a cottage on the Lord’s land, and leaves property to his wife. After the death of the wife, possession will transfer to his daughter. The wife and daughter both die, but her second husband continued to reside on the realty. The plaintiff was the daughter’s heir and she claims title to the property. Issues: Does the heir have a right to repossess the property? Holding: Yes. The plaintiff’s claim in EJECTMENT is valid. Reasoning: The original occupier had rights to possession, and he made a will in which he granted a determinable life estate to the wife (X to A for life until A remarries). Once the wife remarried, the daughter captures the remainder (the whole estate in fee simple). When the daughter dies, all of her property goes to her heir-at-law. The defendant would have had to argue that he had been in sole possession. Once the daughter dies, possession would have expired. If possession gives rights, and possession ends, should not the next possessor acquire rights. Per Cockburn CJ, the plaintiff maintains her right to the land, because the possession is passed in succession to her. Based on the testator’s possession, the law grants the testator a right in the land that he can transfer to others. Once rights in possession are crystallized, they can be transmitted, even if the person to whom the rights are transferred is not in ‘actual’ possession. Per Mellor J, possession is evidence of prima facie title, however, it is not equivalent to title. The defendant would have to show that the person with earlier possession has a bad title or that he has a superior one. The defendant did not do so in this case. Rationale: A person can derive rights from possession and then that person can pass the rights on to others. Once the rights are transmissible, the right is transmissible by will. Possession involves physical occupation and intent to possess. Is the holding in Asher not in consistent with the definition of possession? The court alludes that the defendant was not in possession long enough to have rights to make his possession superior to the original possessor. Adverse Possession of Real Property A statute of limitations will limit the period to which a title-holder to sue a trespasser or adverse possessor for return of its land (see Ontario Real Property Limitations Act). Once the period expires,10 the trespasser does not necessary obtain possession, but the authority of the paper title is decreased. The possessor now has the best right – but not necessarily title. Over time, the owner’s title may extinguish as well. The court treats the owner as having lost superior rights to the rest of the world. Why justify adverse possession? Callaghan rejects the theories that adverse possession punishes complacent landholders and rewards possessors, since there is no evidence that statutes of limitations reward possessors. Callaghan explains that statutes function to clear titles to land because the registry system may not accurately represent the actual possession interests in land. Ziff explains that claims resultant from adverse possession often rectify mistakes in fact. A person may have acquired realty with a defective title, honestly believing that the land belonged to him. Limitations Acts recognize that other people may rely on inaction. The courts may deem that a person has abandoned the property. Carol Rose, “Possession as the Origin of Property” Rose contends that possession is the origin of property, because the possessor must communicate its intentions to keep the property to the world. The doctrine of adverse possession functions on the basis of communication: if the title holder fails to communicate the trespass to the world, while the adverse possessor does so continuously over a period of time, then the title holder will lose possession and ultimately, lose the title. Economists suggest that communication as to possession is important because communication minimizes waste. It provides certainty as to claims to entitlement, which means that people will not duplicate or waste resources to develop realty. People can then bargain to trade their rights in property, without competing for them. In terms of possession, it is prima facie evidence of seisin in fee (see Mellor J’s judgment in Asher). Now, however, common law jurisdictions have registry systems. The Registry Office will verify who the true owner is. Environmental critique of the law of adverse possession: lands may be exploited by possessors. Adverse possession also amounts to private expropriation without compensation. 10 In Ontario, the time-period is 10 years. To show adverse possession a person must establish the following: Open, Peaceful, Continuous, Acquiescence, where the true owner does not object, Exclusive, with the intention of excluding the true owner, and also, the true owner must discontinue possession,11 Actual possession for the statutory period (not constructive), Adversity, where the possessor cannot be in possession of the realty with the permission of the owner. Once permission is granted, the adverse possession ends. Then the use of the land becomes akin to a license. The owner does not need to know that the squatter is acting on the owner’s land, only that the actions are open and discoverable. Intermittent use can still be “continuous” (as with a winter cottage). Also possession can be passed on consensually, such that a subsequent possessor can benefit from the accumulated possession of the previous possessor (see Mulcahy v. Curramore). Keefer v. Arillotta (1976) OCA Facts: The parties are in dispute over possession of a strip of land between their properties. The land contains a garage, a grassy area, and a driveway. The defendants (Arillotta) used the strip for delivery access for their business. The plaintiffs (Keefer) used it to park their car, they built a garage over part of it, and they built a skating rink over it in the winter. The defendants had title with an easement granted to the plaintiffs for a rightof-way over the strip. Issues: Who has possession of the strip of land? Holding: The defendants have possession, with the exception of the garage. Reasoning: Wilson J.A. held that the plaintiff who claims adverse possession has the burden of establishing his right by possession. If possession was the result of a grant, such as an easement, this burden becomes more difficult to establish, because the plaintiff will have trouble showing adversity. Wilson also identified a problem of exclusivity. Although the defendants used the strip sparingly, this did not establish that the defendants had yield possession of the strip. Possession of part of the strip was sufficient to establish a constructive possession of the whole property, since the defendants were the title-holders. The defendants merely allowed the 11 This is a general intention to exclude others, which means that the doctrine of adverse possession applies to MUTUAL MISTAKE. plaintiffs to overstretch their right-of-way, as good neighbours. Wilson identifies a test that measures the adverse possession against the use of the true owners make of the property. Wilson notes that the defendants did not care whether the plaintiff’s place a rink there or park a car – and that they used the land sparingly. This is problematic because if the title-holder has minimal or no intention to use the land it may never be possible to acquire title by adverse possession, because the possession is not inconsistent with the use of the owner. Rationale: When a plaintiff cannot establish the intent to exclude others, including the owner, then the plaintiff fails to establish the animus possidendi required to claim title by adverse possession. Critique: MacKinnon JA dissented. He found that the limitation period had expired and therefore the defendants had no title to the strip. The plaintiffs sufficiently established intent to possess, by treating the land as their own, regardless of the right of way. The case imposes a higher burden on a person with permission to use the land, as opposed to a trespasser. However, in the case of a trespasser, it is obvious for the owner to identify the trespasser. It would be unfair to the true owner to exercise the vigilance against the person who has the permission to be on the land. By the same reasoning, since the title-holder does not object to the placement of the garage, Wilson could have found that the defendants implied consent. However, when the plaintiff occupied the land under the garage, it denied access to the defendant. Additional Notes: In Ontario, the doctrine of adverse possession only applies to the registry system (per the Registry Act). Under the land titles system, the doctrine of adverse possession does not apply (per the Land Titles Act). An owner does not seem to have to do as much to re-assert possession as a person with the burden of establishing possession by adverse possession (see Keefer). ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ The Acquisition of Property Interests Original Acquisition By taking possession of objects that are res nullius, a person acquires rights by the very taking of possession (with the exception of discussion in Kowal v. Ellis). Gifts of Personal Property – Property Rights are Derivative of Another’s As a general rule, there are three requirements to transfer a gift successfully: intention to donate, acceptance (presumed), and sufficient act of delivery.12 The sufficient act is different from a promise, because exchange of promises is the matter of contract. The purpose of the delivery condition is to allow the donor to change his mind. Delivery is the ceremony by which a donor demonstrates the giving of a gift. From Milroy v. Lord, in order to render a voluntary settlement valid, the settlor must do everything necessary to effect the transfer. The settlor can either transfer the property to the person. The settlor can transfer the property to a trustee (either himself or someone else). There are exceptions, however, in which delivery of the chattel is not required. One such exception is if the donor agrees to hold property in trust. However, the distinction between the creation of a trust and a promise to alienate is minor. Another exception occurs if the donee becomes the executor of the donor’s estate. Thirdly, the transfer of the gift can occur by transfer of a representation of the gift, such as a deed (or keys). In that situation, delivery is complete when (1) the donor no longer retains control over the gift and (2) all that can be done has been done to divest title in favour of the donee. When gifts are made in the contemplation of death, the rules are relaxed. Land cannot be given validly as a gift under this circumstance. The donor must be in “sudden peril” such that there is an apprehension of death on the part of the donor. In some cases, a symbolic or constructive delivery might be sufficient to fulfil the requirements.13 12 Possession requires delivery so the donor feels the wrench of parting with an object. Delivery provides proof of transfer. 13 Note: In State v. Weinstein, a scrap dealer was convicted of theft for collecting newspapers left on the side of the curb for collection, because title passed from the citizens to the city through this action. Cochrane v. Moore (1890) Facts: Benzon owed the horse originally. Cochrane claimed that he had a contractual right to the horse. Moore claimed that Benzon gave him an undivided ¼ interest in the horse before the sale, leaving ¾ to Cochrane. Yates is in possession of the horse, and Benzon tells Yates about the transaction to Moore. The trial judge considered that the exchange of intent and acceptance is sufficient to establish a gift. Issues: Was the transfer a valid gift? Holding: No, delivery is required to transfer by gift. It is possible to transfer a chose-in-possession by deed or by receipt (sale). Reasoning (obiter): The problem in this case is absence of delivery. The court rejected the statement that assent to communication of a gift is sufficient to fulfil the requirements for delivery. The court reaffirmed that a “change of possession” is required to show that a person received a gift. One could say that communication to Yates, a third party, and transfer of the horse to him, represented delivery. The court ignores this. Reasoning: The court decided Moore was the beneficiary of a one-quarter share in the horse. Before the execution of the bill of sale, Cochrane accepted Moore’s interest in the horse, even though neither party mentioned a trust. [B construes property to C for a ¾ benefit in C and a ¼ benefit in M]. To create an EXPRESS TRUST, three things must be certain: intention to create, the subject matter of the trust, the objects of the trust. Rationale: Change in possession is a requirement for transfer. Critique: In Milroy v. Lord, the court held that the court cannot use one form of gift to uphold another. Therefore, if the transfer is intended to be a direct gift, courts of equity should not construe the exchange as a trust. Note: The holding in this case was applied in Watt v. Watt Estate, where the court held that delivery of keys of a boat to a marina did not constitute a gift, because the owner still retained control. However, after the owner’s death, the court ruled that the marina had a half-interest in the boat (an express trust as well). There are two other types of trusts other than express trusts: 1. A RESULTING TRUST – generally occurs when one party purchases property (and paid for it) on behalf of another (see Hussey v. Palmer below). The other has the legal title, but a resulting trust may grant equitable title to the purchaser. Equity may presume that the other holds the property on behalf of the purchaser. This presumption can be rebutted. 2. A CONSTRUCTIVE TRUST – arises when a person without title to property has made contributions to it. Therefore it would be an unjust detriment to that person, should he not obtain any benefit from the property (see Lac Minerals v. International Corona below). Re Cole (1964) Facts: A husband took his wife to a fully furnished new home and declared, “its all yours.” The parties lived in the homes as if the property belonged to the wife. Issues: Did the husband give a gift to his wife? Holding: No. Reasoning: No transfer over the dominion of the furniture in the house occurred such that the husband effectively delivered the property to his wife. Both the husband and wife were in common possession of the furniture (he did not leave the house and the furniture to her). “There is no equity in this court to perfect an imperfect gift.” Chattels that a bulky can be transferred by symbolic delivery. The introduction of the wife to the furniture within the house was insufficient to evidence a change in possession. The husband intended to retain possession but give his wife use and enjoyment of the property. The husband could have given the wife title to the furniture but he did not. There was ambiguity as to whether the delivery is effected. Rationale: Change in possession is a requirement for transfer. Critique: The court could have treated husband’s declaration as an express trust. In Kilpin v. Ratley, a father purchased furniture for his daughter, which was kept in her house. The father said, “It’s yours now,” and the court accepted this action as a valid delivery. There is evidence of the ‘wrench’ of delivery. There is no possibility of confusing the father’s intention to continue to remain in possession of the chattels (the act is unequivocal), as he does not live in the house, and so he will not benefit from them. He leaves the furniture in her control. In 1873, the Judicature Act recognized the assignment of choses in action without consideration was recognized at common law if they were absolute, in writing, and if written notice was given to the debtor. Requirements for Effective Transfer of a Share (chose in action): execution of the transfer, delivery of the share certificates, registration of the transfer (up to the company’s directors to decide – at their discretion if the person should hold the share). Only after these requirements will the person receive legal title. Re Rose (1949) Facts: A legatee and another dispute title to shares owned by a testator. The legatee claims that the testator never passed the title to the other person. Issues: Were the shares a gift to the other person? Holding: Yes. Reasoning: The testator did everything in his power (required of him) to divest himself of the shares. Although legal title would not be perfected until the directors of the company approved, that was not an act that the testator had to do. Rationale: Where the actions or approvals of third parties are irrelevant for the purposes of the gift, then the transfer of the property does not depend on those actions or approvals. This case discussed what the relationship was between the donor and donee from the time he has done everything in his power to the time the 3rd party performs the event that is required for the transfer to be completed. The donor effectively creates a trust until the transaction is complete. Does this, however, violate the principle in Milroy v. Lord, such that the court will not perfect an imperfect gift? Thomas v. Times Book Co. (1966) Facts: The administratrix of Dylan Thomas’ estate sued for the return of an original manuscript from the defendant, Thomas’ friend and editor. Thomas lost the manuscript while in England and told the editor “if he found it, he could keep it.” The editor found the manuscript. Issues: Was this a gift? Holding: Yes. Reasoning: The words “you can keep it” seem clear that this is a transfer. The editor got possession of the manuscript where Thomas had lost it. Thomas had consented to the transfer (as he told the editor of possible locations that he could find the manuscript). There does not have to be a concurrence of time between intent and the taking of possession. Rationale: The words “you can keep it” with qualification and possession, constitutes the sufficient requirements to show the transfer of a gift. The problem in this case is the lack of testimony on the part of the deceased, Thomas. Perhaps the editor might have believed a gift was intended, but his state of mind is not at issue. The editor might have wanted the manuscript and therefore his state of mind was influenced by this want. The word “keep” in this context involves a transfer of title, rather than a bailment. Arguably, if Thomas had changed his mind, the intention would have ended. What happens if a finder found the manuscript before the editor? The editor’s right has not crystallized until he takes possession. The editor could act as an agent of the true owner, and on the basis of an agency relationship, the editor can claim possession. The editor can “estop” the owner from reclaiming possession based on the prior intention to transfer the object. One could also claim that the finder acts as a bailee, per Kowal v. Ellis. Here, the editor has a precedent prior relationship would allow editor to make a claim against the finder (pre-possessory rights). Transfers of Interest in Land A conveyance of land can occur by an actual change of possession or by a representative form (like a deed or will). In the olden days, the grantee gets an interest in livery of seisin, which is a change in possession. The grantor cannot convey future interests in land by livery of seisin, because the future interest does not have possession. Therefore, future interests require deeds. The Statute of Frauds, RSO 1990 c. S19 requires that all transactions in realty must be signed in writing in order to be binding. Modern real estate transactions involve two steps: the purchaser tenders a deposit, and then the purchaser makes the final payment to close the transaction. If the title is satisfactory and the purchaser can obtain financing, the parties will exchange the deed and keys. However, the purchaser may be unable to secure financing, the vendor may die, or the property may become unusable during this intermediary period. Lysaght v. Edwards (1876) Facts: The vendor died prior to the closing of the transaction for an interest in land. Issues: To whom does the land belong? How do we characterize the property interests as they change over time? Holding: The purchaser. Reasoning: This situation is essentially a trust, but it is not an express trust. The vendor becomes a trustee for the purchaser beneficiary. 1. The parties form the contract of sale. Beneficial ownership passes to the purchaser, once the purchaser has to check to see if the title is unencumbered (i.e. purchaser is buying a fee simple, not a life estate). The vendor has a lien on the property for the remaining payment of the purchase price. The position of the vendor is akin to that of bare owner and mortgagee. The unpaid vendor (mortgagee) has a right to foreclose in the purchaser is in default. 2. Once the vendor has accepted the title, the contract is fully binding. 3. In this case, since the purchaser accepted the title during the lifetime of the vendor, the contract continues even though the vendor is deceased. The purchase money becomes part of the vendor’s estate. A valid contract will change the ownership of the house to the purchaser in equity. 4. If, however, anything happens to the estate during this period, the liability is on the purchaser unless the parties have contracted otherwise. The purchaser should thus acquire insurance. Likewise, the vendor is not entitled to treat the estate as his own and is responsible for damage that he wilfully causes to it. Rationale: Subject to non-payment of the purchase price, a contract of sale of real estate will transfer equitable interest of the estate to the purchaser, once the purchaser finds the title to be valid. The vendor retains legal title. In order to make sure that one’s rights are good against third parties, a person must register its interest in the land. This emphasizes the notion of publicity to give effect to a right in common law. Intervention of Equity A DEED OF GIFT – a written, documentary evidence of an act of delivery, which can be less ambiguous that the act of delivery on its own. In Schilthuis v. Arnold, the Ontario Court of Appeal held that a gift between lovers was conditional upon marriage, even though the trial judge held that the deed was unconditional. Since the marriage plans fell through, the deed did not represent delivery of the gift. Recall Cochrane v. Moore, where in that case the court did not find that the plaintiff had a legal title, but that he had an equitable interest in it. Cochrane owns $4000, but Moore has a $1000 equitable interest from the sale. Hussey v. Palmer (1972) Facts: The plaintiff paid for an addition to the defendant’s home. She lived there for 15 months but eventually moved out and asked for support. The defendants refused to pay for support and the plaintiff sued for the value of the addition. Issues: Is the plaintiff entitled to compensation? Holding: Yes, based on an equitable interest in the property. Reasoning: 1. The payment by the plaintiff did not constitute a loan because the plaintiff did not ask for repayment, nor did she intend that the defendants repay the money. 2. Denning held however, that when one person contribute the construction of a home, the owner of the home holds that contribution in constructive trust for the contributor even in the absence of intention to create a trust (hence the term “resulting trust”). Denning imposes the trust based on “justice and good conscience”. Phillimore agreed with Denning. The plaintiff did not intend to make a gift of the money because she could not afford to do so. Rationale: When a party contributes to the purchase or development of an object without the express act of deliverance of a gift, the result is that the contributing party will hold an equitable interest equal to the value of the contribution in the object. Critique: Cairns held that because of the parental nature of the relationship, the arrangement was a loan. Cairns orders a new trial for the plaintiff to present more evidence to establish her case as if the claim was a loan (repayable on demand). All of Hussey’s testimony reveals that it was a loan. The evidence did not support the cause of action that Hussey’s attorney pled. Denning expresses the concept of equity in bold terms. The resulting trust applies in Hussey. Palmer holds the property on behalf of both of the parties, since the plaintiff contributed money toward the property. This result benefits Hussey because: the equitable interest is a property interest and may be a security in the house, it may be protected from seizure from Palmer’s creditors, the property value may increase and therefore, the value of the interest may increase. Additional Notes: The Statute of Frauds does not apply in the case because the statute excludes trusts imposed by law. These trusts are imposed ex post facto and therefore it does not make sense to have the writing requirement added retrospectively. Part II - PROPERTY INTERESTS IN LAND A person does not own land. An owner is a tenant in free and common socage, for an estate in fee simple, in Blackacre. Doctrine of Tenure A person who holds land, a tenant, holds the land for the allodial owner. However, the Law Reform Commission recognized that the doctrine of tenure is irrelevant today, since the practical implications of tenure have disappeared. When William conquered England, the Crown took ownership of all of the land. William set up a hierarchal system of title, whereby lords and their tenants had reciprocal (personal) obligations to each other. Common labourers held their land in “unfree tenure” because the services due to the lord were not predetermined. The occupier of the land did not have the discretion to alienate the land without the permission of his lord. Not only did tenure bring obligations by service, but also incidents. These incidents include wardship, which allows the lord to obtain guardianship of an heir of the tenant and benefit from the profits. The lord can obtain relief, which included payment upon the death of the tenant and acquisition by an heir. The lord also had the right of escheat, which returns the property to the lord if the tenant dies with no heir. These incidents have an impact upon our law. The effect of the incidents are profound. Avoidance of the incident of escheat led in part to the creation of the trust. A tenant’s friends could hold land on behalf of the tenant’s infant heir, to avoid the burden of the incidents on the heir. If the friends breached their obligations, the heir could seek relief from the Court of Chancery. Two types of alienation were available: substitution and subinfeudation. Under a substitution, the lord consents to a new tenant who forms a personal relationship with the lord. Under subinfeudation, a person could become a lord himself and create a tenurial relationship with another person. The tenant-in-chief would lose his right to reclaim the land under escheat, and could lose all revenue from the land as well. The 1290 Statute Quia Emptores eliminated alienation by subinfeudation, and therefore, only the Crown, could grant new tenures. The statute made land freely alienable, but limited it to substitution. The 1660 Tenures Abolition Act abolished all incidents of tenure but escheat and all tenures except for free and common socage. In Canada, the Crown granted all land in free and common socage (without any services of tenure). Doctrine of Estates (Absolute Estates) The tenant owns an estate in the land. The doctrine of estates fragments land over time. Estates allow a number of people to hold interests in the same piece of land. Holders of estates can enjoy possession in succession. Tenure determines the quality of the interest, while the estate determines the quantity (period of time). A FEE SIMPLE – one person and his heirs have an interest in land [to X and his heirs].14 A person can convey a freehold estate by inter vivos grant or by a will. This is an estate in inheritance unlike the life estate pur sa vie that cannot be acquired by inheritance. 15 This estate endures so long as the estate has heirs.16 To convey a fee simple estate inter vivos, the court required specific language: to X and his heirs, otherwise the grant would be a life estate. X acquires an estate measured in duration by X’s heirs and not the grantor’s. The court is more generous with testamentary grants. “To X and his heirs” must be defined further. This grant sounds like X and X’s heirs have a shared interest. The common law interpreted the grant as yielding the fee simple to X, because a person does not have heirs until he dies. Heirs are identified at the death, which will stand to inherit. The words “and his heirs” are words of limitation, because they limit the size of the estate. Conveyancing of Law and Property Act of Ontario reverses the common law position which does not require “and his heirs” to grant a fee simple. Where no words of limitation are used, the grantee receives a fee simple (therefore, “to X” is sufficient). To create a life estate, the grantor must use explicit words, “for life”. A LIFE ESTATE or FEE FOR LIFE – one person acquires an interest in land for his life, and upon death, possession passes to another person [X A FEE TAIL – “To X and the heirs of his body” is lesser interest in land, because only lineal descendants can maintain the interest. It is obsolete in all provinces but Manitoba. This is an inheritable estate. The grantor retains the fee simple. A grantor might want to keep land in the family – to control their property well into the future. The tenant in tail, like the tenant for life, may not have an incentive to repair or improve the property. Now, grants of fee tail are treated as fee simple. 14 15 A life estate pur autre vie can be inherited, but title presumably terminates once the person of “autre vie” dies. 16 Heirs can be transferred to lineal heirs (descendants) or collateral heirs (other blood relatives and their descendants). to A for life, and then to B].17 B is the remainder-person. If there is no remainder-person then interest reverts to X [X to A for life]. All of these interests are present interests in the land. For example, consider X to A for life, B for life, C and his heirs of the body, and D and his heirs. D has a present interest in the land, but intermediate interests exist that make the present interest less valuable. A pure life estate or a pure fee simple estate has no furthering condition. It has no qualification that may limit the possibility of acquisition or retentions. The Rule in Shelley’s Case The right to relief was a benefit of a lord that formed a new tenancy with a substitute tenant. The lord would only acquire a relief if the estate was conveyed mortis causa (because the lord would consent to a conveyance inter vivos). Consider, the following grant: X to A for life, remainder to the heirs of A in fee simple.18 X, the grantor, would grant two interests or two estates. The first estate was to A and the second to A’s heir. Because A’s heir acquires his interest with the grantor was alive, A’s heir would not owe relief to the lord. The Rule of Law in Shelley’s Case states that the words “heir” provide a limitation and not the size of the estate. The Rule provides that A’s heir has no interest in the land (no estate), unless A’s heir pays relief to the lord. Note: the Rule also applies when the grant to the heirs is postponed by an intermediate grant (X to A for life, then to B for life, then to A’s heirs). Perhaps the rule should no longer apply because relief is no longer paid. Also, the word heirs does not include an oldest male son. Heirs can have real meaning – who could very well be alive. Note: A grantor can grant a life estate without invoking Shelley’s rule by stating: “To X for life, remainder to X’s children”. Re Rynard (1980) Facts: A mother, Maggie, conveys her farm in death to her son, Kennedy, and then upon his death, to his heirs. The will also contained a clause which circumscribed a “protective trust” that stated that her son could not sell or dispose of his interest in the land and that it was protected from seizure by creditors. Issues: Does the Rule in Shelley’s case apply? 17 18 Consider also: “X to A for the life of B” that grants a life estate pur autre vie. See also, “To A for life remainder to X for life remainder to the heirs of A.” Holding: No. Reasoning: The Rule is a rule of law, which can defeat the intention of the testator. The court considered whether the Wills Act overturned Shelley’s rule by providing a definition for the word “heirs”. The court held, however, that the Act merely provided clarification of the term given that an heir is no longer the eldest male son. The court recognized that it took an explicit act, the Law of Property Act, 1925, (UK) to overturn Shelley’s case in England, to which no counterpart was legislated in Ontario. Kennedy wants to sell the farmland, but the plaintiff, his daughter, claimed that her father only had a life estate in the farm. What does Maggie have? Maggie’s father grants Maggie the farm for “her use and benefit during the term of her life” and “after the property” it goes to her heirs in tail. Wilson acknowledged that Shelley’s Rule applied. Maggie acquired the fee simple by dis-entailing deed. What does Kennedy have? Wilson suggest that Maggie, by stating the words “heirs” did not intend to use words of limitation but words of purchase. Wilson says that “heirs” means next of kin, because the heirs are determinable (the children, plaintiffs). Secondly, Kennedy’s estate is limited to a life estate, since the word “life” is repeated throughout the will. By virtue of clause 5, Kennedy’s rights to alienate are limited. Shelley’s rule does not apply to qualified life estates. Kennedy’s lawyer submitted that the “repugnancy rule” applies, where a grantor cannot give an interest but then limit so severely. Wilson holds that the repugnancy rule only applies in cases of interests subject to conditions subsequent and not determinable estates. Rationale: Wilson makes to determinations (both of which are questionable). Firstly, the court will consider whether the testator intended to use heirs as it applies to a line of succession or to the next of kin – and then it will determine whether Shelley’s rule applies (question of construction, before question of law). Secondly, Shelley’s rule does not apply to qualified life estates. We can critique several aspects of this judgment. Perhaps Maggie only had a right of use in the land and not a life interest in the estate. This virtually kills the rule in Shelley’s case, because Wilson places the rule of construction ahead of the rule of law. Life Estate – Created by Formulation of a Grant To grant a life estate, historically, the life estate was the default position (i.e. “To X forever” or “To X”). This has changed because of s-s. 5(3) of the Conveyancing of Law and Property Act. To cut the grant down to a life estate, the grantor must be explicit: “To X for life” “To X for as long as she lives” “To X and after her death, to Y” “To X, remainder to Y”19 “To X, then to Y” Where is the fee simple? If the grantor specifies a remainder using the words: “then” “remainder” Then the remainder goes to that person in fee simple. Otherwise, the property reverts to the grantor’s estate. Note: that the owner of a life estate pur autre vie continues after death of the other person continues to possess after the death, that “owner” becomes an adverse possessor. Re Waters (1978) Ont. Sup. Court Facts: The deceased devised his wife use of the home for “as long as she lives.” Upon her death, re-marriage, or renunciation, the home reverts to the deceased’s estate. She wanted to rent the property. A life estate, she owns an estate for the period of her life – and she can alienate that estate. A license is a mere personal right, we she can exercise, that she cannot alienate. A property interest makes a difference. Issues: Did the wife receive a life estate or did she have a license (something less than a life estate)? Holding: She had a life estate. Reasoning: A judge, when interpreting a will, must put himself in the position of the testator at the time of the will. Pennel J construed the meaning of “as long as she lives” as a life estate. The grant also required the wife to pay the necessary taxes and make the necessary repairs. The wife can be charged with the obligation to repair if those repairs are reasonable. 19 Historically, on that language, X and Y would only get life estates with a reversion. Legislation has changed that, but the legislation now says, “to X” now gets a fee simple. You cannot have an estate after a fee simple. Since “remainder to Y” and “then to Y” creates limitations, the grant may be a life estate. If the property is a mere license, the property would still be part of his estate. He parts with the estate for a period, and then it reverts to his estate, which demonstrates that it is a life estate. Rationale: A person with a life estate can alienate that interest in the land. We have seen the word “use” before. The word “use” suggests a personal engagement with the property, which is different from a property interest. In addition, she may only have a life estate so long as she uses the estate – making it a qualified life estate. Pennel rejects these arguments in favour of the life estate. Waters highlights a conflict with successive devolution of property. The life estate holder will seek to maximize its enjoyment of the property, while the remainder-person will want the estate holder to preserve the property for the remainder-person’s future use. A life tenant is not required to maintain the property in good repair (see Patterson v. Central Canada Loan). A donor may render an estate holder UNIMPEACHABLE for waste. Qualified Estates A QUALIFIED ESTATE – a condition is attached to the conveyance of an estate. The estate can terminate not only on death, but on another circumstance. The purpose of a qualified estate with a condition subsequent is to compel compliance on the pain of forfeiture. 20 A DETERMINABLE ESTATE (condition to retain) will revert automatically on the occurrence of some event. The qualification marks the size to begin – which is intrinsic to the grant. Words that create a determinable fee simple include: “so long as” “during” “while” “until” The grantor has a possibility of a reverter. The estate is lost automatically once the determining event occurs. A DEFEASIBLE ESTATE ends when an event, or a CONDITION SUBSEQUENT, defeats the estate. The condition is something extrinsic 20 For example, in Rynard, the life estate to Kennedy was a qualified estate. Kennedy’s lawyer said that because the condition subsequent was repugnant – “on condition that he does not sell” – it should fall away. Wilson J. held that the event was a determinable estate, so that the estate continues while Kenendy does not sell it. The language in the grant was all mixed up – making the guidelines per Laskin J.A. not authoritative. The rule in Shelley’s case does not apply to an estate less than an absolute estate. that interrupts the estate. Words that create a condition subsequent include: “on the condition that” “should” “if it happens” “unless” “provided that” … “thereafter” “but if” The grantor retains a right of re-entry. The estate is not lost automatically, but only when the grantor exercises the right of re-entry. THESE WORDS ARE NOT DETERMINATIVE, see Re McColgan. Laskin J.A. said that a grantor can use the terms “determinable” or “defeasible” expressly in the grant to clarify. The grantor can also specify the consequences. If the grantor uses language of “time” and makes the condition integral to the grant, then these grants generally are determinable. If the grantor uses language words that are “conditional” and uses a divide clause separate from the grant, then the grants generally are defeasible. If a condition subsequent is uncertain or void for other reason, the qualified estate becomes absolute. However, if the determinable event is uncertain or void, the whole estate is void. This distinction creates unnecessary uncertainty. A CONDITION PRECEDENT is a condition for acquisition, not of retention. A person will not acquire the interest unless the condition is fulfilled [X to A on the condition that A person some task]. What does this all mean? 1. Per Rynard, a determinable estate allows for limitations on alienation, while a defeasible estate does not. The estate will endure as long as the event does not occur (and therefore, there is no repugnancy). 2. If the determining event is invalid, the whole estate collapses, since the determining event sets the size of the estate. If a condition subsequent is invalid, the condition disappears because it is external to the grant. 3. The possibility of a reverter is a present & “vested” interest in the land (although it is not vested in possession). A right of re-entry is not a present or vested interest. After 1966, the Perpetuities Act, like the right of re-entry, the right of reverter is not a vested interest. Therefore, if the grant occurred before 1966, this is a potential issue. Re Essex County (1977) Ont. Sup. Court Facts: The devisor devised property in fee simple to the school board, but “should the land cease to be used for school purposes, the grant ends.” The clause stated that the grantor’s heirs had a right in preference if that condition ceased. Issues: Is the qualification valid? Is this a determining event or condition subsequent. Holding: The clause stipulates a condition subsequent. The school board has an absolute fee simple. The condition falls away because of the rule against perpetuities and is therefore invalid. Reasoning: A condition subsequent is added to a full grant, which can defeat the grant of the condition becomes true. Even though the heir has the option to purchase and title does not revert automatically, that makes no difference on the nature of the condition as a subsequent one. The grantor added the condition on top of the grant rather than forming an integral part of it – which would characterize it otherwise as a determinable fee simple. Rationale: When the grant is in fee simple a condition subsequent provides another person a right to cease the grant once an event occurs. However, due to the Perpetuities Act the interest is no longer a vested interest. Re McColgan (1969) Ont. Sup. Court Facts: 1. The testator devised all of his property to his trustee (fee simple). 2. The testator devised the equitable fee simple to his intimate friend, Mary, to “hold my property as a home until her death or until she is not residing therein personally”. The grant is followed by another qualified estate not at issue in this litigation. 3. The will continued: “while such property is held, all taxes, insurance, repairs and other charges shall be paid from a fund sufficient in the opinion of my Trustee to cover the same.” - - - Ideally, Mary would want to plead that she has a defeasible life estate, with void conditions that fall away, and the grant is absolute. Secondly, Mary would want to argue that the conditions (either determinable or subsequent) are valid, but those conditions have not been fulfilled. This is not as good, because she may have to ensure that she meets the condition. Thirdly, Mary would want to have a licence with the estate. Issues: Does Mary have an equitable life interest in the house or merely a license to use it? Is the condition subsequent valid? Who pays for repairs? Holding: An equitable life interest was granted, the condition was void for uncertainty, and the trust pays for the upkeep. Reasoning: Keith J explains that the interest was more than a license because the testator told the beneficiary to hold the property as a home. This evidenced an intention to create an interest in the property. “Until she is not residing therein” represents an external limitation to the estate – even though the clause contains the word “until.” 21 However, the condition is void for uncertainty because the term “residing” is ambiguous. The court could not determine what the testator meant by residing, because due to the facts of the case – the friend’s health, economic status and he frequent travel to and from the house – made it difficult for the court to consider “from the beginning, precisely and distinctly of what event” would terminate the estate. The court also considered the nature of the relationship between testator and beneficiary. Keith reasoned that since the testator knew of the beneficiary’s financial situation, he would not have wanted to burden her with the upkeep of the estate. This might also have had an impact on the determination that the estate is defeasible with a void condition. Therefore, the court held that the trust should pay for the repairs. Likewise, because the estate was a life estate without condition, the beneficiary was entitled to lease it free and clear of charge against the other beneficiaries. Rationale: Where the words of a condition cannot determine the event that will trigger a reverter, the condition is void. The nature of the relationship between the parties will impact the court’s determination as to the rights of one party as beneficiary. The grant could have stipulated: “To Mary for life until she no longer resides there”; “A life estate to Mary until she no longer resides there”; “To Mary for life for the determinable period that she resides there.” 21 Re Down (1968) O.C.A. Facts: The impugned grant in the will stated, “When my son, arrives at the age of 30, provided he stays on the farm, then I give…” The trial judge determined that both conditions are precedent conditions, because they reflect a continuation of a way-of-life, after which the devisee will receive a legal share in the property. Issues: Is the age condition a condition precedent or subsequent? Is the condition, “provided he stays…” a condition precedent, subsequent, or determinable condition? Holding: The age condition is a condition precedent, the “provided…” condition is a condition subsequent. Reasoning: 1. Laskin considers whether the “provided” condition is merely precatory, meaning that it is an expression of a hope, but not binding in law. He rejects this claim, because the words state an express condition, unlike in Re Brace. 2. Laskin determines that attainment of age 30 is a condition precedent to acquire. However, the “provided” condition appears more like a retention condition, rather than one of acquisition. Condition Precedent i. the testator gives the interest after the condition is obtained. ii. the two conditions are stated together Condition Subsequent i. the verb “stays” is a present action, required for retention ii. staying on the farm occurs after the interest is acquired iii. the will envisages that Harold will stay and live on the farm. Given that the characterization is ambiguous, Laskin resorted to maxims of interpretation: i. in case of will, the court should confer the intended benefit, and all parties should receive a benefit ii. the common law favours vesting (and therefore fewer conditions precedent) Laskin, however, finds that the condition is void for uncertainty, because “to stay” on the farm can have many meanings. Once the devisee reaches age 30, he will receive his ½ share (interest) in the farm. Had the condition been a condition precedent, it would have ruined the whole grant. Rationale: Where there is ambiguity as to the condition, as a precedent or subsequent, the court will use maxims of interpretation to make a determination. Types of problematic qualifications: 1. REPUGNANCY – per Rynard, the restraints on alienation (the giving and taking away of a right) can make a condition invalid 2. UNCERTAINTY – per Down, if a qualification is too vague to know when it is can be breached, the law will not enforce it If the court is going to defeat a vested estate by a subsequent condition (or determining event), the court must see “from the beginning, precisely and distinctly, upon the happening of what event it was …” (see Down, Clavering v. Ellison). A court can find a condition subsequent void for uncertainty, because it does not destroy the grant. The court will be more tolerant of uncertain conditions precedent, because the common law favours vesting of estates. As long as the person before the court can be said either within or outside it, the condition can be applied with certainty. Voiding a condition precedent will void the whole grant. This may suggest that the tests to assess the validity of the conditions is different. 3. PUBLIC POLICY - see Mossman and Flanagan. Try an example: “X to A for life, providing he stays on the farm, but if he does not stay on the farm, then to C.” Under common law, the remainder fails because of the rule against shifting freeholds. Suppose this grant is in a will, the condition subsequent fails, because it is uncertain (Re Down). We cannot say precisely what event will terminate the estate (Re Down). However, we can say that the condition precedent is invalid. We can say too that the condition is valid, and C acquires an interest when A “no longer stays on the farm”. It is unclear whether C gets possession or a mere interest. In re Tuck’s Settlement Trusts (1978) Facts: Tuck placed the money in trust on the condition that each baronet marry an “approved wife”. The trust provided a definition of an “approved wife” and a settlement clause in case of dispute. The plaintiff submitted that the definition of “approved wife” was void for uncertainty. Issues: Is the clause uncertain? Holding: No, the settlement is valid. The clause sets out a condition precedent. Reasoning: At each stage, the condition was a precedent condition to receive payment. The court treats the “approved wife” condition as a condition precedent to receive the payment from the trust. 1. Denning and Russell determined that the “Jewish blood” condition was enough to satisfy the condition. The minimalist definition of the condition provides some certainty. 2. Denning held that there is not reason why a third party (in this case the chief Rabbi of London) could not settle the dispute, so long as the decision is made in good faith and is binding. The parties still have the possibility to go to court to adjudicate. The Chief Rabbi clause (settlement clause) overcomes the conceptual uncertainty over what constitutes an “approved wife”. Rationale: A devise that provides a mechanism to resolve uncertainty can be acceptable to maintain the grant. Future Interests: Sequential Ownership of Interests in Land We know that many people can have interest in land (doctrine of estates). A remainder-person may wish to restrain a party from committing waste that may interfere with the remainder-person’s interest in the property. A remainder in property can be express [X to A for life and B in fee simple] or implied [X to A for life] in which title in the property will revert to X upon A’s death. Conditions attached to the grant will also create future interests in the property, because of the possibility of reversion based on the nature of the condition. The common law, however, is suspicious of future interests in land because of the possibility of an “abeyance of seisin” (see above). Therefore, the common law has established a set of remainder rules when a situation of a CONTINGENT REMAINDER is present; that is when the grant is contingent or dependent on the unfolding of an event, which at the time of the grant was uncertain.22 There is a difference between: 1. “To A for life, then to B” – nothing will prevent the taking for the future interest (there is certainty and the future interest is VESTED), and, A has a life estate vested in possession (and interest), B has a fee simple in remainder vested in interest; when A dies, B can take possession. B presently owns the interest, and it is alienable. It can go to his heirs. Recall, that there are words of purchase. 22 For example, suppose B is 15 at the time of a grant of a property to A by X [X to A for life, then the remainder to B in fee simple when B turns 21]. Since B has yet to turn 21, this remainder is contingent on this event, thereby creating an uncertainty as to who will be seized to the property. 2. “To A until he marries B” – there is an element of uncertainty, because the reversion is only a possibility. The possibility of reverter is CONTINGENT on A marrying B. Try an example: “To A for life, then to B’s heirs” (B is alive) – A has a vested interest in possession, B’s heirs have a fee simple in remainder but it is contingent, because there is uncertainty as to who can take. We do not know who B’s heirs/next-of-kin are until B dies. Once B dies, the interest becomes vested in interest until A dies, to become vested in possession. Recall, these are words of purchase. Three types of uncertainties can exist: 1. Is the person in existence? – the person charged with the remainder may not “exist”, such as, an unborn child. 2. Is the identity of the person ascertained? – identity of the person at the time of the grant may not be ascertainable, such as, a widow if the grantee is unmarried. A person’s heirs are not ascertained until death. 3. Has the condition precedent been met? – a condition over which a person may or may not have control. In any of these cases, the property will revert to the grantor if an abeyance of seisin results. For a simple common law grant –with no mention of use or trust The Remainder Rules clarify discrepancies and confusion in the conveyance of title for inter vivos grants. A contingent interest must vest no later than the end of the prior vested estate. Otherwise, the contingent interest falls always. Rule 1 – NO REMAINDER AFTER FEE SIMPLE: A grantor cannot grant a reminder in fee simple if the grantor has already disposed of the property in fee simple. There is nothing left to give. “X to A in fee simple, then to B in fee simple” is invalid. “X to A and his heirs, remainder to B and his heirs” is invalid. “X to A and his heirs of his body, then to B in fee simple” is invalid, since fee tails are now converted to fee simples by Conveyancing Law and Property Act. Rule 2 – TAKER IS VESTED IN IMMEDIATE POSSESSION/NO SPRINGING FREEHOLDS: A grantor cannot grant an estate that will spring up eventually, with the result that an abeyance of seisin exists under that condition is realized. The rule does not apply to leaseholds, because the landlord is in seisin at all times. The interest must pass at present. “X to A upon age 21 (A is 15)” is invalid. Rule 3 – NO GAP IN SEISIN: A gap cannot exist between grants. The common law, according to Mossman and Flanagan, adopts a “wait and see” attitude to these grants. The remainder must vest no later than the end of the previous estate. X to A for life, the remainder to B in fee simple upon attaining 21. X to A for life, then to B’s heirs.23 X to A for life, remainder to B if B marries C. It is possible that the marriage may take place during the lifetime, and therefore, the common law will wait to see. X to A for life, then to A’s children, who are 21. If a child has reached 21 at the time of the grant, that child has a vested interest. If no children is 21, the court will take a “wait and see” approach before the end of A’s estate. Only those members of the class who satisfy the contingency will receive the interest. Why not allow other children to receive an interest? This is the rule in Festing v. Allen. In a common law grant, where interests are contingent, only those members who satisfy the contingency by the end of the prior estate can benefit, and the others do not. The contingency must be satisfied before the vesting. Rule 4 – NO SHIFTING FREEHOLDS (applies to life estates only subject to conditions subsequent). 23 If B dies after A, no one will have the interest. “X to A for life, but if A goes bankrupt, then to B immediately” is invalid. A would seem to have a qualified estate, but B’s interest cannot spring up. The right of re-entry benefits the owner only. It does not apply to determinable conditions, since the determinable condition is part of A’s estate. If the determining condition occurs, it “naturally” terminates the estate, and B can take over. “X to A for life or until an event occurs, and if that event occurs, then the remainder to B in fee simple” is valid. Equitable Interests Before the Statute of Uses (1535), we could consider the following grant: To A (and his heirs) to the use of B (and her heirs). The common law court recognizes the legal fee simple. The courts of equity recognized a concurrent fee simple in equity. A gets the legal title vested in possession (and interest). B gets equitable title vested in enjoyment (and interest). Why create an equitable interest? The grantor can avoid the incidents of tenure. The grantor could not dispose of real property upon death except to heirs (in which the rules of primogeniture applied). Consider an example: To A to the use of B for life. A has possession (legal fee simple), but no use. B has an equitable life estate vested in enjoyment. O (the grantor) has the resulting use (reversion in equity). O has a present, vested interest. This way we can account for the whole equitable fee simple. IS THE WHOLE EQUITABLE FEE SIMPLE ACCOUNTED FOR? The default position is that the owner holds the remainder in resulting use. Equity was not bound by the common law remainder rules. Equity was not preoccupied with the concept of seisin. Rule 1 – NO REMAINDER AFTER FEE SIMPLE - To A (and his heirs) to the use of B (and her heirs) then to the use of C (and heirs). C gets nothing. Consider for example: To A and his heirs, to the use of B and his heirs, but if B marries C, then to the use of D and his heirs. This is equivalent to rule 1 and not rule 4, because rule 4 deals with life estates. A is essentially a trustee: A has a legal fee simple vested in possession. B’s fee simple (vested in enjoyment) is a qualified estate, subject to a condition subsequent. In equity, “to the use of D” is a valid interest. The owner can create a contingent remainder after an equitable fee simple, only if the remainder and the qualified fee simple are both equitable grants. D’s interest is vested automatically once B marries C. D has an equitable executory (contingent) interest, “in the nature” of a fee simple, contingent upon B and C’s marriage.24 D does not have an estate vested in interest or enjoyment. O has nothing left. Rule 2 – NO SPRINGING FREEHOLDS – To A (and his heirs) to the use of B (and his heirs) at 21 (and B is at age 15). A is essentially a trustee: A has a legal fee simple vested in possession. B has an equitable executory interest, in the nature of a fee simple, contingent upon his reaching 21. O has the equitable fee simple (by way of resulting use) vested in enjoyment subject to defeasance when B turns 21. Rule 3 – NO GAP IN SEISIN – To A in fee simple, to the use of B for life, then to the use of D and his heirs if/when after B’s death, C marries D. A is essentially a trustee: A has a legal fee simple vested in possession. B has an equitable life estate. D has an equitable executory interest, in the nature of a fee simple, contingent upon its marriage to C, after B’s death. It is not a vested interest! O has an equitable fee simple (by way of resulting use) vested in interest subject to defeasance, if C does not marry D after B’s death. Now consider the rule from Festing v. Allen. “To A in fee simple, for the use of B for life, then to the use of B’s children at age 21” will allow B’s children to have an equitable interest, even if they do not reach 21 before B’s death. Rule 4 – NO SHIFTING FREEHOLDS – To A in fee simple to the use of B for life, provided B does not marry C, but if B marries C, then to the use of D. 24 D gets nothing until B marries C, therefore it is not an estate. A is essentially a trustee: A has a legal fee simple vested in possession. B has an equitable life estate, subject to a condition subsequent. D has an equitable executory interest, “in the nature of a fee simple”, contingent upon B and C’s marriage, and contingent upon the execution its right of re-entry. Each of the subsequent interests must be equitable, otherwise the common law remainder rules apply! Be careful that the words “to the use” are included in the contingent remainder. Statute of Uses (1535) reproduced p. 212 in Mossman and Flanagan The impetus for the statute was the problem with the avoidance of the incidents of tenure by the creation of equitable interests. Consequently, the statute allowed for the creation of legal interests, that earlier, would have violated the common law remainder rules. The statute applies to some uses, and not to others: 1. The Statute does not affect uses of personal property. 2. It does not apply if the trustee (feoffee to uses) is a corporation. For example, the statue does not apply - “To A Corp. for the use of B” 3. The Statute does not apply when the legal and equitable grant are in the same circumstanced: “To A for the use of A” 4. The Statute does not apply when the trustee/feoffee has an active use; the Statute was meant to address bare uses. After the Statute of Uses was passed, consider: “To A in fee simple to the use of B in fee simple.” A gets nothing B gets a legal fee simple. The statute executes the use. Consider the following grant: “To A in fee simple, to the use of B in fee simple at 21” Pre-Statute of Uses A gets the legal fee simple vested in possession B gets an equitable executory interest, in the nature of a fee simple, contingent upon B’s turning 21 O has the equitable fee simple, vested in enjoyment, by way of resulting use, defeasible, once B turns 21 Post Statute of Uses A is left with nothing. B gets a legal executory interest in the nature of a fee simple, contingent upon B’s turning 21. O has legal fee simple, vested in possession, defeasible when B turns 21 The common law remainder rules do not apply to post-Statute of Uses grants to uses, with one exception: the rule in Purefoy v. Rogers. The rule in Purefoy v. Rogers states that if the interest can comply with the remainder rules, it must. If the grant does not comply with the rules, then Purefoy v. Rogers does not apply. This affects rule 3 in particular: X to A for life, then to the use of B in fee simple upon attaining 21. If B does not obtain 21 before A dies, B gets nothing according to the rule. The grantor can get around this rule by adding the following words: X to A for life, then to the use of B in fee simple upon attaining 21, either before or after B’s death. This grant cannot possibly comply with the common law remainder rules, and therefore the rule in Purefoy v. Rogers does not apply. The Trust – Post 1660 Uses Consider the following grant: X to A in fee simple, to the use of B in fee simple, to the use of C in fee simple.” Well, after the Statute of Uses, A gets nothing, B gets the legal estate, and what would C get? Presumably, there is nothing to give to C, because B would have the legal and equitable fee simple. However, the statute only acts upon the first use. After 1660, C gets the equitable fee simple. When the grant gives a use upon a use, the Statute operates on the first grant to uses in fee simple only. The Statute is exhausted in situations with use upon use. There is a difference between use upon use and use after use. The Statue fails to execute only after the second fee simple!!!! Consider the following: “To A to the use of A [or To and unto the use of A] to the use of B.” Again, A gets the legal interest, via the execution of A’s use, and B gets the equitable fee simple. This can defeat the operation of the Statute of Uses. Trusts are not subject to the rule in Purefoy v. Rogers or the common law remainder rules!!!!!! Consider the following: “Unto and to the use of A in fee simple, to the use of C, when C becomes 21.” (C is 15).25 A has the legal fee simple, vested in possession. C has an equitable executory interest, in the nature of a fee simple, contingent upon C’s attaining 21. O has the equitable fee simple, vested in enjoyment, by way of resulting use/trust, defeasible when C turns 21. 25 The Statute of Uses does not apply. Testamentary Dispositions or Devise BE CAREFUL, “grant” applies to inter vivos grants, while a “devise” applies to dispositions (or real property) by a will. Before the Wills Act, 1540, testator could not make a devise after death. An unanticipated effect of the Statute of Uses, 1535, was that people could not give their property to whom they wanted, because equitable interests became legal ones. The common law remainder rules do not apply except: There are two approaches to looking at testamentary dispositions: 1. Treat all interests as legal executory interests, post-Statute of Uses, with the rule in Purefoy v. Rogers in application. Re Crow (1984) OHCJ Facts: The testator has devised property to his grandsons for the life of each (two parallel life interests for the life estate). On their respective deaths, the “remainders” to his great grandchildren. In 1944, one grandson dies (and there are no grandchildren), in 1983, the other dies, and there are 10 grandchildren. Issues: What happens to the first ½ of the life estate? Holding: It reverts to the testator’s estate. Reasoning: This gives rise to common law remainder rule 3. The remainder is contingent upon there being children. Under rule 3, there is a “wait and see” approach. Since the rule in Purefoy v. Rogers applies, they are out of luck with respect to the other ½ of the fee simple. That ½ interest will revert to the testator’s estate. Since the interest could meet the contingency, it must. The grandchildren had not satisfied the contingency before the first grandchild’s life estate. Rationale: The rule in Purefoy v. Rogers applies to wills. Had the devise said: to the grandchildren born “before and after” would have avoided the rule in Purefoy v. Rogers. The term “after” could not satisfy the common law remainder rule, because there will be a built in gap and therefore the rule does not apply. 2. Section 2 of the Estate Administration Act states that the real property of a deceased person becomes vested in the executor of the estate, as trustee, for the benefit of those who are entitled under the will. The trustee is the person who holds the legal estate. The word “benefit” suggests that the beneficiaries have an equitable interest. This would mean that every interest in a will is an equitable interest. They are not subject to the rules in Purefoy v. Rogers. Had the court taken this view in Crow, the interests would have been immune from the rule in Purefoy v. Rogers and the grandchildren would have taken the impugned interest. Re Robson (1916) UK Facts: The testator grants property to and unto the use of H for life, then, to the use of H’s children when they turn 21. At the time of H’s death, two children were older than 21, and 2 that were younger. Issues: Do we have legal interests in which only 2 qualify or equitable interests in which all 4 qualify? Holding: All 4 qualify. Reasoning: This language is not adequate to create a trust.26 However, in all cases when a person dies, the trustee/personal representative has the legal estate. The problem with this grant is that to create a trust the lawyer would have to had said: Unto and to the use of H (which gives the legal fee simple), to the use of H for life (which gives an equitable life estate), then to the use of H’s children at 21 (which gives the equitable fee simple in remainder). Rule Against Perpetuities Is there a problem, if we create an indefinite sequence of life estates: “To X for life, then to X’s son for life, then to X’s first grandson for life…” In each case, the contingency must be resolved before the death of the previous estate. The grantor could have indefinite control over the property. The rule against perpetuities limits how far the grant can control the divestment of the property the future. 26 The testator grants property to and unto the use of H for life, then, to the use of H’s children when they turn 21. At the time of H’s death, two children were older than 21, and 2 that were younger. If you collapse to and unto the use of H for life to a legal life estate, who has the legal fee simple when the children take the use? Who is the trustee? Consider the following: Unto and to the use of X, in trust, for the first of my descendants to graduate law school in the 23rd century. There are several models that the common law could adopt: it could exclude interests by limiting the number of contingencies, the number of generations, or a fixed period (such as 80 years). Of course, the common law takes more nuanced approach. “The interest must vest, if at all, within the lives in being, plus 21 years.” The reason for this: a father wants to provide for his child, who is alive, but also for a grandchild who will turns 21. It applies to all grants and devises, legal or equitable, of real or personal property. 1. The interest must vest – if the interest is already vested, the rule does not apply. It can vest in interest, possession, or enjoyment. Essentially, we are looking at situations in which a contingent interest will vest outside a person’s lifetime. If the person is already alive, there is no problem. It is not enough that there was a possibility of vesting; the grantor has to say with absolute certainty that it would vest. This is what makes a rule severe against potential grantees. If I can imagine any scenario that the property would not vest, then it is invalid. 2. If at all – if the contingency is satisfied, it must do so within the period. For example, consider: “To X to the use of Y when Y completes the Boston Marathon” (Y=100). There is no perpetuities problem, because if Y does satisfy the contingency, Y has to do it while Y is alive. The contingency does not have to be satisfied. 3. The life in being – is someone in existence at the time the disposition takes effect. There are two categories: IMPLICIT – where the grantor has not pointed to the person (perhaps the grantor, the parent of a unborn child, a uterus, the grantee). EXPLICIT – to extend the period, people will use a class of other lives to set the period (i.e. Royal descendants clause). The assessment is made at the time of the execution of the grant, or at the time of the testator’s death (when the will takes effect). Consider an example: “To X to the use of my first child to marry.” This grant would fail, because the first child could marry 21 years after X’s death. The later born child may not satisfy the grant in the perpetuity period, if the grantor and the other children die one year after the death. It would be an acceptable devise, because there is no possibility of the grantor having another child after the grantor’s death. The only children that could satisfy the contingency are those children that are alive. They may not satisfy it, but that it ok. Consider some more examples: Grant - “To X to the use of my first child to marry” X has a valid legal executory interest. It is a contingent interest, so is there a perpetuities problem? What are the lives in being? The grantor, X, and the living children. Common Law Perpetuities Act The grantor can have a third child Section 3 reverses the absolute (C3), one year later. The grantor, X, rule. A mere possibility that it will and the living children die. Once not vest should not render the the lives end, the third child may not conveyance invalid. get married until he is 30. Therefore, the contingency could be Section 4 presumes that the grant is satisfied more than 21 past the valid or confirm that the interest is group’s death. incapable of vesting. The common law will “wait and see” if C3 will satisfy the grant before vitiating it. The grantor could have said: To X to the use of my first child to marry 21 years after my death.” Grant - “To B for life, remainder to B’s 1st child to marry for life, remainder to the last survivor of B’s children. All three grants satisfy the remainder rules (rule #3). Common Law Perpetuities Act B has a vested interest, a life estate, and therefore there is no perpetuities problem. The contingent interest for B’s 1st child must vest before the end of B’s life. Therefore, there is no perpetuities problem. The interest can vest 21 years after B’s death because of the grant to B’s 1st child to marry. This remainder would fail for the perpetuities problem. The fee simple reverts to the grantor. Section 4 of the Perpetuities Act, takes a “wait and see” approach. Be careful: the common law considers that a woman can have children all the days of her life. The Perpetuities Act presumes that a woman is fertile from age 12 to 55. Grant - “To X to the use of my 1st child to reach 30” (The Statute of Uses applies, therefore the breach of the remainder rules does not void the contingency). Common Law Perpetuities Act O could have another child after X’s Sections 4 and 8 would save the grant. The Perpetuities Act reduces death, 22 years later, which would fail the perpetuities condition. the age of the grant from 30 to the age of the child, if the child falls outside the perpetuities period. The age condition is read down. Grant - “To C for life, remainder to C’s widow for life, remainder to C’s eldest surviving child at the death of C’s widow. All the interests will vest accordingly. Common Law Perpetuities Act If C’s widow lives longer than 21 Sections 4 and 9 save the grant. The Perpetuities Act deems that the years after C’s death, which fails the perpetuity period. “widow” is a life in being, which resets the perpetuity period. The Perpetuities Act is meant to prevent grants from failing the perpetuities problem to recognize family arrangements. Additional Notes: ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ CONCURRENT INTERESTS AND FAMILY PROPERTY Concurrent interests require grantees to share possession. McEwen v. Ewers and Ferguson (1946) Ont. HCJ Facts: The will read: “the property… is to become property of my daughters Bertha and Janet jointly and should they decide to sell the said property each of them is to have an equal share of the proceeds.” Janet claimed the right of survivorship because of joint tenancy. Robert claimed that the property was held in common so that he could inherit his sister’s share. Issues: Was the grant for joint tenancy or tenancy in common? Holding: The property is held tenancy in common. Reasoning: Under the Conveyancing and Law of Property Act, if the will is unclear to give intention to the grant, the court will presume that tenancy is in common. The use of the words “equal share” indicate an intention to divide the property. Rationale: The words “equal share” indicate a division of the property as tenancy in common. We can critique this case since perhaps the interests will only be 50-50 when the property is sold and therefore the interest in the property is not divided into shares, only the proceeds. Secondly, perhaps the condition of division upon sale is repugnant. If one joint tenant dies, the other joint tenants’ shares enlarge correspondingly. Joint tenancy allows for the consolidation of title in one person (which was the motivation for favouring joint tenancy in the common law). However, this is balanced against the interests of fairness, to persons who wish to convey their “interest” to someone else after they die. When all of the joint tenants die at the same time, then the law will presume that they held the property in common (see Succession Law Reform Act). Note: the Conveyancing and Law of Property Act presumes tenancy in common in cases of realty. It makes an exception for trustees/executors. Joint Tenancy and Tenancy In Common 27 Joint Tenancy These tenants share all four unities: possession, interest, title, and time. 27 Tenancy in Common These tenants only share unity of possession. Corporations can also hold property as tenants in common. The dissolution or “death” of the corporation will result in the consolidation of the title in the other tenants. Note: in McEwen, the sisters interests shared all four unities, though the court held that the grant was for a tenancy in common, and not a joint tenancy. Therefore, these principles are not sufficient to determine joint tenancy. By shared possession, in both cases, one tenant cannot demarcate part of the property since the tenants hold and interest in the entire property. A joint tenant has an interest in the While a tenant in common has a whole estate. Unity of title means fractional share in the undivided that the joint tenants acquire their whole. interest at the same time and in the same quality and duration. For example: “To A and B in fee simple; ½ to A and ½ to B” creates a tenancy in common. Joint tenancy gives the right of survivorship to the others, which means that a joint tenant cannot devise its interest because it automatically dies with the tenant. Why create joint tenancy? 1. Reduces the number of eventual owners of the property. 2. Avoids inheritance taxes. 3. Simplifies the devolution of property. 4. Better in situations with trustees. Equity presumes that when the legal title is taken by one, but another has provided the value for the acquisition, the first holds the property in trust for the other. Law Reform Commissions have investigated whether persons could be joint tenants with unequal interests in the estate: to maintain the right of survivorship, while at the same time, it might preclude a party from seizing half the property (if the estate is held in jointly by two parties). 28 28 Tenancy by the Entireties adds a fifth unity: the unity of the person. When property is conveyed to a husband and wife, together, they become tenants in entirety. The right of survivorship, according to J.M. Glenn is “indestructible”. Co-parcenary exists when a property owner dies intestate and the property is held in common by female heirs, if no male heir survives the deceased. Rights and Obligations of Co-Owners A co-owner in possession may have to pay “occupation rent” to other coowners when: (1) the possessor has ousted the other [i.e. when a coowner threatens violence], (2) by agreement, or (3) possessor is acting as an agent or bailee for the others. Co-owners may be compelled to partition the estate. Osachuk v. Osachuk (1962) M.C.A. Facts: A husband and wife separated, each living in one of two houses that they had purchased while married. The husband rented part of the house he occupied, and the wife sued asking for an accounting of the rental income. Issues: As a “joint tenant” is the husband responsible to account to his wife? Holding: 1. Occupation issue Both the husband and wife are full owners (given that that are tenants in common) and therefore, neither is precluded from exercising its tenancy. No party can claim against the other for occupation rent unless it means one of the three conditions above (Mrs. Osachuk’s claim fails). 2. Rent issue When the apartment was rented, the income derived is income generated from the realty and therefore it is shared by both tenants (Mrs. Osachuk’s claim succeeds). When the apartment is occupied, but not rented, the other co-tenant could have insisted upon the payment of rent (Mrs. Osachuk’s claim fails). Likewise, the other tenant could have found a paying renter. A court may order rent to be paid, if one co-tenant offers free occupation to a third party. The court dismisses Mrs. Osachuk’s claim that not renting the property is wilful neglect of it. 3.Disbursements The court reversed the finding of the trial judge that compelled the wife to repay all of the mortgage payments. All co-tenants must share the payment on the capital of the mortgage in proportionate shares because that contributes to the increased value of the house. The occupier is responsible for the current interest on the mortgage, taxes, bills, etc. because this is cost associated with the upkeep of the realty and it does not increase its value. If one co-tenant claims for the interest (or any other current disbursement) then it will have to pay occupation rent. 4. Material changes to the land (not in Osachuk). The court will not impose liabilities on a co-tenant that is not in occupation of the realty. At the time of the sale, however, if the value of the property increases, then the co-tenant that made any improvements can ask for an accounting and receive a return on its costs. If, however, the “improvements” decreased the value, then the occupier may be responsible for the loss (as waste). Severance of Joint Tenancy Severance of joint tenancy will extinguish the right of survivorship. A.J. McClean, “Severance of Joint Tenancies” The Chancery Court in Williams v. Hensman articulated three mechanisms to sever joint tenancy: 1. A joint tenant may act unilaterally to sever the share, 2. Mutual agreement, 3. The parties treated the property as tenancy in common, and therefore severance can be inferred. Courts of equity favour tenancy in common and this is presumed in Canada unless express grant of joint tenancy is made. In fairness to third parties transacting with a joint tenant, the court will consider this as an act of severance so that the third party can have an undivided share. Mossman and Flanagan explain that contracting for a mere encumbrance, like an easement, will not render the joint tenancy a tenancy in common (see Re McKee).29 29 In the context of death during divorce - in Robichaud v. Watson, parties that were in negotiations to separate their property could be assumed to be tenants in common. The attitude and intention during the negotiation will dictate the nature of the tenancy: for example, if the parties do not address the matter of joint tenancy, the court will maintain joint tenancy (see Morgan v. Davis). See also, Kissick Estate v. Kissick, where although the parties lived in separate dwellings, there was no evidence or agreement that either spouse intended to sever joint tenancy. In the context of a murder – in Re Pupkowski, the court decided that the estate would accrue to the survivor (murderer) with an undivided half interest in a constructive trust for the victim’s estate. 1. Knowlton v. Bartlett (1984) NBQB (by unilateral act) Facts: The respondent and his wife owned property as joint tenants. Following a marital dispute, the court ordered that the respondent pay his wife a lump sum in exchange for her interest in the property. This exchange never occurred. The wife executed the deed for herself and left it to her brother, the plaintiff, who claims the share in tenancy in common. Issues: Did the wife and respondent hold the estate in joint tenancy? Holding: No. They held it as tenants in common. Reasoning: The NB Property Act allows a person to convey property to himself. Per Murdoch v. Barry, this action would sever joint tenancy – which the judge found occurred in this case. As for the divorce decree, it did not vest any title in the respondent. He also made no effort to pursue the judgment to acquire full title. Rationale: A party can unilaterally sever joint tenancy by conveying a property to himself. We can critique this judgment on several grounds: 1. The relevant provision NB Property Act did not conform with a similar Ontario statute, or with the other sub-sections of the section. The subsection was missing the key words “in a like manner” which would suggest that a joint tenant can convey property to itself in a common law grant (without having to resort to a making a grant to uses). 2. If this is a recognition of the common law position (legislation is not supposed to overrule the principles of the common law, subject to express statement) then the wife did not convey the property in a way that would sever the joint tenancy. 2. Burgess v. Rawnsley (by mutual agreement) In Burgess v. Rawnsley, one party offered to buy the interest of his joint tenant after the break up of the relationship. The parties never settled on a final offer; however, Denning held that this constituted a sufficient “agreement” or one could say consensus that the property was no longer to be treated as subject to a joint tenancy. The negotiation was evidence of the state of mind of the parties to treat their interests as separate shares as tenants in common. In the context of unequal payments – where the contribution is unequal, the unity of interest is unmet and therefore tenancy is held in common (see Re Ali). Robichaud v. Watson (1983) O.H.C.J. (by course of conduct) Facts: The plaintiff, Robichaud’s mother, sought a declaration that residency of an estate held in joint tenancy among his son and wife, the defendant, was severed before her son’s death. Both parties purchased the estate as joint-tenants and they possessed the house together for three years, until 1974. The wife made all of the mortgage payments until she left in 1974. The husband continued to make improvements until his death in 1979. After the wife fled, she instructed her attorney to recovery her share in the property in 1975. The property was sold in 1979 after he husband’s murder. Issues: Is the plaintiff entitled to severance of the joint tenancy? Holding: Yes, Reasoning: The plaintiff submitted when the parties attempted to negotiate a settlement in 1975 that was enough to sever the joint tenancy. The court must look at the intentions of the parties. A “course of dealing” is sufficient to find that the parties severed the joint tenancy. This can include letters or correspondence with the other party. The judge distinguishes another case, Rodrigue v. Dufton, in which the husband abused his wife, she left, and he continued to reside in the home. The court found in that case that joint tenancy had not been severed. This is a problem in this judgment!!! In this case, the court determined that all that the defendant wanted was her “beneficial interest” and then she would have released the property to her husband. The plaintiff, therefore, recovered her son’s share less the occupational rent. Rationale: If both parties negotiate on the basis of holding separate shares in the property, then they treat the property as being subject to tenancy in common. We know from this case that although the dissolution of a relationship is likely not sufficient to sever a joint tenancy, but the conduct of negotiations in which the parties both believed that they could treat their interests as tenancies in common is sufficient. Partition 1. Is partition or is sale appropriate? Cook v. Johnston (1970) O.H.C.J. Facts: Section 3 of Partition Act provides that a “guardian may take proceedings for the partition of land or for the sale, if the sale is considered more advantageous to the parties.” In this case the parties co-owned an island with two separate cottages. A cottage was built on part of the island. The parties have something of a “timeshare” arrangement. Issues: Should the island be partitioned or sold? Holding: It should be partitioned. Reasoning: The parties had used the island as a summer home for a long time. If it was sold, both parties would lose the ability to spend summer vacations there. The money received from a sale would not provide adequate compensation for loss of the rights to the property. The property could be suitably divided, based on the interests of the two parties. Rationale: Partition may be a favourable option, where the sale of the property would provide less benefit to the parties. The court however fails to consider that the partition of the island might reduce its value. 2. Can the court say no to partition? Recall Knowlton v. Bartlett. In that case the plaintiff wanted to bring an action for the sale of the land. Although the judge in that case held that partition would not be feasible, we can ask ourselves whether this is true given that the estate is quite large. The judge delays the sale, given that the defendant, Mr. Bartlett is elderly, has been living in the home for a long time, and the property has been in his family for more than one generation. We can see the analogy here between Mr. Bartlett as a dependent and children in referenced cases. Additional Notes: ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ RIGHTS IN THE LAND OF ANOTHER There are many situations in which one party exercises rights in land which can compromise the exclusive dominion of ownership. Examples include: co-ownership, adverse possession, qualified estates, “natural rights,” personal rights, and granted proprietary rights, such as a easements. The court might decide that a particular grant is a license or a mere personal right if it does not accommodate the dominant tenement. The court might also decide that it is a possessory right if it displaces the servient owner. Easements The Gypsum Carrier case shows reluctance in the common law to recognize new interests in land. We have seen this before (in Statute Qua Emptores) with respect to subinfeudation, as well as with the Associated Press and Victoria Park cases. Gale on Easements identifies the four requirements: 1. Dominant tenement and a servient tenement These tenements must be adjacent (Ackroyd v. Smith). Mossman and Flanagan suggest that policy justification for limiting who can hold an easement – that is, to limit the burdens on the land – is not relevant today, because of the modern registration systems. 2. Easement must accommodate dominant tenement It follows that the right must attach to land. If it merely benefits a person it presupposes that the right is a personal right like a license. By implication, however, a right in land will probably benefit its occupier. In re Ellenborough Park  Facts: Homes were built adjacent to (and in a short distance away from) a park. The vendors granted the purchasers a right to enjoy the park. Issues: Did the right constitute an easement? Did the right benefit the dominant tenement? Holding: Yes. Reasoning: Evershed MR of the Court of Appeal determined: “the use of a garden undoubtedly enhances and is connected with the normal enjoyment of the house to which it belongs.” The judge seems to be making a fairly subjective assessment of what it means to be a homeowner in England at the time. Had this been free access to a zoo, however, the court would not have accepted the grant as an easement. The right of enjoyment to these few [non-adjacent houses] does not negative the presence of the necessary “nexus” between subject matter enjoyed and the premises to which the enjoyment is expressed belong. The judge also had questions in relation to the utility of the easement. Evershed held that the right was for the benefit of the health of the residents of the dominant tenement. He was also critical of the utility requirement, as he referenced Duncan v. Louch in which the court acknowledged jus spatiandi. Rationale: In some situations, the dominant and servient tenement need not be directly adjacent, so long as the “nexus” exists. The right to walk over someone else’s land may be sufficient to form the subject matter of a grant. Perhaps the grant supplies something that is deficient or lacking in the dominant tenement. Mossman and Flanagan suggest that this case represents an exception to the general rule, because of the nature of the interest involved: that being a communal garden (not a business interest). Jengle v. Keetch and Depew v. Wilkes seem to be conflicting judgments with respect to parking as exceeding a right of way. The cottage owners in Depew showed that parking “was reasonably necessary for the better enjoyment of their property.” 3. Independence of ownership 4. Easement must be capable of forming the subject matter of a grant. The English Court of Appeal in Ellenborough Park determined that a grant may fail to meet the fourth requirement because: The rights claimed are too vague (this could have been an issue in Ellenborough Park, however, the court understood what it meant to enjoy the park for recreational purposes), The rights substantially deprived the owner of proprietorship or possession (an easement will always interfere with possession, but the question becomes whether it displaces possession), The rights were of mere recreation/amusement and not of utility/benefit. Shelf Holdings Ltd. v. Husky Oil Operations Ltd. 1989 Alta. CA Facts: Husky obtained a grant from a farm owner to build a pipeline under the farm. The grant used the language of “easement” and “right of way.” Husky agreed to compensate the grantor for damage caused. Husky was entitled to make repairs to the pipeline. Issues: Is the grant a right of way or another interest? Holding: An easement (right of way). Reasoning: The court recognized that no easement exists if the grant looks like a complete transfer of rights to the grantee. The court distinguished this case from Metropolitan R. Co in which the claimant in that case had built a tunnel (and the court subsequently found that the claimant had a right of ownership, not an easement, because exclusive use of the land does not equate with an easement). The examination of this grant revealed that Husky did not detract from the grantor’s rights of ownership. The owner was prohibited from erecting works over the strip where the pipeline was placed, but otherwise, the grantor had full use and enjoyment of the land. Husky was also prohibited from interfering with the drainage of the lands and would have to compensate the grantor for such damage. The court will consider possession in one of two levels of generality – it accepts from a broad perspective that a pipeline will only displace possession of a small strip of subterranean soil, relative to the whole farm; not that the farm owner is deprived of exclusive use over that space. Phipps v. Pears  Facts: The plaintiff wants to recover for damage done to a wall between its house and the adjacent house, after the adjacent house was torn down (exposing the wall to the elements). Issues: Does the plaintiff have an easement? Holding: No. Reasoning: The plaintiff alleged that it had a right of protection from the weather. Denning explained that the common law is weary about creating new negative easements, because they unduly restrict a neighbour from enjoying its land. This poses an undue limitation on the land because it hinders the land’s development. Note that there is not express grant of an easement in this case, which creates an added difficulty. Easements by prescription require publicity and notoriety, but this would be difficult in the case of a negative easement, because they do not require the dominant owner to do anything publicly. Rationale: The common law does not recognize a right of protection. The distinction that Denning makes seems unusual, since both positive and negative easements place restraints on the servient tenement. In Laurie v. Winch, the Supreme Court of Canada determined that even if the grant makes no express reference to the dominant tenement, the easement can still be created expressly (so long as the servient tenement is mentioned). The court also finds that it can interpret the changing circumstances to specify or narrow down the easement. 1. Non-derogation: in Wheeldon v. Burrows the court articulated two related principles if and when at one point multiple domains were part of the same property and the original owner exercised a “quasi-easement” though the third requirement per Ellenborough was absent. If the owner grants the “dominant” part of the land, and retains the servient, the court will presume that the grantee can continue to exercise the easement over the new servient land. That is “all continuous and apparent easements necessary for reasonable enjoyment of the property are granted. However, if the owner grants the “servient” part of the land, and retains the dominant, the court will not recognize the easement, subject to the following exceptions: Express reservation in the grant, Necessity, Factual reciprocity. 2. Necessity: courts have recognized these easements in cases where a person’s land is landlocked: otherwise the land will not be able to be used, practical necessity is sufficient (over absolute necessity), water access is not sufficient. In Hirtle, the court decided that mere inconvenience was not sufficient to give an easement (peninsula case). However, absolute or practical necessity was sufficient. Water access to the land, especially when the waterway is not used for navigation and transportation probably will not count as a reasonable means of access. We should note, however, that it would seem fairer for the “dominant” owner to prove the necessity, and not for the “servient” to have to go to court to defend the exclusivity of its interest in the land. Note that in Wong, Lord Denning held that since the Public Health Authority required Wong to build a ventilation unit, and because Wong was required to meet the terms of his lease, Denning recognized an easement by necessity otherwise Wong would have been unable to use the premises for the purposes that the parties had envisaged.30 3. Common intention: in Barton v. Raine, the Ontario Court of Appeal held, “there was, by necessary inference from the circumstances in which the conveyance was made, a common intention on the part of both the father on the one hand and the son on the other, that after the conveyance, each of them would continue to use the driveway in the same manner, as in fact, it had been used since the late 1920s.” There was no need to make an easement because they did not consider that the father would have to ask permission to use the driveway. Since the property was conveyed to family, the inference that the easement exists is easier to make. When circumstances change, the easement may disappear. For example, if a party has an easement by necessity, and the state builds a road that connects to the party’s land, the easement by necessity will end. It would have been difficult to argue necessity, because the parties could have accessed the garages at issue by another means, or they could have used it for other purposes. 4. Mutuality/Reciprocity: Recall the situation in Wheeldon with a twist – the divisions of the land both act as “dominant” and as “servient” tenements. In such cases, if one or both parts are alienated, the quasi-easements will continue, if the reciprocity flows to and from the lands involved (i.e. the flow onto and subsequent drainage of water). Easements are supposed to remedy defects in the land, so it makes sense to imply easements in these four situations. 30 Easements can arise in lease situations. In Gypsum, the court found that the right of a railway to pass over a rail bridge was merely a personal right (licence) but the facts of the case seem to suggest that the right met the four requirements of an easement. Even if the grant of an easement was not express in the contract, the holding in Barton might suggest that the parties in Gypsum intended to create proprietary rights so that if one railway merely replaced another, if would also have an easement over the rail bridge and subsequently, if would not have contract with the bridge owner.