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Choses

in Action
What is a chose in action? A chose in action is a personal right of property which can only be claimed or enforced by action, and not by taking physical possession (Torkington v Magee). They exist in law and they also exist in equity.

Is the Property Capable of Assignment?


i. Bare Right to Litigate
Bare rights to litigate include rights to sue in tort, rights to sue for un-liquidated damages in contract and bare rights to sue in equity. None of these rights are rights of property and therefore they are not assignable. Debts and rights to sue for liquidated sums in contract are assignable because they are regarded as rights of property. Exceptions: 1. Fruits of an Action - Glegg v Bromley F: G was a plaintiff in litigation. She executed a deed assigning to her husband, for value, any interest or sum of money (damages) she may become entitled to by virtue of the verdict. She won 200 pound but went bankrupt. She claimed that she had alienated the property to her husband before becoming bankrupt and therefore creditor couldnt claim the money. Held: o The attempted assignment of a bare right to litigate can be distinguished from an assignment of the potential proceeds of litigation. o The fruits of an action can be validly assigned as a form of future property. o Not a presently existing chose in action but future property identified by reference to an existing chose in action (the right to litigate). Equity will regard the assignment of future property as valid so long as there is consideration. As soon as the property comes into existence, the beneficial ownership will attach. 2. Genuine and substantial (commercial) interest Trendtex Trading Corp v Credit Suisse F: A was proceeding in litigation against B, Ran out of funds so assigned the right to litigate to its creditor. Held: o If the assignee has a genuine commercial interest in taking the assignment of a bare right to litigate, then the assignment is valid. Some rights. o I would be prepared to hold where a cause of action arises out of a right which was itself assignable, the cause of action equally remains assignable or, if one must use the language of the older cases, that it is not a bare right to litigate but itself a right of property. Oliver LJ

3. Litigation funding by a third party permitted Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd

ii.

Contractual prohibitions on assignment

1. Assignment of the benefit of a contract, if there is a promise not to assign, is invalid Linden Gardens v Lenesta F: Land owner contracted with a builder. Land owner contracted to pay and the builder contracted to build. The agreement provided that the landowner could not assign the benefit of that contract to a third party without the permission of the builder. Landowner purported to assign it anyway. Held: Assignment is invalid. 2. Cannot assign the burden of a contract but with the consent of the person who is owed the benefit of the contract you can novate (a new contract is formed) Pacific Brands Sport & Leisure v Underworks Held: The original contract between Sara Lee Apparel and Underworks did not admit of the interpretation of an implicit consent to novation. 3. Cannot assign the benefit of a personal service contract Nokes v Doncaster Amalgamated Collieries 4. Assignment in equity contractual obligation of confidentiality Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak

iii.

Public Pay

1. Assignment of personal pay of a holder of public office is invalid on grounds of public policy (to maintain the decorum and proprietary of the offence occupied) unless falls due after the assignors death Arbuthnov v Norton

Legal Assignment
Legal requirements for assigning legal choses in action: Section 12 of the Conveyancing Act 1919 (NSW) 1. There is a clear intention to assign rather than just authorise the debtor to pay another. 2. The assignment must be absolute and not by way of charge. o Means that part of a chose in action cannot be assigned under s 12. Although, part of a chose in action can still be assigned in equity. 3. The assignment is in writing. 4. The writing is signed by the assignor personally (not by an agent); and 5. Express notice in writing is provided to the debtor by the assignee or assignor.

Equitable Choses in Action


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Trust
A trust is an equitable device which separates legal and equitable ownership.

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A trustee is a person who holds legal title to property on behalf of a person. A beneficiary has equitable title to the property. A settlor is the person who creates the trust. The court of equity binds the conscience of the trustee and ensures that he/she lives up to his/her equitable obligations to the beneficiary.

a. Requirements to Create a Trust: o The Three Certainties: 1. Certainty of intention 2. Certainty of subject-matter 3. Certainty of beneficiaries o Trust property must be vested in the trustees (Constitution) To create a valid trust the three certainties must be present: certainty of intention, certain of subject matter and certainty of object or beneficiaries: Knight v Knight. 1. Certainty of Intention: Certainty of intention to create a trust. Must use imperative words (must, will, shall, hold for) to impose a legal obligation. Should not use precatory words (in the hope that, request, wish, desireetc.) Dont necessarily have to use the word trust. Re Adams and Kensington Vestry o In full confidence that she would do what was right as to the disposal thereof between my children not possible to infer a certainty to create a trust. In Paul v Constance, it was held that the phrase "the money is as much yours as it is mine" was sufficient to translate to a trust. Re Kayford: "it is well settled that a trust can be created without using the word "trust" or "confidence" or the like; the question is whether in substance a sufficient intention to create a trust has been manifested". 2. Certainty of Subject-Matter: Both the type and amount of the subject matter must be sufficiently certain. A disposition of the bulk of my estate failed in Palmer v Simmonds. In Re Golay, the testator directed his executors to let Tossyenjoy one of my flats during her lifetime and to receive a reasonable income from my other properties. The court upheld the gift reasoning that a reasonable income could be objectively determined by a court and that a flat could be selected by the executors. 3. Certainty of Object (Beneficiary): The court needs to know which person has standing in order to be able to enforce the trust and make declarations in their favour: Morice v Bishop of Durham. (Beneficiary principle) My children would be fine as it is ascertainable who the intended beneficiaries are.

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Certainty of Object in Fixed Trusts: Courts apply list certainty test to ascertain if the beneficiaries of a fixed trust are sufficiently certain. The trustee must be able to compile an exhaustive list of all the potential beneficiaries of the client. West v Weston o Held that the list certainty test could be satisfied if: within a reasonable timethe court can be satisfied on the balance of probabilities that the substantial majority of beneficiaries have been ascertained and that no reasonable inquiries could be made which would improve the situation.

Certainty of Object in Discretionary Trusts: Discretionary trustees may have a discretion as to which beneficiary they select, so there is no need for them to be able to draw up an exhaustive list of beneficiaries. Courts apply criterion certainty test. Trustee must be able to determine with certainity whether any given individual is or is not a potential beneficiary: McPhail v Doulton.

Trust Property Must Be Vested in the Trustees (Constitution): Nothing actually happens until the property moves from the settlor to the trustee. Settlor has to actually specifically perform the promise and properly constitute the trust for the beneficiary to have any right to enforce the trust in equity.

b. The Equitable Interest of a Beneficiary: An equitable interest in a trust is property-like. Cannot simply define the interest of a beneficiary strictly as either a proprietary right exercisable against the world, or just a personal right that can be exercised against the trustee. Baker v Archer-Shee o The beneficiary has a property right to all of the income, albeit that the trustee has a personal right to reclaim expenses. o When the trustee gets the income it is the beneficiarys however, the trustee has authority to deduct his expenses from the amount.

c. Distinction between trust and debt: Re Kayford o F: Kayford was a mail order company that knew it was entering financial difficulty. It decided to put the money it received from customers into a separate trust account and saw themselves as trustees for their customers. o Held: Obligations in respect of the money had been transformed from contract to property, from debt to trust.

Daly v Sydney Stock Exchange o Were the funds received as a loan or as trust funds? o Objectively, Dr Daly intended the funds to be given as a contract of loan. o They did not receive the money on trust did not involve a relationship between trustee and beneficiary. o He could sue for breach of fiduciary duty but they were bust. Quince v Varga o Quince gave money to Mr McLaughlan. The loan was made for a specific purpose that the money be used for his loan sharking business. o Varga was a third party who had been given some of Quinces money from Mr McLaughlan. o Court held that the trust was an express trust, or a resulting trust that arose after the failure of the purpose of a loan. Distinction between trust and contract: A trust is an equitable relationship. A trust does not depend on agreement. A trustee can decline the property. A trust does not depend on consideration if it has been properly constituted. o Can be relevant when youre trying to force constitution. A trust is enforceable by the beneficiary, who may not be a party in its creation. o Cf privity of contract A trust is not always revocable by agreement between trustee and beneficiary. A trust confers proprietary as well as personal rights on the beneficiary (eg tracing) o The beneficiary can trace the property through their various substitutions.

d.

Contracts for the Benefit of Third Parties: B can sue A for specific performance, if A was supposed to pay C money but decides not to Coulls v Bagots. Beneficiaries of a liability insurance contract are an exception to the privity of contract: Trident.

Trusts of Voluntary Covenants: A settlor formally executes a deed and covenants (promises) to create a trust. The covenant will not give rise to a right to seek specific performance (because C has not provided consideration) but breach of a deed does give right to action for common law damages. Fletcher v Fletcher o If there is an intention by the settlor to create a trust of the promise to transfer property to the trustee for the benefit of the beneficiary, then there may be a completely constituted trust of the promise and the beneficiary may compel the trustee to sue and recover damages o A completed trust of a promise was found and that was a voluntary deed b/w a settlor and trustee that if the settlors illegitimate sons survived him, his executor would pay 60,000pound to the trustees on trust for them.

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And the executor refused to pay. So the surviving son brought an action that there was a trust of the promise contained in the voluntary deed and the trust was that the money would be paid to the trustee so the trustee would be obliged to sue and recover damages.

Don King Productions v Warren o o o Im not assigning a chose of action to the third party Im declaring myself a trustee of the chose in action for the benefit of the third party. A chose in action can be held on trust. Where an attempted assignment of rights under a contract is ineffective in law, it is still open to the parties to create a trust of the benefit of the obligations under the contract. A contractual term prohibiting an assignment of rights does not extend.

Trust and Equitable Charge: Associated Alloys o F: Associated Alloys supplied steel to Metropolitan on credit. There was a clause in the credit agreement that allows Metropolitan to use the steel and to sell it to third parties, however if the steel is sold on to third parties the proceeds of the sale have to be held in trust. However, it looks like AA is going to take a charge on Metros receipts. A charge has to be registered in order to be effective. o Held: HCA held that it was a trust and not a charge.

Trust and Agency: In the case of an agency, have a principal and an agent. Principal authorises the agent to act on behalf of him. In the case of a trust, the trustee is not an agent but is the principal. The trustee is the principal because the trustee is in law the owner of the property. Only not the owner of property with respect to beneficiaries of the trust. When the agent is given money by the principal or where the agent receives money in the course of the agency, the critical question is does the agent receive the money on behalf of the principal as agent for the principal so that the agent would simply account to the principal as a debtor or whether the agent receives the money as trustee for the principal. If agent receives money as trustee for the principal, then the agents bankruptcy will not prejudice the principal. Cohen v Cohen o Held: In claim 1, he was given permission to use the proceeds from the sale or personal chattels for himself (to buy business equipment) and there was no obligation to give money to his wife. He was not bound to keep this money separate, but was entitled to mix it with his own and deal with it as he pleased. He was not a trustee but a mere debtor in relation to this money. However, there was a clear intention that he account specifically for proceeds of sale of the furniture because he was not authorised to mix proceeds with own money. Held to be a trustee in relation to that money.

Walker v Corboy o Held: Debtor-creditor relationship only. Where an agent received the proceeds of sale as opposed to receiving the money on behalf of the owner, the courts will consider the facts and circumstances surrounding the delivery of the property to determine if there is a trust over the proceeds. Adopted Cohen and said it was a question of intention whether the agent is bound to keep the proceeds separate from his own money. The court will look to : The intention of the parties Legal obligations through contract or statute Facts - eg separate accounts.

Succession: Livingston v Commissioner of Stamp Duties o A residuary beneficiary of an un-administered estate has no proprietary interest in any asset in the trust estate only a chose in action against the executors to enforce proper administration. o There is such a thing as a Livingston right but it is less than a trust in the sense that it does not attach to a property in the way that a trust does. o Queensland could not tax Livingstone as it was held that she did not have property in Queensland which could be taxed. In Re Maye (2008): o Chose in action was included by the statutes, therefore the property went to the government. This is the only point in difference with the Livingston case the scope of the statutory definition.

Bankruptcy: Official Receiver v Schultz o F: Mrs Schultz became bankrupt but was discharged after a few years.
During the term of her bankruptcy, her friend died and left her an interest in her estate (i.e. Mrs Schultz became a residuary beneficiary of her friends estate). She is discharged from bankruptcy and then the estates administration is complete and she receives property. The official receiver in bankruptcy claims the property to pay back her former creditors.

Held: The HCA said that as soon as she became a beneficiary under the will, she had a chose in action (a property right) against the trustee. As a piece of property, the chose in action could be transferred to someone else. Here, it was transferred by the operation of the law. Bankruptcy Act 1966 (Cth) says that when a bankrupt acquires property during the term of the bankruptcy, the property is transferred to the receiver. The chose in action arose during this time, so the chose in action belonged to the official receiver. When the chose in action finally bears fruit (when administration is complete), it belongs automatically to the official receiver. When a beneficiary transmits a chose in action (or part thereof) or that chose in action passes by operation of law, such as under the Bankruptcy Act, that transmission naturally encompasses not only the chose in action but also the expected fruits of that chose in action

Re Leighs Will Trusts o Husband died and on the day of his death he owned shares in SMF. He was also owed money by SMF. When he died he left those two rights to his wife. His wife had a Livingston right in respect of the shares in the company and in respect of the debts that the company owed. She died before the will could be administered. o All shares which I hold and any other interest or assets which I may have in SMF Ltd. Arguably those words are still too narrow. She had an interest in the company sufficient to answer the description. o If she had only said all my shares it would not have been encompassed by Livingston Rights because she did not have the shares but had a Livingston right to the shares.

Deserted Wifes Equity: Provincial Bank v Ainsworth If a husband deserts his wife, he cannot not kick her out of the marital home even if she has no proprietary right to the home. What if the house is sold to a third party? Can the third party kick the wife out? Held that the bank could kick her out. She had a deserted wifes equity against her husband not against anyone else. A very low, weak form of an equity chose in action indicates the varying strengths of equitable choses in action. Bank was not bound.

Counter-factuals: If settlor dead Unfortunately it cant be saved but if hed asked me I would have recommended If still alive Can be drafted better

Personal Property
Possible to claim equitable interest in goods: Dougan v Ley Facts: o Ley, the buyer seeks specific performance of a contract for the sale of a taxicab and licence. o Dougan, the seller, argues that specific performance cannot be granted because the buyers have to perform certain acts that would require the supervision of the court. The buyer was required to satisfy the Transport Commissioner of their fitness and suitability to operate a taxicab.

Issue: Are common law damages inadequate? Reasoning: o Damages are generally regarded as an adequate remedy in respect of contracts for the sale of personalty as the damages award can be used to purchase a replacement item in the marketplace o Damages will therefore be inadequate when there is no available substitute to replace the originally promised performance. o For example, there is no substitute for a piece of land, which is unique and cannot be replaced with another o Here, there are a limited number of vehicles registered and licensed as taxi cabs o The price largely represents the value of the licence o Essentiality of the purchasers calling of the chattel and the licence annexed to it Decision: Within the scope of the remedy of specific performance. Issue: Supervision? Decision: The court makes a decree of specific performance conditional upon Ley fulfilling the Commissioners required elements.

i.

Possession
Possession connotes a relationship between a person and some material object. It is a relation subsisting in fact. The right of the possessor to the chattel arises out of the factual situation: Button v Cooper. Two elements are necessary: o Control some exercise of power over the goods or land. o Intention an attitude in the mind of the actor denying the rights of other to have access to the land or goods. Possession confers a possessory title possession is a root of title possession is not only evidence of title but is a form of title itself hence you have a claim against the whole world barring the true owner title is relative.

Control: Young v Hitchens o Herring inside net but fishing net was not fully closed No possession until party has actual control over the fish. The Tubantia o Dutch steamer sunk by Germans in 1916 gold bullion who had possession? o Your control may be quite limited but if its the maximum amount of control that is possible to be exercised then you will be considered to be in possession of the goods. Popov v Hayashi- Both parties have an interest since Popov was intial capturer of the ball, and
Hiyashi was able to take full control of the ball because Popov dropped it. Determining that Hayashi had full possession and property rights in the ball was unfair to Popov because he made the first contact with the ball, and was prevented from gaining full control by circumstances outside his control. They both have an equal property interest in the ball.

Factual elements how do you use the thing?

Physical elements Location? Technological elements o Ohio v Shaw The idea that the fish must be entrapped with no means of escape is a technicality and erroneous. The owners of the nets need only prove that their efforts to secure the fish were taken with reasonable precautions to prevent escape. Social elements o Riley v Pentilla Can you have an easement over a tennis court? No possession as the reason for the fence is to prevent tennis balls from leaving too far.

Intention: Q of fact. Control sometimes demonstrates intention Control of things on your person made decisions to put things on your body. Control of things held as part of your interest in land

Control of space leading to control of things: Waverley v Borough Council - D was using a metal detector in a park owned by the claimant
council. The D found a brooch and reported this. Court of Appeal held that the council had the better right to the brooch. As it had been found within or attached to the land rather than on the surface it was part of the land and belonged to the person.

Bridges v Hawkesworth Roll of banknotes found in public area of the shop belonged to finder not shopkeeper Parker v British Airways Gold bracelet executive lounge of the terminal was public enough for finder to claim possession. Tubantia Control of space around the wreck. Ohio v State Control of the space in the net. Hibbert v McKiernan Lost golf balls on a course belong to a club. Flack v National Crime Authority o Bag of cash o Son suspected of illegal activity o Mrs Flack had an intention to possess o Whatever is found in a private residence the occupier has a greater right of possession over it. Re Jigrose Pty Ltd o Bales of hay left on sold farmland at completion worth $20k were they abandoned? o As a general proposition, if I throw something away I truly abandon it. If I truly abandon it, I intend no longer to retain possession, I do not propose to seek it out and I have no further interest in ownership. Must be intention to abandon.

Title does not automatically transfer to the purchasers on abandonment. It will pass where there is an act such as appropriation (taking to oneself as ones property) requires a manifest intention to exercise control over it. The bales of hay had been appropriated by the purchasers. An intention to exclude others is an exercise of control over the chattels. Munday v ACT o When were the goods at the tip abandoned? o If abandoned then indicates an unwillingness to assert superior title as owner o Finder then can take possessory title against the world- if take possession lawfully o Rights of Revolve (Recycling company) ACT asserts superior right to possession after goods abandoned for benefit of Revolve o No superior right until goods abandoned o Rights of Munday Prior to abandonment people have not lost the right to give the goods away Stockland (Constructors) Pty Ltd v Carriage o Stone tools sitting on the grounds are not fixtures o Cannot get a caveat to protect personal property o All relics belong to the Crown. Aboriginal people can get them but only when there has been an order to transfer them. So no proprietary right over the relics. o Therefore, no interest in the land. Federal Commissioner of Taxation v ANZ Banking Group Ltd o Double locked safe deposit boxes one key with bank the other with the depositor But the bank has a duplicate of the depositors key. o Held that ANZ has custody and therefore has to produce the documents. Physical retention of the two keys gives it control over the boxes. While there was no legal possession there was at least custody and control. Q of fact rather than law. o

ii.

Transfer of Goods by Gift


Land Gifting has to be in deed, trust has to be in deed Declaration of trust no formal requirements of writing Oral words of gift and delivery Donatio mortis causa (Gift in contemplation of death) Gifts of choses in possession require: (a) deed; or (b) delivery (actual or constructive) coupled with intention to part with ownership: Cochrane v Moore (1809) 25 QBD 57.

Transfer of Goods Delivery: Delivery of possession and intention to transfer possession both must coincide at some point Chambers Compare gift of book with a library book. Re Stoneham Grandads furniture possession for two years you can have it possession matches intention

Thomas v Times Book Co lost manuscript you can have it when I find it intention matches with possession. Re Cole gift of house and furniture this i all yours possession shared with husband no delivery as no exclusive possession. Cochrane v Moore o Benzon owed a horse called Kilworth. o Benzon by words of present gift gave to Moore a quarter of the horse but Moore remained ignorant of the gift. o Benzon borrowed some sums from Cochrane and Cochrane later issued a Bill of Sale over a number of horses including Kilworth. o Cochrane sold horse at auction. Moore claimed quarter of proceedings. o Whose rights were superior Cochrane or Moore? o Delivery of a chattel is ordinarily necessary. If you havent delivered then you have not given. Kiplin v Rateley o Mr Ratley got into financial strife his father in law, Purser, paid out the creditors in exchange for Ratleys furniture. o The furniture was in Mr and Mrs Ratleys house. o Dad visited one day and said to Mrs Ratley you can have my furniture o There is no possibility of confusing the fathers intention to continue to remain in possession of the chattels as he does not live in the house so he will not benefit from them. Horsley v Phillips Fine Art Auctioneers Pty Ltd o Contents of house subject to mortgage (bill of sale) in favour of the Catholic Church later assigned to St George o St George claimed that Spies and his brother had gifted the furniture to his mother prior to having a half-share in the furniture so it could not be subject to the bill. o Had the furniture been effectively delivered? o At time of gift, furniture was in possession and custody of the couple so this was sufficient to make the gift effective

Donatio Mortis Causa: Gift in contemplation of death eg conditional on death Three requirements: o Gift made in contemplation of death. o Passing of control o Property to revert if donor survives Indicia of ownership to illustrate passing of control? Keys, Bank passbook (Birch v Treasury Solicitor), old system land title deeds (Sen v Headley) Applies to both real and personal property (difficult with Torrens land constructive trust? Maybe not a problem as someone who is registered wipes out the interest of anyone else prior) Wilkes v Allington o Mrs Allington was a widow with life tenancy

She mortgaged the farm to her brother in law, William 1000 pounds at 5% p.a She died in 1923 and gave the property to her daughters there was no covenant to repay the principal and the mortgagee accepted a payment of 3.5% interest (later 3%) o Mortgagee became deathly ill handed an envelope with letter saying Deeds relating to X. Farm to be given up at death o William died a couple of months later but not from the condition he thought he was going to die from. o Executors sought to enforce mortgage. Nieces sought to argue donation mortis causa. o Gift was still valid although he did not die in the way he contemplated. In Re Wasserberg o Testator having operation bearer bonds put in envelope for wife and put into deposit box list of bonds given to wide plus bunch of keys including the safe deposit key. Later dies o Handing over key enough to constitute effective delivery parting with dominion over the box. Public Trustee v Bussell o Staples and Bussell were lifelong mates. Staples got very ill and was informed that he was dying he gave Bussell share scrip You may as well take these shares now and Ill have them transferred over o Staples said he would change his will but died before that happened. o Delivery of the share certificates was enough for delivery of essential indicia of title. o o

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Transfer of Goods by Sale:

a. Goods
Sale of Goods Act 1923, s 5 Goods include all chattels personal other than things in action and money. The term includes emblements and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

Telstra v Hurstville Council Telstra and Optus put in cables for Cable TV. Federal government passed laws doing away with the requirement for development approval exercised telecommunications jurisdiction. Councils fired back by charging rates on the cable. Telstra and Optus argued that the video information was a good. To provide information is to provide service. Difficult to say that information constitutes goods.

Lee v Griffin (NOT GOOD LAW)

Dentist was contracted to make a set of false teeth for A. A died before receiving the teeth. Was this a contract for the sale of goods that had to be in writing? Where the substance of the contract is the production of something to be sold to the customer, it is clearly a contract for the sale of goods. But if the substance of the contract is skill and labour has to be exercised for the production of the article and that it is only ancillary to that that there will pass some materials in addition to the skill involved, that does not make a different to the result

Robinson v Graves Graves contracts Robinson to paint a portrait of his wife. Graves later refuses to pay. Graves argued that there was no contract as it was a sale of goods over 10 pounds which was at that time required to be in writing. Modified test of Lee v Griffin Held that contract for the painting of the portrait was not a contract for sale of goods. Was the substance of the contract the sale of a tangible thing or is it in substance a contract for the supply of services?

Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd Creation of tool for a new type of plastic injection moulded drawer P contracted with a D and D later applied for a patent over the design Held that it was a sale of goods applying the Robinson test.

Amlink Technologies Pty Ltd and Australia Trade Commission Rejected Lee v Griffin and confirmed Robinsons reasoning.

Gammasonics Institute for Medical Research Sale of software by remote download. Distinguished an earlier English Court of Appeal decision in St Albans City and District Council, where it was found that software on a computer disk is inseparable from the physical medium in which it is embodied, and therefore a good.1 Justice Fullerton noted that in this case, the software was not contained in a single physical medium. Rather, it travelled between one physical medium (the download server) and another (Gammasonics computer), and during the download was not contained in any physical sense. Held not a good for the purposes of the SOG Act.

ii.

b. Concept of Sale
Hire purchase agreements - Helby v Matthews Helby entered in an agreement to the hire purchase of a piano by Brewster. Brewster pawned the piano to Matthews. Matthews argued he was protected under the Factors Act which said that protection would be given if Brewster had bought or agreed to buy the piano.

Held True construction of the agreement was that the hirer was under no legal obligation to buy, but had an option either to return the piano or become its owner. By putting the piano out of his power to return he had not become bound to buy; that he had therefore not agreed to buy goods. Owner was entitled to recover the piano from the pawnbroker.

Conditional Sale Agreement McEntire v Crossley Agreement to hire a gas engine which would become the lessees once the lessee paid full instalments. If the lessee went bankrupt the lessor would have option of taking the engine back or seeking the remaining amounts. Lessee went bankrupt sale of goods? Held Proprietary rights in law or equity did not pass to the lessee during the time when the licence to seize was still operative. No SOG.

Australian Guarantee Corporation Ltd v Balding Must look at the essence of the contract. Held overwhelming nature of the contract was one of debt assignment should have been registered to be effective.

c. When does property pass?


22 Property passes when intended to pass (1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.

23 Rules for ascertaining intention Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Rule 2. Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing be done and the buyer has notice thereof. Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof.

Rule 4. Where goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer: (a) when the buyer signifies approval or acceptance to the seller, or does any other Act adopting the transaction, (b) if the buyer does not signify approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. Rule 5. (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) Where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract.

Carlos Federspiel & CO SA v Charles Twigg & Co Ltd Matthew Short & Associates Pty Ltd v Riviera Marine F: Riviera made cruisers. Short was contracted to transport the cruisers. Short used contractor Campbell to pick up the cruisers and place them on a truck in the parking area and then transport them to the dock. One cruiser was damaged by Campbell whose driver drove the boat into an archway over $100k damage. Who was the owner? Held Since the contract was for future goods, the time fixed by s23 r5 of the SOG Act can be replaced by the time of earlier payments if the parties so intended. It was not the intention of Riviera and the foreign shipbroker to transfer property at the time of payment. It is indicated an intention for property to pass when the boat was loaded onto the freighter. Property did not pass when the boat came into possession of Short of Campbell by reason of s23r5 SOG. Freighter owner was the relevant carrier for the purposes of s23r5(2). Cost and responsibility for arranging the transportation fell upon the vendor.

28 Seller or buyer in possession after sale (1) Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same

effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. (2) Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title. (3) In this section the term "mercantile agent" means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

On-selling Gamers Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd Evans and Rose on-sold cars it had agreed to purchase from Gamer to Natwest. S 28 seems to indicate that the second buyer has to have come and claimed the goods in order to be protected. However, Natwest hasnt physically taken delivery of the cars yet. Delivery refers to possession in its legal or technical sense. Evans and Rose had given constructive delivery falling short of actual physical delivery, and was holding as a bailee.

d. Unascertained and future goods


Re Goldcorp Exchange Company sold gold and offered to store it for customers. Coy told customers that sufficient and separate stock of bullion would be kept they lied. Company went into receivership. Did the customers own their gold? No they had a contract for unascertained generic goods they had no property in law or equity it was impossible to know which bits of gold belonged to which clients.

Brief Facts: The case concerns an insolvent gold trading company and claimants argued that the company should hold their gold on trusts for them. Three classes of claimants existed. First type involved clients who purchased gold bullion and their respective orders were fulfilled in full, with their bullion placed in specific vaults. There is clear segregation of trust property thus it was held that the company holds their gold on trust for these clients. Second type involved clients who purchased gold, but they were merely given a receipt (a "chose in action"). The company only holds minimal amount of gold bullion for their day to day trading use and these clients' orders were not fulfilled in full. Since their gold is unsegregated from the general inventory, these clients were not beneficiaries under trust. Third type of client involved a particular purchaser who bought a large amount of rare "maple leaf coins". Due to its rarity, the company cannot fulfill his order and had to further order the coins from the manufacturers. The client was able to produce satisfactory evidence that if it was not for his order, the company would not have gotten those coins. However,

since these coins were placed in the same vault as the company's other coins, it was held to be unsegregated and no trust exists.

iv.

Commingling

Commingling has occurred as it is


Confusio blended together and inseparable Commixtio mingled but still separable With consent contract or estoppel will determine the split

a. Mixture
Where it is impossible to separate the constituent parts, or the constituent parts are not practically capable of being separated.
Mixture wrongfully without consent: Without consent if mixed wrongfully the innocent party has the superior right and is entitled to receive an interest equivalent to the value of his or her chattels that went into the mixture. Where there is any doubt as to quantities, there is a presumption of value in favour of the non-consenting or innocent owner. Tenancy in common innocent parties get to take their shares first. Staughton J instead held that even where there had been a wrongful commingling, the mixture would generally be held in common in proportion to the contributions of the parties. Any doubt about the proportions would be resolved in favour of the innocent party. However, if it is completely impossible to determine the relative contributions of the parties then the innocent party would be entitled to the entire mass: Indian Oil Corporation v Greenstone

Mixture by Accident: Spence v Union Marine Insurance Company o P was Liverpool merchant, D was a marine insurance company o Ship was full of cotton (2493 bales) with different owners shipwrecked and 2252 bales saved. However, loss of marks and accidental mixing of bales at sea. o Held as long as after the mixture, the Ps retain some proprietary interest in the mixed bales, then their loss is not a total loss for insurance purposes, and their claim fails. They must accept the tender of some equivalent part of the resulting mess. o Where the goods are mixed by accident, or by the act of a third person (for which neither owner is responsible), the proprietors become owners in common of the mixed property in proportion to the amounts contributed.

Mixture when both parties are at fault:

b. Specification
Process of transformation of property so that it is irreducible back to its original form. [The] question whether goods are reducible to the original materials is not simply a matter of physics. Other perspectives have to be considered, including the economic perspective. Associated Alloys.
Steel has been made into pressure vessels and heat exchanges. Lose property right when they have been transformed.

c. Accessories
Two items joined together. Is separation possible? Rendell Hire purchase of engine to Pell. Pell puts engine into truck also on hire purchase from another company. Possession was taken by owner of truck who refused to give back the engine. Court rejected the claim of ownership as the engine could be removed without the damaging either the truck or the engine. The accessories continue to belong to their original owner until it is shown that it is a matter of practicability that they cannot be identified, or, if identified, they have been incorporated to such an extent that they cannot be detached from the principal.

Which is the accessory and which is the principal? McKeown v Cavalier Yachts: Yacht built into a hull ($1.5k). Hull belonged to the P. Young J found that the hull was the principal as each part of the yacht had been added gradually. If the accessory cannot be identified or cannot be detached, then accession has occurred. First, the accessory becomes, in law, part of the principal. Secondly, the title of the owner of the accessory is extinguished.

By losing title to the accessory, the owner of that item may suffer loss. In some circumstances, he/she will be entitled to receive compensation for that loss unjust enrichment. Assuming that the

owner of the accessory actually performs the accession, compensation is payable if that person honestly believed that he/she owned the principal. Conversely, if the owner of the accessory knows or should have known that he/she did not own the principal, no compensation is payable: Greenwood v Bennett.

v.

Bailment

Bailment The voluntary assumption of possession of goods by one person from another for a definite or indefinite period, with an obligation to redeliver. Bailor Person who delivers goods to another so as to create a bailment. Bailee Person who receives goods from another so as to create bailment. Sub-bailment Bailment by a bailee to a third party.

i.

What Constitutes a Bailment?


Delivery of goods (transfer of possession) Voluntary assumption of possession o Only if the sub-bailee has notice that the bailor is not the owner of goods will a bailment relationship exist between the owner and the sub-bailee (Pioneer Container) Bailee must be knowingly in possession (Possession Container) Consent of owner to sub-bailment is not necessary if bailee is acting within the scope of the bailment in doing so (express or implied).

Coggs v Bernard Bernard undertook to carry several barrels of brandy belonging to Coggs from Brooks Markets. Undertaking was gratuitous; he was not offered compensation for his work.

As the brandy was being unloaded at the Water St cellar, barrel was pierced 150 gallons lost. Held - In a gratuitous bailment made for the benefit of the bailee, the bailee is liable for the slightest negligence Six sorts of bailments: o A bare naked bailment of goods Delivered by one man to another to keep for the use of the bailor.

Delivery and Return of the Same Thing: Chapman Bros v Verco Bros Wheat storage contract wheat mixed and stored and sold could return if not sold but what is returned? Not the same wheat. Warehouseman returning a different thing of equal quantity and quality. If the bailee is not obliged to return the goods, then no bailment has been created. In these circumstances, property in the goods passes to the warehouseman when the goods are deposited no bailment.

Pangallo Estate Pty Ltd v Killara

Contract to make wine out of grapes. Pangallo supplied grapes to Cecchini to make into wine. She leased land from Killara. Grapes were supplied in 2007 but Cechinni was removed from the property and her property taken under the lease terms. Wine was not returned by Killara. Was it a bailment or a transfer of property for sale and resale? Reasoning: o Well established that a bailment may involve an obligation to return the goods in an altered form. o Parties never entertained any intention that the growers sell their grapes to Cecchini and then repurchase them o No suggestion that Ms Cecchini would pay for the grapes upon receipt or at any other time: she was paid a fee per tonne for contract winemaking services. o Wine was sold under the name and label of the growers. Held Can return the goods in a fairly substantially altered form.

Transfer of Possession: Askrigg Pty Ltd v Student Guild of Curtin University of Technology Askrigg was a money market corporation and traded in bills of exchange it took deposits from the public it quoted secured and unsecured rates of interest secured came with bills. Bills could be held by the depositors or with the company the parties never took the bills home and each deposit/bill was put in a security box. Went into liquidation no securities registered was there a pledge? Was there a bailment? Was there delivery? If there was delivery, bailment and pledge then it didnt need to be registered to be effective under s 200(2) of the Companies Code. Held Constructive without actual physical delivery is sufficient to create bailment. Brought about by delivery of the means of obtaining possession, such as the handing over of a key to the premises where goods are stored. Acknowledgement that the right to possession to the goods has passed. Thus, if there is an agreement between the parties whereby the possession or the pledger on his own account is changed to possession as bailee for the pledgee that will be sufficient to amount to possession. There was constructive delivery, bailment and pledge. A pledge is a form of security created by a contract which results in a bailment of the subject matter to the creditor which he is entitled to retain until the debt is paid. It requires actual or constructive delivery of the goods to the pledgee. This does not involve a transfer of title and in this way it differs from a mortgage. In that case the mortgagor transfers to the mortgagee the whole of the rights to the property, retaining a right to redemption. Under a pledge the pledgee has no more than a right of possession but with a right of sale of the property upon default by the pledger. There is no right of foreclosure.

ii.

Bailors Obligations:

Obligations in bailment are enforced through the property torts, the law of negligence, the law of obligations (or quasi-contract) and contract law where there is an agreement. Bailment for Reward:

Entitlement to bail the goods That the goods are safe and suitable for bailment To pay the agreed rate for storage, or where not agreed, the reasonable expenses of storage. In a bailment for a term, not to interfere with bailees possession.

Gratuitous Bailment: The right to bail the goods To warn of dangers that might arise from the goods o Make good any damage caused by the goods o Instruct on the proper use of the goods if goods are to be used. Where a bailment for reward comes to an end, the obligations under a gratuitous bailment may continue: Gilchrist v York

iii.
Summary:

Bailees Obligations
To take care of the goods Not to depart from scope of the bailment o Duty to retain possession o Duty not to use/misuse goods To return the goods or deal with them as directed. (Hobbs v Petersham Transport Co Pty Ltd) Not to dispute bailors title: Edwards v Amos

iv.

Duty to Care:
The goods themselves o Value or quality o Nature of the goods how could loss/damage occur? Relationship of parties o Gratuitous or commercial bailment o Other relationships Circumstances of deposit o Exigencies of the moment o Scope of bailment

What is reasonable care depends on:

Scope of the Bailment: Deviation from the bailment: o Entitles the bailor to retake possession o Bailor can sue for conversion

Means that if the goods are lost their full value can be recovered bailee becomes an insurer Whether act repugnant to the bailment has taken place depends on the scope of bailment.

Duty to Return Goods: Duty is not an absolute duty bailee is liable only if the failure to return goods could have been avoided by the exercise of reasonable care.

Duty to take reasonable care - Pitt Son & Badgery Ltd v Proulefco F: Bailee stored wool in shed for reward. Shed not properly fenced. Intruders break in and burn the wool. Bailee has a duty to take reasonable care to prevent damage to the goods.

Proof of Breach of the Standard of Care Hobbs v Petersham Transport Co Pty Ltd F: ASEA Electric needed to move some electrical goods. Petersham engaged to move the goods and contracted further with Hobbs to truck the goods not common carriers 420 miles in the axle breaks and the truck rolls, damaging the goods. ASEA sued Petersham for breach of contract (not bailment) and Petersham brought claim against Hobbs no direct claim between ASEA and Hobbs. I: Was there a breach of contract? Did the breach standard have to be proved by ASEA or did Hobbs and/or Petersham have to disprove it? Windeyer J: o A private carrier (not common carrier) is a bailee of goods delivered to him. o Relationship of bailor an bailee of a chattel can arise and exist independently of contract. By taking the Ps goods into their possession the Hobbs undertook the duties and obligations of a bailee for reward. o Onus is on the bailee to prove that it was not their fault if they fail to deliver or damage the goods. o

Limitation Clauses Davies v Collins Contract for cleaning clothes and repair contained a limitation clause. Appellant sent clothes to sub-contractor but they were lost. Limitation clause of this kind do not apply where the damage that is suffered or the loss that has occurred is due to or takes place in the course of some operation which was never contemplated by the contract at all. Contract did not contemplate sub-contracting so clause was inoperative.

v.
Two types:

Sub-Bailment

1. Authorised - For reward - Gratuitous 2. Unauthorised (not clear that the person had the authority to make a sub bailment) - For reward - Gratuitous If A (bailor) intends that B should be the bailee but B never actually takes possession andjust gets C to take it, there is a bailment between A and C not A-B-C.

Enforcing terms in sub-bailments: Main problem is privity of contract. Six main devices for enforcement of terms between bailor and sub-bailee: Agency Voluntary assumption of risk Bailment on terms Disclaimer Trust Chain of indemnity.

Morris v C W Martins & Sons Morris sent a mink stole to a furrier to be cleaned. With consent the stole was sent to a subcontractor (the Ds) for cleaning (for reward). Subcontract contained limitation clause. Stole was stolen by subcontractors employee. Alleged breach of duty and duty to return goods. Legal relationship of bailor and bailee of a chattel can exist independently of any contract. Sub-bailees for reward are subject to direct duties to take reasonable care the exemption clause to protect the sub-bailee.

Obligation of sub-bailee - Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd P (York) sent two cases of clocks on from Hamburg to Sydney on a ship. The D stevedores unloaded the ship and packed the goods into a shed one box went missing. A person (stevedores) who takes voluntary possession is a bailee even if they do not know the direct identity of the bailor. An obligation to take due care of the Ps goods is owed by the sub-bailees when they voluntarily assumed and possessed the goods. By voluntarily taking the goods into its possession knowing they belong to someone other than the bailee, the sub-bailee assumes responsibility for them.

The Pioneer Container KH Enterprises (cargo owners) entered into contract 1 with carriers. The contract permitted the carrier to enter into sub-contracts to perform the contract on any terms. Carrier entered contract 2 with shipowners which provided that goods were received with an exclusive jurisdiction clause if the goods were lost. Ships collided and was lost was clause binding on cargo owners? Was there a bailment between the cargo owners and the shipowners? The collateral bailment does not usually involve an agreement between the headbailor/owner and sub-bailee. The agreement between the bailor and the bailee may expressly authorise the creation of sub-bailments or that authority may be implied as being necessary to the performance of the principal bailment.

vi.
-

Termination
Demand and/or delivery Act of repugnancy can be difficult to prove o Penfolds Wines v Elliott (1946) Majority of 3/2 against granting an injunction to restrain D, but also 3/2 majority in favour of proposition that Ds conduct repugnant to Penfolds interest as owner of the bottles Transfer of ownership interest to bailee Destruction of goods (liability remains)

If the bailor does not collect the goods: Uncollected Goods Act 1995 (NSW) Applies to: o Bailed goods o Goods means all chattels personal (unless excluded by regulation) Object of the Act: o To provide bailees with a means of disposing of goods without being liable to the bailor by: Obtaining a court order, or Private disposal after giving notice. Goods are uncollected if: o The goods are ready for delivery and the bailor has not taken them. o The bailee is required to give notice, or can reasonably be expected to be relieved the duty of care on giving notice, but the bailor cannot be traced. No liability for disposal in accordance with the Act Bailee can also recover relevant charges (contract sum, storage and disposal costs) under the Act.

vii.
-

Personal Property Securities

Possessory and non-possessory securities Possessory: pledge, pawn, common law lien

Non-possessory: mortgage, hire purchase, equitable charge, equitable lien, statutory encumbrances

Rights in rem Rights in things rather rights to do things

a. Pledges and Pawns


Delivery of chattel as security under bailment Delivery of possession is key (actual or constructive) On payment possession is returned Failure leads to chattel being sold Over-amounts must be returned

b. Common Law Lien


A lien is a right of one person to retain the possess the property or goods of another until a liability is satisfied. Liens do not come with a right to sell Particular liens relate to situations where a debt is attached to a particular chattel General liens allow possession of the chattel in relation all debt: solicitors lien. Only effective against the debtor not third parties with superior rights

Dinmore Meatworks v Kerr Appellants owned abbatoir which respondents delivered cattle to for slaughter. Respondent indebted to appellants for processing a large number of carcasses -> liquidation -> appellants sought to hold the carcasses it still had as security for payment for the whole debt outstanding. Held a particular lien arose over the carcasses the appellants had in their possession, for the costs of processing those carcasses, not the ones that had already been processed and shipped off.

Creation of liens by bailee: Depends on the authority of the bailee: o Mere fact that the bailee has possession does not authorise the creation of a lien (Fisher v Automobile Finance)

Albermarle Supply v Hind Hire of three cabs from Albermarle to Botfield. Botfield garaged cars with Hind. Hind did mechanical work and asserted a lien on the cabs. The agreement between A and B contained a clause preventing the hirer from creating a lien. However A had held out that B had such an authority and he failed to step in when he knew B was getting work done with H. Ostensible or apparent authority. Estopped from raising the clause prohibiting liens.

Authority to create lien Fisher v Automobile Finance Co Ltd HCA Concerned a truck on hire purchase from AFC to Brander No ownership until full payment Must keep in good repair The agreement said that the hirer could not create a lien Brander defaulted AFC have the right to take back truck immediately Brander left truck with F for repair and F claimed a lien HCA held that the goods would not be bound unless the owner authorises the creation of a lien. The fact that he had a right to repair must be read against the lack of power to create a lien. There was no evidence of any holding out of the person in possession by the owner to support an estoppel, and no express or implied authority. No lien

c. Equitable Lien
Arises by operation of equity Does not require possession but attaches rights to property Lien over personal property to secure debt Unpaid vendors lien

Hewitt v Court Prefab house ( a good) partially completed, company goes into liquidated. Purchaser paid for amount of work done and then takes house Liquidator claims house back as a voidable preference Purchasers argue they have an equitable lien. If youve part paid as a purchaser you should get property rights which have priority over a debt interest. Appellants were entitled to alien for the amount of the purchase money paid when the contract could not be completed.

d. Chattel Mortgages
Chattel mortgage or bill of sale Legal Mortgage: In the case of legal mortgage, the mortgagor transfers legal title to the mortgaged property in favor of the mortgagee by a deed. In legal mortgage transfer of legal title to the mortgage involves expenses in the form of stamp duty and registration charges. Equitable Mortgage: On the other hand, in case of an equitable mortgage, the mortgagor transfers the documents of title to the mortgagee for the purpose of creating an equitable interest of the mortgagee in the property.

It means that legal title to the property is not passed on the mortgagee, but the mortgagor undertakes, through a Memorandum of Deposit, to execute a legal mortgage in case he fails to pay the mortgage money. The mortgagee is thus empowered to apply to the court to convert the equitable mortgage into a legal mortgage if the mortgagor fails to pay the mortgage money on the specified date. Three features of a mortgage Waldron v Bird Promise to repay money Absolute assignment of property Promise to re-transfer when the mortgagor makes repayment or performs the obligation.

Bills of Sale: An instrument in writing where a person transfers to another the property s/he has in the goods, without intending to give up possession. A bill of sale over personal chattels means goods, furniture, fixtures and other articles capable of complete transfer by delivery. A bill of sale is given by an individual.

e. Difference between the Pledge, Lien and Mortgage


Palgo Holdings Pty Ltd F: The lender made short-term loans of small amounts The agreement defined itself as a mortgage/bill of sale and purported to transfer ownership In all cases bar one the lender kept possession. Was the lender involved in the business of pawnbroking? At trial and on appeal both a mortgage and a pledge. Held: o The three types of security are mutually exclusive and that it is not possible, for example, for the creditor to be both a pledgee and a mortgagee of the same asset at the same time. o Depends on the intention of the parties. Is he intended merely to have possession, with a right of sale in the event of the debtors default (pledge), or is he to be a security owner or chargee? Was a mortgage.

f. Charge
Equitable in nature Types: o Fixed o Floating (debentures) A charge is an agreement or a mortgage taken over a company's assets, undertaking or goodwill. Neither possession or ownership but a right to call upon property if a triggering event occurs Agreement, attachment and perfection . United Travel Agencies v Cain

An equitable charge is said to be created when property is expressly or constructively made liable, or is especially appropriate, to the discharge of debt or some other obligation and confers on the charge a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale.

Legal charges (Torrens mortgages) and equitable charges. A charge is a security for a debt or obligation attaching to property of the debtor. It may be fixed on specific property, or it may float over all property, crystallizing on exercise of the chargees rights under the charge the charger will retain ownership of the charged property. If the debtor fails to meet the loan obligations, the creditor has the right to receive repayment of the loan out of the sale of the specific asset. In that way, it is a security device and the creditor (seller) is a secured creditor.

Romalpa Clause - a provision in a contract for the sale of goods that the title to the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer. Retention of Title Romalpa Clauses Aluminium Industrie Vaassen BV v Romalpa F: Aluminium Industrie Vaasen BV was a Dutch supplier of aluminium foil. Romalpa Aluminium Ltd processed it in their factory. In the contract of sale, it said that ownership of the foil would only be transferred to Romalpa when the purchase price had been paid in full and products made from the foil should be kept by the buyers as bailees (the contract referring to the Dutch expression fiduciary owners) separately from other stock on AIVs behalf as surety for the rest of the price. But it also said Romalpa had the power to sell the manufactured articles in the course of business. When such sales took place, this would be deemed to be as an agent for AIV. Romalpa went insolvent, and the receiver and manager of the bank wanted the aluminium to be declared as being under its floating charge. AlV contended that its contract was effect to retain title to the goods, and so it did not need to share them with other creditors in the liquidation. Held - Aluminium Industrie Vaasen was still the owner, and could trace the price due to them into the proceeds of sale of the finished goods, ahead of Romalpas unsecured and secured creditors. He said the clause contained unusual and fairly elaborate provisions which showed the intention to create a fiduciary relationship to which the [tracing] principle stated in Re Halletts Estate (1880) 13 Ch D 696 applies. To the argument that this avoided the statutory regime in (what is now) the Companies Act 2006 section 860(7)(g) which requires registration of charges on book debts, the answer was that if the property in the foil never passed to the defendants with the result that the proceeds of sub-sales belonged in equity to the plaintiffs, s [860] had no application.

Corporations Act 2001 (Cth) Registrable charges on company property need to be registered within 45 days of creation ss 262-3 Registration, time and notice: s 282

Associated Alloys Question for the HCA was whether the proceeds clause created a trust or a statutory charge to be registered under s 262.

Priorities
i. Legal Interests
Balancing of competing interests: Bishopsgate Motor Finance Corporation v Transport Brakes Ltd [1949] 1 KB 332 per Lord Denning: In the development of our law, two principles have striven for mastery. The first is for the protection of property; no one can give a better title than he himself possesses. The second is for the protection of commercial transactions; the person who takes in good faith and for value without notice should get a better title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our times.

Nemo dat quod non habet: No one can give what he or she does not have. Codified in Sale of Goods Act 1923 (NSW), s26: (1) Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owners conduct precluded from denying the sellers authority to sell. (2) Nothing in this Act shall affect: (a) the provisions of the Factors (Mercantile Agents) Act 1923 or of the Registration of Interests in Goods Act 1986 ,

Section 26 does not apply unless goods are sold by someone who is not the owner of the goods. Five exceptions to nemo dat quod non habet: 1. 2. 3. 4. 5. Estoppel (not really an exception) Sale by a mercantile agent Sale under voidable title Sale by seller in possession Sale by buyer in possession

1. Estoppel - Eastern Distributors v Goldring (1957) - Eastern Distributors (a HP firm) who bought the van from Coker vs Goldring who bought the van from Murphy. Who had title? - Coker was armed by Murphy with documents which enabled him to represent to the plaintiffs that he was the owner of the [van] and had the right to sell it. The result is that Murphy is, in the words of [the English equivalent of s 26] precluded from denying Cokers authority to sell, and consequently the plaintiffs acquired the title to the goods which Murphy himself had and Murphy had no title left to pass to the defendant. - Real owner has to make a positive representation that the non-owner seller had the ability to sell. Has to be more than just giving possession. (Not Black and white though sometimes omission good enough!)

2. Mercantile Agents:

Elements: 1. Were they a mercantile agent? 2. Owner has to entrust the good. (Implies consent) 3. As such, if a mercantile agent is both a car repairer and a car dealer have to give it to them in the context of being a car dealer. 4. Has to be in the ordinary course of a business of this mercantile agent. (Giving a Van Gogh to a car dealer - not good enough) 5. Buyer taking under the disposition acted in good faith, and has not at the time of the disposition noticed that the person making the disposition to make the same -> nothing to prevent <buyer> from getting title. Onus is on buyer to prove this. 3. Sale Under Voidable Title:

Title to the good is a title with a defect a title susceptible to being recalled. Buyer has good title. Example - Lewis v Averay F: Lewis was a student and wanted to sell his car. He placed a newspaper advertisement offering it for sale at 450. A person telephoned and arranged to see it, and took it for a test drive. He said he was Richard Greene - a well known actor. He wanted to give a cheque for the 450. Lewis quite sensibly asked for identification. He was shown a Pinewood Studio's pass, and was then happy to take the cheque in return for the car. It turned out that the cheque and other documents had been stolen. The car was subsequently sold on to Averay who purchased it for 200. H: The voidable title had not been avoided by the time of the second sale, therefore Averay got good title.

Car and Universal Finance Co Ltd v Caldwell F: Caldwell was induced by fraud to sell his car to Norris. The title that Norris received was defective as it was susceptible to being recalled. Norris sold it to someone else and eventually it ended up with Car and Universal Finance. I: Is when or whether Caldwell rescinded his contract with Norris. The way you evince your intention to rescind is to communicate notice to the other party or retake possession of the property. H: Caldwell won. I hold that in circumstances such as these the innocent party may evince his intention to disaffirm the contract by overt meanings falling short of communication or repossession.

W Swadling, Rescission, Property and the Common law (2005) 121 LQR 123, suggests the reasoning on recovery of property should not merge the issues of validity of contract and transfer of title. He controversially says the two are separate (i.e. he is in favour of the abstraction principle). So Caldwell should not have got his car back. Rights in property are passed on delivery and with intent to pass title. This is not dependent on the validity of the contract. In short, he argues for the abstraction principle.

4. Sale by Seller in Possession: (Maybe can argue as an estoppel or mercantile agent case)

Where a person having sold goods continues in possession (remove or is)

Pacific Motor Auctions Pty Ltd v Motor Credits (HCA) F: Car retailer in Sydney called Motordom bought cars and immediately sold them to a finance company called Motor Credits for 90% of what he had paid. Motordom was an agent and a bailee for the finance company. However, they were also sellers continuing in possession. Motordom got into difficulties and Motor Credits revoked their licence to sell their cars. Another one of Motordoms creditors was Pacific Motor Auctions and they wanted to collect. PMA said they would take cars in lieu. H: Motor Credit argued that Motordom werent in possession in the capacity of sellers but were relevantly their agents. Although Motordom was still in possession they were not in possession as sellers in character but agents. Privy Council reversed the HC and said the section did not mention anything about the character of the possession only the factual situation. The point here is continuity in factual possession not about capacity of possession.

5. Sale by Buyer in Possession

Buyer in possession is an agreed to buyer in possession. Someone who has agreed to buy but has not yet actually bought it. Example: Someone agrees to buy a car from the dealer, says I cant pay you yet why dont you let me rent it? In that case, that someone, once they have possession, can sell the car to someone else and transfer good title. The difference relates to the words with the consent of the seller - so the person who has agreed to buy goods obtains with the consent of the seller possession of the goods - in s27(1) there was no requirement that the seller be in possession with the consent of the

buyer - under s27(2) the seller (who might be the owner or someone with the right to sell) must consent to the buyer obtaining possession - this consent will still be consent regardless of whether it was fraudulently obtained - so consent for the purposes of s27(2) is still consent even if fraudulently obtained: Langmead v Thyer Rubber.

iii.
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Accession:
Building an extension to a bigger house is not building a bigger house it is building an extension that accedes to the bigger house.

Bergougnan v British Motors Ltd (1929) The Full Court of NSW had to consider the question whether the property in motor tyres belonging to A which had been put into a motor lorry belonging to B, passed to B. It was held that the tyres did not so merge into the motor lorry so that the ownership in them passed to the owner of the lorry. The basis of the decision appears to have been that there was no change of ownership because they were readily identiable and could be detached without damage to the lorry.

ii.

Legal vs Equitable Interests

a. Prior legal interest, subsequent equitable interest


Equitable maxim: If the equities are equal, the law will prevail. This means that usually a legal interest will prevail. A legal interest will usually take precedence over an equitable interest where it has been acquired bona fide and without notice. The prior legal interest is only postponed in four situations: 1. Where the legal owner himself creates the equitable interest. (obvious) - E.g Creates a trust for you. 2. Where the legal owner fraudulently connives in the creation of the equitable interest. 3. Where the legal owner fails to get his documents in. - The law views getting your documents in in the first place as very important. 4. Where the legal owner gives authority to deal with the property as security to an agent, and the agent exceeds that authority. - If I give X authority to raise $2500 for the property and you raise $2600 I am liable for the $2600.

2. Fradulently Connive in the Creation of the Equitable Interest Northern Counties of England Fire Insurance Co v Whipp F: A company manager called Crabtree borrowed money from the company and in return gave the company a legal mortgage over his house (legal interest). Crabtree placed his title deeds in the companys safe however, he maintained a key to that safe. Later, he used that key to take the documents out of the safe and re-mortgaged his house to another company

called Whipp. NCEFI competing with Whipp for priority. In a way NCEFI had factually gotten the documents in but didnt keep the safe safe from Crabtree. H: NCEFI won although they may have had been negligent they had not fraudulently connived in the creation of the interest.

3. Where the Legal Owner Fails to Get Their Documents In Saltoon v Lake 1. 2. 3. 4. 5. 6. 7. F: Concerned mortgage of a racehorse. H: Where the owner acts in such a negligent manner with regard to the security of title deeds that their conduct goes beyond mere carelessness or prudence. Saltoon lent Scali money On security of deed of mortgage over racehorse Deed not registered Scali disposed of horse to Lake 4 months later declared bankrupt Saltoon sued Lake Lake appealed to Court of Appeal

The Court: Not registered under Liens on Crops and Wool and Stock Mortgages Act. Never mind, not invalid against other party. A bill of sale but not registered Assignment without transfer of personal chattels Non registration might have made it invalid against Official receiver but not against the other party

Walker v Linom

Lesser standard than fraudulent connivance Careless about getting documents in could be enough would it be inequitable to allow you to rely on your prior legal interest.

4. Where the Legal Owner Gives Authority

Brocklesby v Temperance Where the legal interest holder entrusted the title deeds to an agent with limited authority to raise money by using the property as a security interest, and that agent exceeds authority by borrowing more than was intended legal interest is bound to the full extent.

b. Prior Equitable Interest and Subsequent Legal Interest


Bona fide purchaser for value of a legal estate without notice of equitable interests General Rule: The holder of a legal interest will usually take precedence over an equitable interest where it has been acquired bona fide and without notice. Will take the legal estate unencumbered. If there is notice, then the legal owners conscience will be bound and her interest will be postponed to the equitable interest.

Elements: 1. Bona fide purchaser - Must be a purchaser in good faith - Must have been a purchase not just a gift. 2. Value - Must have not been a sham. - Consideration does not need to be for the full value of the property but it must be more than nominal. 3. Legal Estate - Must be a bona fide purchaser for value of the LEGAL ESTATE. 4. Notice - Notice includes actual knowledge; Nelsonian knowledge (similar wilful ignorance) - Constructive knowledge (the knowledge a person would have if they had made reasonable inquiries); and - Imputed notice(bound by the actual and constructive knowledge of their agent). - Notice is reason to suspect

Barclays Bank v OBrien [1994] 1 AC 180 at 195-6 per Lord Browne Wilkinson The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it.

Wilkes v Spooner F: Respected butcher sold the goodwill of his general butcher business but the buyers wanted him to enter into a restrictive covenant to not go into the general butchering business. He agrees and sells. Butcher then sold his lease back to the landlord who sold it to the butchers son who proceeds to open up a general butchering shop trading on the family name. H: Landlord did not have notice of the equitable interest. When the landlord bought back the lease they were buying back a legal interest encumbered with an equitable interest (restrictive covenant) but had no notice so it was extinguished.

iii.

Equitable vs Equitable Interest


Equity of redemption

Examples of equitable interests:

Strong equitable interest: equitable interest under a trust; an equitable mortgage; an equitable interest that an owner of a charge has. Objective vs subjective equality.

a. Comparable Equitable Interests


General rule: Where the equities are equal, the first in time prevails: Rice v Rice e.g Equitable interest in trust, equitable mortgageetc. The prior interest of a beneficiary will not be postponed if a trustee gives over indicia of title to another party which allows a subsequent interest to be created. Exceptions: Walker v Linom H: Walker was FIT; Trustees did not notice that this deed was missing which meant they were careless and did not get their documents in. The rule does not apply if it is the behaviour of the beneficiary which amounts to postponing conduct or if the trustee never had possession of the title deeds in the first place. A beneficiary cant be in a better position than their trustees are in.

Failure to caveat: Placing a caveat on a property allows a party to protect and, give notice to the world of, their prior interest. The failure of a party to caveat will not always postpone an earlier interest but it can be a significant factor when the courts are assessing the merits of the parties at dispute. Abigail v Lapin

F: True owners of the property (the Lapins) gave their title deeds and a transfer document to Mrs Heavener, the nominee and wife of Lapins solicitor, as security for a loan. However, this was only ever intended to be a mortgage. The Lapins did not lodge a caveat therefore it looks from the register as if Heavener is the absolute owner. Heavener fraudulently used the deeds to register her ownership of the house and then created an unregistered mortgage over the property to Abigail. Lapins have an equity of redemption (right to repay the loan and get the property back) and Abigail has an equitable mortgage. H: Lapins prior interest was postponed as they had clothed a party with apparent absolute ownership and then failed to lodge a caveat which would prevent another interest being created.

Arming a third party with the indicia of title - Breskvar v Wall F: Husband and wife borrowed money from P. In return, they gave P a signed transfer form and certificate of title in relation to the house. They had granted an equitable mortgage to P. He was only supposed to register himself as the legal owner if they defaulted. However, he registered his grandson as the legal owner of the house when there was no default. Grandson contracted to sell the land to a third party. Just before the legal transfer took place the husband and wife lodged a caveat. Competing equitable interests. Another argument: The husband and wife had the right to set aside a sale which is a lesser equity than a constructive trust. H: Decision of Abigail v Lapin governs husband and wife lose out.

DISCUSS BOTH APPROACHES!!! Heid v Reliance Finance Gibbs CJ describes the postponement of the interest of the true owner as a form of estoppel by representation. Mason and Deane JJ found the estoppel approach to be convoluted and preferred to take a flexible approach: ask which party has the better equity in the relevant circumstances based upon principles of fairness and justice. They argued where the conduct of the prior interest holder makes it reasonably foreseeable that a later interest could be created, the negligence of the prior interest holder should give rise to a postponement of their interest. (IN EXAM: MENTION MASON AND DEANE JJ)

b. Mere Equities
Mere equity: This right has been defined as a right ancillary to the recognition of an equitable interest: Latec Investments v Hotel Terrigal. The holder of a mere equity has acquired a right to claim equity relief but not a substantive proprietary interest (though can still be devised or sold). Examples of mere equities: Right to set aside a transaction due to undue influence

Right to set aside a fraudulent power of sale Right to enforce an oral mortgage under the doctrine of part performance.

A mere equity is considered to be a weaker form of right and therefore the equities are not equal: Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd. Latex Investments v Hotel Terrigal F: Latec took a mortgage over the property of Terrigal. Terrigal defaulted and Latec exercised its mortgagees power of sale and tried to sell the property. Latec put it up for auction but received no bids above the reserve price. Latec then wrongly sold it to its own wholly owned subsidiary. Southern Hotels buys this property but that sale is vulnerable because it looks like a wrongful exercise of the mortgagees power of sale. Latec sold it to itself cheap. Southern Hotels are the legal owners but the title is vulnerable to being set aside but they granted a floating charge over the property to MLC Nominees. The charge crystallised and MLC Nominees sought to take ownership of the hotel. Terrigal says we know we defaulted but argues that Latec fraudulently exercised their mortgagees power of sale for too little. H: Equities were not equal. The right to set aside a fraudulent sale is an equity and is sufficiently proprietary to sell or devise in a will. In cases such as Phillips v Phillips, such a right was classified as personal right MLC Nominees have no impediment to their claim whereas Terrigal is asking the court for an impediment to be removed. The court wont remove that impediment. Menzies J: The right to have a fraudulent sale set aside was an equitable right which, if held by a person, could be devised or sold to another; but, in a priority dispute with a holder of a subsequent equitable interest MLC Nominees had a better equity than Terrigal did. If Terrigal had asked for the sale to be set aside earlier when it was first sold to Southern Hotels then they may have been successful in having the sale set aside.

Double Bay Newspapers Pty Ltd v AW Holdings F: There was a house in Crows Nest and the owner mortgaged it four times. One of them was a legal mortgage and took priority. Problem is with the three later equitable mortgages which are all competing for the same small pool of money thats left. First mortgage was with Ezyfind. Ezyfind had an equitable mortgage but they did not lodge a caveat. Second mortgage was with Double Bay Newspapers. They thought they were the first equitable mortgage. Ezyfind had not lodged a caveat which can look like postponing conduct. Double Bay did lodge a caveat. Third mortgage holder was the Australian Postal Corporation. They took the third equitable mortgage and did not search the register or lodge a caveat.

Turns out Double Bay didnt actually have a properly constituted and evidenced equitable mortgage. They only have a right to rectify. Even though Ezyfind had conducted postponing they had a stronger

equitable interest. There are some objectively different equitable interest and its not just about conduct (see Latec). Judgment went to Ezyfind.

iv.

Equitable Personalty

This does not apply to competing interests in land only personal property. Priority disputes are governed by different rules when personal property is concerned.

Rule: If personal property is assigned in equity to multiple interest holders and a dispute arises, priority will be given to the first interest holder to give notice of their interest to the relevant trustee or debtor. Known as the rule in in Dearle v Hall. Rule came from a false reading of the case. The rule is subject to the following conditions: That the later interest holder gave value for their interest The interest holder had no notice of any other earlier interest when they paid consideration; and The trustee or debtor had no notice of the other earlier interest when they received the notice.

The notice does not have to be in writing and the conduct of the interest holders will not be scrutinised beyond the issues of consideration and notice: Re Dallas

Dearle v Hall F: Zacharia Brown was left money by his father and it was invested for him by his trustees. In December 1808, Brown sold to Dearle an annuity for a once off payment of 204 pounds. As security for this, Brown assigned his interest in the main trust fund to Dearle. Later on Brown did the same thing with Chering. He later sold the trust to Hall who gave notice first. H: Master of Rolls said that Dearle was negligent in not giving notice to the trustee. It was the equivalent of failing to get your documents in. Doesnt change the validity of your interest but changes the riskiness of it. Postponing conduct.

If X owes Y $20,000. Y has a personal right to the $20,000. But it is a personal right, it is not a secured personal right (secured by a mortgage or a charge) it has a proprietary right to the debt and the chose in action. Assigning the right to be repaid - assigning a chose in action. S 12 Conveyancing Act requirements.

Future property Q This could be royalties or it could be a present right to properties. Always must mention assignment of chose in action (s 12) and then might be a future property.