COMPARATIVE ASPECTS OF PROPERTY LAW

BRIEF INTRODUCTIONCourse TitleComparative Aspects of Property LawLecturerProfessor Cornelius van der MerweE-Maillaw226@abdn.ac.ukOutlineThis course is designed to discuss a few selected property law topics in comparative perspective. It will trace the development of these topics from Roman law and show how Roman law concepts and institutions have been accepted in contemporary property law systems. It will examine how familiar Roman law concepts have been interpreted and adapted to serve modern property goals. It will include references to civil law, common law and mixed legal systems like the South African and Scots legal system that are systems that combine civil and common law. Students will be expected to trace the development of the concepts dealt with in Chinese property law as codified in the new Chinese Property Code (Real rights Law) of 2007 and the Interpretation of the provisions of the Code by the Judicial Committee of the Supreme People’s Court, adopted at a meeting on March 23, 2009.The first part of the course will deal with a general introduction on the characteristics of civil law, common law and mixed jurisdictions. It will then move on to general property law issues such as ‘what is property?’ and the differences between real and personal rights and between the factual concept ‘possession’ and the legal concept ‘ownership’. The last part of the course will deal with more specific topics such as the modern law of specification (manufacturing things), the law of accession (when does an object attached to another object become a fixture), the institution of nuisance in a property law context, lost property and treasure trove, the law of servitudes with special reference to ways of necessity, mortgages and the institution of apartment ownership or condominium. Materials on the various topics will be supplied to studentsCourse structureThe course will follow a lecture and discussion format. Student will be expected to read materials provided on a specific topic and to compare it with the basic material on the topic in Chinese law. Some of these materials will include important cases decided in the specific field. During the discussion students will be asked to evaluate the treatment of the specific topic in Chinese law. Students will be expected to hand in an essay on any topic of their choice in the field of property law. Class participation will form an important part of the class. AssessmentAssessment of students’ performance in the course will be based on class participation and an essay. Students are expected to write an essay of approximately 4000 words. The essay should be a critical evaluation of any aspect of Chinese property law in comparative perspective. One of the topics dealt with in the lectures should be chosen. Then the Chinese law on this topic primarily as evidenced in the provisions of the new Chinese Property Code of 2007 and its Interpretation by the Chinese Supreme Court, should be outlined. Finally, the Chinese law on this topic should be critically analyzed by comparison with the law on this topic in other legal systems as explained during the lectures.

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Lecture 1

ORIGIN & DISTRIBUTION: CIVIL AND COMMON LAWORIGIN OF CIVIL LAW

1. Classical Roman law (100 BC –350AD)role of jurists: 2000 ‘books’ 3 million lines

2. Justinian’s Corpus Iuris Civilis (530 AD)aiminstructionscompilationvalue

3. Glossators (about 1100-1250AD)notesdistinctionsregarded Corpus Iuris as Bible

4. Post-glossators, Commentators (1250-1500)

take account of local lawsadapt Corpus Iuris to practiceusus modernus Pandectarumlater ius commune of Europe

5. Humanists (1500-1600)revival of classical Roman lawinterpolationsnot popular in practice

6. Reception of Roman lawcanon law in church courtsstudentsfunctionaries in administrations and courtsdiversity of local lawscentralised authority and Supreme CourtMixture of Roman and national laws

7. Natural law (17th & 18th century)human reason, not divine authorityprinciples inherent in man and societyHugo Grotius: Law of Nations

8. PandectistsConsciousness of peopleDiscovered by juristsHeaven of concepts

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Von Savigny

9. French (1830) and German (1900) Civil CodesCode NapoleonDifferences in approach

10. French Civil Code: influenceBelgium, Luxembourg, Netherlands (1838, 1992), Portuguese (1867,1967) Spanish (1888), Swiss cantonsLatin and South AmericaWest Africa ( in combination with Islamic Law)Iran, Lebanon, Israel?

11. German Civil Code: InfluenceItalian Civil Code (1942), Greek Civil Code (1946)

Austria, Switzerland, Czechoslovakia, Hungary, YugoslaviaJapan and South Korea

12. Civil law influence in general

After Fall of Soviet Union: Eastern European countriesAfrica: French, Belgian, Spanish, Portuguese colonies Asia: Cambodia, Indonesia, Laos, Vietnam, Taiwan, Thailand

CONCLUSION

common fund of inherited concepts, passion for theory and systematisation, distinctive modes: thinking &communicationModern times: legislation, jurisprudent & code revision

Harmonisation of European lawORIGIN OF COMMON LAWI. Before Norman conquest

Law unwritten-oral traditionMany tribes with diverse local customsRoman law influence minimalChurch courts: canon lawCounty and Hundred courts: customs + ordeal

2. Norman Conquest to Tudor Period 1066- 1485New legal system developed at expense of local custom

William the ConquerorConfiscated land and distribute to baronsStrong central administrationDomesday survey: 15 000 estates, 200 000 homes1 000 years without invasion: no outside influence

Royal CourtsKing’s council judicial function to Royal Courts Westminster in London: three courts

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Court of Exchequer, Common Pleas, King’s BenchSuperseded local courts

Writ systemPrivilege granted by Chancellor Without writ, no right; wrong writ dismissalEarly: debt, detinue, covenant, replevin, accountLater: trespass: ejectment, trover, assumpsitLater fictionsEmphasis on forms of action and procedure

3. Growth of equity (1485-1832)Complementary and occasionally rival ‘rules of equity’

Break rigid forms of action systemDirect appeal to King, ChancellorInquisitorial: Roman law and canon lawChancery CourtInjunction, specific performance, trustUltimately: equity as long as the Chancellor’s foot

Court of Star ChamberParliament established: supreme law-making body

House of Commons and House of LordsMagna Carta (1215) and Bill of Rights (1689)

Blackstone Commentaries on the Laws of England (1771)English Reports

4. 19th Century Reforms Judicature Acts 1873-1875

Fusion of law & equity: general writSupreme Court of Judicature

Appellate Jurisdiction Act 1876: Lords of Appeal Social reforms: child labour laws, poor law, free trade

5. Modern PeriodWorking class dominance in the House of Commons

House of Lords: power of delay Courts Act 1971: Crown court: criminal jurisdiction Courts and Legal Services Act: solicitors Human Rights Act 1998

Currently: composition of House of Lords; Law Lords restricted to judicial matters; Judicial Commission; Lord Chancellor.WHAT IS ENGLISH LAW?

England, United Kingdom, Great Britain, CommonwealthAppeal to Judicial Committee of the Privy CouncilDevolution for Scotland (1997) and Wales (1998)

DISTRIBUTION OF COMMON LAW matrix of case law and statutes: reception not voluntary

Calvin’s case: English law where no ‘civilised’ local law Republic of IrelandAustralia: English Appellate dec. + Austr. Cases, aboriginalNew Zealand

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Canada: French area; Dominium of Canada (1867); QuebecUnited States, CarribeanIndia: Grand Mogul and princes; family, succession, land religious matters: Hindu & Islamic lawHong Kong, Singapore and MalaysiaAfrican colonies: Kenya, Nigeria, Zambia, Zimbabwe

MIXED LEGAL SYSTEMSRoman-Dutch/English: South Africa, Scotland, Sri Lanka Ars Aequi/ April 2007Roman-Spanish/Anglo-American: Philippines, Puerto RicoRoman-French/English: Quebec, Louisiana Constitutional law, administrative law, law of procedure, mercantile law, criminal law?

ISLAMIC LAWCIVIL LAW VS COMMON LAW1. Primary source: Civil Code v. JudgmentsComprehensive Code covers all disputes

Comprehensive: Judge never excuse: code: : silent, unclear, incompleteLegislature makes law, judges apply lawInterpretation of Code

vsJudges lawmakersLegislation not traditionally primary sourceConsolidations and clarifications of case lawCases fill in gaps

2. Characteristic mode of reasoningGeneral pattern of reasoning deductiveCategorization: finding principle & apply to caseReasons down the way

vs General pattern : inductiveStart with particular examples to find principleReasons upwards

3. Code (+ auxiliary enactments) vs common law legislationCodes more general: latitude for interpretationAbstraction and generality in formulation: open texturedMore latitude for interpretationApplication of rule builds or changes rule

Auxiliary enactments: Traffic Accidents, Nuclear Installations Also concise + straightforwardInterpretation liberal: legislative history, purpose

vsStatutes mini-codes: clarify unsettled areas

Companies Act, Bills of Exchange, Sale of Goods, Am. UCCTry to cover every foreseeable situation: verboseLimit powers of interpretation of courtsStatutes: building; common law: air around to fill gapsPrepared by specialist team of parliamentary draftsmen

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Interpretation: literal to more liberalEuropean Directives; since 1993 Pepper v. Hart: Hansard

4. Role of ScholarshipTurn classic codes into workable instrumentDraw boundaries of acceptable interpretationCase notes & commentaries on terse civil law judgementsAktenversendung Rabel, Larenz, Zimmermann, Mazead, Tunc, Meijers, Huber, Advocates General

VsProfessors and case notes not important: persuasive authority5. Court Procedure (adversarial v inquisitorial)

Inquisitorial: active judge: master of ceremoniesJudge questions parties & advise lawyers & witnessesAim: complete picture, truthNo rules of evidence: judges should get to hear allCase different stages: new evidence + reaction

Criminal procedure: pre-trial examination; accused accessjudge (not advocates, prosecutor)questions witnessesprevious evidence of witness in dossier allowedFrance victim represented: civil damages

VsAdversarial: passive judge: referee: rules of game, winnerAdversaries: Solicitors, barristers prepare case + noticePresents facts and points of law orally in courtCall witnesses and questions them, hands to other side

USA: more fiercely adversarial: often before jury + winner: feesFormal rules of evidence: exclude e.g. hearsay evidence

6. Styles of JudgementBrief: one long convoluted sentence

Difficult: whether relied on previous case or future precedentCollegiate decisions: agree on one viewCoded language need commentaries: highly influential Broad concept: fairness, justice & good morals

VsSumming up of oral arguments, evidence + opposing arguments

Each judge facts, law and conclusion: ratio decidendiRatio binding, not obiter dictaLeading, concurring, dissenting

Cases in point distinguished, per incuriam (through want of care)

7. Role of precedentCategorization of facts: which principle applicableFrance: harmonious line of cases: single principleNo formal stare decisis, but follow esp. higher courtsDepend: number, importance of court & indication by judge:Followed on principle; one-off judgement

Follow: professional dignity, save time, expectations, no prolonged litigation

Photocopy with dossier

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Precedential impact: Cour de Cassation&German Federal Court?Courts diffuse, not unified structure & 1500 (CdC) v 70(HL)

VsEngland: stare decisis: cases: formal source of lawBarristers case law for principle or policyBound by superior courts in hierarchyInferior courts: persuasive & higher courts may overruleSince 1966, House of Lords may overrule own decisionsOnly ratio decidendi , not obiterDistinguish/per incuriam: highly skilled art: pinpointing ratioHard cases make bad law

8. Diffused vs unified structureContinent: different structure for civil, criminal, adm., tax, labour & social mattersSpecialised, decentralised and hierarchicalNo filter system: everyone can appealCollegiality and anonimity: panels of three

VsEngland: unified structure for all mattersCompact court(12House of Lords, American Supreme Court)Filter system: leave to appealCult personalities in Britain and USA

9. Recruitment of judiciarySpecially trained judges (higher courts: practitioners, professors)

training schools or in post law school practical periodmore democratic, womencivil service mentality

VsDistinguished career at Bar: senior advocates, barristersMavericks: 50 and over and maleJudicial Appoints CommitteeAmerica: public election (political)Or nominated by Governor or President: political loyaltiesConfirmed by Senate or Appointments Committee

10. Combined or divided professionCivil countries: no division; no monopoly to appear in courtOffice of notary

VsBarristers and solicitors and no notary

Self-employed v firmsMostly trial work v advice and documentsCentralized structure v diffuse structureCourt officers and guardian of judicial process

Court and Legal Services Act 1990: may appear

LECTURE 2

PropertyDraft

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I. WHAT IS PROPERTY?

Gaius Institutes 1.8Omne ius quo utimur vel ad personas pertinet, vel ad res, vel ad actiones.

PERSONS RES (PROPERTY) ACTIONS

1. Property is not personal in character

In Gaius’ classification res are outside the law pertaining to persons. Thus unlike in Roman law where slaves were for certain purposes regarded as property, no human being can be considered property. Likewise rights pertaining to our personal status like personal liberty, parental authority and rights flowing from marital relationships are considered so personal that they cannot be classified as property. Our freedom, our surname or our jobs may be ours and may be valuable but they do not count as property, which can be sold, leased or bequeathed. The same applies to incidents of the human personality like a person’s name, likeness, physical integrity, dignity, honour, reputation and privacy. They are not objects of property, but incidents of a comprehensive personality right as the Pandectists have shown us. A living human body and its limbs or members are generally regarded as incidents of a person’s personality and not as property in the legal sense. These items are generally regarded as outside commerce and transactions regarding parts of the body were regarded as against good morals (contra bonos mores). With the progress of medical and dental science and the acceptance of a more realistic conception of the spiritual dignity of man, certain transactions concerning parts of the human body have become legalised subject to strict conditions (donations of parts of the body for transplantation). The dire need for organs for transplant in the medical world has given rise to a conception that the human body is nothing more than a bio-engineered physical machine1 which can be harvested for body parts, a concept which is rigorously opposed on religious and moral grounds. Inroads have however been made in the case of replenishable human materials like blood used for blood transfusions and human hair used for the production of wigs. In other cases objects that are considered to have become totally disassociated with the human body like African medicine (muti) concocted from human organs are recognised as property.

2. Property must be capable of forming part of a person’s patrimony

Only things that are of use and value to man, forms part of a person’s patrimony and can therefore be considered property. Examples of objects, which are as a rule without any value to mankind, are a dead leaf, a grain of sand, or a worthless stone. Although the law of property is primarily concerned with economic value, the requirement o of value also includes sentimental value as in the case of an old family portrait, a letter from a friend or a lock of hair kept for sentimental purposes. Furthermore things that are not capable of private appropriation by man like the air, the clouds, the moon, the stars and a shipwreck inaccessibly stranded at the bottom of the sea, also do not count as property. Also public things or res extra

1 bio-engineered physical machines; Is the human body an organic machine driven by chemical reactions and bio-electrical impulses?

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commercium like the beach, public roads and public rivers: the public can use them for bathing, fishing and navigation but they cannot be the subject matter of private ownership.

3. Property consists of corporeal objects and rights (tangible and intangible objects)?

Gaius Institutes 1.8Omne ius quo utimur vel ad personas pertinet, vel ad res, vel ad actiones.

PERSONS RES (PROPERTY) ACTIONSBoth the law of property and law of obligations

Just Inst 2.2 Gaius 2.13Res divided into res corporales or res incorporales Res corporales (physical things, tangible things)Fundus (land), homo (slave), vestis (clothing), aurum, argentumRes incorporales (intangible things, juristic things, rights, existence in law)Hereditas (inheritance) ususfructus, servitutes, obligationes Pandectists: Subjective RightsReal rights: corporeal thingsPersonal rights: performance, prestationImmaterial property rights: products of the human mindPersonality rights: physical integrity, honour, reputation, privacyPersonal rights: relative: specific personOther three absolute: against the whole worldPatrimony: all assets of value in your estate, all assets on an accountant’s balance sheet

In this regard there are three views, a very extensive view, a narrow dogmatic view and a middle or pragmatic view

3.1 Most extensive view: entirety of legal rights to which person is entitled

The most extensive connotation of the word ‘property’ is that which encompasses the entirety of legal rights whatever their nature may be, to which a person is considered entitled. In this sense property is equated with the concept ‘right’. This application of the word ‘property’ is often encountered in legal treatises written during the 17th and 18th centuries. Thus Blackstone2

makes reference to the ‘property’ which a master has in the person of his servant or which a father has in the person of his child, Hobbes in his Leviathan mentioned as objects of property the life and limbs of man, conjugal affection riches and means of living. This archaic notion of property which can be rejected on account of its inclusion of rights pertaining to the personal status of man has been revived in modern times in the sphere of public law in the Constitutions of America and Bills of Human Rights adopted in the Canadian and South African Constitutions. A good example is found in art 1 protocol 1 of the European Convention of Human Rights:

2 Commentaries Volume 3 143

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Every natural or legal person is entitled to the peaceful enjoyment of his possessions (biens). No one should be deprived of his possessions (propriété) except in the public interest and subject to the conditions provided for by the law and the general principles of international law. In the South African Constitution one of the human rights listed is the right to adequate housing. According to the United States’ Constitution no state may deprive any person of life, liberty or property without due process of law. The State of Ohio education law allowed suspension of students for misbehaviour for up to 10 days without a hearing. Court held this to be unconstitutional because it deprived the students of their ‘property’. What is property? That which is protected by the Constitution. Not about private law.

3.2 Narrowest view: property is restricted to tangible things (and proprietary rights)

The narrowest view is that concept property is limited to tangible or corporeal things and do not included juristic things or rights. This is prevalent in the expression law of things or the German Sachenrecht, rather than the law of property. Book III of the German BGB is called the Law of Thing (Sachenrecht) and in § 90 things are defined as physical things. BGB § 90: Sachen im Sinne des Gesetzes sind nur körperliche Gegenstände. The same applies to the Greek CC § 947. In its most restrictive sense it denotes a corporeal object subject to the immediate power of a person. This ranks back to the Pandectist idea that one could have only physical objects under one’s immediate control. Whereas one own corporeal property one is only owed a personal rights via a specific person. The rationale for such a strict definition is that if personal rights arising from of the law of obligations is allowed to be the objects of property, one would usher in the whole of the law of obligations into the field of property law. A wider definition of property would inevitably involve the treatment of the whole area of obligations, both contractual and delictual, as an integral part of the law of property. There are cogent dogmatic reasons for accepting the more restrictive definition of property as excluding incorporeals.First, private law is for systematic reasons divided into various categories of subjective rights, namely real rights, personal rights, personality rights and immaterial property rights (industrial or intellectual property rights). If incorporeals are included in the notion of property, it is difficult to distinguish between real rights (with a corporeal thing as object), personal rights (with a performance by virtue of contract or delict by another person as object) and immaterial property rights (with a patent, a musical composition, a book as the product of a human intellect and the goodwill of a business as object). Only if property is restricted to corporeal (physical) things can one clearly distinguish between these various types of subjective rights by looking at the objects to which they pertain? Second, it is illogical to define property as the object of a right and at the same time asserts that a right can also be property and thus the object of a right. This points to the illogicality of recognising that there can be a right in a right. Third, the inclusion of incorporeals in the notion of property does not correspond to the traditional notion of a real right as conferring some sort of direct physical power over a specific object over a thing in favour of a person. The notion of direct physical control over an incorporeal is nonsensical.

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But this view is too strict. Even Roman law allowed both res coporales and res incorporales into the sphere of the law of property. And modern Civil Codes like that of France, the Netherlands and Spain while maintaining a distinction between chose and propriété, (goederen divided into) saken and vermogensrechten and cosas and bienes3

for patrimonial rights under the definition of property. And ultimately the German Code by allowing a right to be the object of a pledge (BGB § 1273) makes a distinction between Gegenstände and sachen in that Gegenstände encompasses both Sachen (things) and Rechten (rights). Secondly, rights in rem like ownership (ius in re propria) and limited real rights (iura in re aliena) are included in the notion of property although they are intangible things.Ultimately it is a fallacy that by allowing rights as objects of the law of property would negate the distinction between the law of property and the law of obligations. What one has to admit is that there is an overlap to a certain extent between the law of property and obligations and that insofar as personal contractual or delictual claim arises from the law of contract or delict, such right is recognized by economics and the law as a asset in the estate of a person ie a patrimonial right capable of property dealings in the same way as the property dealings in corporeal things This shows a development in law based not on dogmatic preconceptions but rather on legal policy and economic and commercial realities. Thus commercial practice in most jurisdictions would allow the creation of a real having a right itself as its object. Illustrations of real rights that are recognized with another real right as its object are usufructs over a lease, a security right over leases, usufructs and mineral rights and leases of usufructs. Examples of a real right with a personal right as object are a usufruct over the whole estate of a person including debts owed to him and his shares in a company and a pledge of a debt or shares in a company.

3.2 Middle view: property includes both iura in re and iura in personam

From the above it is clear that personal rights emanating from a contract of a delict may be invested with a monetary value no less than corporeal objects and incorporeal property rights like servitudes, usufructs, leases, ground charges and mineral rights. This is recognized in most legal systems. Thus property should comprise every asset with a monetary value outside man which can be appropriated by a private person. In order to meet commercial demands it is therefore vital to adopt a wide definition of property including corporeal property, immaterial property rights in books, patents and designs incorporeal property rights and personal rights arising from contract or delict. Thus your whole patrimony should be the subject of property; every asset put on a balance sheet by your accountant should be the object of your property rights. This balance sheet contains both physical things (such as land, vehicles, stock-in-trade) and rights (such as receivables, bank deposits, patents). The balance sheet sets out your patrimony: which includes both physical things and rights. This is also the position reached in English law practice which was never plagued too much by dogmatic considerations. A short discussion of the various kinds of objects that are considered property, will illustrate the wide range of the law of property.

4. New Property

3 Codigo Civil art 333 Todas las cosas (things) que son o puede ser objeto de apropiación se consideran como bienes (property) meubles o immeubles,

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Since the 1960’s the American concept of property was extended to include several rights and interests against the state. The impetus for such an extension was an article by the American Reich [‘The new property’ 1964 Yale LJ 733] in which he argued in favour of the constitutional recognition and protection of certain socio-economic or welfare rights based upon the state’s distribution of largess on a vast imperial scale. This government largess or ‘new property’ comprises several ‘handouts’ by the state which empowers individuals to participate in the wealth of the modern welfare society. These rights of participation in wealth deserve the same constitutional protection as private law property rights. These claims in respect of the largess distributed by the state includes claims to income, unemployment insurance, aid to dependent children and veterans, employment in several state institutions, professional licenses for amongst others medical practitioners and architects, subsidies, concessions, state employment contracts and access to public resources. The inclusion of these rights and interests in the constitutional concept of property naturally implied the extension of such concept.It is evident that these rights and interests in the largess of the state are also recognized in South Africa. The crucial question however is whether each and every of these rights and interests should be recognized and protected under the property clause in the Constitution. Certain categories of these rights are protected independently by the Constitution which renders their protection under the property clause unnecessary. One category is the so-called socio-economic rights under which the state is obliged to do whatever it can to secure for all members of society a basic set of social benefits including access to housing, health care, food, water and social security for adults and children as well as the right to basic education. Since the Constitution expressly recognize these rights and extend ‘due process’ protection to these rights, these rights are not regarded as an extension of the constitutional property concept. However, apart from these socio-economic rights expressly recognized and protected in the Constitution, there are several other incorporeal assets handed out by the state which allows individuals to participate in the largess of the welfare state. These rights which are characterized by the fact that they are revocable and they are subject to considerable limitations on their use, include income benefits like bonuses, professional and commercial licenses, concessions and quotas, contracts, subsidies and rights of use in public funds and services. These rights and interests are not expressly protected in the Constitution but can in the South African constitutional context be recognized and protected under the concept of property. Consequently, these rights would be protected under the ‘due process’ provision in the Constitution and could be regarded as included in the constitutional property concept thus extending its scope.

II. What are included under the English law of Property?

1 Introduction

The English law of property deals with the relation between a person and an object, namely property. It tells us which objects the law recognizes as property and determines the types of interests or rights in property, which will be treated as proprietary. It highlights the consequences of being considered proprietary, namely that it entitles the holder of the property right to do anything he likes with his property and that others are not allowed to interfere with his property unless he allows them to do so. It further deals with the acquisition and transfer and repackaging of property interests and the protection of property rights by the law.

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A peculiarity of English property law is its preference for abstractions. English law prefers reification or materialization namely treating intangible objects like rights as physical objects and applying the same concepts to intangible things. English law therefore has no difficulty in calling a right a thing. Thus it is natural to speak of the owner of a patent, the ‘owner of a mortgage’ or an ‘estate owner’. The standard form by which a business assigns to a finance house or a factor the debts due from its customers, guarantees, not that the finance house is the creditor of its customers, but that it is the ‘legal and beneficial owner of the receivables’.4 Just as the law of persons recognize juristic persons like companies and other corporate bodies alongside natural persons, property lawyers take surprisingly little interest in land or ships or machinery or animals as such but a great deal in abstract notions like the ‘fee simple’ in land, trust funds, stocks and shares, security interests, title and documents of title. These are the instruments that relate the particular asset to the rest of the economy. Thanks to them, assets (like the field, car or house) lead an invisible parallel life alongside their material existence. Hernando de Soto has recently argued on the basis of research upon the ground, that it is the absence of such instruments, and not the lack of assets or enterprise, that accounts for much of the poverty in the Third World and the former communist nations.5 In his The Mystery of Capital (Bantam Press, London, 2000) de Soto argued that the citizens of these nations huge resources, but they lack the capacity to repackage their property and to create capital. They have houses but not title, crops but not deeds, businesses but not statutes of incorporation. It is the absence of this essential legal repackaging that explains why people who have adapted every other western invention, from the paper clip to the nuclear reactor, have not been able to produce sufficient capital to make their domestic capital work.

Property then is all our possessions, all our belongings, all the assets or valuable things in our estate or patrimony. English property law is not limited to material or tangible things which can be touched,6 but also intangible things, which cannot be touched. In civil law terms, it does not only include corporeal, material or physical things (res corporales), but also incorporeal things (res incorporales), which do not have any physical or material existence. Here are a few examples of the different types of assets that are included under the concept of property.

2 Categories of property

2.1Tangible assets

Tangible assets are divided into movable (animals, crops and goods) and immovable assets (land). English law, however, does not use the civilian terms movable and immovable but make a distinction between real property and personal property. Real property or realty7

denotes all interests in land other than leases.8 Personal property or personalty denotes

4 See Lawson and Rudden, The Law of Property (3ed 2001) 5 and 81-82.5 Hernando de Soto, The Mystery of Capital (Bantam Press, London, 2000); Quotation from

International Herald Tribune, 5 January 2001 quoted in Lawson and Rudden 5.6 Material thing are usually described as things, which can be perceived by the senses of which

the sense of touching is only one.7 An American estate agent is called a ‘realtor’.8 Leases falls somewhere in between realty and personalty. Realty was originally restricted to

the entitlement of a freeholder ie someone whose possession of the land had no fixed term. If the land were held on lease, the lease itself was technically personalty (hence avoiding the medieval rule that realty could not be left by will but had to descend to the heir who then paid a kind of tax to take it). Later when the lessee like the freeholder of land, came to be able to enjoy the remainder of the term of

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everything else. Historically the difference relates to the way in which the law protected someone whose property was wrongfully taken. If land was taken, the law (by force if necessary) enabled the evicted holder to recover the thing (Latin res) itself. If a movable or chattel (from cattle) was taken, the movable could not be recovered directly but only by suing the person (personalty) who had it who was not ordered to return the thing but to pay its value.9

An important category of goods are future goods namely the expected produce of agriculture or industry. These goods are unascertained, fungible and generic. Nevertheless they are constantly bought and sold and the market in future goods facilitates a chain of manufacture and distribution. Next year’s crop or the cars, which are to be produced by a car factory, are already sold to wholesalers, some of whom have already sold the goods on to retailers and ultimate customers. The financial pages of newspapers contain the commodity prices indicating how much one will have to pay for a given quantity and quality.

Some tangible movables of great value are so dependent on their individual characteristics that they require some sure and independent means of identifying them and persons entitled to them. Therefore private registers are kept for racehorses, while public registers are kept for ships and of aircraft mortgages.

It is still useful to keep land apart from other types of property. The reason for this is that land has a number of important features that the other types do not share. Land is permanent, almost indestructible, will produce an income in crops or in cash (rental), and is capable of an almost unlimited division and subdivision into concurrent and successive interests. Therefore English law from the earliest times had used the same piece of land to serve the needs of several persons whose interests may conflict. Furthermore land cannot be stolen, is in limited supply and in a crowded island like Britain, the use of land are very likely to affect neighbors.10

By contrast personal chattels or (movable) goods11 are not permanent. The vast majority of goods are in the process of being manufactured, or moving down the supply line to the consumer who will consume them (food and wine) or wear them out (shoes and cars). Unlike land goods are readily transferable from hand to hand without formal documentation, may be difficult to trace and find, and if fungible often quite difficult to distinguish from others of the same kind. Finally goods are the subject matter of large-scale transactions in a wholesale market. By contrast, land is bought in single lots from retail owners.

2.2 Intangible assets

2.2.1 General

Intangible assets are assets that are incorporeals or rights (interests) in property, which are incapable of being perceived by the senses. Consequently, intangible things like copyright, goodwill, and shares in a company are also recognized as (personal) property, In fact, a great

the lease, the interest of the lessee came to bear the odd title of chattel real.9 Thus real property today relating to land and personal property or personalty relating to

everything else namely movable property and all kinds of intangible assets. 10 For more details see Lawson and Rudden The Law of Property (3ed 2001) 22 –26.11 Goods are defined by the Sale of Goods Act as personal chattels other than things in action and

money

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part of the world’s wealth consists of intangibles. Thus government bonds, worth 325 billion English pounds have been issued to the British public.

The treatment of intangibles as property demonstrates English law’s preference for abstractions. Intangible objects are treated as property because people are willing to buy shares just as much as a house or a car. These abstractions are simply the law’s recognition of economic realities; commerce devised these innovations, leaving it to lawyers to fit them later into some structure of recognition and protection.12

The common-law expression used for intangibles is ‘things in action’ or ‘choses in action’, using the French word for ‘thing’. The phrase was coined to denote two notions one positive and the other negative: ‘thing’ conveys the idea that an intangible is a thing namely an asset with a value which can be inherited, traded and reached by creditors; ‘in action’: conveys the idea that this asset is not tangible and can be transformed into a tangible object only (if at all) by successfully suing someone. If someone owes you $500, your claim is certainly an asset which can be passed on your death and which you could donate or sell. But to get the money you would have to go to court. The older books uses the phrases ‘choses in possession’ for tangible things which you can touch and control and ‘choses in action’ for intangibles which are yours but which you cannot take hold or control.

2.2.2 Receivables

Examples of receivables or credits (in international bond markets) are a balance in a current account in a bank, a loan which can be reclaimed and any claim arising out of a sale of goods or the provision of services. Although such claims may be recorded in writing, they do not need reduction to a document. If L lends money to B, B owes the debt, which L can claim, from him. This claim is an intangible asset in L’s estate. L owns and the borrower owes the debt. L has an intangible asset in the form of a receivable. L owns this claim or receivable because it has value and he can give it to charity, sell it, mortgage it, declare himself a trustee of it or leave it by his will. If L calls for repayment, and then has to sue, L will win. But because the claim can only be brought against B, the claim is often called personal not in the sense that it can be enforced against B’s person by imprisoning B but against B’s property which public officers will take and sell. If B has other debts that are due and these debts exceed the value of his assets, then B is insolvent and may be made bankrupt. In those proceedings L will be a concurrent creditor and will receive only a percentage of his claim in the proportion that B’s assets are to B’s debts. Thus between the creditor L and the debtor B the receivable is a right to be paid, not an interest in any specific asset of the debtor. This means that if the debtor is bankrupt, the creditor would have to compete with others for a rateable share in all the assets of the debtor.

If L sells and assigns the claim to P and B goes bankrupt P will have only the same personal claim against B that L had. But if B stays solvent and L goes bankrupt, then P can take out of his assets the full claim, which has become an asset in P’s estate. P can say to L’s other creditors that they cannot use his (P’s) property to pay their debts. Thus between the creditor (L) and the creditor’s assignees (P) the receivable (claim) is an asset, the subject matter of property rights. And if the creditor is insolvent, that receivable (claim) belongs to his assignee (P) and would not be within the reach of the creditors of the creditor L.13

12 Lawson and Rudden 2113 The above had been culled from Lawson and Rudden 30 and 36 and 37. For the assignment of

non-monetary obligations, see Lawson and Rudden 37-38.

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A firm, which has sold goods and services to customers, instead of chasing each claim, may in return for cash, transfer (by assignment) its claims against its customers to a firm called a factor that specializes in collecting payments. The standard form contract between the firm and the factor provides that ‘the ownership of each receivable shall vest in the factor’.

2.2.3 Documentary intangibles

Documentary intangibles like negotiable instruments and bills of lading are embodied in a document. The best-known negotiable instruments are bills of exchange, promissory notes and cheques. These documentary intangibles are not merely tradable but also negotiable. This means that any ‘holder in due course’ who takes the document in good faith and for value, obtains a good title despite any defect in the title of the transferor who may have stolen the bill or note. Bills of lading are issued by a carrier with whom a seller has contracted to ship goods to the purchaser. Once the goods are on the nominated vessel, they belong to the purchaser under a ‘free on board’ contract. The carrier gives the seller two copies of a ‘bill of lading’, which functions as a receipt of the goods and an undertaking to deliver them to the person who is the holder of the bill of lading on arrival. The seller sends a copy to the purchaser who then has a document representing the goods, which is an asset, which he can sell on. The ultimate holder can then claim the goods on arrival. The bill of lading is not quite so powerful as a negotiable instrument for if the bill of lading has been lost or stolen, the person properly entitled to it can claim the goods from the person who has taken delivery of the goods or anyone who has acquired them since.

2.2.4 Documented intangibles

Intangible things can further take the form of investment securities14 like bonds and shares (stocks), which are issued, in the form of a document like a share certificate. The transfer of the document is however, only evidence of an entitlement to be registered as the owner of the share. Bonds bearing interest are issued by the central government, other public authorities and commercial entities and are traded in the bond market to investors. Companies issue shares and each share represents a stake in the net capital of the company proportionate on the sum contributed on its issue. They are assets in the estates of shareholders and entitle the holders to dividends if the directors decide to divide the profits of the company. The system of issuing share certificates and the registration of shares in the names of shareholders, have been computerized, with trustee-like intermediaries updating the database on a regular basis.15

Lawson and Rudden16 thinks that the old scheme is now obscured by the ‘dematerialisation’ of shares, bonds and investment securities generally where paper certificates are replaced by database entries.

2.3 Intellectual property

Intellectual property rights are special types of intangible assets. They are special because they differ from other intangibles in that they are products of the human mind. The most important kinds of intellectual property rights are copyright, patents and trademarks, followed 14 Securities here refers to investments such as bonds and shares and not to devices to secure a

debt like a watch given in pledge to a pawnbroker to secure a loan made by him.15 For full particulars, see Lawson and Rudden 34-36. In the United States the revised title 8 of

the Uniform Commercial Code sets out a flexible legislative framework for this system.16 At 21.

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by rights in designs and plant breeder rights. In commerce the goodwill of a business (the capacity to draw a clientele) has also been recognized as an immaterial property right. The home state of Elvis Presley, Tennessee, has enacted a Personal Rights Protection Act 1984, which provides that every individual has a property right in the use of his name, photograph, or likeness in any medium in any manner.17

All the above rights are important assets in a person’s estate, inter alia because they can be sold and royalties (tantiéme) can be earned. They are absolute in the sense that they can be enforced against the whole world. An infringement by anyone can be met with a claim for compensation.

2.4 Money

Money in the form of coins and notes is an important asset in a person’s estate. At one level, money (coins or notes) is tangible, movable and anonymous. At another level Lawson and Rudden18 has shown that cash is quite different from other objects:

i) its value is not of the metal or paper but of the sum that it denominates;

ii) it can be used as money only by being handed over (coins kept as ornaments are not used as money)

iii) cash money can be instantly reused

iv) money is used to buy things and not often the object of sale;

v) money is legal tender and creditor and debtor can insist on paying in money;

Note that foreign currency does not have these attributes and is bought and sold by money changers.

LECTURE 3

REAL RIGHTS: BASIC CHARACTERISTICS AND MAIN CATEGORIES

INTRODUCTION

The distinction between real rights and personal rights forms the basis for the division of the Law of Patrimony into the Law of Property and the Law of Obligations. This distinction also has practical significance as different consequences flow from real rights than from personal rights. Historically the distinction is derived from the Roman procedural distinction between acions in rem and actions in personam. Traces of the distinction between real and personal rights as opposed to claims can be found in the Glossators, post –Glossators and the Institutional writers. However, it was only the German jurist Hahn and several Natural lawyers from the 17th and 18th centuries who consciously distinguished between real and personal rights. With the development of the doctrine of subjective rights by the Pandectists 17 See further Lawson and Rudden 42.18 At 43-44.

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in the 19th century, the distinction was settled and from then on formed the theoretical basis for the division between the Law of Property and the law of Obligations.

BASIC CHARACTERISTICS OF A REAL RIGHT

The main characteristics of the ideal prototype of a real right, is that it is absolute in nature and the fact that a real right places a person in a direct relationship with a (corporeal or incorporeal) thing. Although one may be able to enumerate a few basic characteristics of a real right, it must always be kept in mind that real rights often fall short of their ideal prototype in some or other respects.

The basic characteristics of a real right are the following:

(1) A real right is in principle absolute and entitles the holder of the right to a so-called right of pursuit to trace the object to wherever it can be found. Thus a real right is absolute in the sense that it prevails against the world at large, whereas a personal right is relative in the sense that that it can only be enforced against a particular person, namely the other party to the obligation. This characteristic is criticized on the following grounds. First, real rights do not always operate absolutely. The right of pursuit of an owner against a bona fide acquirer is for instance limited by the doctrine of estoppel or personal bar. The pledgee who voluntarily alienates the pledged object is not allowed to claim it afterwards from a bona fide third party (except in cases where non-possessory pledge is recognisesd). Secondly, the fact that a personal right is relative does not mean that the whole world must not respect it A third party that willfully interferes with the contractual relationship between two parties (eg a contract of employment) can in appropriate circumstances be held delictually liable Thus in Jansen v. Pienaar (1881) 1 SC 276 where Pienaar enticed Jacob, a herdsman, to leave the employment of Jansen with the result that several oxen of Jansen died, the court awarded damages to Jansen on the ground of wilful interference by Pienaar with the contract of employment between Jansen and Jacob. This point is also illustrated by the operation of the doctrine of notice in the case of double sales: if A concludes two contracts of sale, one with B and one with C, in respect of the same object and transfers the object to C, C, although he becomes owner of the object by it being transferred to him is not allowed to retain the thing vis-à-vis B if he knew about the contract of sale between A and B.. Finally real rights are not the only absolute rights. Personality rights (right of honour, reputation and privacy) and immaterial property rights (industrial and intellectual property) are also absolute. Despite this one can accept that real rights in principle are absolute in their operation.

(2) A real right places a person in a direct relationship to property.Real rights are primarily concerned with the relationship between a person and property, whereas personal rights are concerned with the relationship between two persons. The object of a real right is a corporeal or incorporeal thing: the object of a personal right is a performance by another person. Whereas a real right places a person in a direct relationship of control over a (corporeal or incorporeal) thing, a personal right only gives rise to a claim against the particular person who is a party to the obligation arising from contract or delict. However, firstly, the description of a real right as a right granting a direct power of control over a thing militates against the basic premise that legal rules govern the legal relationships between persons. The only possible example of a direct relationship between a person and a thing is the juristic fact of possession. A real right does in principle not only comprise a right with regard to a thing but also a right against a person. The fact that A is the owner of a house implies that all other persons should respect his rights with regard to the house. Secondly, one

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can not always distinguish clearly between the powers of disposition and use which flow from certain real rights (for example a lease of land) from those which flow from an analogous personal right (for example the lease of a motor vehicle). The power over the thing in the case of a lease of land seems to be of the same order as the power against the lessor to allow the lessee to exploit the motor vehicle in the latter case.

(3) Subordinate real rights afford a right of preference in the case of insolvency of the owner of an object. Thus if property is burdened with a mortgage or pledge and the owner goes insolvent, the administrator in insolvency is bound to satisfy the holders of the security rights before ordinary creditors from the proceeds of the sale of the property Again, if the property of the insolvent owner is subject to a praedial servitude or a land lease, the purchaser of the property will acquire the property subject to the servitude or land lease when the property is sold in execution by the administrator in insolvency..

(4) The maxim prior in tempore potior in iure (first in time is stronger in right) applies where there is a conflict between two or more real rights. Thus a mortgage or land lease registered against the land will bind a successor in title of the owner of land

(5) The transfer of a real right is accompanied by a certain measure of publicity. Movables must be transferred to the new owner and immovables (land) and real rights in land must be registered in the name of the new owner or holder of the real right. In Scotland the cession of a right as security for a loan must be intimated to the principal debtor that is he must be notified of the cession (assignment).

(6) Real rights flow from juristic facts such as transfer, prescription, occupation and accession and are do not arise from a mere agreement between two contracting parties, a wrongful act or unjustified enrichment.

THE MAIN CATEGORIES OF REAL RIGHTS

Though a definitive list (numerus clausus) seems an almost indispensable requirement for a study of the law of property, most jurisdictions allow for the development of new real rights and does not have a numerus clausus of real rights. The main categories of real tights are the following:

(1) Ownership (dominium). This is the main real right and it is usually defined as the right of using and disposing of a subject as one’s own, except in so far as one is restricted by law or agreement. This corresponds to the traditional definition of ownership in Civilian systems: “the right to use, enjoy and abuse (ius utendi, fruendi, abutendi)”.

(2) Right in security. The Scots Institutional and Roman-Dutch writers recognised that the right held by a creditor in property in security of a debt owed to him is a real right. Scots law recognises a number of different rights in security, the appropriateness of which in a given case depending both on the type of property and, in one case (the floating charge- only real once it attaches) on the type of debtor. The main examples of rights in security are pledge (corporeal movables), standard security (immovables), session of a debt in security (cession in securitatem debiti) and floating charge (property of all kinds owned by a company).

(3) Proper liferent. Liferent corresponding to usufructus of Roman law is the right to use the income of property for the duration of the holder’s life. Only a proper liferent is a real right.

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In an improper (or trust) liferent, trustees hold the property and the liferenter’s right is no more than the right of a beneficiary under a trust, which is a personal right. Civilian systems distinguish three types of so-called personal servitudes namely usufruct (use and enjoy fruits), usus (use) and right of habitation (right of residence).

(4) Servitude. A praedial servitude is a real right held by the owner of dominant land over neighbouring servient land of which he is not the owner. Examples are a right of passage, a right of drawing water, a right of view and a right to prevent the owner of the servient land to build higher. Real burdens, at least where they take the form of restrictive conditions are closely related to praedial servitudes and are also real rights.

(5) Leases of land. A lease is the right to use and exploit land in exchange for a recurrent payment known as rent. The Leases Act of 1449 (see now the Registration of Leases (Scotland) Act 1857) conferred on leases of land the status of a real right. The same is true of long leases of land (over 10 years) in South Africa. In some other countries leases of land are not recognised as real rights, but nevertheless are attributed some proprietary consequences. In contrast to the position with regard to leases of land, the hire of movables confers a personal right only and so may be defeated by the creditors or successors in title of the landlord.

(6) Possession. There is authority in Scotland that the bare fact of possession of property confers the right not to be dispossessed except by consent or an order of court. This real right consists independently of ownership or lease or other right giving specific entitlement to the property. An unlawful possessor, such as a squatter, may have his possession restored if he is dispossessed. The better view is however, that possession is not a legal right but a legal fact from which certain consequences flow and one of which is that the possessor can claim to be restored if he is dispossessed.

(7) Rights held by the public. Scots writers include among real rights, the rights which every member of the public has such as the right to use the public roads, the right of fishing and navigation in the sea, rivers, lochs and the foreshore. To these are added the right to breath the air (common to all mankind) freely and the right to acquire ownerless property, such as wild animals, by the doctrine of occupatio. Strictly speaking these right fall within the sphere of public law and though also absolute rights, they are not real rights in the private law sense.

(8) Intellectual property rights. Intellectual property rights corresponds with traditional real rights in the sense that both types of rights are absolute (enforceable against the world at large), but dogmatically it seems safer to classify them in a separate category namely like the Germans as Immaterial Property Rights under which all products of the human mind are grouped.

Other real rights recognized in civil law countries are emphyteusis or perpetual quitrent (the Dutch erfpagrecht) and superficies or a real right in building or other improvements on the land. Because of the importance of mining, South African law recognize mineral rights in the land of another as a new kind of real right and under the influence of English law, South African law also recognize 99 years leasehold in land as a real right.

LECTURE 4

Lect4FundJapan

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West 383-386The Modern Japanese System

Origin in Meji Era (1867-1912) based largely on French and German models (but even earlier antecedents can be found). 19Japanese Civil Code (1896) and still in force: Art 240: Lost articles are the property of the finder if the actual owner does not appear within 6 months of the date of public notice of the loss, computed as 2 weeks after the recovery (find). The Code then provides that the provision is to be administered in accordance with other special laws.

The relevant ‘special law’, the Law Concerning Lost Articles’, was adopted in 1899 and still in force, provides a concrete set of rules of how to deal with lost property found. A person who finds lost property (irrespective of its value; cf NY 20 dollars) must return it to its owner or submit it to the chief of police within seven days of the find (Articles 1, 9). Lost property includes articles left behind by other people (mislaid property) and domestic animals that have run away (Article 12). If a person finds lost property inside a private establishment (such as a department store, a ship, or inside the turnstiles of a railway), he or she must submit it to the management of the establishment within 24 hours (Article 10).

The law establishes a reward system. Upon recovery, an owner “shall pay” the finder a sum of between 5 and 20% of the value of the lost property (Article 4). If the find was reported within the 7 day period, a finder has a civil right to the reward, but nonpayment is not a criminal infraction. If the property is found in a private establishment, one-half of the reward goes to the establishment owner, giving the establishment owner incentive to secure lost property (and less incentive for the individual finder in such establishments). If no one claims the property, and the finder waives his or her rights to it (or forfeits by [1] not turning in within seven days, or [2] being convicted in the past of embezzlement of lost property), then it becomes the property of the state (Articles 9, 15).

Significant incentives: possession after six months and the finders' fee. Japanese courts provided guidelines for efficient administration: value of property to be determined at the time of its return to the owner. The exact fee within the 5-20% range, depends on the type of property and the surrounding facts, but if the parties cannot agree, the court may determine the appropriate fee. The court generally compromises at 10% of the value Some special

19 The Official collection of Legal Rules of the shogunate of 1742 (incorporating a 1721 edict) already contained the crux of the Civil Code provision: finder must submit property within 3 days; if owner appears and property is cash, finder entitled to half of cash; if other than cash, finder entitled to unspecified reward; property not claimed within 6 months, possession is awarded to finder; if finder appropriates property, he was fined. Earliest case of a fine 1728 where Kuemon’s daughter sold a sword sheath found on the road. Raezamon’s case 1683 earlier: appropriated 50 000dollar today which employer has lost and hid it. Sister informed on him and found guilty of embezzlement (not larceny) but because of huge amount: shogunate decided on death penalty. The Essence of the new Code (1871) the first national Japanese criminal law and its supplementary , Amended Statutes (1873) influenced by the Chinese Ming Code: found article must be delivered to authorities; if owners appear, finder and owner share property equally; owner does not appear within 30 days, property goes to finder; finder faisl to submit: embezzlement of private property less severely punished (beatings with stick) than embezzlement of public property. 1876 Lost Article Disposition Order enacted by Council of State: Western particularly French influence: Finder to deliver property to authorities within 5 days (8 days for animals); reward of 5-20% to finder and if owner does not appear within a year becomes possession of finder. Penal Code passed by Council of State in 1880 which stood for 27 years before replaced by modern version, still embezzlement but changed penalty: instead of beating with stick, imprisonment 11days to 3 moths and fine of 2 to 20 yen copying French model in trend to reduce severity of punishments.. Thus system in existence for at least 125 years or over 300 years

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property deserves special treatment; negotiable notes are valued at one-third to one-half of face value, but non-negotiable notes are valued at only 2% of face value.

The carrots coexist with a potential stick. Article 254 of the modern Japanese Criminal Code, adopted in 1907 and still in force today, creates the crime of embezzlement of a lost article: a person may not wrongfully appropriate a lost article. In perhaps the best-known case in Japan (State v Ono 1981), a group of fishermen in northern Akita prefecture, with the governor's permission, stocked a pond with 1 000 special kind of big colorful carp selling at $1 000 dollar each. About 60 of them escaped their net and were subsequently “found” by Ono. Ono knew their source, but he nevertheless sold them for 380 yen per pound, for a total of 20,520 yen (instead of market price of 54,000 yen). The court found embezzlement and imposed on Ono a suspended sentence of six months' imprisonment (State v. Ono 1981).Japan adopted the German criminal law distinction between lost property embezzlement and entrusted property embezzlement. In 1999 more than 98% of all embezzlement arrests in Japan (about 70,000) were for lost-property embezzlement. Besides embezzlement where one wrongfully appropriates property that belongs to another, a third type of property theft, larceny occurs when one deprives another from possession of the object. Thus taking a camera left on a tour bus for 5 minutes within 20 meters of the owner or a bicycle left at night within 2 meters from one’s home would be larceny not embezzlement but the taking of a bicycle, misplaced by his owner, mail mistakenly delivered and personal goods left on a train, would constitute embezzlement.

In short, finders of lost property in Japan have three choices. First, they can ignore it with no consequence. Second, finders can turn in the property to the police or a private substitute. If they do so within seven days, they are entitled to either (1) the property, after six months and fourteen days, or (2) if recovered, a finders' fee of 5 to 20%. Third, finders may keep the property, but if they do so, they may be punished by fine or imprisonment.

Summary West 395‘Although many people are arrested for lost-property embezzlement, most are juveniles who are freed without trial, and most adults who are prosecuted have either committed more serious crimes or have committed lost-property embezzlement in such a way that it is more akin to pure theft. Still, the stick exists: serious cases are pursued, and even trivial cases are “punished” by lengthy police interrogation. While a careful lost-property embezzler might succeed in evading the law, it would be unwise to attempt to do so.’

West 399-403 Lost and Found in PracticeThe legal rules (Civil Code, special law, ordinances and cabinet orders) that govern lost property together with the everyday process by which police and other officials administer the legal rules, makes the Japan system of lost and found property very efficient.

When one finds lost property in Japan, the first place to visit is often the local police box, or kōban,20 small police posts manned by as few as one or two officers. In 1999 there were 14,700 kōban spread over the whole of Japan. In Tokyo there are more than 96 kōban and police stations for every 100 square kilometers. Many kōban are centrally located near areas that attract crowds: train stations, department stores and parks and on average one is never more than three or four miles away that is walking distance from a kōban. Although an integral part of community policing, a variety of its tasks is not linked to crime such as giving directions and counseling local residents. Most people know where there kōban is. 20 Rrural equivalent chuzaisho,

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Disposition of lost property is the most important function of kōban followed by giving directions. When asked what they would do when they misplaced 10 000 yen in the street, 40% said that they would report it to the police (60% said they would give up). Significant that 40% said that they would report lost cash, even with no identifiable or traceable marks.

Cabinet orders require that the finder on delivery of the object must complete a Finder’s Report, detailing the nature of the object, the amount of cash found, the place where found and contact information of the finder. A Finder’s Receipt is then delivered to the finder setting out his rights as a finder and where to claim the property. Even trivial items are treated seriously by the kōban police which provides a psychological benefit to finder not prevalent in American systems.

In filing the Finder’s Report, the finder has the option to waive his rights to the property and to the finder’s fee. Finders seem to waive rights for the trivial (small change, umbrellas, the old, the embarrassing (articles with sexul connotations) and articles which they already own (cell phones).

Art 1 of the Law concerning Lost Property imposes a duty on the police to attempt to locate the owner for the next 14 days and post a brief notice of the find. If reasonable measures are not taken, the owner has a claim against the prefecture. Notices must be posted on bulletin boards or a log of lost items recounting the item and the place found at police stations and kōban. Particularly valuable items are also listed in newspapers. If police are not successful in locating the owner in two weeks, the property is usually transferred to a central location, such as the Tokyo Metropolitan Lost and Found Center. The property is held at the central location for the shorter of six months or locating the owner.

If the owner of the lost property is located and wants the property, he or she may retrieve it at the kōban quickly, or later at the central holding facility. Police submit to the owner a request for reimbursement for storage costs if any. On retrieval, thepolice calls the finder who within one month may request the 5-20% finders' fee from the owner. Parties almost always settle at 10% of the object's value, the percentage often mandated by Japanese courts when disputes arise. Owners usually pay because the legal provisions are clearly set out in the finder’s receipt as well as the receipt received by the owner when the property is returned. If there is a dispute as to the value of the property or the percentage, their only way forward is a court action.

If the owner of the property is not located within six months and fourteen days, the finder may retrieve the object for a period of two months from the central holding facility. Although most high-value items are retrieved, many items of lesser value are not, despite the nonwaiver of rights by the finder either because they simply forget about the find, they misplaced their finder’s receipt or were not able to retrieve within the specified time. Items not retrieved are either sold at public auction or thrown away.

An owner who has lost an article would visit the kōban and files a Loss Report detailing the loss. If the item is found, the owner is contacted and pays the finders' fee. If the item is found and the owner contacted before a report has been filed, the owner simply files a Loss report at the kōban. Police have notebook registries and increasingly computer databases in place to match owners with property.

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In official literature there is no appeal for the return of lost property based on altruistic or norm-based considerations. But the kōban police and related officials take extra care to advertise the potential economic rewards of submitting lost property. The annual White Paper on Police often lists the year's biggest winners in the lost-and-found lottery, and the popular press follows up on the stories. The Tokyo police issue a brochure that details the lost-and-found process in cartoon-like manner with a boy who reports a lost bag and ends with the boy being rewarded with the bag itself. Also reported that if children turn in lost cions or other itmes found on benches in a park, many koban reward them with a small printed card filled in with the child's name, the date, and the particular deed performed. Officers often make a show of receiving lost coins and putting them in a lost-and-found box. Then they give the child a reward of equal amount, which in fact comes from their own pockets. The lesson is that lost money belongs to the loser but virtue has a tangible reward. The ubiquity of kōban, and the lack of a statutory minimum value for lost property, allows the inculcation of the norms codified in the statute at an early age. In turn, the law is reinforced by the underlying inculcated norms. The use of kōban is thus closely tied to social norms, and the success of kōban may be directly dependent on such norms. But the kōban are fundamentally a legal institution, a formally devised unit of the state, in the same class as legal rules.

West 372-373 notes that the Japanese system of administration of lost property compared to that of the United States and most other jurisdictions has the following advantages:

i) The system is simple and uniform, compared to that of the United States which varies with laws from state to state. 21

21 The Uniform Unclaimed Property Act (1995), adopted in 13 states in America, the State does not take title to unclaimed property, but takes custody only, and holds the property in perpetuity for the owner. According to s 1 (13) definitions ‘property’ means ‘tangible property described in Section 3 or a fixed and certain interest in intangible property that is held, issued, or owed in the course of a holder’s business, or by a government, governmental subdivision, agency, or instrumentality, and all income or increments therefrom. Prime examples are shares, bank accounts, travellers’ checks, insurance proceeds. The term includes property that is referred to as or evidenced by inter alia money, a check, draft, deposit, interest, or dividend; credit balance, customer’s overpayment, gift certificate, security deposit, refund, credit memorandum, unpaid wage, unused ticket, mineral proceeds, or unidentified remittance; stock or other evidence of ownership of an interest in a business association or financial organization; a bond, debenture, note, or other evidence of indebtedness; money deposited to redeem stocks, bonds, coupons, or other securities or to make distributions; an amount due and payable under the terms of an annuity or insurance policy, including policies providing life insurance, property and casualty insurance, workers’ compensation insurance, or health and disability insurance; and an amount distributable from a trust or custodial fund established under a plan to provide health, welfare, pension, vacation, severance, retirement, death, stock purchase, profit sharing, employee savings, supplemental unemployment insurance, or similar benefits. Comment: The Act provides exclusively for the disposition of unclaimed intangible property and does not apply to tangible property, with one exception: Section 3 applies to tangible property contained in safe deposit boxes. It is, however, intended to be all-inclusive; the descriptions of property interests that are set forth as examples are not limiting, but are stated to help holders identify kinds of property interests which otherwise may be overlooked. Thus, “property” is not the check, note, certificate or other document that evidences the property interest, but the underlying right or obligation. “right to be paid” is the “‘intangible personal property’ (or ‘chose in action’) . . .which is recognized in the UPL”). The requirement that the right be “fixed and certain” excludes unliquidated claims from the coverage of the Act, such as disputed tort claims. Comment s 16: After property is presumed abandoned and reported to the administrator the administrator must attempt to locate the missing owner. Thereafter, if the property has been delivered to the administrator and the owner or his representative appears, the administrator must pay the claim. The owner’s rights are never cut off; under this Act, the owner’s rights exist in perpetuity.

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ii) The system has a relatively unwavering history and appears to be well known;iii) The reporting of lost objects is made more efficient by the ubiquity of the kōban

(police box), which helps ingrain law-supporting norms in everyday Japanese life from childhood. The quest for missing owners are made more efficient by the establishment of a legal duty on police to search for owners.

iv) The Japanese finder’s law creates well-defined incentives to encourage finders to report their finds and disincentives to misappropriation of lost property. Japanese law provides a simple system of carrots and sticks. The finder must deposit the article with the police or with the security office of the building where the article in found. The law provides two carrots to encourage the finder to deposit the lost property. First, if the owner claims the property, the owner is obliged to pay the finder a fee of 5 to 20% of the object's value. Second, if no one claims the object in a specified period of time, the object is returned to the finder. Japanese criminal law also provides a stick. Although Japanese law contains no penalties for nonrescue, misappropriation of property for his own amounts to embezzlement and is subject to a fine of up to 100,000 yen and imprisonment of up to one year. Even when prosecution is not initiated, the process of investigation in Japan is often a punishment in itself.

Particularly the kōban system and carrot-and-stick approach embedded in the legal provisions are the most important in influencing individual behavior, and in the absence of either the system would likely be much less effective. But both may be reinforced by simple rules and an educated citizenry, and social norms, in turn, may be both cause and effect for each factor.

West concluded (414-415) that the strength of the Japanese lost-and-found system lies in the civil and criminal legal system that creates clear and longstanding carrots and sticks for the return and nonreturn of lost property, as well as in the corresponding legal institutions that dictate police duties and create the kōban enforcement system. The enforcement of nascent juvenile crime may also be an important variable. Each appears to play an important role, and together they appear to have synergistic effects. Other factors, including altruistic factors and social norms, are both important and interrelated with these institutions, but through various methods-statutory exposition, data analysis, surveys, experiments, and interviews-I have suggested that legal institutions, and the socialization of those institutions over time, may play a more central role in explaining both the system's success and differences between Japan and the United States.

Drawbacks of Japanese system (West 415-416)

The main drawbacks for transplanting the Japanese system to other jurisdictions are the following:

i) The Japanese system is expensive. But Japan can justify such administrative expense because it has very low violent crime rates, in part precisely because it devotes administrative resources to such factors as the kōban system and zero-

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tolerance enforcement of low-level crime. Japan’s broken-windows-based community enforcement creates incentives for property not to become “untended,” and thus fair game for people out for fun or plunder.

ii) Even if one wanted to mimic the Japanese system, it does not export The Japanese experience suggests that for the system to work, it must rely not only on the correct tweaking of civil and criminal incentives, but also on well-oiled administration systems and an educated populace. Modification of institutions in a different historical and social context may not engender as efficient a lost-property market as that which has apparently functioned efficiently for many generations.

iii) Japan are paying the price for their integrity and efficient system as the country sinks beneath a mountain of lost property. In order to counter this problem, the Japanese cabinet proposed to reduce from six to three months the length of time that lost property must be kept before it is handed over to the finder. The police will also be allowed to sell low-valued items such as umbrellas to recoup the cost of storing them.

West concluded (416) that ‘the behavior of finders in Japan provides in microcosm a good and clear example of the many factors that working together make for social control in society and illustrate how law, norms, institutional structures, and economic incentives can mutually reinforce the message that each sends. In Japan, the law commands the return of lost property, it punishes those who fail to return it, and it guarantees rewards to those who do. Police are close by to accept lost objects. Recognized, centuries-old routines exist for turning in lost property and protecting finders' interests, children are taught in visits to kōban the norm of returning lost objects and are socialized by praise and rewards when, as youngsters, they turn in small sums. Adults are rewarded twice: once for turning in lost property, and once when their lost property is found, perhaps thereby creating greater allegiance to formal and informal lost-property institutions. The result is that many people return valuable property, even in situations in which the chance they would be found out if they kept it is relatively low. If only the mix of law and social control norms meshed as well when more significant matters were at stake.’

Principles underlying a model law on lost property

The first principle of paramount importance is the need to ensure the return of lost property to its rightful owner. This can be achieved by a widely publicized legal duty to report finds of lost property, an efficient system for administering lost property and widely publicized incentives for the finder to report as well as disincentives for not reporting a find. Here Japan seems to have an ideal system of rewards to the finder for reporting and criminal punishment in case of misappropriation of lost property found. Another important factor is that the legal duty to search for the true owner must be implemented efficiently by wide publication of the property lost and the keeping of computerized data on lost property easily accessible to the losers of property.

The second principle is that he finder as first taker of the property should prevail against all but the true owner, except in rare cases where there are countervailing grounds based on tort or contract favoring another claimant, or where a different result is necessary to protect the owner. Even if the occupier of a quasi-public place is allowed to hold on to lost property found, he should be compelled to relinquish it to the finder if the owner remains unascertained for a reasonable period of time.

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The situation where the rights of the finder conflicts with the rights of the occupier of the property where the property is found, should be based on the principle of the person who first takes possession of the lost property and not based on the concept of constructive possession to aid the occupier’s claim to the property. This implies that the occupier must at least be aware of the lost property on his premises before he can acquire the rights of a finder. But even then, besides a duty to inform previous visitors who could be owners of his found, the property must be delivered to the police who have the resources and legal duty to search for the true owner. This will abolish the uncertain consequences caused through the distinction between adandoned, lost and mislaid property as well as the locus quo playing a pivotal role in determining who should receive possession of lost property

LECTURE 5

Lect5NovaspTransNOVA SPECIES

I. INTRODUCTION

Requirement: nova species

Kinloch Damph Ltd(seller) v Nordvik Salmon Farms Ltd & Others (defendant)1999 Outer House

Facts: Sale: Kinloch to Salmon Farms:Quarter million smolt; reservation of ownershipSmolt in seawater and fed: 30 times bigger salmonDefendants insolventPlaintiffs relied on reservation of ownershipReservation clause ineffective

Defendants: feeding & husbandry: ceased to exist nova species, irreducible; same biological species: salmo salar, but physiological changesBell’s Principles (1829): materials destroyed

Plaintiffs: no nova species; grown to maturity but still salmo salarOlder, larger, more valuableGrowth natural process; in wild without human interventionRomans not test, but illustr. no reference to growing creatures, animals everydayNot extend to animate creatures.

Lord Macfayden: main dispute: wh. spec. natural growth of living creature?Sense no longer smolts and process of development irreversibleProper scope: inan. objects human efforts; materials used up & cease to exist.No Roman authority on growth of living cteatures and no illustration to specification of growing animals.Greater importance of animals: absence indication: no applicationConclusion: fish farmer feeds and husbands large numbers of salmo salar:to develop: salmon: not new thing separate and distinct from smolt no nova species vesting in caretaker

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Mature salmon in cages, same that plaintiffs supplied.

II. ROMAN LAW Correct? Roots of specificationNotion: Roman law but eulogism: speciem facereNova species: only once: rest: aliquam species, suam speciem pristinam non continet, species mutata, aliud sit materia aliud navis.Romans: factual circumstances: specification, adiunctio, commixtio and confusionSabiniani: matter trumped form and actio ad exhibendum to eventually succeed in rei vidicatio; Proculiani: form: maker Thereofre all examples usable for deciding on requirement of nova species.

5 industrial processes:

1. agricultural processes;wine or must; mead, olive oil; corn;

2. smithying processes;gold silver steel copper: vases, drinking vessels, goblets, dishes , statues

3. tailoringgarment clothes: wool

4. carpentryships, items of furniture, benches, cupboards: cypresses

5. apothecary processesointments, eye-salves and perfumes

Final products: nova speciesNone deal with living creatures or rely on natural growth rather than human endeavour : significant change in substance of material used.

Significant changeWhat extent of change required?Verbs used:

Facere: make clothes or mustTransferre, transfigurare: aliud corpus translalta; ornamentum: transfiguratum

Texts on usufruct: new name: mass of metals changed into vase

Philosophical theories of timeSabiniani: Stoics: matter: quia sine material nulla species effici potestProculiani: Aristotle & Peripatetics: form: Maker: quia quod factum est antea

nullius fuitAlso influence: irreducibility theory: metals, prepared planks, cloth?

Rationale: final product to maker1. Occupation: old object perished; new product res nulliusDifficulty: no conscious taking of possession: long fabricating processes

Only quasi not total destruction of the substance2. Accession: new form principal thing to which the material accedes

workmanship or labour theory; reward theoryDifficulty: accession of material things to immaterial things

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No general principle that labour rewarded.Dyeing (colouring) of wool, refining of metals, threshing of corn

3. Wieacker: problem in identifying object for sake of vindicationno doctrine of tracing

III. ROMAN-DUTCH LAW

Express references to nova speciesGrotius: new gedaente (appearance)Huber: nieuw maeksel (new something made)Vinnius: speciei formatioVoet: novae speciei confectio

Stronger words: Vinnius: transformareVoet: conferreVan Leeuwen: confercire

Repeat Roman examples of specification Van Leeuwen: Censura ForensisWine, olive oil, corn, mead, ointment, perfume,clothing, ships, cupboards, benches

Added: cups, statues: gold or silverNew: brewing beer malt & corn, flour from corn, painting picture: canvass

Products which did not qualify: Vinnius: dyed wool, fluids mixed, dried grapes, pickled

olives, cheese or butter, intoxicating drink of fruits

Divided on threshing of corn from ears of corn: not reducibleNot new species but only reveal species already thereVinnius: Extend to lugiminous plants: lupin, lentils, peas, chickpeas, beansVinnius: corn (same species, name) vs grapes and olives: wine & olive oil

different names, speciesVoet disagrees: wine: pressing of grapes: wine not revealed through pressure of skins

Underlying theoriesOccupation or accessionVander Keessel Dictata: do not agree that accessio with matter acceding to formBut form cannot exist without the matter. Form not a res that belongs to us to which the res of another can accede. Therefore: res nullius falling to the occupier.Grapes extinguished & ownership vanishes; wine new species with a new nameRes nullius: clear from D: basis Proculian view: res produced not exist before D.41.2.3.21 new species which did not exist in nature up to then.res is possessed by a title pro suo: same title as for occupation + animus sibi habendi.confusion to classify specificatio: industrial accession.If reducible raw materials: industry. accession; vase, ring, acquire:power matterForm accedes to matter, but not matter to form

Vinnius: absurd: accessionNova species not power of res, or against will or ignorance, but by our effort

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Absurd: matter to form for form presupposes matter and not vice versaOccupation: belonged to no-one beforeReducible materials: accession applicable, but prefers no new acquisition.

Strongest support for the accession / labour theory: industrial accession

Van Leeuwen not by their own nature but by human labour and skillGrotius& others: form does more for essenceMatter not perished but altered to something elseGrotius’ Belli ac Pacis: form part of substance; changed not totally destroyedGrotius & Schorer: painter painting on another’s canvas.Schorer painting specificatio new species:form is the essence & gives identity. Böckelman: matter accedes to form and becomes the property of the specificans

IV. SCOTTISH INSTITUTIONAL WRITERS

Requires new speciesDef: Stair, Erskine, Bell: producing (making or forming) of a new species (subject) Bankton species or piece of workmanship out of another’s materials.’Stronger words: Stair producing; Bell: rude materials manufacturd different species. Some writers: workmanship; specificans artificer or, less grand, workman.Bell change being produced on the substance.

Repeat examples of new speciesStair: cup or other artifact (metal); wine, cloth, ship (timber)New examples: malt (bear), malt or meal (grain), flour (corn); cup, tankard (bullion), statue (wood)Not new species: dying of cloth, the malting of barley

Underlying theoriesstrong support: accessio / workmanship theory Bankton, Erskine, Bell: industrial accession.Bankton: workmanship, industry: matter becomes accessory to workmanshipErskine Principles final product not reducible; subject not existing: workmanship draws after it the property of the materials.’Bell: ‘industrial accession is produced by the art or industry of man.’Stair final product not reducible materials cedes to workmanship; even if they remain and cannot be reduced to their first nature.: not res nullius.Only Bell materials as a separate existence destroyed, the property is with the workman: implicit support: traditional occupatio theory.

V. NOVAE SPECIES:MODERN SCOTS & SOUTH AFRICAN LAW

Black v Bakers Glasgow (1867) wheat grounded into firsts-grade corn, seconds, thirds and branOliver v The Marr Typefounding Co (1901): quantity of metal type for printing: melted down and converted into new type

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International Banking Corporation v Ferguson, Shaw and Sons (1910): refined cottonseed oil mixed suet (hard fat of kidneys and loins of oxen or sheep): lard compound (rendered and clarified for use in cooking and pharmacy).M’Laren Sons & Co v Mann, Byars & Co (1935) cloth: workmen’s garments McDonald v Provan (of Scotland Street) Ltd (1960) front part of a stolen vehicle welded to the rear portion of another vehicle to produce a built-up carArmour v Thyssen Edelstahlwerke (1986) stainless steel strip coils: cut to shorter lengths: sinks and not recoverable original form: new species:commercial sense. Criticized on appeal: market forces cannot create a new species

South African case law Table from scrap metalBuilt-up motor cargarden shed: dismantled: built into larger shedtape holders new ‘dress’ consisting of a distinctive label, containers and an insert bearing the

trade mark and pictorial matter: nova species

blurring the line between specification and copyright.

VI. CONCLUSION

Nova species: Old species perished, new identity, new name, worth considerably more, new

commercial species?

Inanimate objects: no clear speciesNo longer Aristotelian hierarchyof existences based on matter and formPrecedent and common senseAccessio/labour: amount of workmanship and skillThen new shed and built-up BMW: new species

Kinloch Damph: smolt to salmon not nova speciesBut too far: natural processes of growth: never specificatioReason why not mentioned in RL: lacked manufacturing processSpecification of living things unlikely: living things grows and develops according to a

biological pattern that experience has made familiar.

But human intervention in natural growth plants and living creaturesSkill alter natural pattern: no longer same identityDisrupting sole basis end product is identified with the original materials workmanHowever substantially contribution nurturing salmon, not change natural pattern t

Examples

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Bonsai treesChrysalides: butterfliesArtificial breeding of eggs: chickens

LECTURE 6

Accessio&Specificatio

ACCESSIO OF MOVABLES AND SPECIFICATIO

Khan v Minister of Law and Order 1991 3 SA 439 (T)McDonald v Provan 1960 SLT 230 Lord President Clyde

Two decisions one South African and the other Scottish came to two different conclusions about accession of movables and specification on basically similar facts. My aim of this lecture is to discuss these two cases in the light of the general requirements for accession and specification and the try to come to a conclusion of how these problems can be solved in practice.

In Khan v Minister of Law and Order (1991), Khan purchased the wreck of a 1985 model BMW. He arranged with a panel beater to build the wreck into a 1988 model BMW. The panel beater cut the1985 wreck in front of windscreen pillars and joined rear portion of a 1988 model BMW to the front portion, spray-painted the final product the same colour (dolphin grey) as 1988 portion. The engine of the 1985 model was then modified to conform to a 1988 engine and the car was fitted with a gearbox supplied by the panel beater and various small parts and registered as a built-up motorcar. It appeared that the 1988 model BMW used in the reconstruction was a stolen vehicle. The police seized the built-up car as stolen property. Khan submitted that the seizure was unlawful and sued the Minister of Police for the return of the car. The court argued that this was a case of accession of an accessory to a principal thing. It applied the final identity test and decided that the parts of the 1988 model use in the final reconstruction gave the identity and form to the built-up vehicle. The 1988 portion was thus the principal thing to which the 1985 and other parts have acceded. It was thus the stolen vehicle that was lawfully seized and which need not be returned to Khan.

In McDonald v Provan Ltd a Mr Feldman had obtained two Ford vehicles one of which was stolen. He welded the front part of stolen Ford motor vehicle including half the chassis the engine and gears, to the rear portion of the other Ford. Mr Feldman then sold the composite (built-up) vehicle to a bona fide motor dealer (Provan Ltd) who resold it to a customer (McDonald). Three months after the sale the police removed the composite vehicle as a stolen vehicle. The purchaser claimed damages for breach of an implied warranty by the seller that he had the right to sell the vehicle under s 12 of Sale of Goods Act. The seller (McDonald) argued that the composite vehicle was a new thing and that it belonged to the manufacturer (Feldman) by virtue of the doctrine of specificatio. Therefore Feldman had the right to sell the composite vehicle to him and he in turn had the right to sell the vehicle to McDonald. The court rejected this argument on two grounds. First, the court held that the requirement of irreducibility to its former state had not been complied with. According to the judge the welded parts could easily be cut loose again and the final product was thus reducible to its former state. Secondly the court held that specificatio was an equitable doctrine requiring absolute bona fides. Therefore it could not be invoked where the maker used stolen property to construct the new thing. To make sure that the stolen property in the composite vehicle was not negligible, proof before answer was allowed.

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ACCESSION OF MOVABLES

Ownership is acquired by accession when a thing or portion of a thing is physically attached to, joined to or stuck to a thing belonging to another. Examples of accessio of movables are where a foot or arm is welded to a steel statue, where boards are glued to a ship, where paint is applied to a table, where a wheel is welded to a wagon, where a wooden and iron shed is constructed from materials obtained from a dismantled old shed and completely new materials bought from a timber company; where the front and rear parts of two motor wrecks are welded together. The thing incorporated is called the accessory and the thing into which it is incorporated is called the principal thing. According to the principle accessorium principale sequitur, the accessory follows the principal thing and is absorbed by the ownership of the principal thing. By accession, ownership of the accessory is lost and the owner of the principal thing becomes the owner of the new composite thing.

Accession takes place automatically regardless of the intention of good faith of the parties. Thus the consequences of specification cannot be regulated by a contract between the parties eg a reservation of ownership until payment and despite accession of the materials to a principal thing. Furthermore accession is not dependent on the good faith of the person causing the accession. Even if he acted mala fide in making the attachment ie he knew that the materials did not belong to him or even t if he knew that the materials were stolen, the owner of the principal thing (usually the attacher) would become the owner of the composite thing.

Some Institutional writers regard specification as a form of industrial accession. Accession has definite links with specification and in cases where two things are joined together like in the case of a built-up motorcar, it is difficult to determine whether specification or accession has taken place. The basic difference is the following. In the case of accession the existing ownership is extended by the addition of and extra part or thing with the greater part (principal) absorbing the lesser part (accessory). In the case of specification an existing thing is not merely extended or added to but an entirely new thing is created.

Several forms of accession of movables to movables have been recognized in Roman and Roman-Dutch law and the Institutional writers and special rules have been evolved around these forms. Several Roman law texts give illustrations of welding (ferruminatio), for example where a pedestal is welded to a statue or a handle to a jug. This is regarded as an inseparable form of attachment and the owner of the principal thing becomes owner of the new entity. The prejudiced party can, however, claim compensation for the value of the accessory. An attachment by way of soldering, on the other hand, is regarded as easily separable and no accessio takes place. Inweaving is also discussed, for example where the purple thread of A is inseparably woven into the cloth of B. In this case the cloth is regarded as the principal thing even though the purple thread may be more valuable. B the owner of the cloth thus becomes owner of the thread by accession. In appropriate circumstances A would, however, have a claim for unjust enrichment against B. Where A had written on parchment belonging to B, the Roman jurists regarded the parchment as the principal thing even though the writing was in gold. In Roman-Dutch law when paper became readily available it was decided that the writer only had to return a clean sheet of paper of similar quality to the owner of the paper but that he was entitled to keep the paper on which he had written. This view was followed in South African case law.Where A had painted something on the cloth or plate belonging to B some Roman jurists were of the opinion that the paint became part of the cloth or plate. Other jurists, however, held the view that the cloth or plate should follow the painting and thus belonged to the painter by accession. This was accepted in Roman-Dutch law subject to the condition that the final painting was much more valuable than the (unpainted) cloth of plate. The view of the famous

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Roman-Dutch writer Grotius that painting should be considered an example of specification was not widely accepted.

The following requirements must be fulfilled for acquisition of ownership by accession of movables

(a) the attachment must form an indissoluble union and must not be easily separable;(b) one must be able to identify a principal thing and an accessory; and(c) the attachment of the two movables must not amount to specification.

1. Indissoluble union

The first requirement for the accession of movables is that the union between the accessory and the principal thing must be indissoluble. A union is considered to be indissoluble if the materials cannot be separated without destruction or considerable damage the rationale being that an economic unity should not be destroyed and should pass as a composite thing to one owner. In Scottish case law this principle has been accepted in a case dealing where a firm of coachbuilders added mouldings and carvings belonging to another company to the body and wheels of a hearse they had constructed. It was held that separation of these parts would impair if not destroy the value of these fittings for the construction of a hearse. It is a question partly of technology, as in Roman law, where soldering was not regarded as a permanent union whereas welding was.

The fact that a thing is made functionally part of another, as where a part is built into a machine, need not necessarily deprive the owner of the part of his ownership even if the part is commonly regarded as an “accessory” of the machine. The reason for this is that the notion of accessories has a wider connotation in the law of contract and succession than in the law of property. Take the following example. If an engine, new tyres and a spare wheel (belonging to A) are added to a motor vehicle of B, the law of property would rule that only the engine (which was not easily separable) would accede to the car and would thus become the property of B. However, if the same car were sold, the purchaser would expect to get not only the engine, but also the tyres and the spare wheel as “accessories” of the car. Neither the tyres nor the wheel have acceded in the law of property sense (no indissoluble union; the tyres and spare wheel can be separated without material damage to themselves or the principal)), but there is little doubt that the purchaser will be entitled to both. The reason for this lies in the law of contract and not in the law of property. In buying a car, C is entitled to the car itself and everything that have acceded to it. But, depending on the terms, express or implied, of his contract, he may also have a wider entitlement, and there seems little doubt that in the sale of a car, the tyres and spare wheel are impliedly included. Therefore it can quite logically be held that a part is an accessory but that there has been no accession in the sense of acquisition of ownership. In a South African case a man bought a truck and fitted it with tyres bought from another garage. When the cheques given in payment for both the truck and the tyres were dishonoured, the seller of the truck reclaimed the truck and was placed in possession of the truck. The sellers of the tyres then claimed his tyres. The court decided that since there was only a functional or economic union between the tyres and the truck and no physical union, the tyres had not acceded to the truck. In a Scottish case where axles and transmissions were sold and then joined to earthmoving equipment, the court rejected the claim of the trustee in insolvency of the purchaser that their was an indissoluble union because the removal of the axles and the transmissions would impair the efficiency and reduce the market value of the equipment The rule just identified for the law of sale, applies equally to donation, security, and indeed to all other rights, which may be created in respect of property.

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2. Identification of principal and accessory.

In contrast to accession by building where land is invariably considered the principal thing, the problem of identifying the principal and the accessory assumes great importance in the accession of movables. Sometimes the answer is obvious as in the example of an arm welded on to a statue but the matter is not always so clear.

Various tests have been employed in order to determine which of the two individual things, which have been joined together, is the principal thing, namely:(a) the thing with the highest value;(b) the thing with the greatest bulk;(c) the thing without which the accessory cannot exist;(d) the thing which belongs to the person on whose account the things are joined; (e) the thing which is adorned by the accessory; and(f) the thing which gives the final entity its identity, form, name or function.

The Scottish Institutional writer Bell uses a combination of these factors and arranged them in a specific order. The rules are: first if one of the substances used in the union cannot exist without the other, like the handle joined to a cup, that substance would be the accessory; second, where both the substances can exist separately, the principal is the substance which the other adorn or complete like a gem in a ring; third, in the absence of these indications, bulk prevails and then value.

It is submitted that the last-mentioned test is preferable. A principal thing is therefore the substance or element in the composite thing, which gives it its character, form and function. This is also the basis for the predominant role test devised by the Scottish Institutional writers. Thus valuable materials woven into existing cloth and a precious gem added to a ring, would follow the cloth or ring, though they may be much more precious than the cloth or ring, whereas a gem set in gold, would carry the gold setting. Conceptually the cloth or the ring continues to be the dominating factor. The test of the dominating role also supports the view that a canvas or board would accede to a painting on it and paper the writing on it. This was also the test employed in the South African case of the built-up car. The judge applied the character, form and function test and decided that the built-up vehicle can be said to be an 1988 model, to which a 1985 engine modified to conform to a 1988 engine was added and to which small portions of a 1985 body were added. The 1988 element in the final product thus gave the built-up car its character, form and function.

3. Attachment must not amount to specification

We have already seen that accession involves the extension of an existing thing, whereas specification signifies the creation of a new thing. The physical union of two things must therefore not result in the creation of a new thing for accession to apply.

SPECIFICATION

The word specificatio is a medieval contraction of the words speciem facere meaning to make or form a (new) species. Specification therefore occurs when a person creates a nova species (a new product) out of materials, which belong wholly or partly to another. The original material has been worked into a final product with an entirely different identity. Examples of specificatio are where olive oil is produced from olives, wine from grapes, flour (or bread) from corn and margarine from lard; where clothes are fashioned from wool, where a ship is made out of trees that have been cut down or sawn, where a statue is sculptured from marble, where a patchwork blanket or a hippy coat is fashioned out of small pieces of cloth or

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where a car is built up from components found on a motor scrap yard. The Romans did not consider the threshing of corn and the dyeing of wool as specificatio.

The question as to who becomes the owner of the new species has given rise to the famous controversy in Roman law between the Sabinian and the Proculian schools of jurists. The Sabinians followed the Stoics and regarded the material as the most important element and thus awarded the final product to the owner of the material. The Proculians, by contrast, followed Aristotle and regarded the skill and labour contributed by the artificer as the most important element and thus awarded the final product to the manufacturer or producer. Justinian eventually solved this controversy by following a media sententia or middle course: If the final product was not reducible to its former state like wine to grapes, flour to corn or a marble statue to its original marble, the maker or producer became the owner of the final product; if, however, the final product could be produced to its original state, like a statue of gold and silver which could be melted to bullion again, the owner of the materials remain the owner of the final product. In Roman law it did not matter whether the producer acted bona fide or male fide. If a new species was produced and the final product was not reducible to its former state, the producer became the owner of the final product even though he knowingly used material belonging to someone else. Bona of mala fides, however, affected the remedies that could be instituted by the person who suffered damages on account of the specification. If the producer was bona fide, the owner of the lost material could only claim on the ground of unjustified enrichment for the loss of his or her materials. If the producer was mala fide, the owner of the materials had a delictual action against the producer for the patrimonial loss he suffered as well as an action on theft in appropriate circumstances.

Justification for specification

The following theories have been advanced as justification for awarding a new product to the producer thereof:that the maker acquires the new object (an unowned thing) by occupation;that the former owner of the materials are no longer able to vindicate his or her materials because the materials are no longer identifiable being subsumed in the new species;that the materials acceded to the workmanship; and that the maker should be rewarded for his labour and skill in producing the new entity. The impossibility to vindicate and the producer being rewarded for his skill and artifice, find the most support in modern South African and Scots law. The rationale for specification is of particular importance for the question whether a maker in bad faith should acquire by specification.

Specification vs accession

Both specification and accession are original forms of acquisition of ownership and both could involve the production of a single entity from two or more constituent elements. In the case of painting or drawing on another’s canvas or paper they are in virtual competition with each other. In such a case one has to decide whether the final product consists in the mere addition of an accessory to the principal thing (the paint to the canvas) or whether a completely new entity has been created. In the case where the existence of the new entity is precluded as in the case where a house is built on the land of another, accession takes precedence because the accession of the house to the land precludes the existence of an independent new thing. The same is true where a frescoe is painted on the wall of a house.

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Requirements for specificationThe requirements for the acquisition of ownership by specification in Scots and South

African law are the following:(1) a new species must have been produced;(2) the new product must not be capable of being reduced to its original form;(3) the maker must probably have acted bona fide;(4) the new product must have been produced without the consent of or a prior

arrangement with the owner of the materials; and (5) the producer must have produced the new product himself or it must have been

produced in his name.

1. Nova species (new entity)

The first requirement for specificatio is that a nova species, a new entity must have been created. There are no hard and fast rules as to what is considered a new species. The requirement is explained by illustration rather than by the formulation of a general test. The new thing must apparently assume an identity clearly distinct from the materials of which it is constituted: Bell requires that the substance of the materials must have been changed . Factors which point to a nova species are where the new product is called by a new name (for instance planks cut and nailed together to form a garden shed vs planks stacked on a heap), where the old form of the material used has been completely lost, where the new product is characterised by its new form rather than by the material from which it derives, where the new form contributes substantially more to the increased value of the final product than the old material or where the final product falls into a new commercial category. Some of the Institutional writers already regarded painting and writing as examples of specification rather than of accession. It is submitted that several new artistic forms, like printing and decoration of paper and engraving should be considered forms of specification. The same should apply to new pharmaceutical products and a new species of indoor plant or (for example a japans bonsai tree). Another example is where a motor vehicle is wholly built up from parts collected from a scrap yard or where a new (Bohemian) coat is fashioned out if the cloth of several old coats. No nova species is, however, produced if a motor vehicle is merely fitted with new spare parts or where a damaged painting is restored. Likewise it is accepted that the malting of barley or the dying of cloth does not change the species of the old material.

The South African courts accepted that a new species were formed where iron legs were welded onto a steel plate to form a table. However, it refused to accept that a new species was produced where a small shed was dismantled and built into a much larger shed from new wood and iron bought from a timber company. This decision was criticised in the case concerning the built-up BMW but that court refused to regard the modification of the engine of the 1985 model and the attachment of the front part of the 1985 model to the rear part of a 1988 model BMW as specification. In Scottish case law it is accepted that the essence of specification is that the original article disappears and a new species is created. Thus it was accepted that the production of margarine out of oil produced a new species. In another case a cutter stole cloth from a shop and sold it to a purchaser who worked it into workmen’s garments and sold it to customers. When the owners of the cloth tried to vindicate it from the purchaser, the court refused the claim because the cloth had been worked into a new species and the separate existence of the original cloth has been destroyed. In yet another case, the plaintiff sold stainless steel coil strips on credit but with the reservation of title to a purchaser who cut them into shapes for the eventual construction of sinks. When the purchaser became insolvent without payment of the full price, the plaintiff claimed the stainless steel coils back. The court of first instance decided that a new species was created since it was recognised in

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the steel trade that the steel coils were in fact transformed into a different form and in a manufacturing sense into a new species. This view that transformation into a different commercial category amounted to the production of a new species, was, however, rejected on appeal by the Judge who held that he could not accept that market forces could create a new species for purposes of specification. In the most recent case on specification, the plaintiffs sold one and a quarter million smolts (the small creatures which grow into salmon) to the owner of a salmon farm on credit with reservation of ownership. When the owner of the farm became insolvent, the plaintiff wanted his smolt back. The trustee in insolvency argued that since the smolt had been placed into sea water and husbanded and fed to develop into salmon 30 times their original size. The court, however, found that specification was concerned with the process of manufacture or creation and not with the growth of a living creature. It reasoned that the tending to the growth of living things were widely practised in Roman times and in the time of the Institutional writers but were never regarded as amounting to specification.

2. Non-reducibility

Where a new species has been created, it must not be capable of being reduced to its

former state. The Institutional writers seem to require that the original materials must be capable of being restored intact. Thus if a new species can again be reduced to the mass or matter of which it was made, the law considers the former subject as still existing and the legal fiction that it becomes the property of the producer does not apply. In Roman law we find the example of a statue made of silver or metal that can be melted again to its original substance. The Scottish Institutional writers mention the example of a plate made of bullion, which still exists although it has taken on a new form.

In a Scottish case decided in 1910 it was held that the component parts of margarine manufactures from oil and other components could not after the creation be again resolved into their original elements’. In the case where the two Fords were joined to produce a built-up car, the court argued that the parts that had been welded together can be cut apart again and were thus reducible to their former state. In the case where the cloth sold by the cutter was worked into workmen’s garments, the purchaser tried to argued that the garments could be cut up again and like the pieces of a puzzle restored to the original cloth. The court rejected this argument and held that the garments were irreducible to their former state and that specification has therefore taken place.

The requirement of non-reducibility is dependent on contemporary technological expertise and knowledge. The requirement implies literally that whenever an artistic creation, like a silver goblet can physically be reduced to its former state, for example by melting it down, the specificator is not entitled to his handiwork. Modern European Codes reject this requirement as an unsuitable test based on antiquated Roman views on physics and award the final product to the specificator whenever the relative value of the specificator’s creativity far exceeds the value of the materials used.

3. Bona fides

Roman law did not require bona fides on the part of the producer for him to become the owner of the new creation. However both the Roman-Dutch writers and the Scottish Institutional writers differ amongst each other as to whether bona fides should be a

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requirement for the acquisition of ownership by specification. South African case law seems to lean towards requiring bona fides and the Scottish case on the built-up Ford followed the Institutional writer Bell and expressly requires complete bona fides. On the facts he found that the manufacturer did not construct the new vehicle bona fide since he stole a substantial portion of the materials from the rightful owner and concluded: ‘This in itself excludes the doctrine of specificatio and introduces the other well-established principle of Scots law whereby the owner of stolen property is entitled to follow and recover his property into whoever’s hands it may have gone’. In this regard one could ask whether the original object was sufficiently identifiable to support a rei vindicatio. The requirement of bona fides could cause uncertainty in the commercial world where new creations are freely transferred. If it is accepted that the true rationale for acquisition of ownership by specificatio is that the manufacturer of a new species is rewarded for his skill and creativity, the better view seems to be that it is immaterial whether he acted bona or mala fide. Inasmuch as bona fides is not required for accession there is no reason why it should be a requirement for acquisition of ownership by specificatio. Whether an owner is deprived of his interest through accession, or because a new thing has come into being, the question of rights in the new entity should be distinct from the issue of possible compensation. While the state of mind of the annexor or maker should be relevant to the issue of compensation, it is open to question whether it should be a consideration in respect of proprietary consequences.

4. New product produced without consent or prior arrangement

The new product must be produced without the consent or prior arrangement with the owner of the materials. If the product is manufactured with the consent of the owner, there would usually be some kind of arrangement between them as to the ownership of the new thing for example that the thing would be held in co-ownership. Thus where a company hired a coachbuilder to construct a hearse from his own materials (the body and wheels) and materials supplied by them (the mountings and carvings), the Scottish court decided that the rules of specification were not applicable and a decision was reached on equitable grounds to award the almost completed hearse to the contracting parties in co-ownership.

5. Own production or production on his or her behalf

Only the person who produced the new product himself or herself or the person on whose behalf the new product is created can become the owner of the new creation by specification. Thus in the South African case the owner of the 1985 wreck requested the panel beater to construct the 1988 model BMW for him partly from materials obtained from the 1988 wreck. If specification were allowed, the owner of the 1985 wreck and not the panel beater would have become the owner of the final creation by specification. If one analyses the transaction what really happened is that the owner of the wreck had contracted the services of the panel beater in a contract of service (locatio conductio operis). Should one not conclude in such a case that the panelbeater who had no arrangement with the owner of the 1988 model, would become the owner by specification and that the owner of the 1985 wreck would only become the owner on delivery of the finished product to him.

Compensation

In view of the fact that the maker becomes owner of the new product, the owner of the materials can claim compensation for the loss of his materials presumably on the ground of unjustified enrichment. (The institutional writer Bell allows the owner of the materials a

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claim for the equivalent materials or their price if the thing cannot be restored to its constituent materials). If the object can be restored the owner of the materials become the owner of the new creation and the workman is allowed a claim for indemnity in quantum lucratus (to the extent of his enrichment) against the owner of the new thing unless the maker acted animo donandi. A mala fide specificator can in addition be sued delictually for damage (pure economic loss?) caused and in appropriate circumstances for theft. In the Scottish case where oil had been used in good faith to make margarine, it was held that while the margarine belonged to the maker, the value of the oil must be paid to the former owner.

Conclusion

Possible solution to the problem outlined in the beginning. Is this a case of accessio or specificatio? What is the cardinal test? Which requirements of accession or specification need to be adapted?

LECTURE 7

NUISANCE IN NEIGHBOUR LAW

Definition

The word nuisance is derived from the Latin word nocumentum meaning hurt, injury or harm. In legal literature it is usually used in the strict sense of an activity causing discomfort or inconvenience usually by smells, noises or indecent displays. The basic characteristic of nuisance is thus not an activity causing patrimonial loss or an injury to the personality but an activity interfering with a person’s (usually a neighbour’s) quality of life. The remedy for such interference is the proprietary remedy of an interdict prohibiting interference with a neighbour’s rights. This remedy would only be granted if the defendant could prove that the nuisance was plus quam tolerabile that is more than he should be expected to tolerate. This lecture would like to explore which factors are to be taken into account in determining whether a particular nuisance is plus quam tolerabile thus entitling the plaintiff to an interdict.

Illustrations

Let us start we two sets of facts, both taken from South African law. The first is from a South African case called Gien v Gien decided in the Regional Supreme Court of the Transvaal (court of second instance with appeal to the Supreme Court of Appeal) in 1979. This case concerns two brothers Gien 1 and Gien 2 farming on neighbouring farms in a cattle-breeding region of South Africa. At first the brothers were very fond of each other and farmed the farms jointly in partnership. But after their parents died there was a dispute about the inheritance, and the brothers became like JR Ewing and Cliff Barnes in the American television series Dallas and acted spitefully towards each other and running to the police with all sorts of minor complaints. The issue that gave rise to the process in court was when Gien 1 erected a scaring apparatus on his farm purportedly to protect his small vegetable garden 100 meters in diameter from baboons, birds and other vermin. This apparatus is called a purivox (clear voice) and operates by means of water dripping down on a chemical substance with the

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effect of producing a loud explosive noise: BOOM! BOOM! BOOM! As soon as Gien 2 heard the noise, he immediately lodged a complaint with the police. The police investigated the matter ands decided that the only offence that was committed by Gien 2 was desecration of the Sabbath since the noise also continued on Sundays. When Gien 2 received this news, he turned the purivox machine faster so that it made a noise every 6 minutes instead of every 30 to 40 minutes. When the state refused to prosecute, Gien 2 lodged an action in court. He complained that he and his family could no longer sleep at night, that his Pedigree Brahman cattle got nervous when dipped and that his horse was so restless that it was impossible to saddle the animal. He requested an interdict for the noise to be stopped immediately. The question is: Was the noise from the purivox machine plus quam tolerabile, more than Gien 2 should be expected to tolerate?

Take another example. Mrs Belle bought a house in a small South African town opposite a church. She decided to turn the house into a guesthouse offering bed and breakfast to the numerous visitors to the historic town. The trouble in this case was the church bells, which chimed every quarter of the hour and played a full ditty at the hour. This has been going on for more than 100 years and was considered to be one of the almost sacred traditions of the town. Mrs Belle, however, complained that her guests were disturbed by the noise of the chiming bells at night and that she has lost business as a result of this nuisance. Is the noise plus quam tolerabile? What is the neighbourly solution for this problem?

Test

In the instances of nuisance mentioned above the conflicting interests of neighbours are at stake. This conflict can be traced back to two opposing maxims in the field of neighbour law, namely “cuius est solum, eius est usque ad caelum et ad inferos” and the age-old maxim “sic utere tuo ut alienum non laedas”. The first maxim is called the heaven to hell rule in America. In terms of this maxim a landowner is deemed to be not only owner of the surface of the land but also of the space above the land and anything attached to or beneath the surface of the land. This implies that an owner has unrestricted power to use and enjoy his land as he pleases. The second maxim, however, cautions an owner to exercise his powers of ownership in such a way that his neighbour is not prejudiced. An owner’s seemingly unrestricted powers of ownership are thus in fact restricted by the fact that his neighbours have similar powers of use and enjoyment of their own land. Neighbours live on the principle of live and let live and some writers argue that neighbours have entered into a social contract that some minor discomfort must be endured. These conflicting interests of neighbouring landowners are balanced on the basis of an objective criterion of reasonableness. The defendant has to prove that his activities were proper, becoming, or socially adequate in light of the prevailing views of the society; while the plaintiff has to show that the activity causing the nuisance was more than he could be expected to tolerate. This is an objective standard judged against the conduct of a reasonable man living and working in the same locality. This is not the subjective test of the reasonable man since the lawfulness of the landowner’s activities and not his culpa or fault is at stake. The inquiry is whether, in view of the particular circumstances, a landowner’s exercise of a particular power of ownership is proper, becoming and socially adequate in view of the prevailing view of the community (secundum bonos mores).

RELEVANT FACTORS DETERMINING OBJECTIVE UNREASONABLENESS

In order to ascertain whether a landowner’s conduct is objectively reasonable under the circumstances various factors are taken into account, namely:

(a) the locality or neighbourhood in which the alleged nuisance takes place;

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(b) the proportionality of benefit and harm; (c) the sensitivity of the plaintiff or his or her property to harm;(d) the motive with which the landowner carries out the activity;(e) the social utility of the activity or its utility to the general public;(f) the inquiry whether the same goal could have been achieved by the landowner by

employing measures less harmful to his neighbour;

(g) the practicability of preventing the alleged nuisance; and(h) the inquiry whether the plaintiff has “come to the nuisance”.

After a balancing of the abovementioned factors which are relevant to the activity in question, the court has to decide on a balance of probabilities whether the landowner’s conduct was reasonable in the circumstances or whether it was unreasonable in the sense that it was plus quam tolerabile, more than his or her neighbour should be expected to tolerate.

1. Locality 

What is an actionable nuisance in one place will not necessarily be a nuisance in another place. Certain areas or places are devoted to certain uses or activities, for example agriculture, industry, commerce or residential habitation. The character so impressed upon the locality determines the levels of tolerance of interferences with human comfort. Consequently, city residents cannot expect the peace and quiet of the countryside and persons dwelling in an industrial or commercial area cannot count on the tranquillity of a choice residential area. Conversely, urban residents are not expected to endure the sounds, smells and vapours considered tolerable in agricultural or industrial areas. The type of nuisance acceptable according to prevailing views of the community may even vary according to the type of agricultural or industrial locality concerned. Thus in a cattle farming area like in the Gien case, the lowing of cattle would not be considered unacceptable whereas the noise emanating from an animal scaring device would be unacceptable in such a community. Conversely, the noise emanating from a bird-scaring device would be considered tolerable in a wine growing area. No locality, however, has to put up with an additional nuisance. Thus an area in the centre of a busy city need not tolerate extensive building activities.In a South African case the council of advocates succeeded in interdicting buildings operations carried out next to their offices to between 8.00 pm and 6.00 am and during weekends Important in this respect is that the tempus inspiciendum of the locality is the time of the institution of the nuisance and not the time when the activity causing the nuisance was started.

2. Proportionality of benefit and harm

Following locality, the benefit and utility of the activity to the landowner must be weighed against the harm suffered by the plaintiff. An interference with a neighbour’s comfort will not be considered unreasonable if caused by some activity from which a landowner derives substantial benefit. However, an activity from which a landowner derives only marginal benefit will be considered unreasonable if the harm suffered is substantial.

To ascertain the gravity of the harm or interference factors such as the measure or extent of the interference, the duration of the interference and the time when the interference took place are considered. Only harm, which is “material or substantial”, is taken into account and not harm, which is slight or trivial. The materiality test if objective; namely harm that a

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normal person residing in the locality would consider an excessive or intolerable interference with the comfort of human existence and therefore an interference which the plaintiff should not be expected to tolerate. Thus in Gien v Gien[5] it was decided that the noise which emanated from the purivox machine was in excess of the standards set by the bureau of standards. Only an interference that continues for a considerable time or at least with some regularity is considered to be capable of inflicting material harm. Interferences that are merely momentary or temporary are as a general rule not considered unreasonable. Finally, the particular time when an interference occurs is a factor in assessing the gravity of the harm caused to the plaintiff. A high premium is placed on slumber, repose and sweet dreams and thus a nuisance which is considered reasonable during the day may be considered unreasonable if it occurs at night.

The benefit and utility of the activity to the landowner must be weighed against the harm suffered by the plaintiff. An interference with a neighbour’s ordinary comfort or convenience may not be considered unreasonable if occasioned by some activity which is so beneficial to the landowner that it outweighs the harm suffered. Consequently, where bulldozers were employed for 6 months in erecting a dam on land with the result that the noise of the bulldozers interfered with the breeding of bull-mastiffs on the neighbouring farm, a Canadian court decided that the building of the dam was so beneficial to the landowner that even if it could be proved that one of the aims of the landowner was to interfere with his neighbour’s breeding programme, his activity would still be considered reasonable. On the other hand an activity that is only marginally beneficial to a landowner will be considered unreasonable if abnormal harm is caused to a neighbour. Thus in Gien v Gien it was decided that Gien 1 derived only marginal benefit from his small vegetable garden and that such benefit was disproportionate to the inconvenience caused to Gien 2 in sleepless nights and restless animals. In the case of Mrs Belle the benefit of preserving an old tradition intact had to be weighed up against the discomfort caused to Mrs Belle and her guests and her possible loss of income as a result of the chiming of the bells.

3. Sensitivity of plaintiff or his property to harm  

The sensitivities of the plaintiff play an important role in determining the gravity of the harm inflicted on him. The test employed is not that of the perverse or finicking or over-sensitive person, but that of the normal man of sound and liberal taste and habits. Consequently, plaintiffs who are abnormally or extraordinarily sensitive will not be entitled to relief even though they may personally suffer substantial discomfort and inconvenience. Thus when a minister of the church complained about the noise emanating from a power station, the court found that he was he was oversensitive because the noise neither distracted his congregation nor interrupted his sermon. The same was decided a in a case where the chiming of church bell caused a man to suffer epileptic fits due to him suffering from sunstroke previously and where a wife who had moved to an industrial part of town with her husband complained that her attacks of migraine were aggravated by the noise from a cooperage (manufacturing wine barrels) and a blacksmith. This principle applies apparently not only in relation to the personal, physical or moral sensitivity of an occupier of land, but also where the activities conducted on the neighbouring land are delicate or ultra-sensitive. Thus where sensitive salmon hatchery was conducted in a river on a farm and the salmon eggs were destroyed by moderate forestry activities conducted higher up in the stream which slightly muddied the water, a Scottish court refused an interdict on the ground that the activity was ultra-sensitive. Again where delicate brown paper stored in a top flat was destroyed by moderate heat coming from the floor below, an English court decided that such delicate trade does not warrant an interdict. The rationale for these decisions is that an owner’s use of the

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property could not be made dependent on the effect of such use on a person with a peculiar personality or suffering from an uncommon disease or on an sensitive activity conducted on neighbouring land. If this were done all industrial activity would be paralysed.

4. Motive  

The motive behind a certain activity may determine its objective reasonableness. If the activity is motivated solely by spite, ill will or a will on the part of a landowner to harm his neighbour (animo vicino nocendi, aemulatio vicini) this fact may turn an otherwise lawful activity into an unreasonable activity which could not be expected to be tolerated. A classic example is where a landowner bores a water hole with the sole intention of cutting off the water supply from his neighbour’s boreholes. Other examples are where the defendant annoyed by music lessons in the neighbouring flat, banged on the common wall beat on trays, whistled and shrieked; where deciduous trees are planted on the borderline with the sole intention of damaging a neighbour’s malt floors producing beer and where the defendant allowed his son to fire gun shots in the vicinity of a neighbouring farm with the sole intention of interfering with the breeding of silver foxes on that farm.

5. Social utility  The social utility of the activity complained about or its utility to the general public is an

important factor in assessing the reasonableness of the landowner’s conduct. Implicit in this factor is that one type of land use activity may have greater social utility than the social utility representing the ordinary comfort of human existence. Thus the burning of weeds, the emptying of a cesspool and building on land are accepted as nuisances which neighbours should tolerate reciprocally. In this regard agricultural land is apparently accorded a higher social utility by the courts than activities, which only indirectly advance public welfare through trade, industry and commerce. Thus we have seen the the social utility involved in building a dam on agricultural land was accorded a high social utility. On the other hand in a Scottish case where the production in s whiskey distillery was destroyed by the fumes emanating from a neighbouring aluminium factory the court granted an interdict against the aluminium factory even though the factory produced 72% of the aluminium in Great Britain, even though replacement of supplies of aluminium could be obtained only at much higher cost and even though the closing down of the factory would cause unemployment in the region.

6. Less harmful measures  The fact that the same goal could have been achieved by the landowner if measures less

harmful to the plaintiff had been employed is an important factor in determining the reasonableness of a landowner’s behaviour: the greater the possibility of preventing harm by precautionary measures, the more likely that his conduct will be assessed unreasonable. Thus an interference with the comfort and convenience of a neighbour which could have been prevented or at least diminished by the defendant carrying on the activity at a different time, in a different manner, at a different place, or with greater expertise is more likely to be considered unreasonable than one which could not have been prevented by such measures. Since the same result of scaring animals away from the vegetable garden could have been achieved if the noise of the scaring apparatus had been toned down or could only be heard

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during the day and not at night, this factor contributed materially to the court’s decision in Gien v Gien that the conduct of the landowner was unreasonable.

7. Practicability of preventing harm  If a landowner inherits a certain state of affairs which is injurious to his neighbour, the

practicability of preventing harm to his neighbour is taken into account in assessing the reasonableness of his continuing the state of affairs. The landowner is only expected to take steps “reasonably practicable” in the circumstances. Harm which could not have been avoided even if reasonably practicable measures had been taken is not considered to have been caused unreasonably. Thus in Regal v African Superslate (Pty) Ltd it was held that the cost of erecting a weir in the stream to prevent slate-waste deposited on the river bank by the defendant’s predecessor in title from being washed down by the river during a rain storm and causing damage to neighbouring land made it reasonably impractical for the landowner to prevent harm to his neighbour. Consequently, the landowner’s omission to take such measures was not considered unreasonable.

8. Coming to nuisance  Another factor which has sometimes been taken into account in assessing the

reasonableness of a landowner’s activity is whether the activity complained about was carried on prior to the plaintiff’s “coming to the nuisance” Thus this factor was taken into account in the South African case where the wife suffering from migraine moved with her husband to an industrial area and then complained that her migraine was aggravated. Another illustration of such a situation is where the boundaries of a town are extended by new township developments up to the boundary of an existing hatchery or pig farm. However, the weight of authority seems to require that the plaintiffs coming to the nuisance must fall into the category of acquiescence or volenti non fit iniuria before it could act as a complete defence against a claim on nuisance.

9. Avoidance or mitigation of harm by the plaintiff

The plaintiff is obliged to take all reasonable steps within his own premises to minimise the inconvenience of which he complains. Thus it was decided that the smells from a neighbouring fish shop could have been avoided by a hotelkeeper opening his windows at certain times of the day so as to neutralise the smells by a modest admission of fresh air. Not more than reasonable efforts are, however, required from the plaintiff. He is not required to keep his windows shut all day or to install double-glazed windows or to stay indoors for most of the day in order to avoid noises or smells or activities injurious to his senses. In the plaintiff is not required to mitigate the harm, the fact that measures undertaken by him would be a considerably cheaper method of abating the nuisance than remedial measures by the defendant, will not effect the defendant’s liability.

Remedies  

A landowner who has been harmed or who is threatened with harm by a state of affairs creating a nuisance has two main remedies at his disposal, namely an interdict and an action for damages. In order to obtain an interim interdict the applicant must establish a prima facie right, apprehended harm, which may be irreparable, balance of convenience and the absence of a satisfactory alternative remedy. For a final interdict the plaintiff must establish a clear right, injury committed or apprehended and the absence of a satisfactory alternative remedy.

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Where the nuisance has caused actual patrimonial loss an action for damages will lie. As mentioned earlier, it is unclear whether such an action is available under the actio legis Aquiliae or whether it is based on some form of strict liability. Where the interference with comfort or convenience involves animus iniuriandi or otherwise violates interests of personality, sentimental damages are recoverable, in appropriate cases under the actio iniuriarum.

LECTURE 8

SERVITUDES (EASEMENTS)

1 General

The name servitude is derived from the Latin word servire, which means ‘to serve’ or ‘to be of service’. A servitude is thus a real or property right over one piece of land called the servient land, which serves another piece of land called the dominant land. A servitude is real right which can be enforced against an indefinite number of persons. Therefore once created, it burdens the servient land and benefits the dominant land, irrespective of who the owner is. This means that the servitude will bind all the successors in title of the servient land and will benefit all the successors in title of the dominant land.

The existence of servitudes is justified by legal and economic arguments. The legal argument is that the servitude limits the freedom of the owner of the servient land to do on his land as he pleases for the benefit of the neighbouring property. This substraction from his ownership means that the servient owner cannot do certain things such as to build his house higher to block out the neighbour’s light, or must permit the neighbour to enter his land for certain purposes for example to use a road to gain access to a public road. The economic argument is servitudes allow plots of land to be exploited to their fullest economic potential. The dominant land can be used more efficiently and more profitably if the servient land is burdened with a servitude, which supplies the dominant with, an access to the public road of reduce the shortage of water on the dominant land. The assumption is that the value of the benefit would outweigh the cost of the burden. An obvious example is where the dominant land is landlocked and the shortest way to the public road is across the neighbour’s land.

The law of servitudes is one part of the English law of property, which has been influenced by Roman law. The word ‘servitude’ as well as the designations ‘dominant’ and ‘servient’ land are Roman terms.

Servitudes are divided into three categories namely easements; profit a prendre and restrictive conditions. The first two categories have been recognized from time immemorial in response originally to the needs of farming. Restrictive conditions originated in 1848 to regulate urban development.

2. Easements

2.1 Kinds of easements

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Easements comprise two classes of rights. The first are rights for the owner of the dominant land to do something on the servient land, other than taking something from it.22 The second are a strictly limited number of rights to stop the servient owner from doing certain specific acts on his own land. Therefore from the point of view of the owner of the dominant land, certain easements are positive where the owner is entitled to do something on the servient land while others are negative where the owner can stop the owner of the servient land from doing something. Neither category entitles the dominant owner to require the servient owner to do something.

Positive easements are unlimited in number but constrained by the requirement that they must benefit the dominant land and not only please the owner. They include, for instance rights of way, the right to lay gas mains or electric cables together with the ancillary right to enter the land in order to inspect and maintain them and the right to park a car on neighbouring land. They do not include freedom from competition: thus the owner of the dominant land may be given the right to trade on the servient land, but not the exclusive right to do business on the land. Such a right cannot be construed as an easement giving the purported dominant owner the right to stop competitors from trading on the servient land. This does not exclude a right in contract against the owner of the servient land who granted the right in the first place.

Negative easements, which give the owner of the dominant land the right to restrain activity on the servient land and thus to prevent the servient owner from doing things on his own land, seem to be strictly limited in number and comprise only the following four rights:

i) the right to light, that is to say the right to stop any activity on the servient land that will obstruct the light flowing to a window unreasonably;23

ii) a similar right to prevent the obstruction of a free flow of air through a defined opening, such as a ventilator shaft;

iii) the right of support to buildings on the dominant land, that is the right to stop any use of the servient land or building on the land, which will interfere with the support they provide to adjoining buildings on the dominant land;

iv) the right to stop any interference with the continued flow of water through an artificial water-course.

Note that although all these easements are in a sense negative, they originated in some positive act by the owner of the dominant land, namely the construction of a window or a ventilator, the erection of a building, or the creation of an aqueduct.

2.2 Requirements for positive easements

22 Taking something from the land, would be construed as a profit a prendre.23 The amount of light that can be claimed depends on the type of room affected. A bedroom

does not require much light and where the claimant has used the bedroom for 20 years to repair watches, the court decided that the claimant could still only claim the amount of light appropriate to a bedroom. The Court of Appeal has decided that a greenhouse used for normal purposes requires an extraordinary amount of light and also the benefits of such light, including the rays of the sun. Although there is no right to an unlimited amount of light, another court decided that to determine the amount of light claimable, regard must be had to the nature of the locality and to the higher standard of living enjoyed in modern times. Nevertheless, there is no claim to a view or prospect from the window as recognized in many civilian legal systems

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In order to avoid the proliferation of positive easements, they must comply with strict requirements.

i) There must be a dominant and a servient land. A valid positive easement cannot exist en gross that is without reference to the holding of land. A right of way in favour of the public can be constituted as a public right of way but not as an easement.

ii) The easement must confer some benefit on the dominant land to increase its value or to make it a better or more convenient property. For this reason the servient land need not adjoin the dominant land but must be sufficient close for it to benefit the dominant land. Furthermore the condition on the servient land must be such that it could permanently benefit the dominant land. If the easement confers the right to abstract water, the source of the water on the servient land must be such that it could provide a permanent supply of water to the dominant land. Finally, the easement must benefit the land and not the personal enjoyment of its owner. Thus an easement to stroll on neighboring land or to swim in a pond situated on neigbouring land cannot be registered as an easement. Recently the Court of Appeal has decided that the right to use a neighbouring garden for recreation would confer sufficient convenience on a number of dominant tenements situated in a densely populated part of a city.

iii) An easement is only a burden of land and can never be so extensive as to leave the owner no right of enjoyment in the land. Thus a right of parking allowing the holder to claim possession of the entire land, cannot be constituted as an easement.

iii) An easement is a right to use or restrict the use made by the owner of the servient land. It can never impose a positive obligation on the owner of the servient land to do any work or spending any money on the servient land. Thus servitude of way cannot impose a duty on the owner of the servient land to repair the road used by the holder of the easement. Similarly, the owner of an entertainment park cannot impose an easement on neighbouring land to supply music for the park over the weekend.

2.3 Creation of easements

Easements are established either by an agreement between the parties followed by the recording of the easement in the Land Register or by prescription.

2.3.1 Easement by grant and registration

The first method requires a grant of the easement by the servient owner to the dominant owner. The grant must be contained in a deed or a contract signed by both parties and registered in the Land Register against the servient land. If an owner subdivides his land and sells off one of the subdivisions, he may reserve an easement over the land, which he conveys for the benefit of the land, which he retains. This reservation is contained in the deed of conveyance necessary for the transfer of the subdivision to the purchaser.

When an owner subdivides his land and conveys one of the subdivisions, the following easements are implied:

i) Easements of necessity, in the form of a right of access to the public road where the subdivided plot of land is completely landlocked with no exit to the public road;

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ii) Intended easements that would be necessary to carry out the common intentions of the parties;

iii) Ancillary easements that would be necessary for the efficient exercise of the easement; for instance, the right to inspect and if necessary to repair the gas mains and electric cables laid on the servient land from time to time.

2.3.2 Easements created by prescription

In order to obtain an easement by prescription, the holder of the dominant land must exercise the prospective easement openly and without force or permission for a number of years. This requirement has been taken over from the Roman requirement of nec vi, nec clam, nec precario (without force, stealth or permission). The law of prescription is based on the acquiescence of the servient owner in the open exercise of the easement Surprisingly, there is uncertainty about the number of years required for acquisition by prescription. There are exact numbers in elderly statutes but since their application is obscure, it is sufficient to accept that in general exercise of the easement for 20 years will probably constitute an easement and that exercise for 40 years will definitely be sufficient.This is the only example in English property law where the passage of time creates a right and where one can thus use the term acquisitive prescription. We have seen that for the rest English law works with the limitation of actions, which does not create rights but only extinguishes actions or the right to sue. During the period it is always open to the servient owner to interrupt the exercise of the prospective easement. This can be done by locking a gate across a right of way or by insisting on the payment of a small some of money for the exercise of the right as an acknowledgement that the exercise is by permission only and thus not without permission. Nevertheless 40 years similar exercise will establish the easement and if the owner of the servient land wishes to prove that the right was exercised by permission he must produce a written document to that effect. To reach the required period, the periods of exercise of predecessors of the dominant owner may be added and in the case of a right of way, periods of use of an original and a substituted way may be added together.

Thus in order to create an easement to park on neighboring land, the easement must first fulfil all the requirement for positive easements namely: you must be the freeholder or leaseholder of your house; the entitlement to park must enhance the value of the dominant land and not merely confer a personal benefit on you; and the easement must not amount to a claim to the possession of your neighbor’s entire yard. If these requirements are fulfilled, the easement may be created by deed and registration in the land register or by the exercise of the right of parking openly and without force or permission for the prescriptive period of 20 years.

The acquisition of negative easements by prescription causes difficulties because the only way the exercise of such easements can be interrupted is by doing the very thing, which the dominant owner wants to claim, should not be done. Thus for instance, if your neighbour opens a window overlooking your garden, you can only interrupt the running of prescription by either obtaining a written agreement or deed from the owner to the effect that you gave him permission to have his window opened24 or you would have to interrupt the enjoyment of the right for a continuous period of a year by erecting something that blocked the light. To

24 Oral consent will not bar the claim even if the claimant has made regular monthly payments for the use of the light.

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facilitate interruption the legislator25 enacted that the filing of a notice of obstruction with the local authority, has the effect of interrupting the exercise. But since these negative easements are definite and few in number, the doors are not really opened for the acquisition by prescription of a vast number of negative easements by mere general and indefinite inactivity. Furthermore in the days before town planning, when much of the work was done by hand in shops and houses in the narrow congested towns, it was very important that occupiers of houses and shops should not be deprived of necessary light and air by building operations on neighbouring land.

In fact, it was the ease with which negative easements could be acquired by prescription that persuaded the courts to limit the number of negative easements to only four categories. A cannot if he has enjoyed television signals over his neighbour’s land for 20 years claim that he has acquired a negative easement over the neighbour’s land to prevent him from building a skyscraper which will cut off the signals. If A pays for it, he might be able to achieve this result by the creation of a restrictive covenant.

2.4 Termination of easements

An easement is extinguished by the expressed or implied release (abandonment) of the easement by the dominant owner or by the consolidation of the dominant and servient land. At law a deed is necessary for express release, but in equity an informal release would be effective if it would be unconscionable for the dominant owner to claim that the right still exists. An example of the implied release of an easement by conduct is the demolition of a house to which an easement of light attaches. This would, however, not be the case if it is intended to replace the house by another building. The consolidation of both the ownership and possession of the dominant and servient tenement in one hand, will extinguish the easement because no one is allowed to have an easement over his own land.

3. Profits a prendre

Profits a prendre confers a right on the owner of land to take something of legal value from the land of another: grass by grazing, game by hunting, fish by fishing,26 turf or peat by digging, wood for fuel, building or repairs by gathering,27minerals by digging, crops by picking and most recently sporting rights on the land. The right to take water from a stream is treated as an easement rather than a profit a prendre because running water cannot be privately owned and is therefore not something of legal value. These rights may also be common allowing the general public to exercise them on specific land. Profits attaching to land are acquired in similar manner as easements. They differ from easements in that they are rights of profit, whereas easements are rights of enhancing the value of the dominant land without taking anything from the land.

4. Restrictive covenants

25 See the Rights of Light Act 1959 as amended by the Local Land Charges Act 1975, which requires a notice to be registered on the local land charges register indicating where he would have put up a screen, This operates as if the access of light had been restricted for one year.

26 The term is piscary or fishery is here used in the sense of a ‘common of fishery’, which is the right of fishing in another man’s water (the lord of the manor) in common with him.

27 The term used is ‘estovers’ . A common of estovers is a right to take from woods or waste lands of another a reasonable portion of timber or underwood for use as fuel, for building or for repairs on the land of the commoner, that is the person entitled to the profit a prendre.

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Like easements, restrictive conditions presuppose the existence of at least two pieces of land one of which benefits from the burden imposed on the other. Like negative easements they restricts what can be done on the burdened land. In fact, they are called restrictive covenants because their content is always negative: for instance that the servient land may not be built upon, or exploited as a business, factory or shop or for any purpose other than a dwelling house. As in the case of easements, the covenant may not impose a positive duty on the owner of the servient land. Thus the House of Lords decided in 199428 that a positive covenant to repair the roof of an adjacent house did not run with the land and thus is not a property right passing the repairing duty on to a subsequent owner. The economic function of restrictive covenants are much wider than that of easements in that they protect the amenity or quality of life enjoyed on the dominant property or in the neigbourhood.

Restrictive conditions cannot arise by prescription but must be created with the consent of the owner of the servient land and must be paid for. If you want to enjoy forever the view over your neighbour’s land, you must persuade him never to build on his land and for this you would have to pay a lot of money for you are in fact prohibiting any future development on his land. Furthermore since you are creating a property right that will forever benefit your land and always burden the neighbouring land formalities for the transaction itself must be met and notice must be given to any future owner of the burdened land. The undertaking not to build on the land should be contained in a deed (or covenant) or at least in a written contract signed by both parties. Notice is given by registration in the Land Registry under the title number of the burdened land. This will inform a prospective purchaser of the land what must not be done on the servient land and which neighbouring land can enforce the restriction.

In practice restrictive covenants are employed mostly in urban developments. In a new housing development, the developer will subdivide undeveloped land into plots and construct houses thereon. In order to preserve the residential character and atmosphere of the entire development each purchaser, for the benefit of all the others, undertakes not to do certain things on the land, open a pub or a butchery, run a business, open a kindergarten. The result of registering these restrictions in the Land Register is that the residential character and amenity of the whole development is maintained because the burden and benefits are mutual or reciprocal. The covenants simultaneously bind and benefit each present and future owner.

The courts first recognized and enforce restrictive covenants against successors in title around 1848 when the Court of Equity issued an injunction against someone who had bought land in Leicester Square in London with notice that his predecessor had, for the benefit of the houses around the square, covenanted not to build on it. In cases that followed restrictive covenants were subjected to the general requirement that they must be for the benefit of a dominant tenement. But being a creation of equity, their enforcement depended on the defendant having notice of their existence. Nowadays notice is given by registration.29

Restrictive covenants may be enforced by an action for damages or a claim for an injunction prohibiting the breach. An action for injunction may be lost because of delay and or acquiescence, leaving a claim for damages only. In Gifford v Graham30 the claimant had the benefit of a restrictive covenant over adjoining land to the effect that it would not be built 28 Rhone v Stephens [1994] 2 WLR 429.29 Restrictive covenants imposed by a lease bind the land for the benefit of the landlord ’s

reversion. They are so numerous that they are not registrable. But anyone taking an assignment or a sub-lease is entitled to see the last lease and so will usually have notice of the restriction.

30 The Times, I May 1998.

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upon. With full knowledge of his legal rights he failed to seek relief to prevent the erection of a building housing an indoor riding school on the premises. The court held that he could not be granted an injunction for the demolition of the building and for preventing of the use of the land as a riding school. Acquiescence barred his right to injunctive relief and left him with a claim for damages for injury to his property right.

The Law of Property Act 192531 allows an interested person to apply to the Lands Tribunal to discharge (cancel) or modify a restrictive condition. Application to the Lands Tribunal is expensive and time-consuming. Consequently, developers who fears possible claims based on restrictive covenants against development on the particular land on which he intends to develop for instance a shopping mall, prefer to obtain indemnity insurance against such claims.

LECTURE 9

Lect9TransNotesVIA EX NECESSITATE [WAY OF NECESSITY, IMPLIED SERVITUDE]I. INTRODUCTION

Independent tracts of landCommunal land exchanged for independent tracts of land

But economic interdependenceNot lessen the natural and economic interdependence of tracts; for efficient exploitation somehow operate on adjoining land; conflict with neighbor’s right to exclude

Landlocked: link to public infrastructureLacks sufficient link

Inundation, subdivision, close of public roadResult of inundation, earthquake, subdivision, close/deviation: public road

Existing exit inadequate for full exploitationRight to have entrance and exit if existing access insufficientSouth Africa: via ex necessitate; Germany: Notweg (917-918BGB)Mixed system: case law; Germany civil law jurisdiction German CCRoman-Dutch v Germanic notions

II. HISTORICAL SURVEY

Iter ad sepulchrumRight of way to grave: individualistic; absolute, exclusive ownership

LimesOpening of 5 feet between tracts of land

Land surveyors31 S 84 as amended by the Law of Property Act 1969.

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Passage for public if flooding / natural disaster; or passage if land woule remain undeveloped

Germanic law: uitweg More flexible: communal property: not as absolute and exclusive; unrestricted access: church, grave, village, public road; harvest gathering

Roman-Dutch: hybridRoman iter and Germanic uitweg

III. LEGAL NATURE OF WAY OF NECESSITY

German CC: inherent limitation of ownershipNot limited real rightNot registered, bf acquirer

Notweg not registered and existence not public; bf purchaser no means of finding out: bound

No order required for constitution: declaratory effectNo court order required; circumstances of need; only declaratory effect

Self-helpSome commentators: selfhelp even before court order

SA law: conventional servitude; later need entitles: declaratorySA law confuces with conventional servitudes and only in one of conventional ways

Declaration of general entitlementLater condition of necessity sufficient and order: general entiltment

Grant of specific routeGrant of specific route: court order

Limitation on ownershipNot legal servitude but limitation on ownership; neighbours so situated bound to tolerate use of their land; anyone who happens to block nother’s access: preexist judicial decision

Surrounding neighbors

IV. CIRCUMSTANCES IN WHICH NOTWEG ARISES

A. Insufficient access to a public road

Germany: §917 I 1 lack access necessary for proper exploitation

totally landlockedfrequently impassable

existing access: only temporary, not permanent access

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floods frequently interrupting access; portion cut off by mountain rangeCrucial: if existing or potential access: Notweg ?

not merely more convenient / cheaperbut reasonably necessary for proper

exploitationCost in proportion to total income of farm

Cost in maintaing the more cumbersome road disproportionate to total income of land

Not too harsh on neigbourIllustrations

Parking of motor vehicles residential propertyGerman Federal Court: house covered the entire breadth of the land; only parking space via neighbour’s property at the back; court though residential property normally entitled to parking, here very harsh on neighbor and on-street parking available: not Notweg

Commercial or agricultural propertyDifferent: may requite loading or unloading of trucks etc; Alpine country hotel 1,8 kilometres from road or farm owner entitled: exploitation of propertiesSouth Africa: individualistic v public interest: optimal exploitation

Grotius v Huber (improving agriculture)Two factors: no other reasonable/ sufficient access

existing: practically impossible (necessity: Trautman)

too long, dangerous, expensive (construct /maintain)optimal exploitation of enclosed land (Saner)not too harsh on neigbour (van Schalkwyk)

B. Insufficiency caused by voluntary act

§ 918 I: volutary actEx: abandons servitude (lease), bridge, wall, closure: public roadBreak down bridge, erecting wall, closing exit;

SA law: not virtually expropriate neigbours’ rightsNot by own design: position where he could virtually expropriate neighbour: abandons existing servitude of way; cooperates in closure of road, demolishes a bridge’ erects a building, sells off portion of land so as to create necessity

Placement of farmstead in inaccessible locationIf h e chooses to place house in an inaccessible spot, not claim necessity if property as a whole abuts on public road

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Moving farmstead to accommodate exploitation (Illing)Placement of house to accommodate fullest exploitation: farm 6700acres and 5 to 6 miles long; southern portion with farmstead: access to public road; move to northern portion: access no longer reasonable sufficient for farming operations: though virtually created by owner himself, exit granted

Germany: change manner of (undeveloped land)or intensifying exploitation (heavier

machinery)Thus, necessary for commercial exploitation; transport heavy machinery to land and found exiting access unsuitable unstable condition, owner entitled to a Notweg

Requirements: natural potential of land & not unduly burden

C. Lack of access on account of alienation of land after subdivision

Land with one exit subdivided& subdivision alienated

Issue: if no arrangement: Notweg from neighboring land?

Germany: § 918 II subdivision must grant NotwegGrounds: presumed intention, caused:

voluntary actPresumed intention: provide exit; caused by voluntary act; entitlement to Notweg over land of neighbour not involved must be excluded

Successors-in-title; compensationEnforceable against successors in title; and not so special: compensation can be claimed

SA: rationale: subdivision cannot force servitude on neigbour

Not way of necessity but conventional servitude

Enforceability against successors? Should way of necessity always be excluded?

(Matthews)South Africa vast tracts for farming impractical from a distance point of view where owner has subdivided to compel the owner of subdivision to use the right of way enjoyed by the seller, and none other when closer and more reasonable access available by the grant of a way of necessity over another neighbor’s property.

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V. LOCATION OF NOTWEG OR WAY OF NECESSITY

Conflicting interest: route over same or more than one landBalancing interests: encl. land, neighboring lands, road network

Equal or in favour of servient neighbors?others opinion that interests of the servient neighbours given more weight up to point where treatment of the owner of enclosed land becomes commercially unacceptable. The prevailing view seems to be that the enclosed owner should not be restricted to a use of the servient land, which causes the least burden if his commercial needs would not be reasonably catered for by such a route.Existing public network?if it is discovered that a specific plot of land had previously provided an access to the public road by virtue of a real or personal right, the burden of providing a Notweg should fall on that neighbour. The practicality of such an approach is evidenced by the fact that this provides an opportunity to utilise existing roads.

South AfricaChoice between neighboring lands

Shortest except if considerable damageOnce chosen: shortest and least damage

VI COMPENSATION

Germany: annuityNot once off payment; cognizance of uncertain duration of Notweg and avoid disputes over partial payment on sudden termination

Reduction in value of servient landReduction in value of whole of servient land and not increase in value of dominant land: not proceeds from imaginary lease

Subsequent increase?Value at time when need arose

South Africa: reasonable priceAdvantage and disadvantage

By taking into account: advantage gained , disadvantage suffeedNot indemnity for damages

Dutch: decrease in value, inconvenieince suffered and risks accompanying grant eg infection of cattle

VII CONCLUSION

Considerable case law: same practical results

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Cons. Case law and similar results in Germany and SANeighbor law and concept of ownershipAbsolute necessity v reasonable sufficiency

Both systems: not only if absolute necessity, but also reasonable insufficiency; no more exclusive entitlement but ownership exercised in interest of public as a whole: foster public utility

Esp. more intensive and change of exploitation

Technical differences: subdivision, compensationClimate differences and agricultural & industrial

practicesCrucial: antiquated vs societal concept of ownershipBest possible exploitation of available land

resourcesPublic law: planning & environmental concernsPrivate relationship: not dependent: voluntary

arrangementSad state of affairs: forced to sell at low price

The crucial point is that both jurisdictions have by the recognition that there is a general entitlement to a Notweg or way of necessity showed their willingness to move away from the antiquated idea that private landownership is absolute and exclusive. 32 The automatic limitation on the rights of the owner of the servient land inherent in the institution of Notweg or way of necessity, recognizes that landownership carries with it social obligations and that it should be exercised in the interest of the general public.33 Thus the rationale for granting an access to the public road is to foster the public interest in the best possible exploitation of our available land resources. In this regard the recognition of a sufficient access upon a more intensive exploitation of the enclosed land or a change in the manner of exploitation plays an important role.34

The public interest appears from the special kind of neighbor relationships which exist in this context. We have seen that the artificial juridical division of the earth into separate tracts of land does not disturb the natural relationship between these tracts of land. Public law takes account of this relationship by various planning law and environmental limitations. In the sphere of private neighbor relations the dependence of a landowner on voluntary arrangements with his neighbor could lead to a monopolistic situation inimical to the public interest. This had been recognized as early as 1880 by the editor of the preliminary draft of the German Civil Code, Reinhold Johow: ‘Even if the need for an access is subjective, the public interest consists therein that the deplorable state of affairs that small landowner without a sufficient access to the public road would be forced to sell his land to one of his neighbors at a very low price because of lack of competition’. 35

LECTURE 10

32 Represented by Staudihger-Roth § 917 BGB note 1ff.33 See inter alia Münchener Kommentar-Säcker § 917 BGB note 1ff. 34 German version note 7735 German version footnote 78; for compararison with common-law jurisdictions, see last par. Of

German version.

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MORTGAGE (HERITABLE SECURITY, STANDARD SECURITY) IN SCOTLAND

General The standard security is the statutory real security right created by the Conveyancing

and Feudal Reform (Scotland) Act 1970 in respect of corporeal heritable (immovable) property in order to secure a principal obligation between a creditor and a debtor. Though it broadly follows the model of the English ‘mortgage’, it is a mistake to equate it with its English counterpart. Before 1970 there were three forms of security in immovables namely: the bond and disposition in security; the cash credit bond and disposition in security; and the ex facie absolute disposition qualified by backletter. With the coming into force of the 1970 Act on 29 November 1970, these forms ceased to be competent, and the standard security became the only kind of security that may be created over heritable subjects. The standard security was not a brand new invention. It is really just a revised version of the old bond and disposition in security, with a shortened name. [Heritable (immovable) property may also form the subject of a floating charge, but that method is available only to an incorporated company or an industrial or provident society. By contrast, any person or corporation having an interest in land may grant a heritable security (security in immovable)].

Subject (object) of standard securitySection 9 of the Act provides that a standard security can be created over any real right

registered in the Sasine or Land register and which can exist as a separate right. The subject matter of a standard security is thus land or any registered real right in land like a lease over 20 years, a liferent or even another standard security.

Note that there could be different standard securities over different rights in land. Suppose A owns land over which he has granted a lease of 20 years to B. A and B could grant standard securities. Suppose A defaulted: his creditor would then sell the land. C would then have a new landlord. If B defaulted, B’s creditor would sell the lease, and B would find himself with a new tenant.

Obligation securedDepending on the terms of the deed, standard securities can be either restricted to a

certain amount (special) or unrestricted. In practice standard securities are almost always unrestricted. Even if a particular amount is mentioned in the deed, this will almost invariably be followed by additional words stating that the security also secures “all sums due or to become due” by the debtor to the creditor.

Creation of standard security The civilian principle that ownership (here a real right) is not transferred by agreement

alone, but by delivery (traditionibus, non nudis pactis, transferuntur rerum dominia) applies also to the creation of a heritable security. Thus the familiar two-stage approach of a contract, which create a personal right and registration, which creates the real right, is required for the creation of the security.

Schedule 2 of the 1970 Act prescribes two forms, A and B for the granting of a standard security. Form A combines the personal undertaking to repay the loan with an undertaking to grant the security for repayment (the loan and the standard security agreement securing the debt are rolled up into a single document)(s 9(2)). By contrast, Form B prescribes a standard security pure and simple and thus contains only an undertaking to grant the security. The terms of the loan agreement are set out in a separate document.

Schedule 3 contains a standard form contract containing standard conditions which are in terms of section 11(3) automatically included in the standard security agreement. Some though not all, of these conditions may be varied or excluded by agreement. The variable

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conditions relate to obligations imposed on the debtor with regard to the maintenance, repair and insurance of the subjects of the security. The non-variable conditions concern sale, foreclosure and redemption of the security by the debtor (conditions 8, 9 10 and 11). Any purported act in contravention of the conditions is void and unenforceable (s 11(3) read with s 11(4)(b)). For example should the debtor contravene condition 6, which prohibits the granting of a lease over the security subject without the permission of the creditor, the debtor would be in breach of his or her condition and the creditor could have the lease reduced. This would not apply in the case where the creditor knew that a lease is already extant, or that one is to be granted. The creditor’s mala fides (bad faith) would then prevent the lease from being reduced. (See Trade Development Bank v Warriner and Mason (Scotland) Ltd 1980 SC 74).

Execution of the security deed, however, creates only a personal right. No real right is constituted until the deed is registered in the Register of Sasines or the Land Register as appropriate (1970 Act s 11(1)). Registration of the deed is therefore required for the constitution of a standard security over heritable property just as delivery is needed for the constitution of a pledge over movables.

Release of part of land from standard security

The holder of a standard security can agree that part of a property shall be released from the security, the remainder remaining burdened. Thus suppose a company buys a site for housing development. It borrows money from the bank and this is secured over the land. As each house is completed and sold, the buyer will insist on an unencumbered title. The developer will prearrange with the bank that as each house is completed that property will be released from the security against payment of a defined portion of the purchase price of the house. So the bank will register a deed of restriction, disburdening the house from its security.

Right and duties of the debtor

The debtor still remains the owner of the heritable property subject to the security. He may thus exercise his rights of ownership in the land subject to the security. He must employ the care of a reasonable man in safeguarding the subject of the security and is liable if through his fault the creditor is deprived of his or her security or if the value thereof has diminished. Except if an agreement to the contrary has been reached, he has to account for the fruits and profits of the land. He may not burden the land with a servitude and may only grant leases with the permission of the creditor (Schedule 3 condition 6).

Redemption by the debtorThe debtor may redeem the subject of the security by giving two months’ notice (s

18). The debtor’s right of redemption is unqualified and may be exercised notwithstanding that the debtor is in default. Thus in G Dunlop and Son’s JF v Armstrong 1994 STL 199 the court accepted that the creditor’s right of sale and the debtor’s right to serve a notice of redemption could co-exist. The opinion was expressed that the position would differ once the creditor had concluded an enforceable contract to sell the subjects of security. A decree of foreclosure will also extinguish the debtor’s right of redemption.Discharge of standard securities

A discharge (governed by section 17 of the 1970 Act) is a deed executed by the creditor and duly registered to the effect that the land (property) is wholly disburdened of the standard security. The repayment of the money under a fixed sum security will extinguish the security, making a discharge unnecessary. However, even in this case the debtor may claim a formal discharge as evidence from the ex-creditor. In this case, the discharge has only evidentiary value and does not extinguish the security. If, however, as is mostly the case, the

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standard security is not for a fixed sum but unrestricted (for all sums), repayment of the debt does not extinguish the security, for any new debt which arises thereafter will be secured. Thus if O grants a standard security to a bank to secure his or her overdraft, and the overdraft is reduced to zero three years later, the security is not extinguished and will revive whenever the overdraft is reactivated. Hence once the debit balance reaches zero in an unrestricted security, the ex-debtor must choose whether to discharge or not. If he wishes so, he can insist on the (ex)-creditor granting a discharge. In that event, the discharge effects a discharge and does not merely provide evidence thereof.

Effect of the standard securityThe constitution of a standard security confers the following powers on the creditor:

(i) Once a standard security has been constituted, the subject of the security together with accessories and fruits is isolated or set aside as security for the secured claim. The creditor can interdict any action on the part of the debtor, which purports to diminish this security in any way.

(ii) The creditor has a right of pursuit with regard to the subject of the security. The owner of the land subject to the security may neither alienate the land, burden it with a servitude or lease it without the permission of the creditor. If, however, the land is alienated or burdened the creditors rights will enjoy preference in accordance with the maxim first in time is stronger in right (qui prior est tempore, potior est iure).

(iii) In the event of the debtor’s insolvency, or in the case where the security subject has been attached by diligence, the creditor has a right of preference over unsecured creditors of the debtor.

(iv) The remedies open to a creditor on the debtor’s default (Sch 3, standard condition 10 which is not variable according to s 11), include(a) the power to sell the security subjects (standard condition 10(2));(b) the power to enter into possession of the security subjects (standard condition 10(3)): once possession is obtained, the security holder has the right to let the subjects and any lease granted by the debtor over the subjects is transferred to the creditor (standard condition 10(4) and (5)); (c) the power to effect repairs to those subjects (Schedule 3 standard condition 10(6)); and (d) the power to apply to court for an order of foreclosure (Schedule 3 standard condition 10(7)).

These powers are in addition to any other remedies that may be available to the debtor arising from the contract of loan (1970 Act s 20(1)).

The remedies mentioned above, must be used only for the purpose of recovering the loan (debt) without undue harm to the interest of the debtor. Lord Jauncey summarised the position as follows in Armstrong, Petitioner (1988 SLT 255, 258A: ‘A creditor’s primary interest will normally be recovery of the debt due to him and I do not consider that he has unlimited discretion as to which one or more of the powers he exercises. If the value of the heritage is likely to exceed the sum of the debt, his interest is to have the heritage sold and to account for the surplus of the debt of the debtor… A heritable creditor cannot use his powers for the primary purpose of advancing his own interests at the expense of the debtor when he has the alternative of proceeding in a more equitable manner.’

In the event of the debtor’s default, the creditor will in practice usually opt to realise his security by a sale of the property given as security. The 1970 Act sets out three different routes to sale namely(a) by way of a calling-up notice, (b) by way of a notice of default and (c) by an application to the sheriff for a warrant to sell (s 24).

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If (c) is not followed, the chain of events is the following: Where the debtor defaults in repayments or otherwise breaches the terms of the security agreement (see standard conditions), the creditor may serve a calling up notice or a default notice, or both. The calling-up notice (requesting repayment of the whole debt) must be in the prescribed style (Form A of Schedule 6) and must give the debtor at least two months (variable by agreement) to pay (s 19 and Schedule 3 condition 10). The default notice for rectifying a remediable breach of the terms of the security agreement (such as a failure to maintain the property, to take out insurance, or to pay arrears), must allow the debtor at least one month in which to comply with the notice and rectify the fault complained of (s 21(1)). If the debtor fails to comply with a calling up notice or a default notice (or has without serving a notice has obtained a warrant from a sheriff even where the default complained of is irremediable: City of Glasgow District Council v Excess Insurance Co Ltd 1986 SLT 585, 588 (Lord Justice-Clerk Ross) or where the proprietor (not the debtor) of the security subjects become insolvent ((Schedule 3 condition 9(1) and (2)), the creditor may exercise his or her statutory right to take possession of and sell the property subject to the security (security subject)(s 20 and Schedule 3 standard condition 10).

In practice creditors usually go for the “belt and braces” approach. They adopt the first or the second, and in addition obtain an s 24 warrant (warrant to sell from the sheriff). The latter is convenient because a debtor who refuses to leave can be ejected by judicial warrant. In cases where the subject of the mortgage is leased out, the creditor will normally not try to obtain possession, but simply sell the property as leased property allowing the purchaser to buy it as an investment entitled to the “rental stream”. The lessees will simply get a new landlord.

The Home Owner and Debtor Protection (Scotland) Act 2010 (Part 1) was enacted somewhat hastily to regulate repossessions of mortgaged property by banks in the light of the debt crisis. It provides that all repossession cases relating to residential property must now be heard in court, except in cases of voluntary surrender by the mortgage debtor (which require written confirmation that the surrender was voluntary). This ensures scrutiny by a sheriff of the extent to which creditors have complied with the pre-action requirements (requirements for calling up the standard security). In cases where the debtor appears in court or is represented in court it also allows sheriffs to consider wider circumstances about the debtor and those living in the property before any decree for repossession is granted (sections 1, 2 and 3).

Section 4 sets out the pre-action requirements for creditors to call up the mortgage (standard security). These require creditors, before applying to repossess a residential property, to provide the debtor with information and to take reasonable steps to avoid repossessions occurring. They also require creditors to refrain from taking repossession proceedings in certain circumstances.

The pre-action requirements are the following: (1) the creditor must provide the debtor with clear information about the terms of the mortgage (standard security), the amount due (including any arrears and charges in respect of late payment and redemption) and any other obligation under the security in respect of which the debtor is in default;(2) the creditor must make reasonable efforts to agree with the debtor proposals for future payments and the fulfilment of any other obligation under the mortgage in respect of which the debtor is in default;(3) the creditor must refrain from making a section 24 application for repossession or sale where the debtor is taking steps likely to result, within a reasonable period, in the payment of arrears or the principal sum and to fulfil any other obligation for which the debtor is in default;

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(4)The creditor must provide the debtor with information about sources of advice and assistance in relation to management of debt;(5)The creditor must encourage the debtor to contact the local authority in whose area the property is situated.The creditors are required to have regard to guidance issued by Scottish Ministers. Scottish Ministers are allowed by subordinate legislation to make further provision about and modify the pre-action requirements, but not to add new categories of pre-action requirements (s. 4(6) and (7).

Section 2 sets out a new procedure for court applications by creditors. Instead of the summary application made by the debtor under tight deadlines under the Mortgage Rights Act to suspend the enforcement rights of the creditor, the creditor must now make the summary application in all cases where he wants to enforce his or her rights. This ensures that in all cases the court will set a date on which it will hear the case and on which the debtor will have an opportunity to defend the case or make submissions to the court (s 2(2) of the Act).

The matters to which the court must have regard when considering a creditor’s application mirror the matters to which a court currently has regard in an application made under the Mortgage Rights (Scotland) Act (Asp 11) of 200136 (which has now been subsumed under the 2010 Act). The Mortgage Rights Act was enacted to protect debtors against heartless creditors, harshly proceeding with repossession actions by bringing in a substantial element of judicial discretion in the enforcement of mortgages (standard securities). This Act as subsumed under the 2010 Act applies only to mortgages (standard securities) over residential properties or more precisely ‘any standard security over an interest in land used to any extent for residential purposes’ (s1(1). Examples are ordinary residential property, a farm with a farmhouse, properties which are bought to let, a public house with accommodation for the owner or the site of a caravan park. (See Urquhart 2001 53 Greens Property Law Bulletin1 at 2).The nature of the property and not the nature of the secured loan is important.

Section 2(5) confirms that a court may grant any order that it thinks fit on the application. But the court may only grant the application if it is satisfied that the pre-action requirements have been complied with and that it is reasonable in the circumstances of the case to grant the application. On application being made, the court has discretion to suspend the exercise of the creditor’s enforcement rights to such an extent, for such period, and subject to such conditions as the court thinks fit. Note that the court can only suspend enforcement right of the creditor; it cannot alter the terms of the loan. The Act does not affect the other remedies of the creditor. He can still petition for sequestration, enforce any other security such as an assignation in security for a life assurance policy and he can obtain a decree for payment and proceed to attachment of the property (diligence).

The sheriff must take the following factors into account in coming to a decision (s 2(6) and (7)): (a) the nature of and reasons for the default (possible reasons: divorce, loss of employment);(b) the ability of the debtor to fulfil within a reasonable time the obligations under the mortgage (standard security) in respect of which the debtor is in default;(c) any action taken by the creditor to assist the debtor to fulfil those obligations (e g rescheduling of mortgage payments);(d) where appropriate, participation by the debtor in a debt payment programme approved under Part 1 of the Debt Arrangement and Attachment (Scotland) Act 2002; and

36 The matters are currently set out in section 2(2) of the 2001 Act (as amended by S.S.I 2004/468 to include reference to the Debt Arrangement Scheme established under the Debt Arrangement and Attachment (Scotland) Act 2002).

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(e) the ability of the debtor and any other person residing at the mortgaged property (e.g. children) to secure reasonable alternative accommodation.

These (and other) factors must all be taken into account for the application cannot succeed unless it is reasonable under the circumstances.

Factor (b) may present difficulties if the mortgage contains an acceleration clause whereby missed payments give the bank the right to call for full payment at once. Thus if debtor defaults, the bank can exercise its acceleration option, and serve a calling up notice for the whole amount (say £70 000 after 3 years instead of the initial £75 000). What prospect does the debtor have to pay the £70 000 within a reasonable period? England needed legislative amendment to rectify this position but mortgages securing overdrafts still remains outwith the scope of the English provisions.

Once granted, a mortgage right order must be registered in the Register of Inhibitions and Adjudications (s 3). Although the Act does not say in whose name, it should be in the name of the creditor as named in the order. The reason for this is that it is his right to sell that is limited. Such registration will give notice to potential purchasers from the heritable creditor that his power to sell has been suspended.

Section 5 of the 2010 Act makes provision for ‘entitled residents’ to intervene and to make representations to a court considering a repossession application by a creditor. It allows ‘entitled residents’ to apply to the court to continue the proceedings or to make any other order the court thinks fit. It further provides that in such an application the court is to have regard to the same matters (mentioned above) as it is required to consider if a debtor appears or is represented. An ‘entitled resident’ is a person whose sole or main residence is the mortgaged property (in whole or in part) and includes the owner where the owner is not the debtor under the standard security; the spouse of civil partner of the debtor; the person living with the debtor as husband or wife or in a relationship similar to that of a civil partner.

The creditor is obliged to serve notice of a repossession application on the occupier of the mortgaged property. Since the notice has to be served by recorded delivery post, unoccupied premises and debtors refusing to accept delivery might create problems. In future purchasers from a mortgage creditor will need to search the register of Inhibitions and Adjudications ideally from the time the mortgage was granted for possible suspension of the mortgage rights of the creditor. Unfortunately such searches will only reveal the existence of suspension orders but not whether the right notices were served, failure of which will nullify the power of sale.

If the creditor is successful in a repossession application, the creditor can proceed to obtain possession of the property for sale. Even if a s 24 warrant in terms of the 1970 Act has been obtained, the actual sale will be extra-judicial, which is internationally very unusual since in most countries the sale is conducted by the court. When the mortgaged property (security subjects) are sold, the creditor has a statutory duty (s 25) to advertise the sale and to take all reasonable steps to insure that the best price reasonably obtainable is secured for the property. The burden of proving that a creditor is in breach of the statutory duty rests on the debtor: Associated Displays Ltd v Turnbeam 1988 SCLR 220 (Sh Ct). What constitutes a reasonable price falls to be determined at the time when the mortgage property is sold and not by reference to any possible (but unquantifiable) hope of an increase in the value at some future point. In Dick v Clydesdale Bank plc (1991 SC 365) some land near a town was sold for agricultural purposes, rather than for commercial purposes that in the opinion of the debtor would have commanded a higher price. The court recognised the debtor’s right to object to a sale in which a reasonable price was not obtained, but held that, in this particular case, the sale of the land for agricultural purposes was perfectly reasonable since no planning permission for non-agricultural use had been granted. Any surplus left over after payment of the secured debt falls to the debtor or to his or her representative such as a trustee in

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bankruptcy (1970 Act s 27). A debtor cannot prevent the creditor exercising his or her right to sell the mortgaged property, once the debtor is in default, merely because their value is less than the amount of the outstanding debt or because the debtor has offered to resume payment of the debt. (Halifax Building Society v Gupta 1994 SC 13).

If the creditor is unable to sell the mortgaged property (subject of the security) or any part thereof, he may seek a decree of foreclosure in respect of the unsold portion of the property (s 28). A decree of foreclosure extinguishes the debtor’s right of redemption. Once recorded in the Register of Sasines or registered in the Land Register, as appropriate, the property of the unsold part of the former security subject, will vest in the former creditor.

RankingWhen more than one security have been granted over the same heritable property (as

often happens in practice), the ranking of competing claims is determined by the date of recording or registration of any properly executed standard security unless this has been varied in a so-called ranking agreement (s 13(3)(b) and Schedule 2 note 5). However, the preference in ranking of a prior security is restricted, upon notification (the giving of notice) to the first creditor of the creation of a postponed (second) security, to advances already made, future advances which he is bound to make and present and future interest thereon together with expenses and outlays reasonably incurred (s 13(1)). Suppose that O has granted a standard security to B and it is for all sums over his house. The amount outstanding on the loan is £40,000. The property is worth £100,000. O wants to borrow £20,000 from C, also on the security of the house. This will be a postponed standard security. C should feel happy for the available equity on the house is £60,000 and he could take a secundo loco (second ranked) security. However, since the first standard security is an all sums loan (unrestricted) B is entitled to increase his loan and can for instance lend a further £50,000. Since B is primo loco. He will now be first-ranked for £90,000 and C’s position has become perilous. This danger would deter people to lend on the faith of a postponed (second-ranked) security. Hence s 13 of the 1970 Act (more or less re-enacting the common law) provides that in this situation, if C intimates to B the fact that the second security has been created, then any lending which B thereafter makes will not prejudice C’s ranking. One qualification is that a notice under s 13 does not affect the ranking of subsequent lending by B if B had already contracted to lend such sums. In addition a section 13 notice does not affect the ranking of any future interest due to B.

If the standard security has been constituted as a real right before the crystallization of a floating charge, it will prevail against the floating charge (Companies Act 1985 s 464(3), (4)(b)). In terms of s 464(1) of the Companies Act 1985, however, the floating charge may contain a prohibition or restriction on creating a fixed security or other floating charge (AIB Finance Ltd v Bank of Scotland 1993 SC 588).

When one creditor (termed the catholic creditor) has a heritable security over two subjects belonging to the debtor and another creditor (termed the secondary creditor), has a second security over only one of these subjects, the catholic creditor must use his securities so as to maximise the value of the secondary creditor’s security, but need not thereby prejudice his own legitimate interests in obtaining full payment. Thus the secondary creditor cannot prevent the catholic creditor from choosing to sell the security subject burdened by both their securities. In such circumstances the catholic creditor is, however, obliged to assign to the secondary creditor his or her security over the remaining security subjects. In cases where separate secondary creditors each have a postponed security over security subjects in respect of which a catholic creditor has a prior security, the secondary creditors must according to Ferrier v Cowan (1896) 23 R 703, bear the burden of the catholic security

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rateably in proportion to the respective values of each property regardless of the respective dates of creation of the secondary securities.

Differences between pledge and standard security Some of the differences between a pledge and a standard security are the following: A pledge is created by way of delivery and not by registration in the Sasine or Land Register as in the case of standard securities; the object of a pledge is a movable whereas the object of a standard security is heritable property; the protection afforded to a pledge-creditor is not as strong as that afforded the holder of a standard security; and finally it seldom happens in practice that the same thing is pledged twice whereas the practice of constituting a second or even a third standard security over the same object, is fairly wide-spread..

LECTURE 11See 2015 transECTURE ONE Oct04I. ANCIENT INSTITUTIONS OF CONDOMINIUMOases; housing shortage, Jewish colony of Elephantine in Egypt; buildings divided into multi-ownership units

Superficies solo ceditBuilt on land part of land; no separate ownership of floors/apartments

Shortage of housingWhenever acute shortage of housing; law devised something to provide necessary

accommodation

‘Stockwerkseigentum’12th century: separate floors, storeys; cellars equipped as taverns, pubs for beer underneath house belonging to other; shortcoming: not clear division between individual and common property: stairs; no management structure; no resolutions of disputes; streithäuser; differently painted: see from a distance

European CodificationsSuperficies solo cedit; only France (art 664) and SpainII. MODERN STATUTES ON CONDOMINIUMNeed statutory foundation to legitimise and to regulate in more detail; legitimate basis for providing title to apartments Especially after world wars

European states – World Wars – Belgium (1924), Greece (1929), Italy (1935), France (1938), Austria (1948), Netherlands (1951), Germany (1951), Spain (1939), Switzerland (1963), Turkey (1965), Denmark (1965) + second generation statutes (Catalonia Act (2007)British Commonwealth – Australia: New South Wales Conveyancing (Strata Titles) Act (1961), Canada (1966), Singapore (1968), South Africa (1971), New Zealand (1972), Malaysia (1985), England (Commonhold & Leasehold Reform Act (2002),

Half of Act deals with insolvency of the management corporation

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Scotland (Tenement (Scotland) Act 2004))Codified 300 years of case law on condominiums: with little modernisationUnited States – Puerto Rico (1958); Federal Housing Act (1961); first generation statutes (1969 all 50 states); shortcomings (terminology, diversity, skeletal); Uniform Condominium Act (1977);

National Commissioners of Uniform state laws: devoted to obtain uniformity; prepare uniform laws to be adopted by separate states: Uniform Condominium Act (1977) Bar Association (1978); 1980 minor amendments 14 states;Minor amendments (1980: Conformity with Planned Community Act))

Legislative activity; reconsideration of UCA by drafting committee of uniform Planned Community Act; variety of land ownership regimes similar to condos

Uniform Common Interest Ownership Act (1982); Amendments (1994)Latin America – Spanish & Portuguese influenceBrazil (1928), Chile (1937), Argentina (1948), Cuba (1952), Mexico (1954), Venezuela (1958), Bahamas (1965), Nicaragua (1971), El Salvador (1972), Haiti (1975)Socialist Europe – Hungary (1924), Poland (1934) (1994), Yugoslavia (1959), Soviet Union (1961), Czechoslovakia (1966)

Leasehold rights to buildings; qualified persons; limited space; commerce restricted: no profit; if children out of house move to smaller apartmentOther countries - Israel (1952, 1961, 1969), Lebanon (1962), Japan (1962), Zaire (1977), Korea (1984), United Arab Emirates (Strata Title Act 2007); Dubai (Strata Titles Act 2008)

III. BASIC STRUCTURE OF CONDOMINIUMThree-fold unity

Owner of unitJoint owner of common propertyMember of management corporation

IV. REASONS FOR INTRODUCING CONDOMINIUM1. alleviate housing shortage

increase in population; escalating building costs; scarcity of land in vicinity of major city centres

2. better utilization of land resourcesoptimum use of available land; spread high cost of construction; common walls, cables. Sewerage; but construction costs higher the higher you go

3. fulfil psychological need for a homesocial staus of home-ownership spread to larger segment of population; bind people to a fixed abode; economic, social and political stability; post war Europe resettling of refugees and homeless families

4. hedge against inflation

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not money down the drain: leasing; can sell at a profit5. closer social life, additional amenities, security6. replanning, redevelopment of city centres

new motorways, underground systems7. public housing, housing for employees

IV. USES OF CONDOMINIUM

1. residential condominiumshigh-rise, low-rise; maisonettes, duplex apartments; semi-detached housing; conversion of old rental apartments and houses into condominiums; duos, trios

2. Commercial condominiumsShops, warehouses, motels, parking garages Sao Paulo, Rio De Janeiro 80% apartments commercial; Lucky plaza Orchard Street

3. Industrial condominiumsEach floor different industry: chemical substances; engineering tools; medical instruments

4. Professional (office) condominiumsDoctors, lawyers, architects, engineers, printers, graphic art industries; interior decorator

5. Mixed condominiumsMultiple use: residential, professional, industrial, commercial; one building not undertaker and medical clinic

6. Resort condominiums: rental pools, time-sharingCoast, mountains, national parks; time-sharing based on condo concept; cubic ownership and here interval ownership; recreational facilities, golf, swimming ‘rental pools’; capital investment as opposed to buying time-share unitsCondominium statutes geared to residential schemes: boundaries; allocation of quotas; termination of schemes; improvements & modernisation; reorganisation of units (but see s 1-207: non-residential may opt out)

V. ALTERNATIVES

A. LEASE

1. not so much security of title as with ownershipcan be evicted by owner; (rent-control); owner cannot be evicted by anyone; both has real rights in most countries

2. restricted userules of landlord; by-laws of condo: at lease control over content of by-laws

3. subject to rent increasesubject to increase of assessments for repairs, maintenance and managementc

4. not capital investmentmoney down the drain; expectancy of capital gainmany conversion: shortage of rental apartments; But: indigent older people

frequent movers

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B. REAL ESTATE COOPERATIVESStock cooperative; share-block companiesWhat

stockholding in corporation plus use agreementcovenants, conditions restrictions, by-laws, proprietary leaseenforceability

commonly not recorded and dependent on landlord and tenant law, corporate law and trust law ot other law peculiar to form in which cooperative was organised.

Differences, Disadvantages (v. Condominiums)1. not real right in apartment or common amenities

cooperative and not in owners2. restricted use: articles of association, resolutions

covenants, conditions and restrictions 3. NB financial interdependence4. stock (share) certificate as security for a loan?5. company do not strive for harmonious residential

communityHistory

1882 (Barrington: New York); 1st World War (housing shortage); New York, Chigaco, Southern CaliforniaDepression; 2nd W WarHigh mortgage repayments commitmentsToday: middle and low income groupsHousing projects of USA Dept. of Housing & Urban Dev.

Need for legislation

1. Corporate law, no enabling statute, scant regulation and little consumer protection2. Adoption of Uniform Condominium Act (UCA): need for common regulation

Model Real Estate Cooperatives Act (1981)Goals:

1. parallel UCA2. greater consumer protection3. easier financing4. maintenance of historical legal structuring

Features: 1. home owners’ association2. residential cooperatives (not commodity, marketing,

consumer services)3. essentially residential (industrial, commercial?)

C. PLANNED UNIT DEVELOPMENTS (CLUSTER HOUSING)What

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multi-unit residential planned community; common facilities; home owners’ associationzoning concept at local levelclusteringzoning mechanism by local authorities

Differences (v. Condominiums)

1. title to units2. title to common elements (facilities)

served by common area facilities owned and operated by the homeowners’ association; under commo law without benefit of statutory enablement.

3. structure of home owners’ association home-owners’ association same functions as condo associations;: derive powers from CCr’s recorded at beginning of project

4. use of units, common facilities5. restrictions on design, common facilities

Need for legislation

issues addressed on ad hoc basisparallelism with UCAUniform Planned Community Act (1980)

D. UNIFORM COMMON INTEREST OWNERSHIP ACT (UCIOA) (1982, 1994)

Reasons for introduction:

confusing uniformity consolidation with preservation of differences relatively

simple states wide range of choices

uniformity amongst all three types of multi unit ‘ownership’; simply by consolidating the 3 prior Acts and adding a few generic definitions;n ‘common interest community’; section numbering system completely parallel;

VI. REQUIREMENTS: BUILDING AND LOTBuildingLotModern kinds of developments

Vacant site condominiums

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DockominiumsAir space condominiums (lollipop)Parking garagesNeon signs

LECTURE 12

PROPIEDAD HORIZONTALI. INTRODUCTION

superficies solo ceditno separate property in land and buildings or part of building

desperate need for housingelephantine, walled cities, World Wars: psychological need

special statutes on strata titleEurope and South America; Puerto Rico (’58)United States; NSW: British, British Columbia, Singapore (’68), South Africa(’71), new Zealand(’72), Malaysia (1985)Former Socialist, Middle-East, Islamic, Japan (’62), Korea, Maharastra (’63).

threefold unityowner, joint owners, members of management corporationII. REQUIREMENTS: BUILDING AND LOT

BuildingMust be a building; permanent, non-combustible materials; more that one unit

LotWalls, ceilings, floors; suitable for human use; toilet, sink and cooking facilities

Modern kinds of developmentsVacant site condominiums (dockominiums) Caravans, mobile homes, strata title mooring slips: Yachts, jettiesAir space condominiums (pollipop)New York: lollipop: arispace: reinforced shaft; Airspace above public streets or railway stations to provide blocks of offices; Parking garagesCommercial structures without any walls; parking spaces in parking garage: clearly demarcated

Neon signsStratum need not be cubic space: Comm. units

III. PHASED DEVELOPMENTSsingle phased developments

first generation statutes: buildings must be sufficiently completed for occupation; if sale before stringent consumer protection measures: escrow; restricts adaptability, cash flow

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advantages of phased developmentsi. smaller initial outlay; ii cash flow eased; iii adapt to market demand; iv better land utilization; vpurchaser: better facilities, amenities

Mechanisms: UCA: 4 kinds of development rights“convertible land”building on undeveloped land“ convertible building space”

reserve higher floors for later development acc. to market “ additional land”extend by later addition of land: further amenities; subdivision

“withdrawable land”financial diff. impossible to complete scheme

Consumer protectionQuid pro quo for flexibility: time-limit; suff. disclosure of physical and legal aspects of projectIV. FLAT AND COMMON PROPERTY

Importance of distinctionI More extensive powers; ii responsibility for maintenance; iii insurance: double insurance

Problem areas1.Broken windows, intercoms, parlophonesW. Sing.:part of c.p; SA: median line;intercoms:Sing. accessory lot 2. Hot water installationserves only one unit: lotholder3. Leaking roofSA median line: Sing: common property

SHARE VALUE (participation quota, lot entitlement) rights & obligations acc. to share valueShare value determines

Share in common propertyUse, proceeds of insurance, reserve fund, in land on term.

Proportionate contribution Expenses for management, maintenance and repair

Proportionate value of voteGeneral meetingFormulae employed

EqualityIsrael, small schemes, units of equal size

Relative sizeFloor area, cubic area

Relative value

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Which value: market value, when?Developer: “just and equitable”

Obj. utility: size, components, location, proximity to c.fac.Tested by Commissioner in Sing., Valuer-General in NZCriticism

Only one formula3 totally divergent matters: 3 different formulae

Relative contributionsService test: frequency of use: lifts, swimming pool, common heating and air-conditioning installations

Virtually unalterable Singapore: unanimolus resolutionPeriodic reallocations: NSW by Surveyor-General in unreasonably madeAlaska: Periodic appraisal due the changing circumstancesNew highway at back cutting off clear view of the sea, land acquisition of parking spaces

STRATA OWNERSHIP: TRUE OWNERSHIP?Individual ownership of flatSing. Subsidiary proprietor; master of his flat, administer, muse and enjoy, alter, decorate, animals, parties, invite hippy friendsLimitations

NuisanceExcessive noise, smells, overflow of sink; life intolerable

Statutory reciprocal easementsStat. easements: support, shelter; passage: pipes, ducts

Bylaws:Duty to repair

Positive duty to keep in good state of repair; flat, fittings, pipesOutside windows

Part of external wall: no advertisements etcBalconies

Alterations & additions: consent; no washing-lineRefuse disposal

Dry containerAnimals

Consent of trustees, number controlled 1dog, 2 cats, 11goldfNoise

Not between 11pm and 7am“reputation of building”pound chillies

without sufficient floor covering.Characteristic features

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Destructible buildingNot indestructible building

Structurally interdependent lotsNot individualised group of neighbouring landowners

Intensified community lifeNext to each other, on top of each other

Permanent natureUntil terminated by court or unanimous resolutionLandownership. Planning, environmental,peculiar typeMy flat is my castle, home sweet homeVII. ENFORCEMENT OF OBLIGATIONS

Financial obligations:contributionsNo vote: name and shameFine: S$ 10,000: Draconian, absentee landl.Small Claims tribunal: cheap & quickCharge on lot in favour of m.corp.

Priority of registered; Social obligations:

‘adequately clothed, no offensive language or behaviour’ underpants, shouting abuse

fine (S$ 1000), no votecompulsory sale of flat Germany, Switzerland, Austria: life unbearable, special resolution, priv sale, public saleexclusion from possession: Spain, Holland, Denmark: warning, resolution, court proceedings possession for up to 3 years & family: not affect other ownership rights.

MANAGEMENTAttendance of general meetings very poor, SA quorum: over

50 units:20%; within ½ hour Sing.2 in person; SA proxies, some systems: one person, 25% of vote

Reluctance to be council members subsidiary owners and immediate family; love and charity; high duty of care

Managing agent or professional manager: appointed by council, Germany profess. expensiveHow democratic is general meeting?One lot, one vote: one owner, one votePoll even after result, according to value: loadedNon-proprietors: spouses, mortgagees, lessees, children (Mandela 16); economic interests, social interests, temperature of pool; when barbeques on the lawn?

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