Archive for the ‘Property’ Category

Social dimension of private property

April 15, 2014

My article, Have we forgotten the social dimension of private property? has just appeared in the SCMP. The link is here.

Relief from forfeiture available for finance lease of equipment and effect of sale pursuant to court order

September 19, 2012

In On Demand Information plc v Michael Gerson (Finance) plc ([2002] UKHL 13) M and O entered into four finance leases of video and editing equipment. The leases were for ‘primary’ periods of two years and would then continue for an indefinite secondary period. In effect, O was to pay for the equipment (through the rentals) during the primary period and the rentals for the secondary period were nominal. During the secondary period the lessee could sell the equipment at the best price available with the lessor’s consent and keep 95% of the proceeds of sale (as an ‘abatement of rentals’). 

The leases stipulated that the appointment of a receiver of the lessee would be a repudiatory breach. The lessee went into administrative receivership when the primary period of two of the leases had ended and was about to end in the case of a third lease. There were three months left of the final lease and it was only in respect of this lease that there was an outstanding primary period rental still to be paid. The lessor sought to rely on the breach to bring the leases to an end. The lessee argued that it was entitled to relief from forfeiture.

The lessor consented to a sale of the property under RSC Ord. 29 r. 4. This was without prejudice to the parties’ rights and was intended to allow the best value to be obtained for the property.

At first, the lessors had argued that relief had always been unavailable in this case since the leases were purely contractual. This had failed in the Court of Appeal; relief was available. The rights were not purely contractual and the conditions in which the court should consider relief were met ([28] and [29] of the House of Lords report). This aspect was not part of the appeal to the House of Lords.

The question was whether the sale had the effect of making relief impossible. The first instance judge and the Court of Appeal thought so. The House of Lords held that the sale pursuant to a court order which was expressly without prejudice to the parties’ rights did not take away the right to relief but shifted the parties’ rights from the property to the proceeds of sale.

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What is ‘property’?

September 9, 2010

Gray and Gray discuss the philosophical question as to the meaning of property as part of their discussion of the proprietary / non-proprietary divide (Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), pp86  – 114).

For those with a taste for theory, this discussion is worth reading; it combines fine writing with what seem to me to be real insights into the nature of property. I can’t do justice to the discussion in a blog post but can give a flavour as to what they have to say.

They argue that three features lie at the heart of the social institution of property:

  • immunity from summary cancellation or extinguishment;
  • presumptive entitlement to exclude others; and
  • entitlement to prioritise resource values

(Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), p. 99)

In other words, when you own something you don’t expect the state to take it away from you unless there is a very good reason (based on the demands of the common good) for doing so. Even then, fair compensation should be paid. You expect the law to prevent others from infringing your property rights. Finally, the property owner gets to decide on the use to which the property is put.

In the absence of a robust protection for these three features of property law a chaos of the commons is likely to arise. The chaos of the commons refers to the situation where resources (such as land) can be used by anyone and no-one has a duty or an incentive to look after them. The result is likely to be damaging exploitation of the resource. Perhaps the evolving idea of environmental protection and our appreciation of the harm that has been done in the marine environment illustrate the point.

Still on the first of the three core features of the concept of property, they discuss the idea of ‘takings’ by the state. This can be for some genuine public purpose. They also talk about the danger of the state taking property from one private person to give it to another:

‘One of the pressing questions of the future is whether the state can really demand to purchase anything it wants from any citizen-owner and then transfer it to some other person or corporation who may supposedly make higher or better use of the asset in question. If this were ever so, private property would have become simply a mush of social and economic resource to be reallocated at will by the state.’ (Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), p. 101)

One of the central ideas in Gray and Gray’s discussion is that ‘property’ is not an absolute concept but rather that it is relative. There are degrees of ‘propertiness’. They argue that property is ‘a relationship of socially permissible control.’ (Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), p. 90) Some property rights give more control while others, although still amounting to property, confer a lesser degree of control. The lease and the easement are each types of property but the former gives more extensive control over the relevant land. Sometimes, the degree of control conferred is so low that the right or privilege is not thought of as property; the licence is the prime example.

How does this philosophical discussion tie into the law’s understanding of property? The authors point out that there is a need to distinguish between the legal and the philosophical approaches to the question. A philosophical analysis of property, they suggest, requires us to think of a spectrum of propertiness. A legal system, however, cannot work like this. The law has to be clear about what counts as property and about the rights and duties of the property owner. This order and certainty is also vital to the working of a market economy. (Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), p. 107)

The authors point to the human dimension of property ownership (surely this human dimension is really the real source of our understanding of the idea of property):

‘To have property in land is not merely to allege some physical affinity with a particular piece of land, but rather to stake out a claim to the legitimacy of one’s personal space in this land … To have ‘property’ in land connotes, ultimately, a deeply instinctive, self-affirming sense of belonging, control and domain.’  (Kevin Gray and Susan Frances Gray, Elements of land law, (5th ed), (Oxford, Oxford University Press, 2009), p. 105)

The authors suggest that there has been a shift in our understanding of the degree of socially permissible control that is conferred by land ownership. They contrast an older ‘absolute’ notion of property ownership with a more ‘relative’ notion of property ownership. The former approach (typifed by Bradford Corporation v Pickles [1895] AC 587)  allows property owners to exert total control over the use to which land is put, no matter what the consequences for others. The relative approach insists that private ownership be made compatible with broader societal interests. They suggest that the relative approach to property is gaining ground (through environmental and planning legislation for example).