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LAWS3113 - Lecture 3 - Week 3 Equitable Property Interests Equitable Interests Equitable interest means an interest that a court of equity

y will recognise & protect Dont always need to have both a legal estate & an equitable estate in each item of property (Commissioner of Stamp Duties v Livingston) o In Livingston, equity did not consist of EPR, but merely of personal right against executor of estate Classification of Equitable Interests Different categories:o Equitable proprietary interest o Mere equity o Personal equity Equitable Proprietary Interest / Equitable Estate o Equitable estate means an equitable interest that is proprietary in nature (rights in rem) o Key characteristics alienable, transferrable, can be left in a will o E.g. beneficiarys interest in fixed trust, equitable mortgages & charges o DKLR Holdings v Cmnr of Stamp Duties Absolute owner in fee simple does not hold two estates, a legal estate & an equitable estate - she holds only the legal estate, with all rights & incidents that attach to that estate o Livingston v Commissioner for Stamp Duties Facts Under Livingstons will, his widow was beneficiary of 1/3 of his property in Queensland Question Whether at time of widows death, the widow had an equitable proprietary interest in the Qld property Held HCA Fullagar J (Menzies J agreeing) majority o Widow had equitable interest in assets giving her right to enforce proper administration (but NOT proprietary) Dixon CJ (Windeyer J agreeing) - dissent o Widow had beneficial interest in property in Queensland o Dixon CJ rejected argument that beneficial interest in assets was not vested in anyone while estate was being administered Held Privy Council (disagreed with decision of Dixon CJ) Viscount Radcliffe Law does not requires the existence of two kinds of interests in property (equitable & legal)

During period of administration, all property is vested in the executor - executor therefore has legal title to that property Court doesnt need to find that beneficiary has equitable interest in property in order to protect the rights of the beneficiary Widow DIDNT have an equitable proprietary interest o Instead, she had a chose in action - right to go to court to insist upon proper administration of the estate personal equity

Mere Equity o Originated in Phillips v Phillips o Equitable interest that is less than an equitable estate but more than a personal right of action against a person Less than equitable estate assertion of right in property requires taking of court proceedings to seek an equitable remedy More than a personal right of action effect of court proceedings is to restore property right to claimant o Mere equity is capable of transfer to a third party o Latec Investments Pty Ltd v Hotel Terrigal Nature of mere equity Right to seek equitable relief Right to rescind transaction OR attain rectification for a mistake Facts Latec was mortgagee of land owned by Hotel Terrigal HT had failed to keep up repayments under the mortgage L exercised its power of sale as mortgagee L sold property to Southern Hotels - wholly-owned subsidiary - for a much reduced price (later held to be fraudulent) therefore HT had a right to rescind the sale SH gave MLC Nominees a floating charge over all their assets (no notice of wrongful sale) Five years later, HT tried to have transaction set aside on basis of fraud equity of defrauded vendor (or mortgagor) is the right to set aside the fraudulent conveyance once the mortgage is set aside, this revives the equity of redemption HT was willing to pay arrears on mortgage (he who seeks equity must do equity) Two entities claiming equitable interest in property - HT & MLC Nominees - two competing innocent parties Held - Kitto & Menzies JJ HT did not have equitable interest - had mere equity MLC had acquired an EPR for value without notice HCA amended order of NSWSC - HT could redeem its equity of redemption only subject to rights of MLC (security obtained)

Particularly because HT had taken so long to vindicate its rights

Personal equity o Right to seek equitable relief - cannot lead to acquiring a proprietary right - cannot assign the personal right o E.g. right to rescind a contract for innocent misrepresentation (Gross v Lewis Hillman) only available against party who made the misrepresentation o E.g. beneficiary under a discretionary trust Kennon v Spry Person falling under class of object under a discretionary trust doesnt have a proprietary interest in the trust assets - trustee has wide discretion Object only has a mere expectancy or hope that one day the power will be exercised in the objects favour Object of discretionary trustees power has certain rights, including a right in equity to due administration of the trust, right to bona fide exercise of discretion, right to obtain information etc. Trustee owes a fiduciary duty to the object to consider where & in what way she should exercise the power o E.g. interest of residual beneficiary in an un-administered estate Right to due administration of estate (Commissioner of Stamp Duties v Livingston)

Creation of Equitable Interests Creation by implication o E.g. vendors equitable lien (Hewett v Court) Where vendor has not been paid for property but purchaser has taken possession In Queensland, vendor's ELs have been abolished by statute (s191 Land Title Act) o E.g. purchasers equitable lien Purchaser of real estate has lien over deposit, which is exercisable on event that contract is terminated for reasons other than purchasers breach of contract o E.g. constructive trustee (Lysaght v Edwards, approved in KLDE Pty Ltd v Cmnr of Stamp Duties (Qld)) Vendor is constructive trustee where: Purchaser who has paid consideration AND Contract where specific performance would be available (i.e. where damages at law would be inadequate) Principal right of purchaser is to obtain specific performance Equity will restrain the vendor from dealing with the land contrary to the purchasers interests KLDE Pty Ltd v Cmnr of Stamp Duties Facts o Shia Holdings Aust had agreed to purchase land from KLDE for $800,000 o KLDE was then wound up, its assets were sold & distributed to its sole shareholder o

Issue o Whether beneficiary ownership of land passed to Shia Holdings (which later became KLDE) Held o Moment you have a valid contract for sale, vendor becomes, in equity, constructive trustee o Beneficial ownership passes to purchaser, vendor having a right to purchase money, a charge/lien on estate for security of purchase money & right to retain possession of estate until purchase money is paid