Personal property is distinguished at common law from real property. The importance of the distinction has reduced over time. Prior to 1959, there were different rules on succession for each type of property, which had profound consequences. The distinction is still of great practical significance, in several other contexts.
Real property comprises land and fixtures, including in particular buildings and other fixed structures on land. Certain things which are closely associated with the land are classified as real property. Some such things remain real property, at least for certain purposes.
Chattels, movables, goods and personal property are subject to different rules to real property for many purposes. These terms have broadly the same meaning for present purposes and are used interchangeably here
Interests in Goods
It is not possible to create multiple interests in movable goods to the same extent as is the case with immovable property, (i.e. land and buildings). However different interest in goods may be granted and may arise. Different parties may hold different interests and security rights in the same goods, albeit not to the same extent as may subsist in land.
The golden rule of property law is that the purchaser of a legal interest in the property, without notice of an equitable interest or other equitable claim to it, takes free of those rights, interests and claims.
Where a person with good title sells or mortgages goods, the first purchaser generally obtains good title. A transfer of legal title in goods may be effected by an instrument of transfer or by “delivery” (in the legal sense). This usually requires a physical delivery of possession. Most equitable and minor legal interest in the property require the retention of possession in order to assert them or to prevent them from being destroyed by a sale to a third party without notice of them.
Co-ownership may exist in personal property. It is possible for two or more persons to have concurrent ownership in goods. The owners may be joint owners or owners in common. The general principle of survivorship applies to joint owners. Tenants in common own distinct shares.
Where a number of persons own the same goods, each is entitled to possession of them.As with land, it is possible to have tenants in common and joint tenants of goods. Joint tenant takes on the debt of the other joint tenant. Tenants in common shares go to their personal representatives and beneficiaries
A co-owner will be liable in conversion if he excludes his fellow co-owners from the co-owned movable property. However, he may not be liable in conversion merely because he makes use of it in a reasonable way, takes it and in some cases even sell it, provided that he accounts to his co-owner for the proceeds.
The principles in relation to joint ownership and tenancy in common in respect of goods are broadly similar to those for land. The legal and equitable rules differ slightly. The equitable rules take precedence.
A joint tenancy in personal property may be severed and thereafter become a tenancy in common. Severance may occur by assignment or agreement for assignment by one joint owner. In the case of a chose in action, severance may operate in equity only.
Where persons are interested in undivided interest in personal property, they may apply to the court for an order for the division or sale of the property. See generally the sections on co-ownership in the context of real property.
Nature of Property Rights
A key feature of property rights is that they hold good against third parties, and in the case of absolute owners and those with the best title, against all third parties. Legal actions resolve disputes between two parties so that in this sense, rights are relative. If a person with better rights asserts title, then he may take precedence. A person who is in a position to defend his title against all comers is an absolute owner.
A person in possession of property may assert his rights against all others, except those who can establish a better title. A third party cannot challenge the possessor’s title with reference to a third party’s better title. Only the third party himself may assert this better title in a civil action, against the person in possession. A person whose title derives from crime may be deprived of property under the criminal law.
Property Tort and Contract
Property rights are protected by the law of torts (civil wrongs). There are civil claims which protect against interference with property. A claim of negligence may be made in relation to property damage. Direct interference with property may be the subject of a trespass claim. There are rights, in some cases to recover specific items. In other cases, a right to damages (compensation) only, is available for the loss of the goods.
Generally, it is not possible to impose restrictive covenants and obligations which are binding on the goods. Rights which restrict what may be done with goods may be imposed by contractual obligation, but they will not generally be binding on subsequent owners.
Questions arise in some cases, in relation to the boundary between property law and contract. Certain types of contract rights may be asserted by injunction or specific performance. In this case, the third party is effectively bound by the right. It does not follow, however, that the rights concerned are necessarily property rights, in the wider sense set out in this article.
Property Interests in Goods
Most tangible things are capable of being the subject of property rights. Full ownership of goods, entails the right to immediate possession, the right to sell, dispose of, transfer and destroy the goods.
At common law, property rights in goods consisted of full ownership and special property rights, such as security rights under a pledge. To a limited extent, lesser rights may subsist, concurrently in goods.
A third-party may have security rights in goods, to secure the payment of money or the performance of an obligation. Goods may be mortgaged, which requires a transfer legal title. The owner’s right of redemption is equitable.
Goods may be hired or leased. In this case, the owner parts with possession to another who is let / leased rights to the goods. The lessee’s rights are enjoyed in accordance with the contract of hire or lease.
In equity, goods may be held under a trust.
Equitable Rights and Interests
Until the recent Land and Conveyancing Law Reform Acts, it was possible to create a number of legal estates and interests in land. The reform legislation has limited the types of legal estates which may be created. Most lesser rights in goods may now only subsist as equitable interests under a trust
It is not possible to create multiple legal interests in movable property (goods). However, it may be possible to create equivalent equitable interests in them. Goods may be held in trust. The person who is the legal owner has obligations under the trust to the beneficiaries to manage and exercise the rights over the goods or other property for the benefit of the beneficiaries in accordance with the terms of the trust. (See the chapters on trusts and equitable rights).
As with real property/land, the approach of law and equity to moveable property differs in some significant respects. Where there is a difference, the equitable rules will be given effect. Equitable rules and remedies are subject to important limitations, which are set out in other sections. In particular, equitable rights may be lost, where innocent third parties purchase the property. Equitable remedies are discretionary. In contrast to legal remedies, they are not available as of right.
Equitable Interests in Personal Property
Generally, it is not possible to have successive legal ownership in movable items. It is possible to have equitable ownership under a trust with successive ownership.
Equitable interests in movable property, including equitable mortgages may be created to a certain extent. Movable property may be held in trust, thereby creating an equitable interest in the beneficiaries. To some extent, successive equitable interests in movable property may be created by a declaration of trust.
A trust may be created by a disposition made during lifetime or by a will. The legal ownership remains vested in the legal owner. The terms of the instrument define the interests of the beneficiaries. There is considerable scope and freedom to define the terms of the trust.
Equitable interests in personal property were subject to restrictions under perpetuities rules. These rules were abolished in 2009. There are other limitations on the effectiveness of trusts of movable property, which result from various statutory and common law principles relating to movable property.
Enforcement and Loss of Equitable Interests
The courts of equity allow actions to be taken for specific performance of a contract for the sale of real property. The Sale of Goods Act allows a court to direct that a contract be performed and that specific goods be delivered. Courts may have powers to order specific restitution of goods.
The courts of equity have discretion in relation to making an award of specific performance and specific delivery of goods. Real property is always regarded as unique. If a movable item is a common article of commerce, specific delivery or restitution may be refused.
Equitable rights may be lost when the asset is sold for full value to a person without notice of them. As with land, the equitable owner may in effect lose the title. He may have a right of action to redress the wrong concerned against the party who has disposed of the asset in breach of his rights. In contrast, legal rights hold good, even against innocent third parties who acquire the goods in good faith and for value.
Proprietary Rights of Recovery
Property rights may arise from the breach of a contract for the sale or transfer of goods. Where property or goods are sold, and there is a flaw in the contract, such as undue influence, duress or mistake, the person affected, may have a right to reclaim the property. The transfer of property under the contract may be suspended or reversed, by a breach of contract.
Where trust assets have been taken in breach of trust, it may be possible to recover them, even in the hands of the innocent third party. The so-called “tracing right” is a proprietary right to reclaim the goods.
Where things are mixed up, so that they are no longer distinguishable, such as with liquids, corn, logs, then accession does not apply. Where this occurs by accident, agreement or the act a third party which is unauthorised, there is a common ownership in the respective shares of the components owned by the owners of the underlying materials. Where, however, a person wilfully causes or allows his assets or property to be mixed with another’s without the other’s knowledge or consent, the whole belongs to the other.
If the above rules would lead to injustice, different principles may apply. If a small portion of the goods of one person is mixed with a larger portion of goods of the latter, by the latter’s negligence, it is likely that recovery for conversion of the small part will be allowed. The owner of the small part may become the owner of the whole.
Manufacturing Mixing and Wrongdoing
When a thing is changed from one type of thing to another, such as by grape being made into wine or bread from wheat or barley etc., the person who undertakes the operation is presumed to become owner. The previous goods cease to exist.
This principle does not apply to cases of fraud or wrongdoing. The person who undertakes the operation may be liable in conversion to the owner of the ingredients for the value of the goods converted, regardless of fraud or wrongdoing.
Where there is an addition to stolen property, the true owner on recovery may reclaim the benefit of the addition by accession. Under this approach, the accession to property stolen by a wrongdoer passes to the true owner. If, however, a bona fide purchaser or other innocent third-party has purchased the thing, the courts may favour that party.
Mortgages of Goods
The legal owner may retain possession of goods and grant a third party a legal or equitable mortgage or charge over them. A legal charge will bind third parties and is outside the above principle, that a bona fide purchaser without notice may take free of an equitable interest in the the goods. The interest is not equitable.
A mortgage or charge by a company must be registered in the Companies Registration Office within 21 days in order to be enforceable against all parties. A legal mortgage or charge over goods by a person requires registration as a Bill of Sale.
In practice, the Bill of Sale legislation is difficult to comply with. Registration is not required where the mortgagee takes possession. Registration as a bill of sale is not required where title to the goods was never held by the chargor. These exceptions explain why security over goods is commonly given by way of retention of possession under a pledge or a lien or by way of a seller retaining title to goods.
Where a transfer of property is effected by a document, it is required to be registered as a bill of sale. The first registered takes priority. If one disposition requires registration as a bill of sale, but the other does not, the first in time prevails. In the cases of a charge over goods by a company, first registration in the Companies Registrations Office gives priority over another registerable charge. It may also give notice to third parties that there is a security interest in the goods. This is subject to any other system of priorty that might apply to that type of property,
Possessory Security or Power of Sale
A pledgee must retain the goods in order to preserve the pledge. Therefore, it will rarely happen that the true owner will attempt to sell the goods, as he does not possess them and is unable to deliver them. If he did succeed in selling the goods, the interest sold would be generally subject to the pledge.
A lien involves a right of retention of goods, commonly for work or services done in relation to the goods. Liens arise at common law and may also arise by statute or the terms of the contract. It is usually security for sums due for the work done. Questions may arise as to the extent of the debt covered. A right of sale may usually be exercised in order to realise the sum due
Where a person is under an obligation to sell land or goods, equity may regard what is agreed to be done, as done. In the case of the sale of land, equity may regard the entitlement of the vendor as monies and the entitlement of the purchaser as land. This accords with the principle that the purchaser has an interest in the land. In this context, assets are regarded as transformed or converted from one form to another.
Formerly, the principle of conversion was of greater significance, particularly in the context of property and succession law. This differs from the separate notion of conversion as a tort / civil wrong.
The principle of conversion is still relevant in various contexts. Where a person holds monies and is under an obligation to invest them in property (typically under a will or trust), it is regarded as real property. Trusts under which a person is obliged to either purchase or dispose of land may be regarded as converted from the outset.
The principle of conversion also arises in the context of intangible rights. Intangible assets are choses in action. A common example is the right of a partner in the partnership to an account of the net proceeds of the partnership on winding up. His interest is not treated as an interest in the partnership property, but as an interest in the ultimate fund, as ascertained on winding up.
References and Sources
Modern law of personal property in England and Ireland 1989 Bell
Consumer Law Rights & Regulation 014 Donnelly & White
Commercial Law White 2012 2nd ed
Commercial & Economic Law in Ireland 2011 White
Commercial Law 2015 Forde 3rd ed
Irish Commercial Precedents (Looseleaf)
Commercial & Consumer Law: Annotated Statutes 2000 O’Reilly
Personal Property Law: Text and Materials 2000 Sarah Worthington
Personal Property Law (Clarendon Law Series) 2015 Michael Bridge
The Law of Personal Property 2017 Professor Michael Bridge and Prof. Louise Gullifer
The Principles of Personal Property Law 2017 Duncan Sheehan
Crossley Vaines on Personal Property 1967 by J C Vaines
The Law of Bills of Sale 2017 James Weir
Palmer on Bailment 2009 Norman Palmer
The Reform of UK Personal Property Security Law: Comparative Perspectives 2012 John de Lacy
The Law of Personal Property Security 2007 Hugh Beale and Michael Bridge