Usufruct – Not A Pokémon

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Every now and then a vestige of the past pokes its head up in correspondence or pleadings and my reaction is usually either “Hey, good for you…nice word!” or “…tosser…”.

In this instance I chose neither option and instead turned to Google so I could Bing the word in order to know which reaction was appropriate.

What is Usufruct?

Usufruct is a term from Roman Law that is the right to use someone else’s property as long as that use does not destroy or deplete the property. Usufructuary rights can be granted individually or to groups such as a timeshare arrangement where each individual member of the group can use the house seperate of the other members but holds an obligation not to damage the house.

Usufructuary rights can be granted for any amount of time such as a life estate in property, where ownership never changes hands but that persons right to use the property is irrevocable for the term of their life.

As opposed to ownership rights the usufructuary cannot sell (alienate) the property but under some circumstances they can sell or lease their interest. The usufructuary is able to sue for relief if their rights are infringed by the owner or otherwise.

Origins

Usufructory: Usus = a use. Fructus = Fruit.

The Latin term meant literally that a person was entitled to a use of and the fruits of property or fair use and enjoyment, which should sound similar to anyone renting a property. Roman Law distinguished between usus and abusus; which was the right to sell, give or destroy property, as is usually associated with true ownership.

There were several different types of usufructuary rights including fructus industriales such as crops growing on someone’s land and is similiar to fructus naturales such as a river running through property or the naturally inhabiting wildlife. The Romans also extended fructus naturales to the human slaves which naturally came with the property, because of course. Other usufructuary rights included fructus civiles such as rights which were legally occurring like loan interest. Even more:

  • Fructus consumpti – the right to consume recurring fruits which can be consumed without destroying the means of production, such as an apple off a tree.
  • Fructus extantes – a general term for fruits which cannot be consumed such as the right to harvest crops, but harvested only to deliver them to the owner. A right to mine land on behalf of the owner for a fee for example, like a contractor.
  • Fructus pendentes – fruits not separated from the means, such as the right to apples only once they fall from the tree but not whilst they are Fructus pendentes (pending fruits).
  • Fructus percepti – the opposite of pendentes, being the right to harvest the fruit and retain.
  • Fructus percipiendi – fruits which have not been produced but should have. Keeping with the apple analogy, buying the right to trees and the trees don’t produce fruit. This would create a right to recover the equivalent that should have been produced.
  • Fructus separati – fruits separated from the object which produced them (e.g. berries gathered from a tree)

(Walter G Robillard, Browns Boundary Control and Legal Principles, 6th Edition, CTI Reviews, online)

Usufructuary rights is one of the oldest legal principles in existence and was recorded in both the Code of Hammurabi the Law of Moses. The Law of Moses created a charitable usufructuary right where landowners would leave a small percentage of their crop unharvested for the collection and use of the poor.

What is it now?

There remains types of usufructuary laws in Australia, but they are more commonly known by other names such as life estates or certain types of resource leasing.

Dickerson v The Grand Junction Canal Company, 9 E. L. & Eq., 520 for example dealt with a landowner having rights to draw water from a stream. The question arose as to whether that right extended to a subterranean water course. As the usufructuary rights related to riparian rights (water) it was decided that the right to a subterranean course must naturally flow (pun intended) to the legal rights holder of the surface stream, whether those rights are total or usufructuary.

The idea of usufructuary has also been used in political philosophy and organisation such as usufructuary rights evolving in Europe as a version of collective ownership. Marx in Capital (ch 27) discussed the destruction of the traditional agrarian community farming during the late fourteenth and early fifteenth centuries towards a newer, more capitalised model of complete ownership and servitude:

“The vast majority of the population was made up of […] free peasants cultivating their own lands, regardless of the feudal obligations that were attached to their rights of ownership. […]. As for day labourers, “as well as their wages, they were given a concession of at least a four-acre field; […] in addition, along with the peasants in the strict sense of the term, they enjoyed the usufruct of communal property, where they could graze their cattle and provide themselves with wood, turf, etc. for heating.”

Léon Bourgeois in his book Solidarité takes the idea in the direction of a general duty to act in the interest of future generations in all regards including politically, culturally, environmentally and so on, evoking more of a stewardship model of collective action:

“It was for the benefit of all those called to life that those who have died created this capital of ideas, forces and aids. Consequently, it is for the sake of those who will come after us that we have inherited from our ancestors the responsibility for paying this debt […] Each generation that follows can truly consider itself to be a usufructuary of this inheritance: it only has the right to hold on to it on condition that it preserves it and faithfully passes it on.”

When Remote Evidence May Be Given

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With the modern nature of the law it’s common for lawyers or their witnesses/clients to be unable to actually appear in person. Usually the courts or tribunals are pretty accomodating about the use of AV equipment, but not always.

Whether you’re called out of town, sitting on a beach or appearing in another state there are numerous reasons that you are unable to appear in person. In the instances of criminal trials it’s often more important that the jury is able to examine the witness in person. Each matter and each particular witness and their evidence will determine whether the court will allow people to present their evidence or make their appearance remotely.

Power of Court to Allow Remote Evidence 

The general power of the court to allow for remote evidence is a purely discretionary one. However there are general principles that have been set out which guide the exercise of this discretion. These could broadly be characterised as:

  • the Court will allow evidence to be given remotely when the facilities are available;
  • when it is more convenient; and
  • when there is no prejudice or that it would not be unfair.

The core power of the court stems from its inherent jurisdiction to determine the manner and means under which it considers appropriate to receive evidence. Inherent jurisdiction is of course subject to legislation. The Evidence (Miscellaneous Provisions) Act 1991 (ACT) sets out the same three factors as above at section 20(2).

The Evidence (Miscellaneous Provisions) Act was essentially designed to plug procedural holes in the Evidence Act, especially those that may evolve over time with the advancement of technology without needing to mess with the loftier goals of the Evidence Act. This includes remote audio visual provision of evidence, the ability to swear an oath without a bible, and pre-recorded evidence.

Further to the Act, the Court Procedures Rules 2006 (ACT) provides for these allowances with rules 6700-6704, including rule 6703 which governs when evidence can be given by telephone and states that:

(1)     The court may receive evidence or submissions by telephone, video link or another form of communication in a proceeding.

Further, at subs(2) the rules allow for the court to impose any conditions on this that the court considers appropriate.

Considerations

Leading judgment in the ACT contains considerations that fell from Higgins CJ in Brodie v Streeter [2003] ACTSC 88:

9. The appellant, opposing the application, pointed out that the court itself had facilities to aid the hearing impaired. As to the second ground, …”more convenient” related to the adducing of the evidence not the convenience of the witness. For example, it may be “more convenient” to give evidence remotely by video link if the witness could not, without undue difficulty and expense, be brought to the courtroom. A prisoner at a remand centre, or a medical witness in a different city were examples given.

10. That interpretation is consistent with the objectives stated by the then Attorney-General, Mr Humphries, on 18 February 1999, introducing a Bill (inter alia) to enact s 30 (supra).

This decision has been re-affirmed several times including recently in R v BNS [2016] ACTSC 51 where the court held that:

12. The Respondent submitted that the witness’s evidence could not be given “more conveniently” from a remote location by video link. His Honour rejected the argument, saying at 179: [14]-[17]:

    1. Her Worship adopted a wide interpretation of ‘more convenient’. Clearly, the witness in this case was not more conveniently located in a remote witness room as opposed to being located in the courtroom. She could equally conveniently access either.
    2. The dictionary definition, adopted by her Worship, is in terms of suitability – being ‘not troublesome’ to a person. It seems to me that ‘more convenient’ is an expression used in a wide sense to include the convenience of the court, the parties and the witness in question.
    3. In the present case, it was, in my view, open to her Worship, on the evidence, to find that the witness’ stated aversion to the appellant, whether reasonably based or not, made it ‘more convenient’ for her to give the evidence remotely.
    4. It was also more convenient for the court to have the evidence given free from the stated inhibitions troubling the witness. Indeed, to an extent, it would favour the appellant that, if the witness’ evidence was nevertheless unsatisfactory, that could not be attributed to the inhibiting presence of the appellant.

The right to appear remotely will more likely be granted when the nature of the evidence to be given does not require the witness to analysed on their personality. Most cases that reject the provision of evidence remotely are related to criminal trials where it may be unfair for the jury to not have the opportunity to examine the demeanour of the person. In Brodie this was rejected because it was at the interlocutory stage but I note that this consideration led to this application of the test being rejected in several cases including in In the matter of an application by the Director of Public Prosecutions [2010] ACTSC 138:

4. On the other hand, as Mr Kukulies-Smith has pointed out, he is one of the major Crown witnesses, indeed the primary witness in relation to the case against HK. His demeanour will be central to the acceptance of his evidence by the jury and there is every likelihood that he will be asked to demonstrate particular features of the activities of the night in question, during the course of his evidence. This can create significant difficulties over the audio/visual link, and certainly lacks immediacy for the jury.

Conclusion

To reiterate the original 3 points the evidence must be able to be given by the facilities available, be convenient to the giving of the evidence and that there will be no prejudice to the party not relying on the evidence. If these conditions can be satisfied there should be no reason, if given that the excuse is genuine, that a lawyer or witness should not be able to appear remotely.

Partnership Obligations Surviving Retirement

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Partnerships are an odd form of association. All of your debts and fortunes are your partners and vice versa. It should certainly be enough to give anyone pause before accepting to enter into a partnership with someone.

But partners retire, relationships go sour and people hit hard times. So what obligations, duties and also entitlements survive termination? Taking a leaf out of Buzzfeed’s books, let me tell you that the answer may surprise you.

A situation recently arose where a retiring partner refused to sign documents that would have put the partnerships affairs in order. The retiring partner was claiming an entitlement but refused to acknowledge any surviving duties. Putting aside the operation of any partnership deed, which will usually include some sort of duty of good faith (even though this is implied in law), it may be instructive to assess the law as abstract from any specific circumstances.

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Partner’s Duties

Partners are required to act in a manner just and faithful towards one another, including a duty to produce due and fair accounts, more on this later. (Lindley & Banks on Partnership 19th Ed. (2010) pp 234-5.) Further to this, they must act in a manner that is in the utmost good faith and in accordance with their fiduciary duty. (Lindley & Banks, pp552-561; Bean Fiduciary Obligations & Joint Ventures (1995) p 143 and pp185- 196)

Upon retirement, the Partnership Act 1963 (ACT) provides in statute with section 21(3):

“A partner who retires from a firm other than an incorporated limited partnership does not by that retirement alone stop being liable for the firm’s debts and obligations incurred before the partner’s retirement.”

Also at section 44 that:

(1) After the dissolution of a partnership, the authority of each partner to bind the firm and the other rights and obligations of the partners continue, despite the dissolution, so far as necessary to wind up the affairs of the firm or to complete transactions started but unfinished at the time the partnership is dissolved, but not otherwise.

Turnbull & Abbott

Case Law

The answer to the titular question is essentially twofold: the obligations survive as far as is necessary to give a full accounting and wind up the partnership, and (linked to the first branch) a partner is restricted from taking advantage of a benefit that arose under the partnership and therefore should have been included in the accounting.

Chan v Zacharia 154 CLR 178 is the seminal case and concerns a partner who refused to sign a lease renewal on behalf of the partnerships so that he could take personal advantage of it.

  1. “… After the dissolution, the obligations of the partners continued so far as was necessary to wind up the affairs of the partnership…In those circumstances the obligation of “perfect fairness and good faith” which is owed by one partner to another continued: see Lindley on Partnership 14th ed. (1979), at p 430. 

…each of the former partners owes the same obligation to the other former partner in respect of that interest as he did while the leasehold interest remained the partnership property …”. That statement is, in my respectful opinion, correct if it is understood to be limited to the case of a partnership which has not been completely wound up…”

This was further approved in John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 in which a partner was determined to not only not take benefit (sorry for the double negative) but actively take positive steps to  “to finalise their obligations by working out ‘who owed what to whom’” [313]

Chan further at [21]:

“The relationship between the partners was curtailed and altered by the dissolution of the partnership. It did not however cease. In particular, and with the exception of the “goodwill” of the practice, each doctor, by reason of his position as a former partner, remained under fiduciary obligations in respect of the partnership property which was to be realized [sic] and applied in paying or discharging partnership debts and liabilities and the expenses of and incidental to the winding up of the partnership affairs…Notwithstanding the dissolution of the partnership, “the good faith and honourable conduct due” from each partner to the other persisted for the purposes of winding up the affairs of the partnership and each partner remained under a fiduciary obligation to co-operate in and act consistently with the agreed procedure for the realization [sic], application and distribution of partnership property”

This position has been affirmed in the Territory primarily in Re Ravinder Rohini Pty Ltd and Janak Raj Sharma v Ivan Krizaic [1991] FCA 318 and also notably in another High Court decision United Dominions Corporation Ltd v Brian Pty Ltd (1986) 157 CLR 1. 

It should also be noted that the same duties can be inferred into joint ventures and other situations where fiduciary obligations can be implied.

So what does that mean?

Well, it means that once a partner retires, he must still act as though he is in the partnership until such a time as a full accounting is taken and distributed of all aspects of the partnership.

This duty extends to taking proactive steps to avoid losses caused to the partnerships through your actions or omissions and alternatively your partners owe you the same duty; to effectively and efficiently do everything they can to secure the release of the retiring partner.

Death?

The same. Section 38 of the Partnership Act, provides that the death of a partner will be treated the same as any other form of dissolution. The same rights of the partner to be paid for their share accrue to their estate.

Debts are a little more complicated, but essentially they operate in the same way except that the debts of the dead partner owing to the partnership must take second priority to any other personal debts directly owing from the dead partner’s estate. [section 13]