Choice of Law in Property (L21/22)

Question 1

How does IPL classify property differently from Scots and English domestic law?

Answer 1

Scots domestic law.
- Heritable and moveable.
English domestic law.
- Real property and personal property.
International private law.
- Immoveable and moveable (corporeal/tangible – or – incorporeal/intangible).

Why an IPL classification?
A common universal basis for disputes with a foreign element.
A natural/physical classification, which avoids the quirks of domestic law.

Question 2

Which law is used to classify property as moveable or immoveable?

Answer 2

Lex situs: the law of the place where the property in question is situated.
Re moveable property: lex loci rei sitae.

Question 3

How does Macdonald v Macdonald (1932) show the importance of the situs in determining the classification of property?

Answer 3

‘ … the law of the asset’s situation must determine whether it is moveable or immoveable’ – per Lord Tomlin.

Macdonald was Scottish domiciliary, died, survived by wife and daughter. Owned property in Canada.
His will said that his estate should do to his wife.
Daughter wanted to act on her ‘legal rights’, which only apply to moveable property.

Was this moveable?
The right was as a creditor to a mortgage on immoveable land. Court held the characterisation was to be done by the law of that Canadian Province.
Canadian law stated the property was immoveable, so the daughter had no claim.

Question 4

How does Islamic Republic of Iran v Berend [2007] demonstrate an exception to the rule in Macdonald?

Answer 4

Object was ancient part of a building, traded as an antiquity.
Parties agreed to treat the item as moveable.
Court accepted this.

Question 5

What law determines the alienability of property?

Answer 5

Lex situs/lex loci rei sitae determines whether property can be transferred.

Duc de Frias v Pichon (1885).
Marketability of ancient sacred vessels stolen from a Spanish monestry. Silver challaces. The items were taken from Spain to France. Sold on in France.
According to Spanish law, the fact that they were sacred means they couldn’t be sold. This was not the case under French law.
Because they were in France at the time of sale, their alienability is to be determined under French law.

Question 6

What law governs transfers of immoveable property?

Answer 6

Governing law: lex situs.
Note: this is consistent with CJJA rule on exclusive jurisdiction in civil and commercial matters.

Question 7

What distinction must be made when looking at transfers of immoveable property?

Answer 7

Distinguish between:
An agreement to transfer land (cf missives).
An actual transfer of land (cf disposition).

Question 8

What does Rome I say about the law governing transfers of immovable property?

Answer 8

Art 4.1.c.
Contract relating to a right in rem … applicable law shall be law of country where property is situated. But rule is subject to art 4.3 displacement.

Question 9

What does Bank of Africa Limited v Cohen [1909] tell us about the importance of the lex situs to capacity to transfer immoveables?

Answer 9

Cohen was an English woman. Wanted to grant a security interest in favour of the South African bank, over land that she owned in Johannasberg. She was giving this security because the bank had made a loan to her husband.

Under South African law at the time, a woman could not act as her husband’s guarantor. She knew this and instructed her attorney to renounce those rights for her. Security was granted. Mr Cohen defaulted on his payments. The bank then wanted to realise its security against Mrs Cohen.

Centres on her capacity.
It is for the lex situs to determine the capacity. The renunciation of her rights was not valid because it was not lawful under South African law. Bank argued her capacity should have been governed by her own law, of England. Usually this is the case.

Shows the strength of the situs rule.

Question 10

What formal validity requirements must be met for a transfer of immovable property?

Answer 10

Rome I Regulation, art 11.5.
Mandatory requirements of lex situs.
Proprietary rights and rights in security (i.e the actual transfer of property interests): lex situs is governing law.

Question 11

What is the law governing transfers of corporeal moveable property?

Answer 11

Lex situs rule: the law of the place where the object is/was situated at the time of the transaction in question (i.e. when ownership is alleged to have passed).
- Macmillan Inc. v Bishopsgate Investment Trust plc (No. 3) [1996].

What is reasonable for someone taking title to property.
- In re Anziani [1930].

Question 12

Contractual rights and proprietary rights for corporeal moveable property are governed by what law?

Answer 12

Contractual rights (personal rights).
If parties agree to a transaction in the future, this is governed by choice of law in contract.
Determined by the contractual governing law (applicable law per Rome I Regulation).

Proprietary rights (real rights).
To determine which party has the good right to the property.
Determined by the lex situs (lex loci rei sitae) at time of the transaction in question.

Question 13

Cammell v Sewell (1860) shows the origin of the situs rule. What are the facts of this case?

Answer 13

Ship carrying timber from Russia to England.
Ship suffered a shipwreck off the coast of Norway, timber rescued by the ship’s captain.
Timber belonging to an Englishman was rescued and sold at auction in Norway, sold to the British Vice Console there.
He then sold it onwards to a subsequent (good faith) purchaser, who took the timber to England.
Claim at court by the original owner against the subsequent purchaser.

Question 14

Cammell v Sewell (1860) shows the origin of the situs rule. What was decided in this case?

Answer 14

English court looked at the transactions in Norway.
At the time when the title was first said to be passed, by Norwegian law, those were valid sales.
This means the title taken by the purchaser was good by Norwegian law, and so it is recognised in the UK.

“If personal chattels are sold in a manner binding according to the law of the country in which they are disposed of, that disposition is binding in this country” (p744).

Question 15

What does Princess Paley Olga v Weisz and others [1929] tell us about the situs rule?

Answer 15

Derived from the aftermath of the Russian Revolution.
Group of Russian revolutionaries took and retained possession of lots of moveables belonging to the Princess Paley Olga. Later sold to third parties.
Defendants brought the objects to England.
She brought an action to recover her property. Action failed.

English court said it would not inquire into the validity of acts done by the Russian Government in Russia.

Question 16

What does Luther Co v Sagor Co [1921] tell us about the situs rule?

Answer 16

Timber seised from sawmills by revolutionaries.
Valid by Russian lex situs, the English court would not undo it.

Act of taking said not to be so contrary to moral principle that the judges ought not to recognise it.

Question 17

What does Winkworth v Christie, Manson & Woods Ltd [1980] tell us about the transfer of corporeal moveable property in dispute between the owner and a bone fide 3rd party purchaser?

Answer 17

Netsuke (elaborate ivory carvings).
English owner had a collection of these carvings. Stolen from him in England, taken to Italy. Sold in Italy to the second defender in good faith. Delivered to Christie’s, the auction house.
Who owned these goods?
Court held to the lex situs rule.
According to Italian law, good title was conferred on the purchaser.

‘Security of title is as important to an innocent purchaser as it is to an innocent owner whose goods have been stolen from him’ (per Slade J).

Question 18

What is the effect of the situs rule … who does it benefit (Goetschuis v Brightman (1927))?
Theft of a car. Content of the law of New York favoured the original owner.
The question is whether the original transfer is valid under the lex situs.

Answer 18

Theft of a car. Content of the law of New York favoured the original owner.
- The question is whether the original transfer is valid under the lex situs.

The situs rule is a neutral choice of law rule.
Sometimes it will favour original owner, at other times it will favour bona fide purchaser.

Is the transfer valid and effective according to the lex situs at the relevant time?

Question 19

Winkworth v Christie, Manson & Woods Ltd [1980] 1 Ch 496 tells us of exceptions to the situs rule. What does it say?

Answer 19

“The first ‘if goods are in transit and their situs is casual or not known, a transfer which is valid and effective by its proper law will … be valid and effective in England’ … The second exception … arises where a purchaser claiming title has not acted bona fide. The third exception is the case where the English court declines to recognise the particular law of the relevant situs because it considers it contrary to English public policy. The fourth exception arises where a statute in force in the country which is the forum in which the case is heard obliges the court to apply the law of its own country … Fifthly … special rules might apply to determine the relevant law governing the effect of general assignments of movables on bankruptcy or succession” (p501).

Question 20

What is exception one to the situs rule – goods in transit?

Answer 20

Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966].
- The ‘proper law of the transfer’.
- Law of place of dispatch (lex loci expeditionis).
- Law of place of destination (lex loci destinationis).
- Lex situs praeteritus (suspense pending arrival at ultimate destination)?

Not really a clear law on this… up to the judge to determine the most appropriate law.

Question 21

What is exception two to the situs rule – absence of good faith?

Answer 21

A conflict lawyer’s grumbles …
Re. interpretation of the exception.
Re. substance of the exception.

Question 22

What is exception three to the situs rule – contrary to English public policy?

Answer 22

‘Foreign law’ contrary to public policy (c.f Kuwait Airways Corporation v Iraqi Airways Company [2002]); or
‘Application of foreign law’ (i.e the outcome) contrary to public policy?

Question 23

How does Winkworth v Christie, Manson & Woods Ltd [1980] show scope for expanding the category of exceptions?

Answer 23

(a) The fictional situs argument;
Intolerable uncertainty would result, so this argument failed.

(b) The ‘exceptional’ circumstances argument:
“[W]here movables have been stolen from country A or otherwise unlawfully taken from the owner in country A and are then from country A removed without the owner’s knowledge or consent and are then dealt with in country B without his knowledge or consent and are then returned voluntarily to country A, the law of country A should be applied to determine whether the original owner is or is not still the true owner of the movables”. Was not successful in the case.
However, this principle has been developed since in other European legislatures.

Question 24

What is the situation when there are competing claims to moveables i.e. what has happened?

Answer 24

When fraud is perpetrated BY the original owner. Two transferees claim the property interest has been transferred to them. Classic situation is when the original owner claims to sell the property to a good faith purchaser, when it has already been transferred to a creditor.

Question 25

How does Robertson & Baxter v Inglis (1898) show the general rule for competing claims to moveables, (that the situs determines the rightful claim)?

Answer 25

English man owned whisky stored at a Glasgow warehouse. Transferred his security interest to Inglis, another Englishman. Inglis did not intimate to the warehouse keeper his new interest.
This meant that under Scots law he did not have a valid security interest. However, it is valid under English law.
Goldsmith had prior creditors (Robertson and Baxter), who were Scottish. They tried to seize the whisky in the warehouse.
Competing claims. Which law was to govern these claims? Lex situs — Scots law.

Question 26

North Western Bank Ltd v Poynter, Son and Macdonalds (1894) shows the exception to the general rule for competing claims to moveables. What is the exception?

Answer 26

Where competing claims are governed by the same governing law, that common governing law will determine the competition.

NB. Enter a 3rd or subsequent claimant, basing his claim under a different governing law: lex situs determines the competition.

Question 27

What does Lord Watson say in Robertson & Baxter v Inglis about the exception to the general rule for competing claims to moveables?

Answer 27

‘When a moveable fund, situated in Scotland, admittedly belongs to one or other of two domiciled Englishmen, the question to which of them it belongs is prima facie one of English law, and ought to be so treated by the Court in Scotland’.

Only applies when both claimants are basing their claim under the same law.