I have recently had the privilege of writing a practical guide on conflict of laws issues in property disputes. A key component of that guide considers jurisdictional issues that arise where real estate is located in another country and a dispute in relation to the same arises in England and Wales. This article examines this issue. However I would ask the reader to consult the full practical guide for further details. The practical guide can be purchased here >>>.
The ultimate question is whether the Courts of England and Wales has jurisdiction (i.e. the power) to compel the parties to be brought before it to try the type of case identified above.
The General Rule from Moçambique
In the foreign property context, the general rule of jurisdiction is derived from the age-old but leading authority of British South Africa Co v Companhia de Moçambique [1893] A.C. 602 (“Moçambique”) which sets down a very specific exclusionary rule at common law that the Courts of England and Wales do not have jurisdiction to determine the title to, or the right to possession of, foreign immovable property (“the Moçambique Rule”).
The Moçambique Rule typifies and gives effect to a general conflict of laws principle that can be found across the world, namely that where the case involves immovable property, the Courts of the country where the property sits has exclusive jurisdiction over it. This general principle ties in neatly with the general principle of lex situs (namely that the applicable law to a dispute involving foreign immovable property is the law of the country where the foreign immovable property is physically located).
As can be seen from the above, if the cause of action concerns the title to, or the right to possession of, foreign immovable property then the Courts of England and Wales holds no jurisdiction and cannot entertain the proceedings. The reference to title to, or the right to possession of, foreign immovable property is essentially a reference to rights held by a party in the foreign property in rem (i.e. against the whole world). These are a reference to proprietary rights. This is significant because the Moçambique Rule is only a very specific exclusionary rule and is subject to a few exceptions.
The Rationale for the Moçambique Rule
The reader will have noticed that the Moçambique Rule dates back to the late nineteenth century and this common law principle has continued to remain in place. However, what is the rationale behind the rule? The rationale was examined and explained in R Griggs Group Limited and Others v Evans and Others [2004] EWHC 1088 (Ch) (“Griggs”) as follows:-
“Suppose the dispute concerned land outside England, instead of copyright. Except where they felt able to exercise their equitable in personam jurisdiction (see below) the English Courts refused to decide questions of title to foreign land. This was so even if the defendant was otherwise properly before the English Court. In the first instance, it would have been pointless to assert such a jurisdiction: how could our Courts order foreign peace officers to put the successful claimant in possession of the land? In the second place, they considered that to try title to foreign land would have been disrespectful to their foreign judicial colleagues, as by seeming to undermine their jurisdiction and authority ” ([62]).
“At various times several reasons have been advanced in justification of the Moçambique rule. In my judgment the only rationale which survives today (apart from the Court’s possible incapacity to execute its order abroad, which is not applicable in our case) is that it would be a breach of international comity to try questions of title to foreign land in rem, save incidentally: see, for example, the judgment of the Court of Appeal in Pearce v Ove Arup Partnership Ltd [2000] Ch 403, 430d. But we still have to discover precisely why it would be considered a breach of comity” ([72]).
As can be seen from the above passages, the Judge in Griggs starts with the conclusion that the rationale behind the Moçambique Rule is that, even if a defendant is brought properly before the Court (i.e. the general rules of jurisdiction have been satisfied including the valid and effective service of proceedings), when it comes to rights in rem in relation to foreign immovable property, from a practical perspective the Courts of England and Wales are not in a position to enforce and execute its judgment in respect of the same directly. However, from a policy perspective, the Moçambique Rule is justified on the basis that to try questions of title to, and right to possession of, foreign immovable property, this would be disrespectful to the authority of the foreign Courts and in breach of, what is called, international comity (i.e. a principle of respect and deference to the laws, rules and procedures of a foreign state). Indeed, because the foreign immovable property is seated physically in the territory of a foreign state, one can see why a foreign state may be offended if rights in rem were tried and tested by the Courts of another foreign state. This ties in neatly with the principle of lex situs discussed earlier (i.e. the general principle that the applicable law in relation to a dispute involving foreign immovable property is the law of the country where the property is seated). However, the Judge in Griggs went further:-
“It cannot be merely because, in trying title to foreign land, we would be delving into a right of property which is granted by and exists under the laws of a foreign sovereign. For instance, it is clear that no equivalent to the Moçambique rule has ever applied to chattels. They might be ships, or jumbo jets…Yet nobody objects that the bringing of the action is forbidden because it may call into question the existence or scope of laws created by a foreign sovereign. The foreign law is treated as a question of fact. The foreign law is created at the will of the sovereign, and, when we find the fact, we are trying to respect his will, not defy it” ([73]).
“Hence it must be clear that the proper justification for the Moçambique rule cannot rest on a general proposition that our Courts do not entertain disputes concerning the existence or scope of laws made by a foreign sovereign. They do it all the time” ([74]).
“So the reason it is perfectly in order for our Courts to decide that the defendant has misappropriated or dispossessed chattels situate in a foreign state, contrary to the laws of that state; to decide that the defendant is liable for personal injuries or damage to property inflicted by his breach of the local road traffic or ship navigation laws; to decide that A but not B shall succeed under an English will made by the owner of foreign land; to order that X must convey to Y land situate in a foreign state in accordance with his obligation, must be because, according to the usages of nations, it is not considered to be a breach of comity to do these things” ([77]).
The Judge here is questioning why the case of trying the title to, or rights to possession of, foreign immovable property is met by the exclusionary Moçambique Rule whereas this same exclusionary rule does not exist when it comes to, for example, other forms of property rights relating to chattels and other causes of action. The Judge notices that the Courts frequently do delve into foreign property rights in this respect and entertain disputes concerning the existence and scope of foreign laws all the time. Yet there is not considered to be a breach of comity in this respect. However, by way of this process of reasoning and questioning, the Judge reaches the following conclusion:-
“Even so, it is apparent that to litigate a title in rem to land situate abroad is regarded as a special case. Why is it a special case? It is partly because the Court cannot enforce its judgment and partly because it is felt the local sovereign might object. But why might he object? Why can one bring a claim that says “According to the laws of the sovereign the chattel is mine”, but not “According to the laws of the sovereign the land is mine”? The answer must be that it is understood that in the case of land the sovereign is or may be asserting a double prerogative. It is not only a prerogative to make laws for his own country, but a prerogative to have those laws adjudicated in his own Courts exclusively. That was the traditional understanding when it came to land” ([78]).
From the above, it is clear that the Judge was not convinced as to why the Moçambique Rule has held a special place in the common law distinct from the approach taken when it comes to other areas of law (such as chattels and conversion). However, the Judge appears to settle on the position that, in relation to foreign land, the nation state is asserting a double prerogative that it makes its own land law and, when it comes to proprietary rights in rem, the Courts of its own country holds exclusive jurisdiction in relation to the same.
The Exceptions in Outline
However, whilst the Moçambique Rule is an absolute exclusionary jurisdictional rule where a case deals with the title to, or rights to possession of, immovable property located abroad, there are certain exceptions.
The first exception is where the case is really dealing with the contractual relationship or equitable rights between the parties (“the In Personam Exception”) and the second is where the Court needs to determine title to, or the right to possession of, foreign immovable property for the purpose of administering an estate or trust that deals with a mix of foreign and domestic property (“the Trusts and Estates Exception”).
Thirdly, pursuant to Section 30 (1) of the Civil Jurisdiction and Judgments Act 1982, the jurisdiction of any Court in England and Wales or Northern Ireland to entertain proceedings for trespass to, or any other tort affecting, immovable property shall extend to cases in which the property in question is situated outside that part of the United Kingdom unless the proceedings are principally concerned with a question of the title to, or the right to possession of, that property (“the Torts Exception”). However, the reader should be aware that the Torts Exception is subject to the provisions of Schedule 4 of the Civil Jurisdiction and Judgments Act 1982 (see Section 30 (2)). It is the above exception which has led the Supreme Court in Lucasfilm Limited and Others v Ainsworth and Another [2012] 1 A.C. 208 to state the following:-
“It is clear that much of the underpinning of the Moçambique rule…has been eroded. All that is left of the Moçambique rule…is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are “principally concerned with a question of the title, or the right to possession, of that property”” ([105]).
Whilst the aforementioned quote appears to target the Moçambique Rule generally as opposed to the Torts Exception specifically, as the reader will see below, a claim under the In Personam or Trusts and Estates Exception will not, by its very nature, be principally concerned with a question of the title, or the right to possession, of foreign immovable property.
The In Personam Exception
In the Privy Council case of Pattni v Ali [2006] UKPC 51, Lord Mance stated at [26] that “it has long been accepted in England that an English Court may, as between parties before it, give an in personam judgment to enforce contractual or equitable rights in respect of immovable property situate in a foreign country.” Further in the Court of Appeal decision in Moçambique ([1892] 2 Q.B. 358, 364) this exception was explained in the following manner – “Courts of Equity have, from the time of Lord Hardwicke’s decision in Penn v Lord Baltimore… exercised jurisdiction in personam in relation to foreign land against persons locally within the jurisdiction of the English Court in cases of contract, fraud, and trust…”
In other words, so long as the general rules of jurisdiction have been satisfied, the Court has jurisdiction to preside over a case dealing with the enforcement of contractual or equitable rights in respect of foreign immovable property (e.g. a case involving breach of contract, allegations of fraud and breaches of trust to name a few). The Court can give an in personam judgment in relation to the same. Whereas a judgment dealing with proprietary rights in rem deals with the rights over immovable property against the world, a judgment dealing with personal rights in personam is a judgment dealing with the rights and interests personally existing between the parties alone (e.g. contractual or equitable rights and interests).
However, it would appear that this exception is not a narrowly contained exception and could apply to a wide variety of cases involving personal obligations which could be enforced. The Judge stated the following in Deschamps v Miller [1908] 1 Ch. 856, 863- 864:-
“The question is whether under these circumstances the Court ought to entertain jurisdiction. In my opinion the general rule is that the Court will not adjudicate on questions relating to the title to or the right to the possession of immovable property out of the jurisdiction. There are, no doubt, exceptions to the rule, but, without attempting to give an exhaustive statement of those exceptions, I think it will be found that they all depend on the existence between the parties to the suit of some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct which, in the view of a Court of Equity in this country, would be unconscionable, and do not depend for the existence on the law of the locus of the immovable property. Thus, in cases of trusts, specific performance of contracts, foreclosure, or redemption of mortgages, or in the case of land obtained by the defendant by fraud, or other such unconscionable conduct as I have referred to, the Court may very well assume jurisdiction. But where there is no contract, no fiduciary relationships, and no fraud or other unconscionable conduct giving rise to a personal obligation between the parties, and the whole question is whether or not according to the law of the locus the claim of title set up by one party, whether a legal or equitable claim in the sense of those words as used in English law, would be preferred to the claim of another party, I do not think the Court ought to entertain jurisdiction to decide the matter.”
Examples of the types of cases that might fall into the In Personam Exception include claims that seek a decree of specific performance of a contract of sale of foreign land (Richard West and Partners (Inverness) Limited v Dick [1969] 2 Ch. 424 (CA)) and unjust enrichment actions to recover purchase monies in respect of foreign land (Stevens v Hamed [2013] EWCA Civ 911). This might include recovery of deposits. Further claims may include one for the enforcement of security over foreign property (Mercantile Investment Co v River Plate Co [1892] 2 Ch. 303).
However, if the lex situs (law of the land where the property is located) would prevent the enforcement of a particular decree or order, the Court may refuse to exercise its jurisdiction (see Luxe Holding Limited v Midland Resources Holding Limited [2010] EWHC 1908 (Ch) at [37]).
The Trusts and Estates Exception
The Trusts and Estates Exception is a further exception to the Moçambique Rule. If the question of title to, or the right to possession of, foreign immovable property has to be determined for the purpose of resolving a dispute in the administration of a deceased’s estate or a trust that deals with a mix of foreign and domestic property, the Courts of England and Wales can determine the question. The rationale that sits behind this is that, if the Court is being asked to resolve a dispute in the administration of an estate or trust, if the incidental consequence is that it is necessary to determine title, or the rights to possession of, foreign land then it needs to be able to decide those issues to avoid a diversity of proceedings (see Griggs at [70]). There are a few supporting examples in case law where the Court has done just that:-
- The Court holding jurisdiction to decide who is entitled to land in Sardinia, Italy bequeathed by the testator upon trust alongside other property in England (Re Piercy [1895] 1 Ch. 83).
- The Court holding jurisdiction to decide a dispute between a beneficiary of a will and a tenant in possession of Scottish land (the will also containing English property) (Re Stirling [1908] 2 Ch. 344).
- The Court holding jurisdiction to determine entitlement to Italian property bequeathed under an Italian will (Re Ross [1930] 1 Ch. 377).
- The Court holding jurisdiction, in a case where a testator produced English and Spanish wills, to determine to whom Spanish property bequeathed by the testator passed (Re Duke of Wellington [1948] Ch. 118 (CA)).
The Torts Exception
As set out above, Section 30 (1) of the Civil Jurisdiction and Judgments Act 1982 confirms that the Courts of England and Wales (and Northern Ireland) hold jurisdiction to deal with proceedings for trespass to, or any other tort affecting, immovable property located abroad. However the Courts of England, Wales and Northern Ireland will not hold such jurisdiction if the proceedings are principally concerned with a question of the title to, or the right to possession of, the property in question. However, the reader should be aware that the Torts Exception is subject to the provisions of Schedule 4 of the Civil Jurisdiction and Judgments Act 1982 (see Section 30 (2)).
The question for the legal practitioner will be, when ascertaining if a particular action in tort should be brought in relation to foreign immovable property in the Courts of England and Wales, what is the meaning of ‘principally concerned’ with a question of the title to, or the right to possession of, the property in question. In Re Polly Peck International Plc (In Administration) (No 2) [1998] 3 All ER 812, 829 (“Re Polly Peck International”) the Court of Appeal approved the lower Court’s interpretation of the aforementioned phrase ‘principally concerned’ which was interpreted in the following manner:-
“I consider that the purpose of s 30(1) of the 1982 Act is to preserve the Moçambique rule only in cases where the real issue in the proceedings is the question of title to, or the right to possession of, foreign land, and all other questions are merely incidental thereto.”
As can be seen from the above, in a tort related case, if and only if the real or main issue in the proceedings is the question of title or the right to possession of the foreign immovable property and all other issues are merely incidental or subordinate to that issue, the Moçambique Rule would capture the same. This is not a black and white question for the legal practitioner and each case will likely turn on its own facts and nuances in the framing of the claim. In The Bodo Community and Others v The Shell Petroleum Development Company of Nigeria Limited [2014] EWHC 1973 (TCC) (“Bodo Community”), a case involving a group claim for damages in light of oil spills in Nigeria, the High Court provided a useful set of examples at [165] to show the operation of Section 30 (1) of the Civil Jurisdiction and Judgments Act 1982:-
“(a) An individual claimant can readily show that he and his family for four generations before him have occupied and farmed land which he alleges was swamped by 50 cubic metres of oil from one of the spillages. Shell does not admit his connection to the land (simply putting him to proof) but runs a positive case that the oil spillage never reached this land. It might be said that the claim is not “principally” concerned with the title or possession to land.
(b) An individual claimant alleges that he was a tenant of land right by the location of the pipe and which was swamped by 50 cubic metres of oil from one of the spillages and claims loss of use of the land. Shell admits that the land was so swamped by oil spilling from its pipe (and would in principle attract compensation) but runs a positive case that he was not ever a tenant. It might be said that his proceedings are “principally” concerned with the title or possession to land.
(c ) A chief, king or headman seeks in representative proceedings compensation but the only issue, on analysis is whether he is representative because he seeks to claim that he represents areas which are said to be outside his bailiwick. That might well be a claim which is “principally” concerned with the title or possession to land.
(d) Representative proceedings are challenged on numerous grounds, for instance that many of those represented have no claim under the OPA as not having sufficient interests in the land, that they have suffered no “damage” which is recoverable under the Act, that many of those represented suffered no more than inconvenience etc and that the oil spillage did not reach where they lived. It might be said that the claim is not “principally” concerned with the title or possession to land, largely because there are a myriad of seriously contested issues.
I am using the word “might” to avoid being prescriptive because the Court will need to look overall at claimants’ claims and see if the issues are “principally” concerned with the title to or possession of land.”
As can be seen from the above, the Court is very careful to treat these are mere examples and caveats the examples by stating that the word “might” is being used to avoid being prescriptive. It is for the Court to assess the facts and the framing of each claim before it to determines whether the real issue is the title to, or the right to possession of, foreign immovable property and that all other issues in the proceedings, if any, are merely incidental to this question.
Further, one can see from the final example that even if the title to, or the right to possession of, foreign immovable property is a real issue in the case, if there are other equally seriously contested issues, the Torts Exception appears to be engaged. In other words, the title or right to possession issue cannot be the only real issue to which other issues are merely subordinate because in that situation the Moçambique Rule would be engaged instead.
In addition, the examples bring to light a particular procedural point. If a claim in tort is brought and it involves foreign immovable property, it is likely that the claimant’s interests or rights in that property will be asserted by the claimant. However it is not at that point that the Court can really assess its jurisdiction (by reference to the Mozambique Rule and Section 30 (1) of the Civil Jurisdiction and Judgments Act 1982). It is only once the defence comes through that the Court will be in any position to really ascertain the existence of its jurisdiction. Indeed, the defence may put the claimant to proof on the issue of title, or right to possession, of the foreign immovable property (in which case this issue does not appear to amount to a principal issue in the case), admit the same (in which case this issue will not amount to a principal issue in the case), or make a positive case against the same (in which case this issue may amount to a principal issue in the case). The claim and the defence may bring to light a myriad of other prominent issues (thereby making the issue of title or rights to possession one of a number of real issues) or demonstrate that the only live and real issue is the title, or right to possession of, foreign immovable property (and thereby caught by the Mozambique Rule). Therefore at least in relation to a torts related case, it would appear the issue of jurisdiction will only be resolved post the filing of a defence.
The lesson for the legal practitioner is to examine the state of play on the pleadings and set out the list of issues, order them by prominence or importance and if the title to, or right to possession, of foreign immovable property is an issue in the case, examine if this is a real issue in the case and if so, whether the other issues are merely subordinate to it or are equally as important. It is important to take a step back and look at the overall picture of the case accordingly.
Summary of Key Practical and Tactical Tips
- It is important for the legal practitioner to identify from the outset whether the claim is going to engage the Moçambique Rule. If the matter concerns title to, or rights to possession of foreign immovable property, the Courts of England and Wales will decline jurisdiction (however this is subject to the statutory modification applicable to causes of action involving tort).
- The legal practitioner may want to consider how to frame the cause of action so as to avoid engaging the Moçambique Rule. The Moçambique Rule is triggered squarely when the case deals with proprietary rights in rem in relation to foreign immovable property. However if the claim being asserted relates to rights in personam this may be permissible. It is the effective and proper characterisation of the claim which will likely prove decisive in at least moving pass the jurisdictional hurdle of the Moçambique Rule. It is therefore important to focus on the nature of the right that is being asserted.
- It is therefore also important to undertake an analysis of the case to see how it can be framed, anticipating the need to rely on the exceptions to the Mozambique Rule as early as possible. Where the Moçambique Rule is engaged the focus ought to shift to see whether any of the recognised exceptions apply.
- When considering the In Personam Exception it is important to identify the source of the obligation early, ascertaining whether there is a contract, a fiduciary relationship or an alleged fraud or other unconscionable conduct to be reversed.
- Even where jurisdiction is said to exist, the Court may refuse to exercise jurisdiction by way of its discretion where foreign law prevents enforcement. This is something to bear in mind.
- When it comes to the Torts Exception in particular it may be important to analyse all the pleadings to ascertain the real issues between the parties to see if the exception is engaged. It may be that it is only at this point the Court can determine the existence of jurisdiction. Jurisdictional issues in this respect will likely crystallise after the filing and service of the defence when title may be admitted or put to proof or positively contested for example.
- A practical approach that may be taken is to identify all the issues from the pleadings, assess their relative importance and determine if the question of title to, or rights to possession of, foreign immovable property is the dominant issue or not.
This article reflects the law as of the date it was published. Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational and/or informational purposes. It is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose. This article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.
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