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Cheshire, North & Fawcett: Private International Law, 15th Edition by Grušić, Uglješa; Heinze, Christian; Merrett, Louise; Mills, Alex; Otero García-Castrillón, Carmen; Tang, Zheng Sophia; Trimmings, Katarina; Walker, Lara (28th September 2017)

Part VI The Law of Property, 29 The Distinction Between Movables and Immovables

Paul Torremans

From: Cheshire, North & Fawcett: Private International Law (15th Edition)

Uglješa Grušić, Christian Heinze, Louise Merrett, Alex Mills, Carmen Otero García-Castrillón, Zheng Sophia Tang, Katarina Trimmings, Lara Walker
Edited By: Paul Torremans, James J. Fawcett

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 13 December 2018

Subject(s):
Choice of court and immovable property — Applicable law — Immovables — Movables — Trusts

(p. 1251) 29  The Distinction Between Movables and Immovables

1.  Introduction1

In order to arrive at a common basis on which to determine questions involving a foreign element, English private international law classifies the subject matter of ownership into movables and immovables, and thus adopts a distinction that is accepted in other legal systems,2 though even common law jurisdictions cannot agree whether some kinds of property are movable or immovable.3 The first task of the court in a private international law case when required to decide some question of a proprietary or possessory nature is to decide whether the item of property which is the subject of the dispute is movable or immovable. The legal system that will be applicable to the case depends on this preliminary decision. Rights over immovables are determined by the law of the situs; rights over movables are not necessarily governed by that law. In the sphere of private international law, then, the common law distinction between realty and personalty is abandoned, even though the case concerns a common law country where it is recognised in the sphere of domestic law. The importance of not confusing the domestic distinction between realty and personalty with the private international law distinction between movables and immovables can scarcely be exaggerated. They do not cover the same ground. The one cuts across the other in the sense that personalty includes both movables and immovables. Thus “realty” is not synonymous either with “land” or with “immovables”, for though a life tenant, for instance, holds an interest in realty, a leaseholder holds an interest in personalty. For the purpose of private international law, however, a lease creates an interest in an immovable and is subject to the law of the situs.4

(p. 1252) 2.  Classification By the Law of the Situs

The determination of whether the subject matter of ownership is movable or immovable generally presents no difficulty. English law and most other legal systems accept that interests in land, whether classified according to their nature, such as legal estates and equitable interests; or limited in duration, such as fees simple, entails and terms of years; or independent of the right to possession of the land, such as easements, profits and rent charges, are interests in immovable property. A more complex problem arises in those cases where a right over what is physically movable is regarded by a particular legal system as a right over immovable property. For instance, the owner of such obvious chattels as title-deeds, fixtures, fish in a pond and the key of a house is regarded by English internal law as having an interest in land.5 Again, it seems obvious at first sight that a building erected for the purposes of an exhibition, and which cannot be removed without losing its identity, must be in the same category as normal buildings, yet in the USA6 its owner has been deemed to hold an interest in movable property. If, therefore, the subject matter of ownership is regarded as immovable by one system of law but as movable by another, to which law is the decision left? The answer given by English law and by most foreign legal systems is: the law of the situs.7 If the law of the situs attributes the quality of movability or of immovability to the property in question, the English court which is seised of the matter must proceed on that basis.8

3.  Some Examples

(a)  Mortgages

Mortgages provide an important illustration of this classification. It has been held that the right vested in a mortgagee of English land must be regarded by English law, being the law of the situs, as an interest in an immovable. This is notwithstanding that it is classified by English domestic law as personalty and that the debt, not the charge, is the principal characteristic of the transaction.9

(b)  Trusts for sale

A further and important illustration is provided by Re Berchtold.10 This case turned on the English doctrine of conversion,11 namely, that: “Money directed to be employed in the purchase of land, and land directed to be sold and turned into money, are to be considered as that species of property into which they are directed to be converted.”12 What this equitable (p. 1253) doctrine means in effect is that where there is such a direction the realty is treated as personalty for certain purposes, or in the reverse case, the personalty is treated as realty for certain purposes. If, for instance, land is conveyed to trustees on trust for sale and payment of the proceeds to A, and A dies before the actual sale, a bequest by him of all his personalty will include the money eventually arising from the sale. This, of course, does not alter the fact that until sold, the land is still immovable. This becomes material if the beneficiary under the trust dies domiciled in a foreign country before the conversion has actually been effected. Re Berchtold is just such a case:

A party died intestate, domiciled in Hungary, and entitled to a freehold interest in English land which though subject to a trust for sale, had not been sold. The English choice of law rule is that intestate succession is governed by the law of the situs in the case of immovables, but by the law of the deceased’s last domicile in the case of movables. It was, therefore, vital to decide whether the freehold interest, despite the doctrine of conversion, was still to be regarded as an interest in immovable property.

It was argued with some plausibility that by reason of the trust for sale the land was already money in the eyes of equity, that money is a movable, and that, therefore, the devolution was governed by Hungarian law. The fallacy of this argument, however, was demonstrated by Russell J. The primary question before the court was whether the subject matter in which the deceased was interested was immovable. This had nothing to do with a subsequent question that might arise under the doctrine of conversion, namely, whether realty was to be treated as personalty, or vice versa. It was held that the unsold land was immovable, notwithstanding the binding direction for its conversion into money, and that therefore the appropriate law to govern its devolution on intestacy was the law of the situs.13

The decision was distinguished by Morton J in Re Cutcliffe’s Will Trusts,14 where the distinction between realty and personalty, and therefore the doctrine of conversion, were not strictly relevant.

English land that was subject to an English settlement had been sold under the Settled Land Act 1882 and the proceeds had been invested in English debenture stock. The beneficiary under the settlement died intestate in 1897 domiciled in Ontario.

So far it seems obvious that the stock was in fact movable and that therefore under the relevant doctrine of private international law its devolution was governed by the law of the deceased’s last domicile. The Settled Land Act 1882, however, provided that: “Capital money arising under this Act while remaining uninvested or unapplied and securities on which an investment of any such capital money is made shall, for all purposes of disposition, transmission and devolution, be considered as land.”15

Deciding whether the stock was movable or immovable was the primary issue in trying to determine the governing law. It was held that it was immovable and subject as such to the English law of devolution. The decision has been attacked on the ground that the domestic doctrine of conversion was erroneously applied at the stage when the case was being considered internationally.16 But this is to misinterpret the ratio of the case. How could the decision have been otherwise? The stock was physically situated in England. English law, therefore, had to determine whether it was to be treated as movable or immovable. An English statute (p. 1254) peremptorily demanded that for all purposes, ie presumably including the choice of the applicable law, it should be regarded as land.

(c)  Annuities

The character of annuities and other periodical payments depends on whether they issue out of, or are charged on, land. An annuity in the strict sense represents a right to movable property, but a rent charged on land is an interest in immovable property.17

4.  Relevance of Distinction Between Realty and Personalty

Once the choice of law has been made, there may come a stage at which the distinction between realty and personalty then becomes relevant. This occurs where the choice falls on a law that recognises the distinction. The chosen law now has control of the case and it must be allowed to operate in its own way. In Re Berchtold,18 for instance, the effect of deciding that the intestate died entitled to immovable property was to apply English law as the law of the situs, with the result that the immovable, being regarded as money under the domestic doctrine of conversion, devolved as personalty according to the rules of English internal law.

5.  Distinction Between Tangible and Intangible Movables19

By English domestic law, the subject matter of ownership, if not immovable, is property divisible into choses in possession, ie tangible physical objects, and choses in action, such as debts, patents, copyright, goodwill, shares and securities. Private international lawyers usually prefer, however, to classify movables as either tangible or intangible.20 This is not only a linguistic solecism, since it is scarcely possible to move a thing that cannot be touched, but it provokes an unfortunate tendency to ascribe to a disembodied thing, such as a debt, the physical attributes of a corporeal object as, for instance, a definite situs. Although Lord Halsbury once remarked that he was “wholly unable to see that goodwill itself is susceptible of having any local situation”,21 it is of course necessary for certain purposes, such as jurisdiction or probate, to assign a situs not only to goodwill, but to choses in action generally.22 This is not without its dangers. Since the situs principle has furnished a simple and effective rule for questions relating to a physical thing, the natural inclination is to extend it to all questions and to regard it as the general determinant of rules for the choice of law concerning choses in action. This is a false analogy. Moreover, it frequently leads to forcing a rule, eminently adapted to one set of circumstances, to fit circumstances for which it is entirely inappropriate. It is reasonably clear that the appropriate law to govern goodwill or a debt depends on quite different considerations from those that are relevant to a physical thing. One must be aware of the danger of straining rules to fit categories.

Footnotes:

1  See Carruthers (2005), Chapter 1.

2  Re Hoyles [1911] 1 Ch 179 at 185. For a critical examination of the relevant authorities, see Clarence Smith (1963) 26 MLR 16.

3  Eg, the right of a mortgagee. England and Ontario consider it to be immovable: Re Hoyles [1911] 1 Ch 179; Re Ritchie [1942] 3 DLR 330; whereas New Zealand and Australia consider it to be movable: Re O’Neill [1922] NZLR 468; Re Greenfield [1985] 2 NZLR 662 at 664; Wills Amendment Act 1955, s 14(4); Haque v Haque (No 2) (1965) 114 CLR 98; see Sykes and Pryles, pp 648–51, 658–60. There are differing views in Canada as to whether mineral rights are movable or immovable property: War Eagle Mining Co v Robo Management Co [1996] 2 WWR 504.

4  Freke v Carbery (1873) LR 16 Eq 461; Duncan v Lawson (1889) 41 Ch D 394; Re Caithness (1891) 7 TLR 354.

5  Cf The Islamic Republic of Iran v Berend [2007] EWHC 132 (QB), [2007] 2 All ER (Comm) 132, where the parties agreed that a fragment of limestone relief dating from a building in 5th century BC Persepolis should be characterised as movable.

6  Eg Public Service Co of New Hampshire v Voudonas 84 NH 387, 157 A 81 (1930). Cf Germany: BGB, s 95, and Cohn, Manual of German Law (2nd edn), Vol 1, p 72.

7  See Carruthers (2005), paras 1.20–1.46 for full discussion of the meaning of the “law of the situs”, and infra, Chapter 31.

8  Johnstone v Baker (1817) 4 Madd 474 n; Westlake, s 160, approved in Re Hoyles [1910] 2 Ch 333 at 341; affd [1911] 1 Ch 179; Macdonald v Macdonald 1932 SC (HL) 79; Air Foyle Ltd and Anor v Center Capital Ltd [2002] EWHC 2535; [2003] 2 Lloyd’s Rep 753 at [41].

9  Re Hoyles [1911] 1 Ch 179.

10  [1923] 1 Ch 192; and see Philipson-Stow v IRC [1961] AC 727 at 762.

11  On the uses to which this doctrine may be put in a conflict of laws situation, see Hancock (1965) 17 Stan LR 1095, and Carruthers (2005), paras 2.87–2.88.

12  Fletcher v Ashburner (1779) 1 Bro CC 497 at 499; Pettit, Equity and the Law of Trusts (12th edn), pp 73–4 and 456.

13  Cf Murray v Champernowne [1901] 2 IR 232.

14  [1940] Ch 565.

15  S 22(5); see now Settled Land Act 1925, s 75(5).

16  Falconbridge (1940) 18 Can Bar Rev 568.

17  Chatfield v Berchtoldt (1872) 7 Ch App 192.

18  Supra, pp 1252–3.

19  See Carruthers (2005), paras 1.13–1.14.

20  For a criticism of the distinction, see Cook, pp 284 et seq. See also Crawford and Carruthers, Ch 17.

21  IRC v Muller & Co’s Margarines Ltd [1901] AC 217 at 240.

22  See Dicey, Morris and Collins, paras 22R-023–22-053; and Carruthers (2005), paras 1.31–1.42. See also Perrin v Revenue and Customs Commissioners [2014] UKFTT 223 (TC), [2014] SFTD 919, paras 34–35.