| Conflict of laws — Foreign judgment — In rem or in personam — Judgment of Kenyan court ordering transfer of shares in Isle of Man company pursuant to contract governed by Kenyan law — Whether judgment having effect in rem or in personam — Whether enforceable in Isle of Man proceedings
Pattni v Ali and another [2006] UKPC 51
PC: Lord Bingham of Cornhill, Lord Walker of Gestingthorpe, Baroness Hale of Richmond, Lord Carswell and Lord Mance: 20 November 2006
For a judgment to have effect in rem, the determination must be a determination regarding the status or disposal of property which is to be valid as against the whole world. The fact that a judicial determination determines or relates to the existence of property rights between parties does not in itself mean that it is in rem.
The Judicial Committee of the Privy Council so held when allowing the appeal of Kamlesh Mansukhal Damji Pattni from the decision of the Staff of Government Division of the High Court of the Isle of Man (Mr G Tattersall QC and Mr D Allen QC) on 19 February 2004, dismissing Mr Pattni’s appeal against a determination of preliminary issues by Deemster Kerruish on 14 November 2003.
Mr Pattni brought a claim in the High Court of Kanya against the present respondents, Nasir Ibrahim Ali and Dinky International SA (“Dinky”), claiming breach of a contract governed by Kenyan law under which Mr Ali and Dinky agreed to sell Mr Pattni their shareholding in World Duty Free Co Ltd, an Isle of Man company which had exclusive right to operate duty-free retail complexes in Kenyan airports. The Kenyan judge gave judgment for Mr Pattni and the court’s deputy registrar issued an order requiring Mr Ali and Dinky “to transfer all the 100 per cent shares in” the company to Mr Pattni “as per the said sale and purchase agreement”. In subsequent proceedings in the Chancery Division of the High Court of the Isle of Man, in which (inter alia) Mr Pattni sought rectification of the company’s register of members while Mr Ali and Dinky claimed declarations that they were still the beneficial owners of the shares, the deemster determined as preliminary issues (1) that the Kenyan judgment was a judgment in rem and (2) that the Kenyan court did not have jurisdiction to make such a judgment.
Dicey, Morris & Collins on the Conflict of Laws, 14th ed, states in rule 40: “(1) A court of a foreign country has jurisdiction to give a judgment in rem capable of enforcement or recognition in England if the subject-matter of the proceedings wherein that judgment was given was immovable or movable property which was at the time of the proceedings situate in that country. (2) A court of a foreign country has no jurisdiction to adjudicate upon the title to, or the right to possession of, any immovable situate outside that country.”
LORD MANCE giving the reserved judgment of the Board said that both the deemster and the Staff of Government Division appeared to equate any order determining the property in an asset as between the parties before the court with an order in rem incapable of recognition in the Isle of Man under the rule of private international law set out in rule 40 of Dicey, Morris & Collins. For a judgment to have in-rem effect in the sense of rule 40, the determination must be a determination regarding the status or disposal of property which was to be valid as against the whole world. The fact that a judicial determination determined or related to the existence of property rights between parties did not in itself mean that it was in rem. Courts frequently adjudicated on the rights to property and otherwise of parties before them arising from contractual transactions relating to movables or intangibles situate in other states; in doing so, common law courts applied the governing law of the relevant contract and the lex situs of the relevant movable or intangible to the contractual and proprietary aspects of the transaction as appropriate. Where a court in state A made, as against persons who had submitted to its jurisdiction, an in-personam judgment regarding contractual rights to either movables or intangible property (whether in the form of a simple chose in action or shares) situate in state B, the courts of state B could and should recognise the foreign court’s in-personam determination of such rights as binding and should itself be prepared to give such relief as might be appropriate to enforce such rights in state B. The extent to which this was possible might be limited by the law of state B, as the situs or in the case of shares as the place of incorporation of the relevant company (in this case, as both). Applying those principles, the obvious aim and effect of the Kenyan judge’s orders was to establish and give effect to the parties’ rights inter se with regard to the shares and affairs of World Duty Free Co Ltd. The order did not constitute or involve any form of adjudication or purported adjudication in rem relating to the shares, nor did it purport actually to transfer or deal with the shares, as opposed to determining the parties’ rights and duties relating to them. The order requiring Mr Ali and Dinky “to transfer all the 100 per cent shares” in the company was a classic order in personam for specific performance in terms reflecting and predicating the judge’s findings of an agreement for sale and of its breach by Mr Ali and Dinky which were findings central to Mr Pattni’s claim in the Isle of Man to rectify the company’s register. Moreover, since Mr Ali and Dinky had submitted to the Kenyan court’s jurisdiction on the merits and were bound by the judgment which resulted, they could only resist recognition of that judgment in the Isle of Man on such grounds as fraud, failure to comply with natural justice, public policy or inconsistency with a previous Isle of Man judgment. The answers to the preliminary issues were that (a) the Kenyan judgment and order were in all material respects in personam, and (b) the Kenyan court had jurisdiction to make them.
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