Guidance on gifting real estate located in another Jurisdiction.

This post is contributed by Dr. Manos Maganaris, Module Convener for Conflict of laws.

Judges Gavel

The CJEU in its decision of 16 November 2016 in Schmidt v Schmidt (C-417/15) confirmed the views of the Attorney General on Articles 24(1) and 8(4) of Brussels I Recast, namely that a request for voidance of a contract of gift of immovable property on grounds of incapacity, is not covered by Article 24(1).

 

The potential usefulness of this decision for all interested parties lies in that it encourages them not to be hesitant in matters relating to contracts, gifts or matrimonial property simply because they involve real estate located in another jurisdiction. The majority of the legal issues in such circumstances can be perfectly dealt with outside the locus rei sitae (the law where the property is situated).

Mr. Schmidt, in this case, had gifted a piece of real estate to his daughter, who lived in Germany. His name also appeared as owner in the land register. He subsequently sued in Austria for the annulment of the gift due to alleged incapacity at the time, and for removal of the registration. The question here was whether the action fell within the ambit of Article 24, in which case Mr. Schmidt’s claim of lack of jurisdiction was unfounded. Advocate General Kokott made the following points in her opinion:

 

  • The referring court’s request should not be turned down simply because it did not specify the time of seizure. She argued that the Court should not be pedantic about this and deal with the question regardless, based on the fact that the rule remains unchanged.

 

  • In relation to the exclusion of capacity from the scope of application of the Regulation, she suggested that the exclusions should only be relevant where they concern the main object of the litigation, and not as the case is here, when they are raised incidentally.

 

  • When it comes to the annulment of the agreement, the object and purpose of plaintiff’s action is the confirmation of voidness of an agreement transferring such right, due to incapacity, and not the establishment or confirmation of a right erga omnes (towards everyone). That this will have consequences towards everyone if successful is not to the point, given the long-established need to apply Article 24 restrictively. In this respect this case is similar to the Court’s decision in Webb and Webb (C-294/92).

 

  • The Attorney General rejected the notion that, because part of the suit was subject to Article 24, the whole of the suit should be treated in the same way. If that was the case, forum shopping would actually be facilitated.

 

  • Finally, the AG suggested joinder of the contractual claim (the nullity of the gift) to the right in rem (right in the property) claim, was possible under Article 8(4) and rejected that national rules of civil procedure should or even can play a role in this respect.

 

The CJEU in its decision noted the following:

 

  • A request for voidance of a contract of gift of immovable property, on grounds of incapacity, is not covered by Article 24(1). The fact that the contract for which a declaration of invalidity was sought concerned immovable property was separate from the issue of its validity, the immovable nature of the subject matter of the contract being only of marginal significance in that context (at 36).

 

  • This does not endanger the ratio legis (the policy reason or underlying purpose for the law) of Article 24(1). That is because since, by ruling on the request for the avoidance of a contract of gift on the ground of the donor’s incapacity to contract, the court before which the dispute is brought is not required to carry out investigations strictly related to the immovable property concerned so as to justify an application of the rule of exclusive jurisdiction provided for in that article (at 37). In this case, the action is based on the alleged invalidity of the contractual obligation to transfer ownership of the immovable property, which, provided that the contract is valid, must be, and which was initially, performed in Austria. As a consequence the court in question assumes jurisdiction on the basis of Article 7(1) a of Brussels I Recast.

 

  • The separate request for removal from the land register of the donee’s right of ownership, is based on the invalidity of the transfer of ownership and, therefore, on the right in rem relied on by the applicant in the main proceedings. As a consequence, according to the Court, the present action is covered by Article 24(1).

 

 

Relevant case law:

 

Webber v Webber (C-438/12)

 

Komu v Komu (C-605/14)

 

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