[2006]JRC157B
royal court
(Samedi Division)
8th November 2006
Before : |
Sir Philip Bailhache, Kt., Bailiff, and Jurats de Veulle and Clapham. |
Representation of Thomas Nicolas Moustras and Katina Moustras née Gavriel
Advocate R. J. Michel for the Representors
Miss S. C. Nicolle Q.C, Solicitor General, Amicus Curiæ
judgment
bailiff:
Introduction
1. This representation of Thomas Nicolas Moustras and Katina Moustras née Gavriel ("the Representors") has caused the ghost of a long-dead tax avoidance measure to flit from the shadows across this courtroom. There was a time, half a century ago, when it was fiscally advantageous for residents of the United Kingdom to invest in loans secured by simple conventional hypothecs in Jersey. By Article 27 of the Loi (1880) sur la propriété foncière ("the 1880 law") a loan secured by a simple conventional hypothec ("an HCS", to use the common acronym for an hypothèque conventionelle simple) is deemed to be an immeuble, or immoveable property, and such property enjoyed certain exemptions at that time from estate duty under English law.
2. The history of the matter is that a contract of creation of an HCS securing a loan of £9,000 bearing interest at 3½% p.a. was passed before the Royal Court on 14th May 1955 whereby Percival John Green and Marjorie Vera Green, his wife, acknowledged their indebtedness to the Right Honourable Donald Sterling Palmer Howard, the Third Baron Strathcona and the Honourable Donald Euan Palmer Howard, his son. The HCS was secured upon a property then known as Magnolia House but which subsequently became the Magnolia Hotel. The benefit of this HCS (amongst others) was subsequently transferred by contracts passed before the Royal Court on 21st February 1959 to Baron Strathcona personally. Shortly afterwards Baron Strathcona died, and the HCS was inherited by his son the Right Honourable Donald Euan Palmer Howard, Fourth Baron Strathcona. On 12th September 1959 the Fourth Baron Strathcona sold the HCS (amongst others) to Leonora Catherine Duff née Alexander. The contract recorded that the underlying capital sum had by then been reduced to £8,500. Mrs Duff must have sold the HCS during the following two years, but that contract has not been placed before us. On the 5th August 1961 the HCS was acquired (with others) by Sheffield Airey Neave, Airey Middleton Sheffield Neave, and Edward Noble Sheppard.
3. So far as the Public Registry is concerned, only one further transaction has taken place in relation to the HCS since 5th August 1961. Sheffield Airey Neave, MP was murdered by terrorists shortly after passing of that contract when his car was blown up outside the Houses of Parliament in London. By his will of immoveable property, registered on 30th January 1962, he devised a number of HCSs, including that secured upon the Magnolia Hotel, to Airey Middleton Sheffield Neave and Edward Noble Sheppard.
4. On 10th March 1962 there were transactions in relation to fourteen of those HCSs, but they did not include the HCS secured upon the Magnolia Hotel. So far as the records in the Public Registry are concerned, there is an existing HCS in the sum of £8,500 secured against the property in favour of those individuals or their estates.
5. So far as the property itself is concerned, there have been a number of changes in title. Mr and Mrs Green sold the house on 28th June 1958 to Edward Cecil Sidney. Douglas Cecil Sidney inherited the property from his father Edward in 1967, and sold it to the Representors on 30th November 1990. Somewhere along this line, the HCS appears to have been overlooked. The contract of purchase by the Representors contains no reference to it. The Magnolia Hotel has now been demolished and a number of flats have been constructed on the site. The record of the existence of the HCS in the Public Registry has caused difficulties with a number of potential purchasers of the flats. The Representors wish to be able to offer a clear and unencumbered title and at present are unable to do so. They accordingly bring this Representation asking the court to order the cancellation of the registration of the HCS in the records of the Public Registry.
6. When the Representation came on for hearing, it seemed to the court that issues of public importance were involved, and the Attorney General was convened as amicus curiae. The Attorney has been represented by the Solicitor General to whom the court is most grateful for her concise and clear submissions. The Solicitor General submitted that the Representors were in effect seeking a declaration and that the Representation gave rise to a number of distinct issues for determination viz -
(i) Was this an appropriate case for the making of a declaration?
(ii) If the answer to (i) is yes, was the court satisfied that the underlying debt to which the hypothec relates had been repaid?
(iii) If the answer to (ii) is yes, and the court makes a declaration to that effect, did the court have an inherent jurisdiction to supplement the provisions of the 1880 Law and to order the cancellation of the HCS in the records of the Public Registry?
Mr Michel for the Representors concurred with the Solicitor General that these were the relevant issues. We propose accordingly to approach the matter in this way.
Is this an appropriate case for the making of a declaration?
7. The Public Registry is one of the oldest land registries in Europe having been created by Act of the States in 1602 at the instigation, it is said, of Sir Walter Ralegh, then Governor of Jersey. It is a registry of transactions in immoveable property and purports to record not only the ownership of land but also all obligations which are extant and which affect the land. It is axiomatic that the accuracy of the records in the Public Registry is of great importance, both in terms of commercial certainty and in the public interest. For many people the purchase of a house or flat is the most significant commercial transaction of their lives, and it is undesirable that shadowy obligations should linger in the records and that there should be uncertainty as to their legal validity.
8. The 1880 Law was a reforming statute of the first importance. It swept away a system of hypothecation and guarantee of labyrinthine complexity and substituted, with effect from 26th August 1880, a much simpler regime which has largely stood the test of time. Obligations can be secured against land by one of three types of hypothec, a legal hypothec, a judicial hypothec or a simple conventional hypothec (or HCS). An hypothec may be graphically described as a form of claw grasping a corporeal or incorporeal hereditament. It is the collection of legal rights which secures the obligation of a debtor towards his creditor. First and foremost it attaches to land. There are circumstances where an hypothec can become "sans fond", but those circumstances are not germane to this case. In general, a hypothec secures an underlying obligation by attaching to the land against which it is charged. If the underlying obligation is extinguished, the hypothec ceases to exist and the claw falls away. See Articles 29 and 35 of the 1880 Law. However, while the droit de suite (the right to follow the hypothecated property into the hands of a third party) is prescribed in relation to judicial and legal hypothecs (except dower) after ten years, the droit de suite in relation to an HCS is imprescriptible. Absent some acknowledgement by the creditor that the underlying debt has been repaid, the HCS will continue in existence (so far as the records in the Public Registry are concerned) indefinitely.
9. The contention of counsel for the Representors is that the indebtedness underlying the HCS secured upon the site of the former Magnolia Hotel no longer exists and that the HCS should accordingly be cancelled so that the land is shown in the records of the Public Registry to be unencumbered. Is this a matter which engages the jurisdiction of this Court to make a declaration?
10. The power to give a declaratory judgment was considered in Re the Curatorship of X [2002] JLR 259. In that case the court reviewed the authorities and held that it had jurisdiction to make a declaratory judgment on any live issue before it, that is, any issue with a sufficient degree of reality and immediacy to have a practical bearing upon the resolution of an actual dispute or a dispute likely to arise in the future. Birt, Deputy Bailiff, stated at paragraph 18 -
"The Court should adopt a broader approach and consider whether there is a live practical question with practical consequences when deciding whether to exercise its discretion to grant a declaratory relief".
11. We have no doubt that the difficulties posed for the Representors by the continuing existence of the HCS secured upon their property raise a live practical question with practical consequences. This is an appropriate case for the granting of declaratory relief.
Is the Court satisfied that the underlying debt has been repaid?
12. We are satisfied from the public records, and from the submissions made to us, that the underlying debt had been reduced to £8,500 by 12th September 1959 and, as stated in paragraph 3 above, that Airey Middleton Sheffield Neave and Edward Sheppard became entitled to the HCS (amongst others) following the registration of the will of real estate in Jersey of the late Sheffield Airey Neave on 13th January 1962. The question is whether there is sufficient evidence that the borrowing of £8,500 has been repaid during the last 44 years.
13. Mr Michel for the Representors placed a number of affidavits before us. One affidavit is that of Graham Gordon Andrews who is an experienced conveyancer employed by Messrs Ogier who acted for Edward Cecil Sidney when he acquired the Magnolia Hotel from Mr and Mrs Green in June 1958. Mr Sidney had been charged by his contract with the repayment of the loan (at that time reduced to £8,625) secured by the HCS. Mr Sidney died in 1967 and the Magnolia Hotel was inherited by his son Douglas Cecil Sidney. Mr Sidney junior remained in possession of the property for 23 years until selling it to the Representors in 1990. During all that time he paid no interest to Messrs Neave and Sheppard; indeed until the time of the sale to the Representors he was unaware of the existence of the HCS. His father had never spoken to him of if.
14. The affidavit of Paul Watson, a conveyancer at Crills, has drawn the court's attention to the fact that there were 19, and not 18 HCSs (as stated in the will of real estate) devised by the late Sheffield Airey Neave to A.M.S. Neave and Edward Sheppard. An HCS of £10,000 due by La Croix de Lorraine Limited mentioned in the will was in fact two HCSs of £9,750 and £250 respectively. Of those 19 HCSs, A.M.S. Neave transferred his interest in 14 to James Bright Robertson on 10th March 1962. Of the 5 remaining HCSs, the hypothec secured upon the Magnolia Hotel is the only one that has not, according to the records in the Public Registry, been cancelled following reimbursement of the loan. It would seem to the Court very surprising, and unlikely, that an HCS in an amount which was not inconsiderable in 1962 should simply have been overlooked.
15. It is true that the court has received no evidence from anyone connected with the estates of A.M.S. Neave or Edward Sheppard to verify that the repayment of the loan secured by the HCS on the Magnolia Hotel has been achieved. It might have been desirable to carry out some research to trace the heirs but we were told that the cost of such research would have been disproportionate. However, we are satisfied, given the passage of time and all the other circumstances of the case, that on a balance of probabilities the loan was repaid by the late Edward Cecil Sidney during the 1960s. We are prepared to make a declaration that the underlying debt has been repaid.
Has the Court an inherent jurisdiction to order the cancellation of the HCS in the
Public Registry?
16. It was agreed on both sides that there was no statutory provision in the 1880 Law empowering the court to cancel an HCS. Article 23 provides -
"La vente ou autre translation volontaire entre vifs de propriété d'une rente ou autre reclamation emportant une hypothèque conventionnelle, ne pourra valablement s'effectuer qu'au moyen d'un contrat passé devant Justice, et régulièrement enregistré. Ce contrat devra énoncer la date du contrat par lequel l'hypothèque fut établie, et les noms des personnes qui y étaient parties. Les mêmes règles s'appliqueront à l'extinction de l'hypothèque conventionnelle, qui se fera d'accord de parties, et à l'abandon volontaire que pourra en faire le créancier ou ayant-droit."
17. Curiously the court does have the statutory power to order the cancellation of a legal or judicial hypothec. Article 16 of the 1880 Law provides in terms that where the underlying obligation has become extinguished, the hypothecary creditor must produce the relevant Act to the Registrar within one month so that the hypothec can be cancelled. If the creditor fails to take this action, the debtor may action the hypothecary creditor in the Petty Debts Court or the Royal Court, depending on the amount of the debt, seeking the cancellation of the hypothec and any damages which may have been caused by the creditor's breach of statutory duty.
18. It is not clear why the 1880 Law provided no equivalent remedy to the debtor in relation to an HCS. Sir Robert Marett's Lettre Explicative, published before the debate on what was to become the 1880 Law, gives no hint as to why the statute contains this omission. Perhaps the old rule that a person cannot be compelled to take an oath inhibited a provision requiring a contract of reimbursement to be passed. Whatever the reason may be, there is that lacuna. Does the court have an inherent jurisdiction to supplement the provisions of the 1880 Law?
19. In Mayo v Cantrade [1998] JLR 173 Smith J.A. stated at 188 -
"In our view, the vital clue to the nature of inherent jurisdiction in its procedural setting, and revealed in the two passages quoted, is necessity. The court has a particular procedural power because it has to have it to be a court in any meaningful sense. On this basis, the power to require the attendance of witnesses, whether to testify or to produce documents, the power to control abuse of the process of the court, the power to dismiss claims for want of prosecution, the power to issue practice directions, the power to decide who may or may not appear before the court, the power to correct errors in its own orders and many other powers may all be recognized as derived from a single pool, not of powers but of power drawn upon as necessity dictates."
20. In Jones v Attorney General [2000] JLR 103 Nutting J.A. cited the above passage and continued, at 110 -
"The concept of necessity predicates a situation where the court has power to do something but can only achieve it by doing something else: an inherent power can be invoked in such circumstances to enable the court to act effectively. The rationale for the existence of the power is the court's invocation of an implied power to do something which is ancillary to that which the court has an explicit power to do.
Plainly it is possible for an inherent jurisdiction to exist in respect of matters about which a statute is silent. Equally an inherent jurisdiction may supplement a permissive jurisdiction granted by statute. What is cannot do is to confer a power inconsistent with a statutory provision which is itself mandatory."
21. Having issued a declaration that we are satisfied that the underlying debt supporting the HCS has been repaid, it would be a strange state of affairs if this Court were to be impotent to make the consequential and ancillary order sought by the Representors. We find that we do have an inherent jurisdiction to order the cancellation of an HCS in the records of the Public Registry in circumstances where the Court has been satisfied that the underlying debt has been repaid. We accordingly order the Registrar to effect the cancellation of the HCS secured on the property (formerly the Magnolia Hotel) belonging to the Representors.
Authorities
Loi (1880) sur la propriété foncière.
Re the Curatorship of X [2002] JLR 259.