Jersey Unreported Judgments

Property - application for a remise de biens.

[2012]JRC238

Royal Court

(Samedi)

21 December 2012

IN THE MATTER OF THE REPRESENTATION OF GILBERTO FRANCO

AND IN THE MATTER OF THE LOI (1839) SUR LES REMISES DE BIENS

Advocate S. J. Habin for the Representor.

judgment

the commissioner:

1.        On 22^nd November, 2012, the Court granted the representor a Remise de Biens pursuant to the provisions of Article 2 of the Loi (1839) sur les Remises de Biens. 

2.        On 28th September, 2012, on the application of Jersey Home Loans Limited ("JHL") the Court ordered:-

(i)        The pronouncement of "l'adjudication de la renunciation" of all the immovable property of the representor and that a dégrèvement of the immovable property may proceed; and

(ii)       The appointment of Daniel Guy Le Sueur and Mark Hedley Douglas Taylor, Advocates of the Royal Court of Jersey, as Attournés in order to conduct the said dégrèvement and to observe the formalities prescribed by the law in that regard.  

3.        The Attournés fixed 29^th October, 2012, for the conduct of the dégrèvement. 

4.        The only immovable property owned by the representor is a property known as "La Chaumière", Bagatelle Road, in the Parish of St Saviour, Jersey to which the representor has right by contract of hereditary purchase dated 17^th March, 2006, ("the Property") in which the representor lives with his wife and two children. 

5.        The following loans by the representor are the only hypothecs secured against the property:-

(i)        A loan from JHL in the capital sum of £530,000, registered as a judicial hypothec against the property on 17^th March, 2006.  

(ii)       A loan from Alfredo Sanchez and Margaret Charlotte Sanchez in the capital sum of £100,000, registered as a judicial hypothec against the property on 12^th December, 2008, and

(iii)      A second loan from Alfredo Sanchez and Margaret Charlotte Sanchez in the capital sum of £60,000, registered as a judicial hypothec against the property on 27^th November, 2009. 

6.        The representor applied to the Court by way of representation on 12^th October, 2012, seeking a Remise de Biens on the basis that the value of the property significantly exceeded the liabilities of the representor secured against the property and that an orderly sale of the property would result in a surplus after settlement of such liabilities.  The Court stayed the dégrèvement and appointed two Jurats to examine the application and report back to the Court. 

7.        In his affidavit of 12^th October, 2012, sworn in support of the application, the representor disclosed that in addition to unsecured debts of £3,600 in favour of Visa card and £5,000 in favour of his brother, Eduardo Germiniano Franco, he had guaranteed the rental and other obligations of his company Primal Properties Limited, which trades as "Hampton House Estates".  There were rental arrears of approximately £36,000 but he deposed that as the company continues to earn commission in respect of property sales, the landlord had agreed to the payment of such arrears by instalments. 

8.        The first report of the Jurats dated 25^th October, 2012, listed the liabilities secured on the property as set out in paragraph 5 above in the sum of £706,416.77.  Maillards Estates had valued the property at £780,000.  If the property was to be sold for that amount, then after deduction of administrative costs there would be realised the sum of £763,432.50, which set against the secured claims of £706,416.77, would be sufficient to discharge the secured claims in full and leave a surplus of £57,015.73.  As the Jurats had been assured by Maillards that the property was very likely to be sold within three months, they concluded that the Remise de Biens would succeed and that the application should be granted. 

9.        However having issued the first report, it was drawn to the Jurats' attention that on Friday 22^nd October, 2012, the landlord had obtained judgment against the representor under his guarantee in the sum of £36,390.06 and they therefore prepared a second report. 

10.      In their second report of 1^st November, 2012, the Jurats again listed the secured claims as set out in paragraph 5 above totalling £706,416.77.  The amount due to the unsecured creditors, which now included the amount due under the judgment in the sum of £36,390.06, totalled £44,990.06.   On this basis, the secured claims could again be discharged in full, leaving the same surplus of £57,015.73, which was sufficient to pay off the unsecured creditors in full and to leave a balance of £12,025.67 for the representor.  Quoting from the report:-

"We have been assured by the valuer that the Property is very likely to be sold within three months.  However, it must be borne in mind that the interest is accruing on the secured claims until such time as the properties are sold, namely interest accruing of £49,765.67 per annum (£4,147.14 per month) compared with the present estimated balance remaining of £12,025.67. 

Therefore, on the basis that the property was not sold within three months, secured claims would not be discharged in full; there would be no surplus to meet the needs of unsecured creditors; and there would be insufficient margin to justify a Remise."

As a consequence of this, the Jurats were unable to recommend that the Remise de Biens be granted. 

11.      The matter came back before the Court on 2^nd November, 2012, when it was adjourned to enable the Attournés and the secured creditors to be given the opportunity of being heard.  On 22^nd November, 2012, Mr Habin produced correspondence from the Attournés and the secured creditors indicating that they had no wish to be heard on the matter.  Mr Habin submitted that the Remise de Biens should still be granted, notwithstanding the second report of the Jurats.  

12.      The position in relation to the property and the secured creditors had not changed.  A sale of the property would still produce a surplus of £57,015.73 after discharging the secured creditors in full, albeit that the amount now due to the unsecured creditors had increased.  Mr Habin referred the Court to Representation of Mickhael [2010] JRC 166A, where the Court set out the principles the Court should consider as follows:-

"(1)     there is no jurisdiction to grant a remise unless there is a reasonable expectation that a surplus will be available for distribution to ordinary creditors;

(2)       it must be possible for an investigation to be made as to whether there will be a surplus;

(3)       the effect of any extended delay on creditors, given the incidence of prior proceedings, will be considered;

(4)       that a solid basis for a remise exists where there is likely to be equity in the debtor's property which in a dégrèvement might be lost;

(5)       the Court is less likely to grant a remise if the outcome is problematical or the debtor has shown bad faith."

13.      In the same judgement at paragraph 14 it is made clear that the Court has a discretion whether or not to grant a Remise de Biens and whilst it would no doubt wish to take into account the report of the Jurats, it is free to depart from their recommendations. 

14.      Mr Habin submitted that there was a clear and significant equity in the property which would accrue to one or more of the creditors in a dégrèvement and be lost to the unsecured creditors and (potentially) the representor if the dégrèvement were to proceed.  This was a solid basis upon which the Court could exercise its discretion to grant the Remise. 

15.      The conclusion of the Jurats that if the property was not sold within three months the secured claims would not be discharged in full was not in fact correct.  Even with interest accruing at the rate of £4,147.14 per month, it would take some 13 months for the surplus of £57,015.73 to be exhausted and for the point to be reached when the secured creditors would not be paid in full.  It would seem, Mr Habin said, that the Jurats had reached their conclusion on the erroneous assumption that the surplus after paying the secured creditors in full was £12,025.67 when it was in fact £57,015.73. 

16.      The Court concluded that there would be a clear and significant equity on the sale of the property, which would be lost to the unsecured creditors and potentially the representor if the dégrèvement were to continue, albeit that as a consequence of the judgment one of the unsecured creditors might now have a preference over the other unsecured creditors.  From the point of view of whether there would be a surplus available for distribution to ordinary creditors, the position had not in fact changed from the first report to the second report. 

17.      The Court considered the close proximity between the representor's statement on oath that the landlord had agreed to the payment of the arrears by instalments and the taking of judgment against him, but having considered Mr Habin's submissions on the personal circumstances of the representor, the Court concluded that the representor had not acted in bad faith. 

18.      The Court therefore granted the Remise de Biens.  

Authorities

Loi (1839) sur les Remises de Biens.

Representation of Mickhael [2010] JRC 166A.