J. A. Clyde-Smith, Esq., Commissioner, and Jurats Le Cornu, Nicolle, Liston, Blampied and de Veulle.
IN THE MATTER OF THE REPRESENTATION OF REVA HOLDINGS LIMITED
AND IN THE MATTER OF A DOLEANCE APPLICATION
Jayne Clara Grant appeared for Reva Holdings Limited.
Advocate M. W. Cook appeared for Jersey Home Loans Limited.
Advocate A. J. Clarke appeared as Amicus Curiae.
1. On 12th November, 2013, the Superior Number of the Royal Court refused the petition of Reva Holdings Limited ("Reva") by way of doléance and we now set out our reasons.
2. Reva was represented by its director and beneficial owner, Miss Jayne Clara Grant, but she was happy to rest on the submissions helpfully put forward by Mr Clarke, who the Court had appointed amicus curiae. Mr Cook appeared for Jersey Home Loans Limited, who resisted the petition.
3. Reva first applied for a Remise de biens on 20th September, 2013, at which time the Court, in accordance with Article 2 of the Loi (1939) sur les Remises de Biens, appointed Jurats Morgan and Kerley ("the Jurats") to examine Reva's property and report on the appropriateness of a Remise. The application came back before the Court on 4th October, 2013, at which time the Jurats presented their report which recommended against the granting of a Remise. Following submissions on behalf of Reva, the Court adjourned the matter to 14th October for further argument and reserved its decision.
4. We were informed by Mr Cook that the Court circulated its draft judgment declining a Remise on 21st October, 2013, and following representations on behalf of Reva deferred issuing its final judgment until 24th October, 2013, in order to see whether an offer for the property as a whole at a price which would provide a meaningful surplus was forthcoming. No such offer was forthcoming and on 25th October, 2013, the Court issued its final judgment refusing the Remise.
5. The factual background is set out in the Court's judgment as follows:-
3. On 1st October, 2007, Reva entered into a loan facility with Jersey Home Loans Limited ("JHL") by which it borrowed £332,500 in order to assist with the acquisition of the freehold property known as 14 Duhamel Place, St Helier ("the property"). The property consists of three 1 bedroomed flats and one studio flat.
4. In March 2009, the property suffered extensive fire and water damage when a fire broke out. As a result the property became uninhabitable and the lodgers moved out. Reva therefore ceased to receive any rental income.
5. This appears to have been the beginning of the financial problems of Reva. Further difficulty was caused by the fact that there is apparently a dispute with the insurance company as to the extent to which any damage is covered by insurance.
6. Be that as it may, Reva fell behind in respect of the loan from JHL and on the 17th August, 2012, judgment was entered against Reva and Miss Grant in the amount of £355,415.28, together with continuing contractual interest.
7. On 7th June, 2013, JHL obtained an Acte Vicomte Chargé d'Ecrire. On 23rd August, 2013, on the application of JHL, the Court pronounced 'L'Adjudication de la Renoniciation' of Reva's immovable property and ordered that a dégrèvement should take place. It appointed Mr Pollano and Advocate Temple as Attournés.
8. As already stated, Reva applied on 20th September for a Remise. The supporting affidavit suggested that Reva's assets exceeded its secured liabilities.
9. Apart from movable property valued at £3007, Reva has only one asset, namely the property. There is no dispute that the property is divided into four flats. The top three have all been substantially refurbished following the fire. They appear to be in good condition and are let. The ground floor flat is occupied by Miss Grant and the refurbishment of that flat has not been finished. Any purchaser would therefore have further work to undertake in respect of that flat.
10. The Jurats obtained two valuations for the purposes of their report. The first was from Le Gallais, estate agents. Le Gallais valued the property at £515,000. The second valuation was from Broadlands estate agents. This valued the property at £450,000 but stated that, should the flats be sold off separately after completion of the work to the ground floor flat, a figure closer to £600,000 in total could be achieved.
11. The Schedule of Claims prepared by the Jurats, with the assistance of the Viscount's Department, showed secured claims totalling £572,753.63 with ordinary or preferred unsecured claims of £81,838.16, making a total of £654,591.79.
12. The Jurats took a figure for the property of £500,000 (being a figure between that of Le Gallais and that of Broadlands). The total assets were therefore £503,007. After deduction of administrative expenses such as selling costs, the valuation fees and prior dégrèvement costs (totalling £17,426.69) the net assets which would be available for distribution came to £485,580.31. As the secured claims totalled £572,753.63, this led to a shortfall for the secured creditors of £87,173.72. In those circumstances the Jurats felt unable to recommend that a Remise should be granted.
13. When the matter came back before the Court on 4th October, Miss Grant produced a valuation from Labesse and Company, chartered surveyors. Mr Labesse of that firm had inspected the property on 3rd October. He expressed the opinion that approximately £35,000 would be required to complete the works to the property. He gave a valuation of £660,000 assuming completion of the works. It is not entirely clear from that report whether he was valuing the property as a whole or on the basis of selling the four flats individually, but he did give a value for each individual flat, so the latter seems more likely.
14. In the light of this new information and the suggestion that, if the Labesse valuation were correct, there would be a surplus, the Court adjourned the matter for further argument. The Deputy Bailiff indicated that the three valuers should get together to see if anything could be agreed.
15. That duly occurred and on 9th October, Mr Labesse emailed the Viscount's Department to say that it was agreed by all three valuers that the best value would be achieved by selling off the flats individually. A consensus had been reached that, assuming this course of action, the valuation would be £595,000. It was further agreed between the three of them that, if it was not possible to sell the flats individually, the value for the property as a whole was £500,000.
16. On the basis of that information, the Viscount's Department prepared an updated schedule containing an estimate of assets and liabilities. Taking the higher value of £595,000, this showed total assets of £598,007. After deducting administrative expenses of £19,421.69 (slightly higher because of the increased valuation), this gave net assets of £578,585.31. The secured claims remained at £572,753.63, giving a small surplus for unsecured creditors of £5,831.68. However it was pointed out by the Viscount's Department that this figure did not allow for any additional legal fees that would be incurred in order for the four units of accommodation to be sold separately. Legal fees would be incurred either in amending the Articles of Association to enable the four flats to be sold by share transfer or by creating the relevant flying freeholds."
6. At the hearing on 14th October, 2013, Miss Grant produced an estimate from Mr Barry Pickersgill for the legal work required to enable the flats to be sold off separately in the sum of £6,000. She submitted that the Court should not proceed on the valuation agreed between Le Gallais, Broadlands and Mr Labesse and produced an e-mail valuation of 11th October from Mr Nigel Sweeney, a chartered surveyor, who valued the property on the basis of selling the four flats individually in the total sum of £670,000 or, if the property were to be sold as a whole, a likely valuation of between £600,000 and £650,000, Miss Grant had advertised the flats for sale via the Web and an individual had expressed an interest in acquiring Flat 2. She also referred to the fact that Geoffrey Wills Associates, chartered surveyors, had in April 2010 valued the property at £625,000 (and £780,000 after completion of the necessary work). The same firm had produced a valuation of £650,000 in January 2011, based on the then current condition of the property. The Court's judgement continued as follows:-
"24. We do not feel able to proceed on the basis of the Geoffrey Wills valuations. They were both prepared some time ago and the market has been subject to change since then. Similarly, we cannot read anything into the expression of interest by a potential purchaser who has viewed the flats. His email does not amount to an offer and gives no indication as to what figure he might be willing to offer were he to decide to do so.
25. We are left therefore with the fact that Mr Sweeney has produced a valuation which, on the figures contained in the Viscount's schedule, would produce a surplus over the secured liabilities of fractionally under £75,000.
26. As against that, the Court must consider the fact that Le Gallais, Broadlands and Mr Labesse are now agreed on a valuation of £595,000. Furthermore, this figure has been reached after discussion and debate between them. They also reflect a spread of expertise between estate agents and surveyors. In the circumstances we do not feel justified in departing from the valuation figure which they have all agreed upon. We therefore accept that the Court should proceed on the basis of a figure of £595,000.
27. On the basis of this figure, there will be a small deficit in relation to the secured creditors and there will be no dividend for the unsecured creditors. Furthermore, interest continues to accrue on the various secured debts at £32,780.65 per annum (according to the Viscount's schedule of assets and liabilities). The current income from the units amounts to approximately £33,000 and Miss Grant submitted that therefore the position would not deteriorate during the course of a Remise. However, it seems likely that vacant possession would have to be obtained before the sale of each flat could take place. Miss Grant envisaged that the flats could be sold individually as and when purchasers were willing to proceed but we think that is unlikely to be the case. The practice in a Remise is for the whole property to be sold at one time so as to clear all the secured debt. This is because a creditor cannot be forced in a Remise to agree to be party to a contract in order to release his hypothèque. If a creditor is doubtful as to whether all the sales will be sufficient to clear the secured debts, he is unlikely to agree to release his hypothèque. We see practical difficulties in selling off the flats at different times. Thus interest will continue to accrue on the entire amount until sale of all the units.
28. It follows that, on the basis of the figures contained in the schedule of assets and liabilities, we do not think there is jurisdiction to grant a Remise because we are not satisfied that the secured debts will be paid in full upon sale of all the immovable property. Even if it becomes a matter of discretion, the balance is so close that we would not think it right to grant a Remise."
7. After a further short adjournment to look into the precise amount due to Jersey Home Loans Limited, the Court concluded as follows:-
"32. On the basis of the information before us, we see no reason to doubt the figure quoted by JHL. We are certainly not satisfied that the lesser figure quoted by Reva is correct to the extent that we can conclude that there will be a surplus over the secured claims and that it would be appropriate to grant the Remise.
34. Having considered carefully the points put forward by Miss Grant on behalf of Reva, we are not satisfied on the evidence that, if a Remise were to be granted, the sum realised would exceed the secured liabilities and accordingly we decline to order a Remise. The stay on the dégrèvement is therefore lifted and it may now proceed."
8. The law in relation to Doléance is well established and was helpfully summarised by Birt, then Deputy Bailiff, in the case of AG v Michel and Gallichan  JRC 089 at paragraphs 7-9 as follows:-
"7. Doléance is well established under our law. In the case of Re Doléance of Lagadec  JRC 36, Bailhache, Bailiff quoted with approval the words of Frossard, Commissioner, in Re Doléance of Barker [1985-86] JLR 284, where the Commissioner said this:-
'Before allowing a doléance the Court has to be satisfied that there has been an excess of jurisdiction or a breach of natural justice which needs to be remedied, as a doléance is a remedy 'in last resort' when all other doors are closed and a grave injustice will remain unless remedied. This being so, the onus to show this is on the petitioner and can only be described as a heavy burden'.
8. We have also been referred by Mr Le Quesne to Re Doléance of the Harbours and Airports Committee  JLR 316. The judgment of Tomes, Deputy Bailiff, refers there to "manifest, judicial error."
9. We regard the cases as not being inconsistent. Essentially the position is this. A doléance is not an ordinary appeal. It is a review and the Superior Number may only intervene to overturn a decision where the petitioner satisfies the heavy burden of showing that a grave injustice will result whether it be from an excess of jurisdiction, a breach of natural justice, an error of law or some other manifest judicial error."
9. In its representation Reva put forward the following grounds in support of its petition for a doléance:-
10. It was asserted that the Population Office had interfered in correspondence over the property, causing the valuations made by Le Gallais and Broadlands to be reduced. It would seem that the Attorney General had abandoned a prosecution against Miss Grant and Reva for allowing up to five persons to lodge in the property with Miss Grant as opposed to letting out the four units to qualified persons. Le Gallais had inquired into the housing status of the property and ascertained that it was subject to standard 1(1)(a-h) conditions in respect of the three units that existed when Reva acquired the property and on any newly created units. The Population Office had confirmed that each of the now four units should be let to or otherwise occupied by persons who are "entitled". Miss Grant's ability to take up to five lodgers had been a short term concession to her which would not be extended to any new owner. This "interference" was stated to be in breach of the rights of Miss Grant and Reva under the ECHR and in particular their Article 8 right to respect for private and family life.
11. We could see no evidence of any "interference" by the Population Office and if there had been a breach of the Article 8 rights of Miss Grant and Reva it was a matter to be pursued separately. It had no relevance to the petition.
12. The Jurats had listed a Michael and Paul Dineen as unsecured creditors in the sum of £69,040.51, which represented a large proportion of the total unsecured claims of £81,340.84. Their claim was disputed by Miss Grant, who wanted them removed from the list of unsecured creditors so that she could demonstrate that if the Remise was granted all the secured and unsecured creditors would be paid in full.
13. A note to the schedule produced by the Jurats acknowledged that this claim by Messrs Dineen was disputed and was the subject of court proceedings. They were therefore contingent creditors who had been properly listed as such.
14. In any event the decision of the Court was not based upon or influenced by the amount of the unsecured claims, but whether there would be a surplus over the secured claims. This ground again had no relevance to the petition.
15. Under these grounds, which can be taken together, it was asserted that Mr Labesse had met with Robin Sappe of Le Gallais and Roger Trower of Broadlands to agree upon a valuation of the property without Miss Grant's knowledge or consent. According to the representation, Miss Grant had organised a second valuation by Mr Nigel Sweeney so that at the hearing on 14th October, 2013, she would have two valuations in her favour. However, as a result of this meeting, the valuation by Mr Labesse had been "interfered with" so that she was only left with one valuation in her favour. This it was again said was an interference with the Article 8 ECHR rights of Miss Grant and Reva.
16. Mr Clarke suggested that these grounds might be better expressed as a breach of natural justice in that Miss Grant had been denied the ability to cross-examine Mr Labesse at the hearing on 14th October, 2013. None of the three experts were present at that hearing, the Court relying on their joint e-mail of 9th October, 2013, in which they had agreed on a valuation of £595,000 if the flats were sold off individually or £500,000 if the property was sold as a whole.
17. Whilst there had been no order of the Court requiring the three agents to meet, the suggestion was made by the Deputy Bailiff in open Court on 4th October, 2013. It is always helpful for any Court faced with experts with differing opinions to ask them to meet to see if consensus can be reached and we saw nothing in the process here which could possibly be described as a breach of natural justice. If Miss Grant has any complaint about the conduct of Mr Labesse in cooperating with the Court in this way, then that is a matter between them. Leaving aside the issue of whether leave would have been given to Miss Grant to cross-examine her own expert, there was nothing to have prevented her from arranging for Mr Labesse to be present on 14th October, 2013, in order to answer any questions that might have been put to him. As it was she relied instead on a further valuation produced by Mr Sweeney. There was no merit in this ground.
18. The person who had shown an interest in Flat 2 had e-mailed Miss Grant on 22nd October, 2013, saying he thought he would go ahead and revise his offer to £150,000 on acceptance of which he would arrange for the mortgage to be in place by mid-November, subject to a satisfactory survey.
19. This offer was £13,000 above the joint valuation attributed to it by the three experts. If sold at this level, and assuming the valuations of the other flats were achieved, this would leave a surplus for the unsecured creditors. If the valuations of the other three flats had been similarly understated, it was submitted that there would be ample funds to cover secured creditors, the unsecured creditors, the fees, legal costs and six months' interest without taking into consideration the income derived from the existing occupants.
20. This was the substantive argument put forward in support of the petition by way of doléance to which we now turn.
21. It was not suggested on behalf of Reva that the Royal Court had made a legal or judicial error of any kind or acted in excess of its jurisdiction. In our view, it could not be contended that there had been a breach of natural justice. On the contrary, the Royal Court approached its decision with great care allowing Reva every opportunity to put its case.
22. In essence, Miss Grant was seeking a second opportunity to convince the Court that she was capable of achieving sales beyond the joint valuation put forward by the three experts. As the Royal Court said at paragraph 26 of its judgment, the joint valuation had been reached after discussion and debate and reflected a spread of expertise between estate agents and surveyors. It must be borne in mind that all valuations are by their nature speculative and it was perfectly reasonable for the Royal Court to prefer the joint valuation to that of Mr Sweeney.
23. All that had changed since the decision of the Royal Court was the receipt of the offer of £150,000 for Flat 2. That offer was within 10% of the joint valuation, a reasonable margin of error, which could of course have worked both ways. Furthermore, this offer for one flat (subject to a mortgage and survey) ignored the practical difficulty the Royal Court identified in selling off the flats individually at different times, namely that the secured creditors could not be forced to agree to be a party to a contract in order to release their charges. Secured creditors had not agreed to release their charges for the sale of Flat 2 or indeed for any of the individual flats. The practice in a Remise is for the whole property to be sold at once, so as to clear all the secured debt.
24. We concluded that Reva came nowhere near discharging the heavy burden upon it of showing that a grave injustice would result if the decision of the Royal Court was not overturned. The petition by way of doléance therefore failed.
Loi (1939) sur les Remises de Biens.
European Convention on Human Rights.