Jersey Unreported Judgments

Companies - reasons relating to order recognising order appointing receivers of Palmerstone estates Limited.

[2016]JRC066

Royal Court

(Samedi)

16 March 2016

IN THE MATTER OF THE REPRESENTATION OF TIMOTHY JOHN LE CORNU AND CHRISTOPHER JAMES SMITH AS RECEIVERS OF PALMERSTONE ESTATES LIMITED

AND IN THE MATTER OF PALMERSTONE ESTATES LIMITED

Advocate J. D. Garood for the Representor.

judgment

the deputy bailiff:

1.        On 27^th November, 2015, the Court made an order recognising the order of the High Court on 8^th October, 2015, on the application of Banco Santander Totta SA ("the Bank") appointing Timothy John Le Cornu and Christopher James Smith ("the Representors") as receivers of Palmerstone Estates Limited, a Jersey Company ("the Company").  These in brief are our reasons. 

2.        Between 1997 and 2006 the Bank made a number of advances to the Company and by a facility letter dated 15^th May, 2008, and signed by the directors, officers or other agents of the Company the Bank and the Company recorded that the Bank had advanced loans to the Company totalling €900,000.  The obligations of the Company were guaranteed by Mr William Hawkins ("Mr Hawkins") who was at all material times a director of the Company.  In breach of the terms of the facility letter the Company failed to make payments of interest and capital as they fell due and Mr Hawkins failed to make good the Company's failures. 

3.        As a consequence, the Bank issued proceedings in the English County Court to recover monies due from the Company and under Mr Hawkins' guarantee.  On 6^th November, 2013, the Bank was granted judgment against the Company in the sum of £857,740.16 inclusive of interest and costs.  Subsequently the Bank was also granted judgment against Mr Hawkins under the guarantee in the sum of €982,487.88. 

4.        The only asset of significance owned by the Company is a residential dwelling known as Monte do Casal, Lugar do Cerro do Lobo, Estoi, Faro, Portugal ("the Property"). 

5.        In April 2014 the Bank was granted a European Enforcement Order for the purposes of enforcing its judgment against the Company's interest in the property by way of a Portuguese process known as "penhora".  This is a form of interest in land broadly equivalent to what would be in Jersey terms a judicial hypothec.  The enforcement of the penhora is through the Portuguese court supervising the sale of a property by a judgment creditor. 

6.        Unfortunately for the Bank, the Company's title in the Property had a defect in that there was an inconsistency between the description of the Property as between the Portuguese government tax department and the Portuguese land registry.  This requires correction and it can only be corrected by the Company itself. 

7.        As a result, as we have said, on application by the Bank the Representors were, on 8^th October, 2015, appointed as receivers by the High Court of England and Wales for the purposes of the correction of the defect in the Company's title to the Property so that the penhora could be enforced. 

8.        The matter was first brought before this Court on 6^th November, 2015, by representation at which time, amongst other things, the Court ordered that the Company should be served with a copy of the representation and accompanying documentation and that Mr Hawkins should also be given notice of the representation.  Service on the Company was to be effected by personal service on Verita Trust Company which is the company that maintains the Company's registered office. 

9.        Neither the Company nor Mr Hawkins appeared before us nor made representations in connection with the application that we were considering. 

10.      The application is made under the inherent jurisdiction of the Court.  The Court has in the past been prepared to use that jurisdiction to aid foreign proceedings, notwithstanding that there was no cause of action in Jersey (see Solvalub Limited v Match Investments Limited [1996] JLR 361).  Although that case related to the grant of a Mareva injunction in Jersey in support of foreign proceedings (where there was otherwise no course of action in Jersey) the Court's view of its jurisdiction was shaped by considerations such as the interests of working with courts of other countries and in the interests of Jersey's reputation as a financial centre.  Although that case is not directly in point it seems to us that similar considerations apply. 

11.      In the case of In Reo (Powerstation) Limited [2011] JRC 232A the Court had to consider its inherent jurisdiction to issue a letter of request to be sent to the High Court of England and Wales in respect of four Jersey companies which ultimately beneficially owned English real estate.  With regard to its inherent jurisdiction Bailhache, Deputy Bailiff, (as he then was) said the following:-

"12     As to the inherent jurisdiction of the Court it is perhaps apt to refer to two decisions of the Court of Appeal.  The first is the Finance and Economics Committee -v- Bastion Offshore Trust Company Limited [1994] JLR 370 at page 382 where Sir Patrick Neill JA said this:-

'Practitioners in these courts and in the courts of Guernsey are familiar with the maxim "la cour et toute puissante" and "the court is master of its own procedure.'

The better known a proposition is, the harder it is to find authority for it and so it turns out if one seeks judicial statements of these two maxims (though in Guernsey the Court of Appeal relied on the second maxim in Cherub Invs. Limited v Channel Islands Aeroclub (Guernsey) Limited.

Both maxims are expressions of the inherent jurisdiction of the court.  So far as English Law is concerned, the inherent jurisdiction of the court has been said to be-

"A virile and viable doctrine, and has been defined as being the reserve or fund of powers, a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so, in particular to ensure the observance of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them."

12.      Further in its judgment the Court went on to consider how it should exercise its discretion under its inherent jurisdiction in that case.  At paragraph 18 the judgment reads:-

"It seems to us that the Court should be prepared to contemplate issuing a letter of request if it is in the interests of the creditors, or if it is in the interests of the debtor or if it is in the public interest.  In relation to the latter of these three considerations, the public interest obviously includes, indeed we think as a matter of priority, a satisfactory methodology for dealing with the interests of the creditors and the debtor.  Subordinate to these considerations in relation to the public interest is also the interests of the Island in terms of its reputation outside these shores.  Public policy considerations do not overtake the requirement to do justice as between those who are directly affected, and in our view is therefore subordinate to those interests when it comes to exercising a discretion in a matter of this kind, but we can have regard, at the edges of our discretion, to the fact that a major insolvency of a Jersey company, causing extensive damage to creditors and debtor alike is not in the best interests of the Island, and this can operate as an additional reason to exercise the discretion to issue a letter of request."

13.      The matter of the recognition of the appointment of receivers appointed by the High Court was considered in the case of In the matter of the assets of Ablyazov [2012] (1) JLR 44 in which Sir Michael Birt, Bailiff said:-

"We see no reason for Jersey law to take a different stance, so such orders are not capable of recognition or enforcement.  We conclude, therefore, that the Royal Court has an inherent jurisdiction to recognise the appointment of receivers appointed by a foreign court provided there is a sufficient connection between the defendant whose assets have been made subject of a receivership order and the jurisdiction in which the order has been made.  In this case Mr Ablyazov is resident in England we hold that to be a sufficient connection for these purposes."

14.      Under the Bank's standard terms and conditions which govern the terms of the facility letter, the agreement between the Bank and the Company is to be "governed by and construed in accordance with English law and the parties hereto submit to the non-exclusive jurisdiction of the High Court".  In our view, and indeed as is supported by the authority that has been shown to us, there is generally a sufficient connection established between the foreign court appointing the receivers and the debtor if the debtor has accepted the jurisdiction of that foreign court.  It appears from the material before us that the Company did indeed accept the jurisdiction of the High Court and accordingly in our view there was a sufficient connection for us to exercise our inherent jurisdiction and make the order. 

15.      Furthermore it seems to us that as a matter of comity and indeed basic fairness it is appropriate for this Court to recognise the appointment of the receivers for the purpose of correcting the defective title and the conduct of the penhora.  It is in the wider public interest of Jersey to do so. 

16.      Accordingly we made the order recognising the appointment of the Representors as receivers with regard to the Company in the terms requested. 

Authorities

Solvalub Limited v Match Investments Limited [1996] JLR 361.

In Reo (Powerstation) Limited [2011] JRC 232A.

In the matter of the assets of Ablyazov [2012] (1) JLR 44.