Debt - application for a remise de biens
Before : |
Sir William Bailhaiche., Bailiff, and Jurats Olsen and Pitman |
IN THE MATTER OF REPRESENTATION OF GG INVESTMENTS LIMITED AND TYGRES INVESTMENTS LIMITED
AND IN THE MATTER OF THE LOI (1839) SUR LES REMISE DE BIENS
Advocate A. T. H. English for the Representors.
The Viscount appeared in person.
Advocate M. W. Cook for the second Respondent.
Advocate G. D. Emmanuel for the third Respondent.
judgment
the bailiff:
1. We have applications from two limited companies, Tygres Investments Limited and GG Investments Ltd for a remise de biens. Both companies are 100% beneficially owned by Mr Geoffrey Mayger who has sworn affidavits in support. We treat each application separately.
2. Tygres owns Lorraine Guest House at Havre des Pas. The Jurats valued this property at £650,000 having received valuations from two local estate agents, one at £575,000 and the other at £650,000 with a recommended asking price of £695,000. The latter was based on guest house use; the former on a development into one bedroom units, describing the property as "tired" and more akin to lodging house. The Jurats took a value of £650,000.
3. The secured claims are assessed by the Jurats at £660,456.59. Adding in sale costs and Jurats fees and court stamps, there is an additional deduction of approximately £17,636. We pause there for a moment to say that at one point there was objection taken about the adding in of the various administrative costs and we are satisfied that those should be included when making these calculations. There is authority for that in many of the cases. There is thus clearly on the Jurats figures a shortfall on the secured debts, and on that basis it was not recommended that the remise be granted.
4. The applicant asserts that the valuation of the real estate is wrong. We heard evidence from Mr Booth, a qualified chartered surveyor, who put its value on a conservative basis at £695,000. That valuation assumed the grant of a planning permission in accordance with the application submitted in May this year, to which we are told there have been no objections. Mr Booth accepted that the market would discount the value he attributed by about 10-15% for the lack of certainty that comes from the absence of a precise planning permission. We accept that is a correct approach. On his evidence, the property is worth less than the value attributed to it by the Jurats and thus there is even less to pay towards the secured debts.
5. However, Mr Mayger also produced evidence of an offer from a Mr Ellyatt, that evidence being a letter from an estate agent asserting that this offer had been made and we need to assess that because it is clearly relevant. The offer was conditional on a number of points, but included the grant of planning permission, and mortgage finance being available. The fact that it is conditional bears out this Court's experience as to how the property market works in the Island; and indeed as Mr Mayger said in his evidence "We live in uncertain times, and no one is prepared to take a chance till the consent is issued". I will just add in passing Mr Mayger gave his evidence we thought very fairly and in our opinion in a very straightforward way. There is uncertainty until the permit is in hand - and that uncertainly is reflected in value. Mr Mayger took it as certain that a planning permission would be granted in at least as favourable terms as the application was submitted and he also took the view there was some hidden value over and above that amount. We have some sympathy with his approach in that respect - he may be right. But equally he may not, and we are looking at an assessment of market value today, taking into account all the possibilities and risks which the property carries, and not a hope of what it might be worth in the future if all goes swimmingly well. Of course it is for just that reason that we need to assess the offer which Mr Ellyatt has made. Now we are told by Mr Mayger that Mr Ellyatt was familiar with Mr Mayger's case and familiar with the property. He is on a world cruise and we take it therefore that he has not viewed the property and he is not going to be back until the end of July. The offer is hedged about with conditions, as we have said, and it comes in June, in other words very late, shortly after the last hearing. There is no preliminary agreement of sale which has been executed by the parties, even conditionally, and there is no sign even of letters passing between lawyers which would set out the terms of the proposed agreement and the fact that instructions had been given by both vendor and purchaser. In all those circumstances we do not feel confident that the offer would proceed to fruition.
6. The legal test to be applied is well set out in the authorities. Can the Court reasonably consider on the figures available that there will be a surplus from the realisation of property that will enable at least some of the unsecured creditors to receive a dividend from the remise or even a return of funds to the debtor? If not, there is no jurisdiction to grant a remise in the first place.
7. If we were satisfied that there may be a surplus, the Court should consider whether there is more than marginal equity and how complex the process for the sale would be; if only marginal, or if very complex, it might not be appropriate to have a remise, that summary appears In re Mickhael 2011 JLR 1 at para 3.
8. We think it is not possible to say at the moment that there will be a surplus available for the unsecured creditors and therefore that we have no jurisdiction but we have gone on to consider what the position would be if we are wrong in that conclusion as a result of the assessment of Mr Ellyatt's offer. So if we were wrong we think the margins still remain so tight that it does not appear to us to be right in our discretion to grant the remise. The reasons we have for that are that at the moment on the Jurat's assessment none of the legal costs which have been incurred have been attributed to Tygres Investments Limited and on the face of it there is no reason why that company should not bear at least half the costs whatever they might be. We are told that the figure which is claimed by Jersey Home Loans Limited is £76,000 and if one took half of that figure we would be at £38,000 plus whatever has been incurred since the last bills and Mr Cook indicated that the £76,000 was not a completely up to date figure. So if one assumes on that basis that the claim of JHL to costs is in the region of £45,000 the equity comes down quite considerably to something perhaps in the region of £35,000 to £40,000 or so. As against that the complexity of what is in involved until the time of sale needs to be taken into account.
9. The role of the Jurats in managing the property when they will have no assets, no finance to arrange insurance, or to arrange any necessary repairs or deal with the arrangements that need to be made for getting planning permission through, as the Viscount has suggested, all those things are factors to be taken into consideration, and having regard to all those factors we do not think as a matter of discretion that that with these tight margins it would be right to grant the application and it is therefore refused.
10. We turn now to the application of GG Investments Ltd. This company owns Bay View Guest House at Havre des Pas. The property, like Lorraine Guest House a few properties to the west of it, is in an area where one might expect a development permission. But again the probability of a permission for a specific development and the delay before it is obtained are uncertainties which the property market takes into account in assessing value. Like Tygres there is no development permission in place, but unlike Tygres, there has not, it appears, been any application submitted at all.
11. The Jurats obtained valuations from two local agents at £750,000 and £650,000 respectively. The lower valuation is in very similar terms to that firm's valuation of the Tygres property, indeed apart from a change in the name of the owner and the identity of the property there is not a huge amount different, and that may raise some doubts about the quality of that valuation. At all events, the Jurats took a value of £750,000. They also took as an asset of GG Investments Limited the loan due to that company by Tygres of £55,000, which we think may have been an error as the ability of Tygres to repay that sum depends upon the realisation of its property and whether any surplus arises as a result, which for the reasons I have given in relation to Tygres we think is at least questionable. The Jurats considered the secured claims amounted to £990,000 and that left a considerable shortfall. Even if one reduced the claim for costs and treated those costs as being apportioned between Tygres and GG Investments Limited there is still a very significant shortfall.
12. This approach is challenged by the applicant in several ways. First as to the value of the real estate, the applicant's expert, Mr Booth, asserted the value was £825,000. However, he agreed that that value assumed planning permission and he agreed that one had to allow at least a month for the preparation of architects' plans suitable for submission and a further three months for the grant of permission. If one applied a discount of 10-15% to get to current value, the value would be some £800,000. What this discussion prompts is an assessment of the probability of realising value as he calculated it within the anticipated period of the remise if granted. On his figures it would seem that there will not be a surplus for unsecured creditors and the Court would not have jurisdiction to grant the remise.
13. Mr Mayger contended that a more ambitious scheme would pay greater dividends and he considered the property to have a greater value that that attributed by Mr Booth conservatively as Mr Booth accepted. Mr Mayger valued the property at £1.5 million although he would accept the lessor sum of £1.2 million if necessary on this more ambitious scheme. That scheme however involved the participation of his neighbour who would have to agree to sell his property. Mr Mayger showed us email correspondence with the neighbour and told us that the neighbour was in principle willing to sell although he was not an anxious sellor. He valued the neighbour's property at £4 million but it appears the neighbour valued it at £6 million, so there is there a substantial gap to be bridged to say the least. Mr Mayger has had some conversations with potential developers of the combined site. Prices have not really been discussed although one developer was apparently willing to pay £1.5 million for the GG Investments site without any planning permission in place, as long as he had the other property "for a commercial figure". We have not seen any written offer.
14. The position in evidence was summarised we think quite accurately by Mr Mayger when he said "If Carter won't pay the price required by Mr Parry, perhaps Jersey Homes Trust will." Well that has become even more complicated because since Mr Mayger's evidence this afternoon we were shown notice in the Jersey Evening Post last night that very unfortunately the neighbour Mr Parry died about ten days ago and that certainly would add to the complexities of any arrangements for the purchase of his property.
15. In our judgment there is too much "if" and too much "perhaps" for this Court to be satisfied on this application that there will be any surplus available for the unsecured creditors. Furthermore, the time that would be taken to realise any sums from this approach would be likely to take us well beyond the period of a remise. There is no reason why the debtor should have such a concession with the use of someone else's money when the creditor does not wish to make it available and he has no legal obligation to do so.
16. The property is in an area of town where some development permission might be expected. If the dégrèvement proceeds Jersey Home Loans has confirmed through Advocate Cook that it will account to the debtor for any surplus received after payment of all secured and unsecured debts and costs incurred. There is no legal obligation to do so but Advocate Cook has confirmed that that is the company's policy. The tenant après dégrèvement is in a position to run any realisation process of the property but no doubt will receive any information that the debtor is able to provide as a means to maximise its return and reduce or eliminate its losses, and that may have the consequence that there will be monies for unsecured creditors or even a surplus for the debtor itself.
17. The realisation values are so far apart we do not think it would be profitable to spend much time analysing the different calculations of what are secured or unsecured debts and this argument really turns on whether Jersey Home Loans is able to treat its legal costs as a secured debt. Mr Mayger says that the bills have not been taxed or agreed. No doubt that is so, but the facility letter shows that the companies in both cases agreed to pay all costs in connection with the loans. If those costs were treated as unsecured, then one can see that an issue might arise where there could be argument as between the group of unsecured creditors as to how a shortfall in the pot for distribution would be divided, and that could be relevant for consideration as to whether the remise should or should not go ahead. But it does not arise here, no such argument has been brought because we have not heard from any unsecured creditor on that basis. In saying the things we have we accept that although the facility letter refers to all costs there must be a potential question mark over the proportionality of costs charged in relation to a matter such as this, in other words the debtor must have the ability to question whether the costs which are being claimed on behalf of the creditor are in fact reasonable costs and that is a matter which is open to him but it has no bearing on the assessment which we have to make today.
18. Accordingly for all these reasons the application by GG Investments Limited for a remise is also refused.
Authorities