Jersey Unreported Judgments

Property - appeal against the judgment of the Royal Court dated 17th January, 2019.

[2019]JCA101

Court of Appeal

 

7 June 2019

Before     :

George Bompas, Q.C., President; David Perry, Q.C., and Sir Wyn Williams

 

IN THE MATTER OF THE REPRESENTATION BROUGHT BY OLIVER PASSMORE AND JULIA MELIA

AND IN THE MATTER OF THE DÉGRÈVEMENT OF THE IMMOVEABLE PROPERTY OF CAROLINE BEVERLEY ELIZABETH POWELL (NEE CHAMBERS)

Advocate J. Harvey-Hills for the Appellant.

Advocate M. L. A. Pallot for the Respondent.

judgment

the president:

This is the judgment of the Court

Introduction

1.        This appeal is from the judgment of the Royal Court (Dégrèvement of the Immovable Property of Mrs Powell [2019] JRC 004) given on 17^th January, 2019, by the Deputy Bailiff (Mr T.J. Le Cocq, sitting alone). 

2.        The specific question for determination concerns the costs of a creditor with a judicial hypothec over certain land, or "biens-fonds" in the terminology of the Loi (1880) sur la propriété foncière ("the 1880 Law"), in circumstances where there is to be a dégrèvement of that property.  Is the junior creditor who has, at a dégrèvement hearing, elected to take the debtor's land upon discharging obligations of a senior creditor secured by a judicial hypothec, obliged to pay to a senior creditor not only principal and arrears of interest (if any, and subject to a limit discussed below), but also costs incurred by the senior creditor? 

3.        In the present case the Appellant, Jersey Home Loans Ltd ("JHL"), is a creditor with the benefit of a judicial hypothec in respect of the Debtor's St Brelade lands ("the Property").  A little time ago proceedings were started before the Royal Court by another such creditor (Acorn Finance Limited ("Acorn")) seeking a dégrèvement of property of the Debtor.  The Debtor then applied for an order that her property be placed into the hands of the Court in accordance with the provisions of the Loi (1839) sur la remise de biens.  On that application an order was made for a remise de biens which had the effect of staying the dégrèvement application. 

4.        As the Deputy Bailiff explained in his judgment, the proceedings in relation to the remise de biens were much more involved than such proceedings would normally be, with the result that JHL incurred significant costs in the course of those proceedings.  

5.        The remise de biens was unsuccessful and on 20^th April, 2018, the Debtor was deemed as a matter of law to have made a cession of all her property, moveable and immoveable, and the stay on the dégrèvement was automatically lifted.  At the dégrèvement hearing the Respondent, Mr Stephen Hill, as assignee of an unsecured creditor of the Debtor, declared that he accepted a tenancy of the Property.

6.        On this appeal no attention has been given to the precise costs which the Respondent might, in principle, be required to pay to JHL, save that JHL's costs are said to arise out of proceedings brought by the Debtor concerning the Property and affecting JHL.  JHL, as it would seem, characterises the costs as being legal costs of vindicating and recovering their debt.  An assumption which underlies this appeal, and is accepted by both parties, is that at least some of JHL's costs of the remise de biens proceedings were properly incurred by JHL and would ordinarily have been payable by the Debtor to JHL.  There has not so far been any determination of the amount (or indeed existence) of any such costs.

7.        The question on this appeal may be viewed as one concerned only with the principles applicable in a dégrèvement.  But it may also be viewed more broadly as being directed at a creditor's security:  can a judicial hypothec in respect of land secure for the hypothecary creditor anything more than principal and interest (and in particular can it secure an obligation to pay appropriate legal costs)?  By way of example, in the waterfall of payments provided for by Article 32 of the Bankruptcy (Désastre) (Jersey) Law 1990 will the "claim of a hypothecary creditor" referred to in Article 32(6), at any rate in the case of a creditor with a judicial hypothec, include costs properly incurred which will, in consequence, attract the preference for the creditor provided for by Article 32(4)?  A similar question might arise in the event of a remise de biens.  It might also arise, say, in the event of a debtor seeking to discharge a judicial hypothec:  can the debtor clear his or her land of a judicial hypothec by tendering the principal and interest, while still disputing costs and asserting that any obligation to pay costs is purely personal?

8.        The Royal Court's conclusion, in the Deputy Bailiff's judgment, was that ordinarily there was no obligation on the part of the tenant après dégrèvement to pay anything more than principal and arrears of interest. 

9.        Before us Advocate J. Harvey-Hills, representing JHL as the hypothecary creditor with a judicial hypothec in respect of the Property, argued that the Royal Court's conclusion does not represent the law of this Island.  On the other side Advocate M.L.A. Pallot, representing Mr Hill as the tenant après dégrèvement of the Property, submitted that the Royal Court's conclusion was correct for all the reasons stated by the Deputy Bailiff.

10.      The present appeal arises out of an application by the Representors, Oliver Passmore and Julie Melia, as the Attournés appointed as long ago as 22^nd April, 2016, to conduct the dégrèvement of the Debtor's immoveable property.  JHL is not the only hypothecary creditor in respect of the Property.  Ranking junior to JHL, with a hypothec of later date than JHL's, is Acorn.  This company, like JHL, had incurred costs in the course of the Debtor's remise de biens proceedings.  The Attournés' application was prompted by the dispute between JHL, and indeed Acorn, on the one side and the Respondent on the other concerning the position of JHL's and Acorn's costs in the dégrèvement, and was an application for directions.  However, neither the Attournés nor Acorn have taken any part in this appeal, being content for the issues to be argued by JHL and the Respondent, and to be bound by the Court of Appeal's decision on those issues.

The facts

11.      The facts giving rise to this appeal have been summarised above.  Further detail can be found in the judgment of the Royal Court, in addition to what is set out below. 

12.      As appears from the Royal Court's judgment, the Property is the subject of three judicial hypothecs.  There is JHL's created on 14^th March, 2008.  This is described in greater detail below.  Next in point of time is one, created on 25^th January, 2012, in favour of various individuals practising as Viberts.  Finally there is Acorn's, created on 21^st December, 2012.  Besides these, the Representors lodged a declaration of privilege dated 22^nd May, 2018.

13.      The origin of JHL's hypothec lies in the Facility Letter dated 4^th December, 2007, sent by JHL to the Debtor at the Property offering a loan of £500,000 to refinance the Property.  This the Debtor signed as agreed, but subject to an email exchange of a day or two later concerning certain aspects of the offer. 

14.      The material parts of the facility letter were as follows:

"Following our recent discussions we ... are pleased to confirm that we are prepared to offer you ... a mortgage to assist you with the refinancing of [the Property] in the sum of :- £500,000 ... upon the following terms and conditions:-

1.        All amounts outstanding under the advance are at all times available at JHL Ltd's discretion and repayable on demand.

2.        Subject as herein before provided the advance is repayable over a maximum of 25 years by monthly interest only instalments ...

3.        Interest on all amounts outstanding will be charged at the buy to let variable tracker mortgage rate of 7.5% pa (ie 1.5% above the Bank of England base rate), which may from time to time fluctuate, ...

4.        If the amount payable by you to JHL Ltd or any part thereof remains unpaid after it becomes due ... you shall be liable to pay to JLH Ltd ... interest on the total debt from the date when payment becomes due until the receipt thereof, such interest being at the rate of two per cent (2%) per annum above JHL Ltd's Standard Variable Rate from time to time.

5.        As security for repayment of the advance and interest JHL Ltd will require: -

a.        A £500,000 First Registered Charge over [the Property] executed by way of a Bond subscribed by yourself.

b.        Completion of Buildings Insurance cover in respect of the property, with the interest of JLH Ltd as Mortgagees to be duly noted.  The original policy to be lodged with JHL Ltd for the duration of the extant term.

c.        Any other such security as may be deemed appropriate by JHL Ltd from time to time.

d. Confirmation that the existing mortgage with HSBC has been repaid in full.

....

8.        All legal costs, stamp duties and registry fees and other costs and expenses of whatever kind incurred by JLH Ltd or JHL Ltd's agent in the preparation, execution and operation of the advance or any other documentation connected with the advance including the costs of any proceedings taken by us hereunder shall be for the account of and payable by you on demand.

....

To signify your acceptance of the terms and conditions of this offer please sign and return the enclosed copy of this letter ..." 

15.      A feature of the Facility Letter is that neither condition 5 nor any other provision expressly included the Debtor's liabilities arising under condition 8 (the costs and expenses) as among the obligations required to be secured.  On the other hand, nothing in the Facility Letter expressly stated that those liabilities were not to be secured and in particular that they were not to be accessory to the principal sum advanced or to carry the same hypothec.

16.      On 22^nd February, 2008 the Debtor executed the Bond referred to in condition 5(a) of the Facility Letter.  The Bond has three schedules.  The first, Schedule 1, states that "The Capital Sum" was £500,000.  The second, Schedule 2, contains simply a copy of the Facility Letter.  The third identifies the Property by its address.  The Bond starts with an acknowledgment of debt to JHL, then contains a proviso, and in its third part (continuing to the execution block) has 13 clauses containing what are described as, "The following further undertakings and engagements ... entered into by THE BORROWER in favour of the Lender".

17.      The acknowledgment of debt set out in the Bond explained that the Debtor (defined as "the Borrower") acknowledges "being indebted to [JHL] ("the Debtor" which designation shall include its successors and assigns) in the capital sum set out in Schedule 1 hereto of which sum the Borrower undertakes to repay to the Lender with interest in accordance with the terms set out in the facility letter dated 4 December 2007 from the Lender to the Borrower (a copy of which is attached hereto as Schedule 2 hereto)".

18.      The Bond continues as follows:

"PROVIDED ALWAYS that if any such capital or interest which term shall be deemed in this bond to include any interest payable on arrears of interest capitalised under the present proviso shall remain unpaid after the day on which the same ought to have been paid then and in every case the interest so in arrears shall be capitalised and added for all purposes to the said capital hereby secured and shall henceforth bear interest at the highest rate specified in schedule 2 hereto and all the covenants and provisions contained in this present Bond and all powers and remedies conferred by law or by this Bond and all rules of law or custom in relation to the said capital sum and interest thereon shall equally apply to such capitalised arrears and to interest on such arrears save that at any time the Borrower may pay to the Lender the whole of the interest and accumulations of interest for the time being owing on the capital sum."

19.      The 13 clauses include such matters as repairing and insuring promises in relation to the Property, restrictive obligations and a warranty as to title and other like warranties.  Clause 12 should be set out in full:

"12.     THAT the Lender may at any time or times increase or decrease the interest rates referred to in Schedule 2 hereto."

20.      Clause 12 had the effect that it would be open to the Lender to revise from time to time the rates of interest payable by the Debtor.  Not only would the rates fluctuate as described in the Facility Letter by reference to changes in the Bank of England base rate, or JHL's Standard Variable Rate, but could also be varied otherwise as decided by JHL.  The point of this is that is there was no definite system for determining how in the future interest might be calculated.

21.      On 14^th March, 2008, the Debtor signed, in the presence of a witness and before the Judicial Greffier, an acknowledgment of her indebtedness to JHL. This document ("the Billet") also being signed on behalf of JHL and by the Greffier is in the following terms:

"IN THE ROYAL COURT OF JERSEY

Before the Judicial Greffier

The 14th day of March 2008

BETWEEN CAROLINE BEVERLEY ELIZABETH POWELL (née Chambers) ("the Defendant"); and JERSEY HOME LOANS LIMITED (the "Plaintiff"); actioning the Defendant to acknowledge her indebtedness in a Bond in the capital sum of FIVE HUNDRED THOUSAND POUNDS STERLING (£500,000) bearing interest, subscribed by her in favour of the Plaintiff on the 22nd day of February two thousand and eight.

The Defendant, by her signature hereto acknowledges to the Plaintiff her indebtedness to the Plaintiff in the said sum and consents to the immediate registration of this acknowledgment in the Public Registry.

The Plaintiff's advocate, by his/her signature hereto requests immediate registration of this acknowledgment."   

22.      The Billet was registered in the Public Registry; thereupon JHL became a hypothecary creditor of Mrs Powell with the benefit of a hypothec.

23.       According to the Royal Court's judgment, there was a billet dated 21^st December, 2012, made in relation to Acorn "in similar standard terms" to the JHL Billet.

Background law

24.      A surprising feature of the Facility Letter is that it is drawn in a way which would be familiar to a lawyer practising in England and Wales dealing with the giving and taking of security over land.  It offers the Debtor "a mortgage" before stipulating more specifically for a "£500,000 First Registered Charge" and for the interest of JHL "as Mortgagees" to be noted on the Property's insurance cover.  If the law of Jersey relating to security over real property were the same as in England and Wales, the natural answer to the question in this appeal would be that any discharge of JHL's security, if duly provided in the manner contemplated by the Facility Letter, would require the person discharging the security to pay JHL's costs.  On this there is ample reported case law going back at least to the early 1800's, with a more recent example in the case of Parker Tweedale v Dunbar Bank [1991] Ch 26.  A clear discussion of this principle is to be found in Fisher and Lightwood, "Law of Mortgage" 14th Edn (2014), chapter 55.  It is an incident of a mortgage that the mortgagee is entitled to be paid the mortgagee's costs, reasonably and properly incurred, of proceedings between the mortgagee and the mortgagor (or surety for the mortgagor), as well as costs incurred in proceedings where the title to the mortgaged estate is impugned.  Other costs are not within this principle.  The principle is said to be rooted in contract and, whether or not it is taken to be an incident of any mortgage, its application may be affected by the express terms of any mortgage.

25.      However the law of Jersey in this area is different from the law of England and Wales.  At paragraph 43 of the Royal Court's judgment, the Deputy Bailiff noted this difference when considering a submission made on behalf of JHL which involved a comparison with English law.  Part 1 of the Consultation Paper (CP No.8), "Security on Immoveable Property", published by the Jersey Law Commission in May 2006, contains at Chapter 2 a section headed "Historical survey of the law of mortgage in England and Wales" and at Chapter 3 a section headed "Hypothecation - the civilian alternative".  This illuminating discussion explains what would in any event be apparent from consideration of the materials before this Court, namely that it would be a mistake to look to the common law of England and Wales for assistance in the resolution of the question raised by this appeal:  mortgage and hypothec as methods of providing security originate in quite distinct legal backgrounds and, apart from legislative intervention, are quite different in operation.

26.      It is relevant to note that since at least 1880, as a result of the 1880 Law which is central to this appeal, Jersey law has provided for different categories of hypothec in relation to land.  We shall consider particular aspects of the 1880 Law, and the parties' submissions in relation to it, later in this judgment.  By way of introduction we draw attention to a number of features of the 1880 Law.

27.      After a preamble and Article 1, which sets out various definitions, Article 2 provides as follows:  "L'hypothèque, aux fins de la présente Loi, est un droit réel attaché à une rente ou autre réclamation, en vertu duquel un ou plusiers biens-fonds appurtenant au débiteur sont spécialement affectés à l'acquittement de cette rente ou réclamation, et qui confère à son possession les avantages suivants, savoir: ...", followed by a list of features of the rights conferred by a hypothec.  This text could be translated as:  "A hypothec, for the purposes of this Law, is a real right attached to a rent or other claim, by virtue of which one or more of the hereditaments belonging to a debtor are rendered specially subject to the payment of such rent or claim, and possession of which confers the following advantages, that is to say: ..."

28.      In short, for present purposes a hypothec is a right attached to a claim by virtue of which hereditaments (in the present case the Property) are rendered specially subject to payment of the claim.  Further, a traditional characterisation of a hypothec is that it is a droit réel accessoire, being a right in rem accessory to and dependent upon a debt or claim; and this is what is indeed provided for in Article 2.

29.      The specific rights described in paragraphs (1) and (2) of Article 2, are the right to be paid, on a liquidation of the debtor's property, the outstanding part of the hypothecary creditor's claim, and the right in case of a décret or dégrèvement of hypothecated property (otherwise than where the debtor has been declared en désastre) to be constituted as tenant of the relevant property, or alternatively to be paid by the tenant who has accepted that status by virtue of a contract or hypothec of later date.

30.      But Article 2 of the 1880 Law, while providing generally for the advantages enjoyed by a hypothecary creditor, does not expressly address the problem which arises in the present case.  First, it leaves open the question whether costs might or might not be included in a claim supporting a hypothec.  Second, the argument of JHL is that it is, in any event, implicit that an incident of a claim being hypothecated is that the hypothecary creditor is entitled to costs as part of the creditor's claim.

31.      Article 5 of the 1880 Law explains that there are to be three categories of hypothec:  "Les hypothèques sont ou légales, ou judiciaries, ou conventionnelles".  In translation this provides that :  "Hypothecs are either legal, judicial or conventional".

32.      Of these three categories, the first is dealt with in Articles 6 to 11, the second in Articles 6 to 16, while the third is dealt with in Articles 17 to 25 (although there is some overlap between these provisions in that, for example, Article 16 refers not only to judicial hypothecs but also to legal hypothecs).  The first of these categories comprises hypothecs resulting from operation of law, namely legal hypothecs (Article 6), and the third comprises hypothecs created by agreement (that is, hypothèques conventionnelles).  Later parts of the 1880 Law deal with general effects of hypothecs, including those created before 1880, then rentes and guaranties and décrets.  Articles 55 to 90 were repealed in 1904:  they dealt with "Liquidation" and "Distribution". Dégrèvement is dealt with in several Articles of the 1880 Law starting at Article 91; but again there is overlap, so that by way of example Article 101 refers both to décret and dégrèvement.

33.      The hypothec at issue in the present case is a hypothèque judiciaire, or, in other words, a judicial hypothec, resulting from a court act or judgment.  As to this category, Article 12 of the 1880 Law explains: 

"L'hypothèque judiciaire est celle qui résulte des actes et des jugements soit de la Cour Royale soit de la Cour pour le Recouvrement de Menues Dettes, pourvu que les dispositions de la present Loi aient été remplies."

In translation this reads:

"A judicial hypothec is that which results from acts and judgments of the Royal Court or of the Petty Debts Court, provided that the provisions of this Law have been fulfilled."

34.      The category of judicial hypothec encompasses two different sorts of hypothec, on the one hand, those arising from a court judgment ordering the payment of money following conventional litigation, and, on the other, those arising from a court-recognised acknowledgement of obligation.  While the Viberts' hypothec appears to be of the former, JHL's and Acorn's are of the latter, a form commonly referred to as a "reconnaisance".

35.      Article 13 explains how a judicial hypothec is brought into being and obtains priority.  In 2000 the original Articles 13 and 14 were repealed and what is now Article 13 was inserted (although without present paragraph (1A) which came later, in 2018).  This replacing of Articles 13 and 14 was done by the Loi (2000) (Amendment  No.4) sur la propriété foncière ("the 2000 Law"). 

36.      Article 13(1) is now in the following terms.

"Tout acte ou jugement soit de la Cour Royale soit de la Cour pour le Recouvrement de Menues Dettes rendu contradictoirement ou par défaut dans une action pour le paiement ou la reconnaissance d'une obligation actuelle ou contingente, compte, ou autre dette, ou pour le règlement d'un compte, ou statuant le montant des dommages-intérêts, donne, sous réserve des dispositions de cet Article, à la personne qui l'obtienne pour le montant qui est déterminé par la Cour ou reconnu par le défendeur lui être dû ou, en cas d'une caution ou autre obligation contingente, reconnu lui être dû potentiellement, étant une ou plusieurs sommes, avec ou sans intérêts, une hypothèque judiciaire soit sur tous les biens-fonds du défendeur soit sur un ou plusieurs des biens-fonds du défendeur (ou sur toute partie d'iceux) spécifiés dans l'acte ou jugement."

In translation this reads :

"Any act or judgment of the Royal Court or of the Petty Debts Court given after hearing the parties or by default in an action for the payment or acknowledgment of an obligation existing or contingent, account, or other debt or for the settlement of an account, or fixing the quantum of damages, confers, subject to the provisions of this Article, upon the person obtaining it in respect of the amount determined by the Court or acknowledged by the defendant to be due to him or, in the case of a guarantee or other contingent obligation, acknowledged to be due potentially to him, being one or more sums, with or without interest, a judicial hypothec either on all the hereditaments of the defendant or on one or more of the hereditaments of the defendant (or on any part thereof) specified in the act or judgment."

37.      Paragraph (2) of the current Article 13 explains that, for the judicial hypothec resulting from the act or judgment referred to in paragraph (1) of the Article to take effect, the act or judgment must be registered in the Public Registry. This registration will be in the Register of Obligations.

38.      Broadly speaking, under Article 13 priority depends upon the timing of registration.  This repeats what was provided by the original Article 13.  The change of substance made by new Article 13 was in the replacement Article 13(1) in substitution for the first part of the original Article 13 and for the whole of 14 (set out below).  As a comparison with the first sentence of the original Article 13 shows, since 2000 it has unquestionably been possible to create judicial hypothecs carried by contingent obligations, such obligations not being limited to guarantees:  this follows from the express reference to contingent obligations in addition to guarantees in the phrase "en cas d'une caution ou autre obligation contingente".  Further the hypothec may, but need not, be carried by interest on a principal obligation, as well as by that obligation:  this follows from the words "avec ou sans intérêts".  And there may be several claims carrying the hypothec.

39.       Article 13(1) in its current form requires a certain amount of analysis.  It consists of a single sentence with several different clauses.  Reduced to essentials, it provides that a judicial hypothec requires the following:  (1) first, there must be an act or judgment; (2) second, this must be given in proceedings seeking payment or acknowledgment of one or more of several matters; and third, (3) those matters must be (a) obligation (actual or contingent); (b) account; (c) other debt; (d) settlement of account; and (d) fixing the quantum of damages.  Where these conditions are met, Article 13(1) explains that the resulting judicial hypothec will be over the debtor's land or over one or several parcels of land as specified in the act or judgment; so that by inference the act or judgment (4) must specify hereditaments to be charged, unless the charge is to cover all the debtor's lands.

40.      The resulting judicial hypothec, according to Article 13(1), is to be for the amount ("le montant") which is either (a) determined by the Court or acknowledged by the defendant to be due ("qui est determine ... ou reconnu ... être dû"), or (b) in the case of a guarantee or other contingent obligation, acknowledged to be contingently due ("qui est ... reconnu ... être dû potentiellement").  Further, that amount (that is "le montant"), which is to be determined or acknowledged, may comprise one or several sums ("étant une ou pleusiers sommes"), and may be with or without interest ("avec ou sans intérêts").

41.      Unfortunately, this complexity in the drafting of Article 13(1) has not assisted in the resolution of the questions of interpretation we have to decide.  We consider later the application of Article 13(1) in relation to JHL's contention on this appeal that its hypothec secures its costs incurred in respect of its principal debt and the security for the debt.  However, we draw attention to the following features of Article 13(1).

(i)        The description in the second half of Article 13(1), providing for the effect of satisfaction of the conditions identified at the outset of Article 13(1) (conditions described in paragraph 39 above), appears to set further conditions as to the creation of such a hypothec.  In short, it may be that the obligations carrying and secured by the hypothec should themselves appear from the act or judgment and meet certain criteria.  But this is not expressly stated in Article 13(1).

(ii)       Related to the previous point is one of definition.  It is not clear from when the determination or acknowledgment referred to in the second half of Article 13(1) has to speak, whether at the time of the act or judgment which is to be registered or later; and it is not altogether clear whether an amount is sufficiently determined or acknowledged where what is determined or acknowledged involves future quantification and does not comprise a simple statement of a specified amount of money.

42.      Article 15 of the 1880 Law, amplifying the provisions to be found in Article 2, explains certain legal effects of obtaining a judicial hypothec.  Article 15 (as modified in 2000 to remove reference to repealed provisions of Article 52 dealing with décret) provides as follows:

"L'hypothèque judiciaire donnera à celui qui l'aura obtenue un droit réel et spécial et de suite par hypothèque, du jour qu'elle prendra date, sur tous et un chacun des biens-fonds que le débiteur possédait actuellement ou auxquels il avait droit à cette date, et en outre, en cas de liquidation des biens du débiteur, droit de préférence, dans l'ordre de sa collocation, sur le produit de la vente des immeubles que celui-ci possédait, et auxquels il avait droit, le jour de la renonciation de ses biens par cession ou adjudication."

In translation this reads :

"A judicial hypothec shall confer upon the party who obtains the same a real and special right, as well as the right to enforce the hypothec against third parties, from the date it takes effect, on all and every one of the hereditaments then in the possession of the debtor or to which he or she was entitled at that date, and moreover, in case of liquidation of the debtor's property, a preferential right, according to his or her order of priority, over the proceeds of sale of the immovables of which the latter was possessed, or to which he or she was entitled, on the day of the surrender of his or her property by cession or adjudication."

43.      In Article 15 the reference to "liquidation" is to the novel insolvency process introduced by the 1880 Law, later replaced with the process of réalisation in 1904 when the Loi (1904) (Amendment No.2) sur la propriété foncière was made).  The intention of the second half of Article 15 appears have been to achieve a result broadly comparable to that now provided for in Articles 32(4) and 32(6) of the Bankruptcy (Désastre) (Jersey) Law 1990, giving a hypothecary creditor a priority to reflect the security enjoyed by the creditor from the hypothec.

44.      Article 16 then deals with the extinction of judicial, as well as legal, hypothecs and the parties' obligations in that regard.  Materially, paragraph 16(1) provides for cancellation of the hypothec in the Public Registry, should the debt or other obligation carrying the hypothec (that is "une créance ou autre reclamation, important une hypothèque légale ou judiciaire") be extinguished. 

45.      The reference to the extinction of "a debt or other claim" carrying a legal or judicial hypothec in Article 16(1) appears to contemplate that hypothecs may be carried by claims which are not simple debts.  Similarly, Article 29 of the Law, which deals with the in rem consequences of hypothecs until extinction of the relevant secured obligations of the debtor, uses for this purpose the expression "l'extinction des créances ou obligations qui en sont l'object ..."

46.      Article 101 of the 1880 Law, which stands in the part headed "Du Dégrèvement", is relevant to the issues as it has featured both in the arguments before us and in previous cases as assisting in deciding what obligations might be secured by a hypothec as accessory to a simple debt.  On its face the Article is concerned not only with dégrèvement, but also with décret, whether or not in either case they followed an order for a liquidation, and appears to be aimed at setting a limit to the interest arrears which have to be paid to a hypothecary creditor when the hypothecated property is taken, rather than to be legislating to confer a right for the hypothecary creditor automatically to be entitled to interest as accessory to the creditor's debt.  The Article provides as follows: 

"Un tenant après dégrèvement:

La personne rempossédée d'un héritage à la suite d'un décret ou d'un dégrèvement:

Les garants ou cautions devenus responsables par l'effet d'un décret ou d'un dégrèvement:

Ne seront tenus de payer que trois années d'arrérages de rente et d'intérêts de sommes hypothéquées portant intérêts, échus à la date de l'acte de la Cour ordonnant la liquidation, qui aura conduit au décret ou au dégrèvement, ou ordonnant le décret ou dégrèvement s'ils ont lieu sans liquidation préalable."

In translation this reads :

"A tenant après dégrèvement:

The person reinstated in the possession of an hereditament in consequence of a décret or a dégrèvement:

Guarantors or sureties liable as a result of a décret or dégrèvement:

Shall not be required to pay more than 3 years' arrears of rent and interest on hypothecated amounts bearing interest due at the date of the act of the Court ordering the liquidation which led to the décret or dégrèvement or ordering the décret or dégrèvement if they take place without a previous liquidation."

47.      In putting forward their respective arguments, the parties have made submissions concerning the immediate effect of the 1880 Law (i.e. when enacted) on the previous law in this Island dealing with hypothecs, as we describe further below.

48.      Until the 2000 Law, Article 13 (so far as immediately relevant) and Article 14 of the 1880 Law were in the following terms:

"Article 13

Sauf dans le cas prévu par l'Article 52, tous actes et jugements de la Cour Royale, rendus contradictoirement ou par défaut dans une action pour le paiement ou la reconnaissance d'une obligation, compte, ou autre dette, ou pour le règlement de comptes, donneront à la personne qui les obtiendra, pour le montant qui sera définitivement reconnu lui être dû, une hypothèque judiciaire sur les biens-fonds de son débiteur : pourvu que l'acte ou jugement, s'il en a qu'un seul dans la  procédure - ou, s'il y en a plusieurs, un des actes ou jugements - ait été enregistré dans le Registre Public de cette Ile. L'hypothèque aura la même date que l'acte ou jugement enregistré, pourvu qu'il ait été remis à l'Enregistreur dans les quinze jours de son obtention, y compris le jour de cette obtention....

Article 14

L'hypothèque judiciaire ne sera valable qu'autant que les actes ou jugements, qui seront inscrits au Registre Public en conformité à l'Article précédent, contiendront l'énonciation d'une ou plusieurs sommes certaines : au delà desquelles la réclamation principale du créancier hypothécaire vers la personne assujettie à l'hypothèque ne pourra être portée - quoiqu'elle puisse être réduite, s'il y a lieu."

49.      In approximate translation these Articles provided:

"Article 13

Except in the case envisaged by Article 52, any acts or judgments of the Royal Court given after hearing the parties or by default in an action for the payment or acknowledgment of an obligation, account or other debt, or for the settling of accounts, confers upon the person obtaining it, for the amount which is definitely acknowledged as due to him, a judicial hypothec on the hereditaments of his debtor:  provided that the act or judgment, if there is one of them in the proceeding - or if there are several, one of the acts or judgments - has been registered in the Public Registry of this Island. The hypothec has the same date as the registered act or judgment, provided is sent to the Registrar within fifteen days of its being obtained, including the day on which it is obtained ...

Article 14

A judicial hypothec shall not be valid unless the Actes or judgments, inscribed in the Public Registry in conformity with the preceding Article, contain the enunciation of one or more certain sums:  above which the principal claim of the hypothecary creditor against the person subject to the hypothec cannot go - although it may be less, if the case arises."

50.      In its submissions JHL sought to explain the change made by the 2000 Law to Articles 13 and 14 as having been motivated by, among other considerations, the Royal Court's decision in Re the Remise de Biens of Super Seconds Ltd [1996] JLR 117 ("Super Seconds").  In that case the question was whether interest was secured by a judicial hypothec carried by a principal debt of some £770,000:  if it was, as held by the Royal Court (Le Cras, Lt Bailiff), then the remise de biens granted to the debtor in the case would fail, as there would be no surplus after clearing the principal and arrears of interest.  In Super Seconds the Royal Court had to grapple with the difficulty that the original Articles 13 and 14 made no reference to interest; but nevertheless the Court, after considering a considerable body of authority, concluded that arrears of interest are accessory to principal and that as a matter of customary law arrears of interest have had the same hypothec as the principal.  Thus it was consistent with the 1880 Law for arrears of interest to continue to carry and be secured by a judicial hypothec carried by the principal, notwithstanding the terms of Article 14 and the absence of express reference to interest in Article 13.

51.      Relying on the relevant projet de loi, JHL submitted that the 2000 Law by its amendment to Articles 13 and 14, confirmed Super Seconds and put the principle decided by the Royal Court beyond future argument, with the result that interest on a debt could be secured by the judicial hypothec carried by the debt, subject always to the impact of the restriction in Article 101 of the 1880 Law. 

52.      That projet de loi, so far as relevant, reads as follows:

"Members of the legal profession have criticised the wording of Article 13 as being confusing and not sufficiently clear on certain important matters.  For example, the Royal Court was recently asked to decide whether a judicial hypothec secured the payment of interest as well as capital.  The Court held that it did, but Article 13 does not make this clear and there remains the possibility that that judgment may be overruled.

Article 13 in its existing form does not make it clear whether part of a corps de bien-fonds may be charged by a judicial hypothec, nor does it expressly permit the registration of charges securing guarantee obligations or floating overdrafts.

The draft Law would repeal and re-enact Article 13 so as to resolve these areas of doubt.  It would also separate the Article into six separate paragraphs in an attempt to render it more readily comprehensible."

53.      Before us the parties were agreed that, when interpreting legislation, the Court may look at the relevant projet de loi to understand the mischief to which the legislation was directed; on behalf of Mr Hill, Advocate Pallot submitted, further, that the projet might be taken by the Court to indicate the intended effect sought to be achieved by the legislation. But both he and Advocate Harvey-Hills for JHL also submitted that when the words of the legislation are clear the meaning cannot be distorted by reference to the projet.

54.      Since 2000 Article 13 of the 1880 Law has (as explained) differed from Articles 13 and 14 of the 1880 Law which it replaced.  We will return later to the change made by the 2000 Law. It is notable, however, that in the repealed Article 14 there was reference to the efficacy of judicial hypothecs not going beyond the registered "actes ou jugements ... contiendront l'énonciation d'une ou plusieurs sommes certaines"; and this provision no longer appears.  Specifically, the expression "somme certaines" has not been used in the replacement Article 13 and there is no provision which requires that an expressly stated maximum sum must be set for an obligation if the obligation is to carry and be secured by a judicial hypothec.  How far the original Articles 13 and 14 required that judicial hypothecs, in order to be carried by debts or obligations had to be confined only to pay specified sums of money stated on the face of the registered act or judgement, with nothing as accessory to the debts or obligations, may also be open to question, both in view of the reasoning and decision in Super Seconds, and in view of the terms of the projet de loi in relation to the 2000 Law from which we have just quoted.

55.      The Super Seconds case was relied upon by JHL to meet the central plank in the case advanced on behalf of Mr Hill.  The argument for Mr Hill was that nowhere in the 1880 Law is there any express provision for a hypothecary creditor to be entitled to costs, but nevertheless this right is given to the hypothecary creditor as part of the creditor's security in any form of insolvency proceedings involving an insolvent debtor's land subject to the creditor's hypothec.  The counter-argument advanced on behalf of JHL was that either expressly or by implication costs are part of the obligations of a debtor carrying a judicial hypothec; and in this regard Advocate Harvey-Hill's submission was that the 1880 Law, both in its original form and as amended, is at least consistent with this position. A hypothecary creditor may, according to his submission, have as an accessory to the creditor's principal owed by the debtor a right to costs, which right carries the same hypothec as the principal:  that costs right need not be restricted to being an unsecured personal obligation unless and until separately enforced and made the subject of a registered judgment.

The Royal Court's judgment

56.      The Deputy Bailiff considered first the terms of the Facility Letter and of the Bond.  He pointed out that the Facility Letter dealt in condition 5 with the provision of security, described as being "for repayment of the advance and interest", without indicating expressly that the security would also be for costs.  As noted above, condition 8 of the Facility Letter dealt expressly with costs, making them payable by the Debtor on demand, but did not state that there was to be any security for that particular obligation. 

57.      The Deputy Bailiff described parts of the 1880 Law; referred to the 2000 Law; set out the original Articles 13 and 14 of the 1880 Law, along with Articles 95 and 96; and then explained the arguments put forward on behalf of Mr Hill.  These were in summary as follows:

(i)        The Billet itself described the Debtor's acknowledged debt as being the principal sum of £500,000 and interest.  No costs obligation was acknowledged.

(ii)       Because a judicial hypothec is required to be registered in the Public Registry and only then comes into existence, all that can be carried by the hypothec, the only relevant "créance ou ... autre réclamation", is what is in set out in the act or judgment creating the hypothec and thus (in the present case) what is recorded in the Billet as being acknowledged by the Debtor (namely the amount of £500,000 and interest).

(iii)      In any event, it is not permissible for a judicial hypothec to be carried by anything exceeding or additional to a specific sum stated in the relevant act or judgment, so that in the present case £500,000 would represent the maximum in aggregate of any secured debt or claim.

(iv)      In this regard, the purpose of registration in the Public Registry is to enable any potential creditor to make an easy determination of the potential debtor's maximum currently secured indebtedness;  for this proposition reliance was placed upon the judgments of the Royal Court (Sir Michael Birt as Deputy Bailiff) in HSBC v Ansbacher (Channel Islands) Ltd [2007] JRC 167 and of this Court on the appeal in the same case (Asnbacher v HSBC Bank Plc [2007] JCA 228).

(v)       Article 14 of the 1880 Law in its original form mandated that what was to be carried by the hypothec, and therefore to be payable by the tenant après dégrèvement, was one or more "sommes certaines", and that liability for legal costs was not such a matter.

(vi)       Article 101 of the 1880 Law, in providing that a tenant après dégrèvement is not to be required to pay more than 3 years arrears of interest, makes no reference to costs, with the consequence that costs cannot be taken to be payable to the hypothecary creditor by the tenant après dégrèvement in addition to the principal sum and interest.

(vii)     If there is an obligation on the part of a debtor to pay legal costs to a hypothecary creditor, it does not follow that a tenant après dégrèvement would be obliged to pay those costs to the creditor:  they may be a personal unsecured obligation;  the rights and duties of a tenant après dégrèvement are those arising under the 1880 Law and not, except to the extent provided for the 1880 Law, those expressed in the loan agreements between the debtor and creditor.

(viii)    That legal costs are not in fact payable by a tenant après dégrèvement is suggested by the complication that such costs could introduce into what is supposed to be a simple procedure under which one can identify quickly and easily what is required to be paid by the intending tenant; while costs as between a debtor and the hypothecary creditor may involve detailed and difficult issues with no real machinery for resolution as between intending tenant and the other parties.

58.      Broadly speaking these arguments were accepted by the Royal Court.  In particular, the submission on behalf of JHL summarised at paragraph 55 above was rejected. In paragraph [58] of his judgment the Deputy Bailiff concluded that the extracts from the texts relied upon by JHL were directed to the amounts payable by a debtor to a hypothecary creditor in order to release security (a hypothec) that the creditor might have over the debtor's property, and not to what might be secured under the statutory regime introduced by the 1880 Law or what might be the obligations of a tenant après dégrèvement.

59.      Further, after considering the letter of 21 December 1878, the "Lettre Explicative", written by the author of the 1880 Law, Robert Pipon Marett (later Sir Robert Marett, Bailiff), to the editor of "Nouvelle Chronique de Jersey", the Deputy Bailiff concluded that the 1880 Law brought into being a "different and ... comprehensive" system of hypothecation, along with a wholly new process called dégrèvement. 

60.      Although not so stated in terms by the Deputy Bailiff, his reasoning would appear to be that the 1880 Law provided a new code for hypothecs of tangible immoveable property, and therefore any previous customary law concerning those obligations which might carry a hypothec, or as to the effect of a such hypothec, was not brought forward into the new code.

61.      At paragraph [68] of the judgment the Deputy Bailiff explained as a material consideration a need for the Public Registry to be capable of being consulted so that a potential creditor could "form an informed view as to whether or not he might safely lend and that any creditor would know, in lending, the level of indebtedness that they may need to clear were they to take the property as tenant après dégrèvement".  The Deputy Bailiff later explained, at paragraph [69], that for legal costs incurred by secured creditors to be secured, "unless they form part of a separate judgment of the Court and are secured against the property separately", would lead to the Public Registry failing to show "a substantial further debt by way of legal costs incurred by the secured creditors".

62.      Nevertheless, the Deputy Bailiff added, at paragraph [70], that there was a potential exception, and that legal costs could form part of the obligations secured by a judicial hypothec if and to the extent that "the face value of the debt is more than the actual debt" because, for example part of the original loan has not been drawn or has been repaid.  But for costs to be treated in this way, the Deputy Bailiff noted, it would be necessary "that there is an obligation to pay these costs within the loan documentation".

63.      This aspect of the Deputy Bailiff's judgment is significant.  In the present case the Facility Letter made express provision for the Debtor to pay JHL's costs. The Deputy Bailiff appears to have accepted that, if the principal amount due to JHL at the time of the dégrèvement of the Property had been less than £500,000, costs up to the difference between that amount and the outstanding principal would be secured and would be required to be paid by the tenant après dégrèvement.  Before us Advocate Pallot submitted that the Deputy Bailiff's observations in paragraph [70] set out the position correctly. 

64.      Advocate Pallot submitted, further, that the Deputy Bailiff was correct, at paragraphs [72] and [73], to conclude that interest (a) could be capitalised and added to principal, up to the stated amount of the reconnaissance and provided that that amount was not exceeded, thereby carrying the same hypothec as the principal, and (b) could, if in arrears and uncapitalised, be secured but subject to the 3-year limit in Article 101 of the 1880 Law.

65.      In our view there are two difficulties flowing from the Deputy Bailiff's comments in paragraph [70] of his judgment. 

(i)        The first is one of quantification.  We refer below to a submission made by Advocate Pallot to the effect that there is no machinery to allow resolution of a question between tenant après dégrèvement and hypothecary creditor concerning the extent of the Debtor's obligations to the creditor and that the absence of this machinery leads to a conclusion that the only obligations capable of being secured by hypothecs are those which are undisputable and may be identified by simple mathematics.  This submission sits uneasily with an argument that there can be any case in which a hypothecary creditor is secured for costs. 

(ii)       The second issue concerns the form of the Billet in the present case, as well as the terms of the Facility Letter included in the Bond referred to in the Billet.  Unquestionably in the documentation between the Debtor and JHL there was an obligation on the part of the Debtor to pay some costs in some circumstances, namely those provided for in Condition 8 of the Facility Letter.  The statement in paragraph [70] of the Deputy Bailiff's judgment would point to that obligation carrying and being secured by JHL's hypothec (up to a specified maximum), whether or not the Facility Letter stipulated for security for the obligation and whether or not the acknowledgement made by the Debtor and contained in the Billet could be construed as referring to costs as a secured obligation.  If, then, JHL is successful in its challenge to the Deputy Bailiff's conclusion, that by reason of the terms of Article 13(1) of the 1880 Law £500,000 is to be the maximum secured obligation (together with up to three years' uncapitalised interest arrears), the reasoning in paragraph [70] of the Deputy Bailiff's judgment would undermine Mr Hill's case that costs are not capable of being secured.

66.      In this regard we should add that, in view, at least, of the wording of Article 13(1) in its current form, we see no objection to a present obligation to pay a sum in the future, as and when determined on a contingency, and the resulting obligation on the occurrence of the contingency, being a claim within the language of Article 2 and carrying a hypothec. 

Arguments on this appeal

67.      Before us Advocate Harvey-Hills advanced many of the same arguments as presented to the Royal Court.  These were in support of JHL's grounds of appeal which, we would summarise as follows:

(i)        Ground 1 challenges the Deputy Bailiff's conclusion concerning the impact of the 1880 Law and the relevance of previous customary law as to the effect of a hypothec; and thus, Advocate Harvey-Hills submitted, the "corresponding obligations of a tenant après dégrèvement", in the pre-1880 law were that "costs of recovery and enforcement form part of the hypothecated amount".

(ii)       Grounds 2 and 4 contend that the 1880 Law should be construed as not having altered previous customary law save where its provisions "clearly and unambiguously amend the customary law position" and as having preserved "customary law principles as to the extent of security (and the inclusion of costs as part of the security)";

(iii)      Ground 3 contends that by analogy with the reasoning of the Court in Super Seconds and the Court's conclusion concerning interest on a hypothecated debt, costs should be treated as part of the hypothecated obligations;

(iv)      Ground 5 challenges the Deputy Bailiff's view that a hypothecary creditor's costs could only be made to be secured by the creditor obtaining a further separate judgment of the Court or other security;

(v)       Ground 6 challenges the conclusion that any judicial hypothec must be carried by a debt or obligation for a stated maximum sum which appears in the Public Registry on registration of the relevant acte ou jugement; here the reasoning as to the need for the maximum sum was by reference what were mistakenly seen as compelling practical considerations concerning the function of the Public Registry rather than by reference to the language of the 1880 Law.

68.      The submission on behalf of JHL in its written contentions was that "it is a clear and well-established principle of statutory construction that where the pre-existing customary law position is clear, there is a presumption that a statute can only amend that customary law position by clear and unambiguous provision".  For this proposition Advocate Harvey-Hills cited a judgment of the Royal Court in Bradshaw v McCluskey [1976] JJ 335 at 341.  On this basis, so Advocate Harvey-Hills submitted, in determining what obligations are to carry a hypothec as provided for by the 1880 Law, the previous customary law position (namely that such obligations include costs as accessory to the principal debt) is of importance, as the presumption is that no change has been made unless expressly provided for.  As there is no mention of such costs in the 1880 Law, the conclusion contended for on behalf of JLH is that in the case of a judicial hypothec such costs are after all secured, along with the hypothecated principal.

69.      JHL's written submissions also referred to various legal writings to support its analysis of the pre-1880 law and the right for a hypothecary creditor to be paid, as part of the hypothecated amount, costs incurred in recovering the creditors debt.  Several of these texts had been cited to the Royal Court in Super Seconds,and were referred to by the Royal Court in its judgment in that case.  The extracts cited to us were from Basnage, Traité des Hipotéques, 3rd ed (1709); Pothier, Coutumes des Duché, Bailliage, et Prévôt d'Orléans; Traite de l'Hypothèque, Titre X, para 45 (1821); Domat, Les Loix Civile dans leur Ordre Naturel, Livre III, Titre 1, Des Gages et Hypothèques, (1713); Bourjon, Droit commun de la France et de la Coutume de Paris, Tome II, p.731 (1775); and Le Geyt, Priviléges, Loix & Coutumes de l'Isle de Jersey, (1952). 

70.      In our view these extracts clearly support the foundation for Mr Harvey-Hills' argument, a foundation already established in more modern times by Super Seconds.  Advocate Pallot on behalf of Mr Hill did not dispute that before 1880 interest on a debt carrying a hypothec could be considered accessory to the debt and secured by the hypothec, or that in Super Seconds that proposition informed the Royal Court's conclusion that after 1880 interest on a hypothecated debt was also secured along with the principal and carried the same hypothec.  Nor did Advocate Pallot dispute that certain of these extracts placed costs on the same footing as interest as accessory to the principal debt.  For instance, the Bourjon extract contains the explicit statement "Les intérêts & les frais étant l'accessoire du capital, doivent être colloquies a la meme hypothèque que le capital, ils marchent de pas égal avec lui ... ". 

71.      Advocate Pallot also accepted that in Super Seconds the Royal Court found interest to have the same hypothec as principal, a conclusion reached on the basis of the 1880 Law without the amendments made to Articles 13 and 14 by the 2000 Law.  He further accepted that part of Royal Court's reasoning had been that the pre-1880 position, the ancienne coûtume, had been that interest had carried the same hypothec as the principal, and that nothing in the 1880 Law expressly or by implication had altered that principle. 

72.      It was not suggested that Super Seconds had been wrongly reasoned or decided, but rather Advocate Pallot sought to distinguish the decision.  He made three submissions:

(i)        The case concerned interest and not costs.

(ii)       In view of the express limit on interest set out in Article 101 of the 1880 Law, it was "not a stretch for the Court to find that interest had the same hypothec as the principal".

(iii)      The case concerned a remise de biens, not a dégrèvement, and that the latter proceeding (with which the present case is concerned) is a creature only of the 1880 Law in contrast to what had existed before, and in contrast with a remise de biens was not directed at giving indulgence to an insolvent debtor; accordingly, whatever might have been decided about the effect of a hypothec in the former procedure was not a decision about its effect in the latter.

73.      These submissions were directed at explaining why the decision in Super Seconds did not undermine Advocate Pallot's general submission, that the 1880 Law was a new departure, reforming Jersey land law and the law of security over land, so that it would not be correct to interpret the 1880 Law with any assumption that previous customary law principles were still applicable in relation to any of the concepts deployed in the 1880 Law unless inconsistent with express provisions of the Law.  This is the issue to which JHL's second and fourth grounds of appeal are directed.

74.      Advocate Pallot's submission, then, was that pre-1880 Jersey customary law, insofar as it is reflected in the extracts from historic texts relied upon by Advocate Harvey-Hills, was of no assistance in resolving the question in the present case, for the simple reason that the 1880 Law represented a clean break, so far as concerned the law of hypothecation.  Thus, the question whether costs could carry the same hypothec as a principal debt was to be answered, so Advocate Pallot submitted, by reference to the terms of 1880 Law itself together with any subsequent case law and commentary.

75.      In support of this submission Advocate Pallot drew our attention to Sir Robert Marett's Lettre Explicative, to which we have referred above.  Advocate Pallot and Advocate Harvey-Hills were both agreed that this document was of critical importance in understanding the problems which the 1880 Law set out to address, and for any interpretation of the 1880 Law having regard to its intended purpose and effect; we had it read to us in full and both advocates made extensive reference to it.

76.      Two further submissions were made to us by Advocate Pallot concerning the relevance of the pre-1880 customary law.

(i)        The first was that, the materials relied on by JHL addressed only the position of debtor and hypothecary creditor as between themselves, so that it should come as no surprise - and no assistance was to be found - if the materials support the proposition that as a matter of customary law a debtor must pay a creditor's costs and expenses in addition to the principal if he is to discharge his debt carrying a hypothec so as to extinguish the hypothec.

(ii)       The second, as reflected in Advocate Pallot's submission concerning Super Seconds, was that dégrèvement is a procedure created entirely by the 1880 Law and thus that the scheme in Articles 91 to 105 of the 1880 Law contains wholly new provisions for which customary law can provide no assistance.  In this scheme it would not be remarkable if a tenant après dégrèvement is not obliged to pay to a hypothecated creditor when taking the land subject to the hypothec the entirety of the obligations of the debtor to the creditor.

77.      Before us the parties have put forward rival contentions to address the practical difficulties which a hypothecary creditor would face if an obligation to pay costs was not capable of forming part of the obligations secured by a judicial hypothec carried by a primary debt. 

78.      One difficulty referred to by Advocate Harvey-Hills was that in the Ansbacher case, supra, this Court upheld the conclusion of the Royal Court that registration of a subsequent judgment in the same proceeding as one which had given rise to a registered judgment, and therefore to a hypothec for the original judgment obligation, extinguished that previous hypothec.  This conclusion was reached by particular reference to the provisions set out in Article 16 of the 1880 Law concerning the registration of an act or judgment of the Royal Court given "dans la meme procédure".  The problem, so Advocate Harvey-Hills submitted, was that a hypothecary creditor cannot safely obtain security for an obligation on the part of the debtor to pay the creditor's costs of defending the creditor's principal debt or security for the debt, if such an obligation is neither accessory to the debt and secured by the same hypothec, nor capable of being included along with the debt among the obligations carrying that hypothec.

79.      By way of response, Advocate Pallot submitted that in the Ansbacher case the hypothecary creditor, having a hypothec carried by a debt of £700,000, had subsequently obtained and registered a judgment for that debt and interest when the debtor had failed to pay. This therefore involved the creditor effectively doubling its security for the £700,000, something not permitted by the 1880 Law.  The result in that case would have been different, so Advocate Pallot submitted, if there had been a judgment obtained for the interest only and not for the principal.  At any rate, he submitted that obtaining and registering a judgment for costs in relation to a proceeding concerning the principal sum or the security for the principal sum would not lose priority for that security, as the costs judgment would not be "dans la même procédure".  But, as Advocate Pallot accepted, the costs judgment would rank in terms of priority after any previously created hypothecs:  the debtor's obligation to pay costs would not be secured by the judgment creditor's senior security, but would give the judgment creditor the right to elect to become tenant après dégrèvement in preference to any hypothecary creditors ranking senior to the judgment debt but junior to the judgment creditor's original hypothec.

80.      Advocate Pallot suggested, as a solution to the problem of priority, that the amount to be acknowledged by a debtor as the debtor's indebtedness could be stated to be larger than the outstanding debt at the time of the acknowledgment, to allow "headroom" for a costs obligation to be included in the hypothec carried by the principal debt.  This solution he nevertheless recognised to be problematic.  An obvious objection is that a lender could not properly ask a debtor to sign an acknowledgement of indebtedness containing such headroom:  any proposing borrower could reasonably feel that it was wrong to be asked to sign a statement acknowledging themselves to be indebted in a stated sum when much less was in fact owing.  We therefore say no more about this suggested solution.

81.      We have referred to JHL's sixth ground of appeal, directed at the Royal Court's view of the importance of what is to appear in the Public Registry in respect of any judicial hypothec and, in effect, a conclusion that from the Public Registry a specific maximum indebtedness of the debtor to the hypothecary creditor must be ascertainable.  Advocate Harvey-Hills submitted that it was not necessary for what is registered in the Public Registry to contain in relation to any judicial hypothec a maximum headroom, and further that what appears in the Public Registry will almost certainly be incomplete at any given time as to the outstanding amounts secured by a judicial hypothec or payable by a tenant après dégrèvement on taking from the hypothecary creditor the property on dégrèvement.  In his submission the Royal Court attached undue significance to the information, or want of information, immediately discernible on inspection of the Public Register.

82.      In this connection Advocate Harvey-Hills drew attention to the following:

(i)        What is registered in the Public Registry does not, and was not intended to, provide a complete and accurate record of all, or even the maximum amount of, the obligations secured on a debtor's land.  This is because, not least of all, there may very well be interest secured and in arrears, even where a hypothec was created in respect of a simple debt in a specified amount.  On the other hand, what the Public Register does show is the number of hypothecary creditors at any one time in respect of any parcel of land and the general nature of the obligations carrying their hypothecs, so that at the very least any intending lender to or creditor of the debtor will be able to make further informed enquiries if that person so chooses.

(ii)       In the Ansbacher case in this Court Vos JA, giving the judgment of the Court, pointed out that the interpretation of the 1880 Law depends upon its meaning found "on normal principles" and that "the practical consequences could not outweigh the proper meaning" as so found.  In other words, any consideration of the practical consequences is at most a cross-check when interpreting the 1880 Law.

(iii)      There is no express statement in the 1880 Law, at any rate in its present form, that an act or judgment creating a hypothec must be given for, or on the acknowledgement of a debt for, a specified sum or maximum sum.  There is therefore no justification for the conclusion that the Public Registry must show either from time to time or at any time the maximum amount which is secured on a debtor's land.

83.      In response to this argument Advocate Pallot sought to support the Royal Court's conclusion about the need for there to be a maximum sum referred to on the face of the billet, and therefore the inference that an obligation to pay costs cannot be part of the obligations carrying a judicial hypothec.  His argument was simple:  he submitted that a potential creditor would otherwise be unable to ascertain the extent of an existing hypothecary creditor's secured interests.  He submitted: "For the system to be efficacious, a potential creditor must be able to look at the Public Register an ascertain the maximum sums secured against the debtor's property".

84.      Advocate Pallot relied on what had been said by Sir Michael Birt concerning the Public Registry when giving judgment in HSBC v Ansbacher (Channel Islands) Ltd [2007] JRC 167.  In that case at para [24(vii)] Sir Michael said "It was surely the intention of the legislation that the Public Registry should give a fair and accurate picture and enable a potential lender to assess with certainty the extent to which any property is charged and accordingly the scope for any further lending having regard to the value of the property". 

85.      As a final point Advocate Pallot submitted that there is no machinery for allowing a tenant après dégrèvement to challenge amounts claimed by a hypothecary to be secured by the hypothec.  In the present case, he submitted, it would be open to the Debtor to dispute JHL's claimed costs said to be due from her; but he submitted that on the face of it his client would be obliged to accept without possibility of challenge whatever JHL said was due to it for costs.  This, he submitted, pointed to the conclusion that a hypothec could only secure a definite maximum sum, and in consequence beyond that sum could not even secure costs which might have become properly due from a debtor to the hypothecary creditor in accordance with the contract between.

Discussion

86.      In the present case, JHL's judicial hypothec was created after the 2000 Law and therefore at a time when Article 13 of the 1880 Law was in its current, amended, form and Article 14 no longer existed.  Given that nothing is stated in the new Article 13, or elsewhere in the 1880 Law in its amended form, requiring a judicial hypothec to specify a maximum sum beyond which any debt due to the hypothecary creditor cannot be secured by the hypothec, we are unable to agree with the conclusion that inspection of the register in the Public Registry must be capable of revealing the maximum amount of any secured obligation. 

87.      We note that had Article 14 survived in the 1880 Law beyond 2000 there would have been support for the need for any act or judgment creating a judicial hypothec to contain a statement of a specified sum, a "somme certaine", as a maximum sum beyond which there could be no security.  But in our judgment that contention would have been contrary to the decision of the Royal Court in Super Seconds.  In that case there had been elaborate argument concerning the original Articles 13 and 14 and their effect, but the Court nevertheless held that interest on a principal debt carried, and was secured by, the same hypothec as the principal debt.  It follows from the judgment in that case that interest was additional to the amount of the registered bonds.

88.      In our judgment Advocate Harvey-Hills' submissions are correct concerning the relevance of pre-1880 customary law in relation to hypothecs.  No provision was made in the 1880 Law for interest to be secured by a hypothec resulting from acknowledgment of a debt and registration of an act or judgment in respect of the acknowledgment.  Certainly, Article 101 assumed that interest was secured, when it limited what was to be payable on a décret or dégrèvement.  But that Article was premised upon an assumption that interest was secured, despite the absence of any express provision.  We consider that the inescapable inference, in line with the decision in Super Seconds, is that within the 1880 Law interest was and is accessory to principal and therefore carries the same hypothec.  This was an incident of hypothecation as a means of securing debts which had pre-existed the 1880 Law and was carried into the 1880 Law.  Any reference to a hypothec in the 1880 Law was not to a wholly new idea.  The 1880 Law was deploying a concept already known to the law.  This can be seen in terms in Articles 47 and 49(5) of the 1880 Law, referring as they do to hypothecs (indeed judicial hypothecs, in the case of Article 49(5)) created before the coming into force of the 1880 Law.

89.      This point appears to be reinforced by Sir Robert Marett's Lettre Explicative, which contains a commentary on particular Articles in the 1880 Law, many described as being based on the Code Civil Français.  In the Lettre Explicative, Sir Robert Marett noted that Articles 12 to 16 "qui traitent des hypothèques judiciares" reproduced provisions in the Loi (1832) sur les décrets, subject to a single modification which is for present purposes immaterial.  (We were shown the 1832 Law in its original form.  In fact that Law appears not to contain any provisions resembling Articles 12 to 16 of the 1880 Law.  It seems, as both Advocates before us agreed, that the Lettre Explicative was mistaken in referring to the 1832 Law, and that Sir Robert must have had something else in mind, perhaps the French Code Civil or the Jersey Code of 1771.)

90.      In deference to Advocate Pallot's helpful submission concerning the intended purpose of the 1880 Law and the break with the past, we fully accept that the 1880 Law sought to reform very significantly the Jersey law of real property, including the taking of security over real property and the processes for securing and enforcing debts and claims.  But it does not follow that the 1880 Law stands as a complete code to be interpreted without reference to the legal background which provided its contextual setting.  On the contrary, as shown by the passage in the Lettre Explicative to which we have just referred, the 1880 Law made use of existing principles and concepts in setting out laws regulating hypothecation.  Numerous other passages in the Lettre Explicative reinforce this.

91.      Further reinforcing this position is the judgment of the Royal Court (Sir Michael Birt, Bailiff, with Jurats Kerley and Grime) given in Re the dégrèvement of Walton, Syvret v De La Haye [2015] (1) JLR 129.  In that case the Royal Court examined writings from jurists of the Eighteenth Century whose works have been relied on in the present case, and reasoned that these assisted in identifying customary law which, in turn would support the conclusion reached by the Court (namely that an undivided share of immovable property owned in common could be the subject of a judicial hypothec) unless there was anything in the 1880 Law to prevent that conclusion. 

92.      However, in the present case the position is not the same as it was when Super Seconds was decided, for the reason that the 2000 Law made material changes to Articles 13 and 14 of the 1880 Law.  The present case turns, in our judgment, on the meaning to be given to the current Article 13.  The main relevance of what had gone before is to assist with an understanding of the difficulties with the original provisions, and thus to assist the interpretation exercise we have to carry out, by bringing out what may have been the intended the changes made in 2000.

93.      From the relevant projet de loi it is apparent that the new Article 13, in particular new Article 13(1), was enacted at a time when there were uncertainties about the effect of the then existing law, and was to resolve these by seemingly enlarging the scope of the provision.  Among other things, it was expressly established that a judicial hypothec might indeed secure interest on principal, as had been decided in Super Seconds.  It was expressly stated that part only of a corps de bien-fonds might be charged.  And it was expressly stated that there could be hypothecs securing guarantee or other contingent liabilities.

94.      In our judgment there are two material conclusions to be drawn from the 2000 amendments.  The first is that whatever amount appears in the act or judgment creating a judicial hypothec, there is not a fixed maximum beyond which the hypothec cannot secure an obligation. The repeal of Article 14 without direct replacement makes this clear.  Specifically, the 2000 amendments revoked any requirement that there might have been in Article 14 for a "somme certaine" to be a maximum of the creditor's secured claim, while at the same time removing from Article 13 the adjective "définitivement" in conjunction with the reference to the amount decided by the Court to be due or acknowledged by the debtor as due or potentially due.  But even before the 2000 amendments, as Super Seconds had already established, at the very least interest on a stated (and acknowledged) principal sum could be accessory to that sum and, along with the sum, carry and be secured by the same hypothec; and this is now expressly encapsulated in the new Article 13(1).

95.      The second conclusion which follows from the first, is that (at any rate where the obligation is accessory to a principal obligation in a stated sum) it is possible for an obligation secured by a judicial hypothec to be defined in a way which does not require a statement of a present, or even a future or contingent, specific amount.  What is required is that there should be some definition of the obligation which will enable an amount to be arrived at, either presently or in the future.  

96.      The interpretation of Article 13(1) of the 1880 Law in its current form now requires consideration of new Article 13(1A), added in 2018 by the Loi (2018) (Amendment No.6) sur la propriété foncière. This provision reads as follows:

"(1A)   Aux fins de l'alinéa (1), le montant de la réclamation hypothéquée pourra être calculé par référence à la valeur de temps en temps, ou à un pourcentage de la valeur de temps en temps, d'un ou plusieurs biens-fonds particuliers du défendeur."

In  translation this reads :

"(1A)  For the purposes of paragraph (1), the amount of the secured claim may be calculated by reference to the value from time to time, or percentage of the value from time to time, of one or more particular hereditaments of the defendant"

97.      Article 13(1A) of the 1880 Law ensures that an obligation can properly be secured by a hypothec, even where what is secured is a claim for some amount which is bound to change in value as land values change, and where that value will require more than simple arithmetic to calculate because its ascertainment will need a land valuation.  Further, Article 13(1A) does not require that the land driving the valuation exercise must be the same as the land to be hypothecated, but only that it should be land belonging to the obligor. 

98.      Thus, the effect of Article 13(1A), when read with Article 13(1), is to confirm that "the amount" and "the sums" referred to in Article 13(1) are not always to be a stated fixed monetary amount at the point of creation of the hypothec, whether in pounds Sterling or any other currency, set out in the act or judgment creating the hypothec.  Rather, at any rate in a case falling squarely within the description in Article 13(1A) concerning land value obligations, what is to be determined or acknowledged may be a payment obligation of an amount which is or will be measurable or ascertainable by some process and which may vary from time to time.  But this undermines the argument advanced on behalf of Mr Hill, that a hypothecary creditor's costs of preserving the creditor's principal debt or security would be altogether outside what can be secured by a reconnaissance under Article 13(1) of the 1880 Law for the principal debt, because the costs obligation is not for a stated amount on the face of the acknowledgment.

99.      Advocate Pallot also sought to support the Royal Court's conclusion by directing our attention to the original form of Rule 18/4 of the Royal Court Rules 2004 together with Schedule 6 to the Rules referred to in Rule 18/4(3)(b).  Before later amendments, Rule 18/4 required in paragraph (2) that an action for the acknowledgment of debt by consent had to be brought before the Greffier in Chambers, and in paragraph (3) that the action had to be instituted by delivery of an acknowledgment document meeting various requirements, including as to identification of parties, execution, printed form, and stamping to show payment of stamp duty.  One of the requirements, that in paragraph (3)(b), was for the acknowledgement document to "be in or substantially in the appropriate form set out in Schedule 6"; and another, that in paragraph (3)(f), was for the document to "state the amount to be acknowledged expressed in both words and figures".  The forms in Schedule 6 all made provision, in describing the matter coming before the Royal, as being for acknowledgment of "indebtedness in a bond/note of hand, in a capital sum of .... [bearing interest] ....".  And the forms also included a further a statement by the person providing security of acknowledgment of "indebtedness ... in the said sum".   This further statement made no provision for any reference to be made to interest.

100.   Since September 2018 there has been a Practice Direction concerning judicial hypothecs.  This contains new forms of acknowledgment which are to be used. These are to be "in or substantially in the appropriate form set out in Schedule 1".  Broadly speaking they are comparable to those in the former Schedule 6, referred to above.  They may be listed out as "Form of simple acknowledgment of debt", "Form of acknowledgment where the debt is guaranteed by a third party", "Form of acknowledgment of guarantee only", "Form of acknowledgement where a third party makes a declaration with regard to dower, life-enjoyment, etc", "Form of acknowledgment where a third party makes a declaration with regard to existing hypothecary rights", and "Form of acknowledgment referring to the value or a percentage of the value".  The Practice Direction contains an express requirement for the acknowledgment to "state the amount to be acknowledged expressed in both words and figures".  This replaces what was in the unamended Rule 18/4(3).  On the other hand the stamping requirement still remains in Rule 18/4(3) itself, in paragraph (3)(g); but this requirement has now been amended and is for the document to have exhibited at its rear evidence that the appropriate stamp duty "has been or will be paid" (our emphasis).

101.   Advocate Pallot submitted that the Royal Court Rules established that there cannot be an acknowledgment for anything other than a stated sum, a stated indebtedness.  He submitted further that the Judicial Greffier would not act on an acknowledgment which failed to meet this requirement, not least of all because otherwise stamp duty could not be calculated and charged on the acknowledgment of obligation to be actioned.  Advocate Pallot did not explain how the stamping requirement would be met in the case of an acknowledgment within the description in Article 13(1A) of the 1880 Law which did not contain a stated sum as the indebtedness.  He told us that he was not aware of any such acknowledgments having yet come before the Court. 

102.   In respect of Advocate Pallot's submission concerning the relevance of stamp duty we note that the Stamp Duties and Fees (Jersey) Law 1998, referred to in Rule 18/4(3)(g) of the Royal Court Rules, both in its original form and in the form as amended by the Stamp Duties and Fees (Jersey) Amendment Law 2018, does prescribe duties to be paid on certain instruments at specified rates.  But we are not persuaded that an instrument seeking to qualify as an acknowledgment for the purposes of creating a judicial hypothec would fail because the Judicial Greffier is precluded from acting in the absence of stamping of the instrument.  As to this, we note that an acknowledgment of debt would qualify as an item within Schedule 1 of the 1998 Law, and that if there were no rate prescribed for the particular acknowledgment of debt then it would fall to the Bailiff under Article 2(7) of 1998 Law to determine the duty to be charged; but if the instrument fell outside any provision requiring stamp duty to be paid, plainly the Court could not refuse to register the instrument.  The present case, however, does not require further consideration of this point, as it concerns the amount secured by an instrument which has been stamped and registered.

103.   We note that the requirement previously in Rule 18/4(3)(f) of the Royal Court Rules for an acknowledgment to state an amount expressed in words and figures is difficult to reconcile with Article 13(1A) of the 1880 Law which allows hypothecs for obligations which cannot be so expressed.  Further, the last of the prescribed forms, that for "acknowledgment referring to the value of a percentage of the value", does not require any statement of such an amount.  This form, evidently designed to allow hypothecs contemplated by that Article, provides for the intending debtor to "acknowledge their indebtedness pursuant [describe the agreement] dated which indebtedness shall operate as a hypothec [on the whole of the value from time to time] or [on ... percent of the value from time to time] of" certain immoveable property.  In a case where the description of the relevant agreement does not include a statement of an amount of money, and nothing in the form itself or Article 13(1A) requires such a statement, the form would not comply with Rule 18/4(3)(f). 

104.   Further, the last part of the form referred to in the previous paragraph is odd.  Article 13(1A) of the 1889 Law says nothing about hypothecs charging fractional shares of land; rather, it provides for land (that is one or more particular biens-fonds, but without repeating the reference to parts of biens-fonds set out in Article 13(1)) to be made subject to a hypothec carried by an obligation (a secured claim) which is to be calculated by reference to the value from time to time, or a percentage of the value from time to time, of land.  In other words, Article 13(1A) is not concerned so much with the security, namely land as explained in Article 13(1) to which Article 13(1A) has referred, as with the secured obligation.  And in the cases provided for by Article 13(1A) that secured obligation is not to be a simple indebtedness for a stated amount of money.

105.   Ultimately, we cannot accept that the Royal Court's prescribed forms for acknowledgments directed at creating judicial hypothecs determine the issue in the present case in favour of Mr Hill.  While they show that a typical reconnaissance will normally involve a statement that a debtor owes a stated amount of money, it does not follow that an obligation to pay exactly that stated amount of money is all that is ever secured.  Leaving aside the question of interest, which certainly can result in the hypothecary creditor having security for more than simply the stated amount of money, there may be cases where the secured obligation is diminished (most obviously by intervening payment or by the way contingencies eventuate); and there may be cases where events transpire which result in the aggregate of the secured obligation increasing. 

106.   Accordingly, in our judgment JHL's costs are to be included among the obligations carried by JHL's hypothec brought into being by registration of the Billet, if the costs are an accessory to the £500,000 debt specified in the Billet. But the right to include costs as a secured obligation must depend upon what has been agreed (or not agreed) in that regard between JHL and the Debtor.

107.   If this is correct, and accepting as correct what has been submitted to us on behalf of JHL concerning the position of costs under the pre-1880 customary law, namely that costs were accessory to the principal debt and carried the same hypothec, then the conclusion must follow that this remained the case after 1880 and also after the 2000 Law.

108.   In our judgment, the submissions made on behalf of JHL are correct on this point.  In particular, we do not accept that Super Seconds is to be distinguished as concerned only with what happens on a remise de biens and as having no relevance to dégrèvement.  The 1880 Law made general provision concerning hypothecs and the protection accorded to the hypothecary creditor in respect of obligations secured by the hypothec.  One aspect of this was the protection in a décret or dégrèvement, in respect of which the protection was restricted as to the amount of interest.  But, more generally, the 1880 Law was concerned with what would be required on a liquidation or distribution.  The question, quite simply, concerned the ascertainment of the secured obligations. 

109.   We have not been persuaded by the submissions described in paragraph 74 above.  As to the first submission, a hypothec ceases to exist when the obligation carrying the hypothec is discharged.  This is because a hypothec is carried by the hypothecated obligations and has no independent existence.  The writers of the pre-1880 texts, when explaining that some liability, whether interest or costs, was accessory to principal and carried the same hypothec, were indicating that the hypothec was not extinguished simply by the debtor paying the hypothecated creditor the principal.  For the hypothec to be extinguished, the obligations carrying it would need to be extinguished.  We disagree with the distinction sought to be drawn, when explaining the pre-1880 writings, between, on the one hand, a personal obligation to pay principal, interest and costs and, on the other, a secured obligation, an obligation carrying a hypothec, consisting only of the principal debt (and, possibly, interest) but not costs.

110.   As to the second of the two submissions, it is correct that dégrèvement as a system replacing what had gone before in relation to the enforcement of security over land was entirely new in 1880.  But before considering what is required to be paid by a tenant après dégrèvement taking hypothecated property, the first task is to identify what obligations carry the hypothec.  Thus, Article 95 explains what is to be paid by a tenant après dégrèvement.  The last words of that Article, requiring payment of prior ranking hypothecs relating to the hereditament en dégrèvement, impose a duty to discharge the obligations of the debtor carrying the hypothec.  There is no dispute that these can include interest (subject to the Article 101 limit).  Whether in the case of a judicial hypothec costs can be included depends upon whether or not costs are accessory to the principal (as JHL argues) or sufficiently qualify as an obligation within the last part of Article 13(1) of the 1880 Law so as to carry, with the principal, the same hypothec.  The answer to this question, in our judgment, turns more particularly on the interpretation of Articles 2, 13 and 15 of the 1880 Law.  As to that, we consider that, at any rate in the case of a judicial hypothec, costs can in principle be secured.  Whether they are in any particular case will depend on the terms of any agreement between the creditor and debtor giving rise to the principal debt secured by the hypothec.

111.   A further consideration in relation to dégrèvement concerns the respective positions of the debtor, hypothecary creditor and tenant après dégrèvement.  Advocate Pallot's submission was that it is hardship for the tenant après dégrèvement to be forced to pay costs when taking property from the hypothecary creditor, while it would be understandable for costs to be left as a purely personal obligation on the part of the debtor to the creditor.  On the other hand it appears that a hypothecary creditor electing to become tenant après dégrèvement, there being no junior creditor taking, would have the whole of the obligations carried by the hypothec and owed to the creditor by the debtor discharged on taking the subject property.  That was the conclusion of this Court in Investec Bank (Channel Islands) Ltd v Booth [2016] JCA 025, Investec v Booth [2016] (1) JLR 101.  If there were surplus value in the subject property, it would be surprising if the creditor's costs could still be claimed for as a personal debt upon the creditor taking the property (assuming no cession by the debtor).  That consideration would point to the costs being secured by the hypothec as accessory to the principal secured obligation carrying the hypothec.

112.   As mentioned above, in our judgment whether costs are secured by a judicial hypothec will be governed by the terms of the agreement giving rise to the hypothec.  It would not be open to the hypothecary creditor to claim to be secured for more than, or for something different from, what had been stipulated for in the arrangements between the creditor and the debtor.  If those exclude costs or define what is payable by the debtor in respect of the principal debt, the hypothecary creditor cannot go further.

113.   This, we think, may well be what Sir Michael Birt had in mind when, giving judgment in Re Gibbins [2011] JRC 033, he commented of certain legal fees incurred by the creditor in respect of enforcement actions that  "... we think it very doubtful that such sums fall within the amount which is secured by the hypothèque."  Conversely Sir Michael Birt appears to have considered that the inclusion of costs as part of the secured obligations owed to a hypothecary creditor was not impossible, as his judgment in Re Reva Holdings Ltd [2013] JRC 208 contains a discussion predicated upon the inclusion of costs.

114.   In the present case, then, it is necessary to decide what was agreed between the Debtor and JHL in relation to costs.  Condition 8 of the Facility Agreement defines the costs which the Debtor is to pay:  unless costs fall within that Condition (and we have heard no argument on the detail of what might or might not properly be within that Condition), JHL has no right to require payment from the Debtor, and cannot assert that the costs are secured by the hypothec carried by the principal debt.  JHL acknowledged before us, as it had before the Royal Court, that implicit in Condition 8 is a requirement that any costs to be due to JHL must not be unreasonable in amount and must not have been incurred unreasonably.

115.   In our judgment if costs fall within Condition 8 of the Facility Agreement, they are secured as part of the security for JHL's debt.  The starting point is that in principle costs are secured as being accessory to the principal obligation.  Therefore, as regards any agreement concerning security, the presumption would be that the costs are included unless agreed to be excluded.  In the Facility Agreement the parties did not agree that costs would be included; but neither did they agree that they would not.  The result, we conclude, is that when deciding what the parties bargained for in the Facility Agreement concerning costs, the properly chargeable costs are included in the hypothec.

116.   We entirely accept that part of the reasoning in the Royal Court, when considering what had been provided as the effect of registration of successive acts or judgments in the same matter, was that the extinction of the prior hypothec was consistent with an aim on the part of the legislature that consultating the Public Registry should allow a person to have a clear view as to the extent to which property is charged.  The point was further made that double registration of hypothecs in respect of the same debt might cause confusion as to the extent to which properly a property was charged.  Furthermore, paragraph 6 of the Lettre Explicative, to which we have referred already, conveys that the aim of registration was to allow those proposing to acquire land to know, by consulting the Public Registry, precisely what charges the land was subject to and the secured obligations, so that the acquirer would know what might be needed to avoid dispossession.

117.   Nevertheless, for the purposes of the present appeal we do not think the argument concerning the need for clarity in what can be found, without "careful scrutiny of the underlying documentation" (as Sir Michael Birt put the point in the Ansbacher case at para [24(vi)]), compels a conclusion against costs being held to be accessory to and carrying the same hypothec as a principle debt.  In our judgment the submissions on this, described above, made by Advocate Harvey-Hills are to be accepted.  Indeed, in the written contentions on behalf of Mr Hill it was acknowledged that "the Public Register may, in certain circumstances, not perfectly reflect the actual position at all times".  This acknowledgement, rightly made as we think it is, is the same as one made and accepted as correct by the Court in Super Seconds (at page 122, lines 23-24).  It is destructive of an argument that the Public Registry must be able to reveal at any time, without any further investigation, the total amount currently secured on land. 

118.   On the other hand the Public Registry, on the basis of JHL's submissions, will still reveal enough for an intending purchaser, tenant après dégrèvement, or creditor to avoid being taken by surprise and to know what further investigations to make before dealing in relation any charged land.  While it may not show the precise amount required to be paid to clear the land of secured the obligations it will show the nature of the obligations secured by those hypothecs.

119.   We are not persuaded by Advocate Pallot's submission concerning the impracticability of resolving any dispute which a junior creditor, taking as tenant, might have in relation to costs sought to be treated by a senior creditor as carrying and secured by the same hypothec as secured the senior creditor's principal obligation.  A dispute of this kind is to be predicted in the case of a hypothec securing a land value obligation in accordance with Article 13(1A) of the 1880:  land values are frequently matters of opinion.  In view of Article 13(1A), it would be impossible to say that difficulty in identifying or establishing the correct machinery for resolving such a dispute means that there cannot be such a hypothec.  But disputes as to amounts secured cannot possibly be confined to cases of hypothecs securing land value obligations.  In even the simplest form of hypothec there can be argument as to partial satisfaction of obligations; and this takes no account of the fact that Article 13(1) of the 1880 Law allows for contingent obligations, where there may be issues as to whether the contingency has occurred or as to valuation of the obligation in a case where the contingency has yet to occur.  If the Court does not yet have an established procedure for dealing with such disputes, we have no doubt that a procedure would be found.

120.   Finally, we have asked ourselves whether the terms of the Billet (which was in all material respects in the form of the first of the prescribed forms set out in Schedule 6 to the Royal Court Rules 2004 before their recent amendment) might be inconsistent with JHL's contention in the present case; whether, in other words, as a consequence of the form of the reconnaissance the only obligation carrying and secured by the hypothec was a simple one to pay the principal sum of £500,000 or whatever lesser amount out of that principal was outstanding at the time when effect was to be given to JHL's hypothec. This was not what Mr Hill was arguing for, or (in the light of paragraph [70] of the Deputy Bailiff's judgment) what the Royal Court had decided.  The argument would be that all that was acknowledged by the Debtor was "her indebtedness in the said sum", that sum being described as a capital sum of £500,000 bearing interest, so that in the light of Article 13(1) any accessory obligation to pay costs could not be secured by the resulting hypothec.

121.   We consider that Advocate Pallot was correct not to base his contentions on the form of the Billet.  Shortly stated, the Billet contains an acknowledgment of a debt as at the time that it was signed.  At that time all that was due and owing was the principal sum of £500,000.  In the Billet the indebtedness was described as being "indebtedness in a Bond in a capital sum of £500,000"; and in our judgment that is sufficient to indicate that the terms of the Debtor's obligation to JHL in respect of the principal sum were to be found in the Bond.  Those terms included terms making the Debtor liable for JHL's costs in connection with the debt and security, should any be incurred and fall within the agreement between the parties to be found in the Bond.  Thus, what was secured by the hypothec brought into existence by the act of Court and its registration in the Public Registry was an obligation, not only to pay the principal sum (and interest), but also to pay the JHL costs (if there should be any) as accessory to that principal.

Conclusion

122.   For the reasons we have explained, we allow JHL's appeal.

123.   Provisionally our conclusion is that (subject to what we say in the next paragraph) Mr Hill should be ordered to pay JHL's costs of this appeal.  If either party considers that some different order should be made, we should be notified within 7 days of the handing down of this judgment and will then give directions for exchanges of written arguments and decide on the papers what, if any, costs order should be made.

124.   After the hearing of the appeal further written submissions were made on JHL's behalf.  These, accompanied by several cases noted in the Tables des Décisions (with copies of the full manuscript versions and translations), were directed at the meaning and effect of certain words in Article 39 of the Loi (1832) sur les décrets.  The submissions did not add anything of real value.  Advocate Pallot objected, we think with justification, to the introduction of the submissions at that late stage.  In the circumstances, we consider that JHL should not be entitled to any costs in respect of the further submissions. 

Authorities

Degrevement of the Immovable Property of Mrs Powell [2019] JRC 004. 

Loi (1880) sur la propriété foncière. 

Loi (1839) sur la remise de biens. 

Bankruptcy (Désastre) (Jersey) Law 1990. 

Parker Tweedale v Dunbar Bank [1991] Ch 26. 

Law of Mortgage" 14th Edn (2014). 

Loi (2000) (Amendment  No.4) sur la propriété foncière. 

Loi (1904) (Amendment No.2) sur la propriété foncière. 

Re the Remise de Biens of Super Seconds Ltd [1996] JLR 117. 

HSBC v Ansbacher (Channel Islands) Ltd [2007] JRC 167. 

Asnbacher v HSBC Bank Plc [2007] JCA 228. 

Bradshaw v McCluskey [1976] JJ 335. 

Loi (1832) sur les décrets.  . 

Re the dégrèvement of Walton, Syvret v De La Haye [2015] (1) JLR 129. 

Loi (2018) (Amendment No.6) sur la propriété foncière. 

Royal Court Rules 2004. 

Stamp Duties and Fees (Jersey) Law 1998. 

Stamp Duties and Fees (Jersey) Amendment Law 2018. 

Investec Bank (Channel Islands) Ltd v Booth [2016] JCA 025

Investec v Booth [2016] (1) JLR 101. 

Re Gibbins [2011] JRC 033. 

Re Reva Holdings Ltd [2013] JRC 208.