Jersey Unreported Judgments

Order of Justice

[2023]JRC230

Royal Court

(Samedi)

21 November 2023

Before     :

R. J. MacRae, Esq., Deputy Bailiff, and Jurats Austin-Vautier and Berry

 

Advocate J. M. Sheedy for the Plaintiff.

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

judgment

the deputy bailiff:

Introduction

1.        The Plaintiff bought proceedings by way of Order of Justice on 20 September 2023, and on 28 September 2023 the Court ordered that a preliminary issue in this case be determined as a Cause de Brievété.  That preliminary issue was heard on 6 November 2023.  On that date, the Court heard argument and reserved its decision.  Although the issue raised was principally one of law, the Jurats had already read the papers and accordingly sat in order to hear the argument.  This judgment provides that decision and the reasons for it.

2.        The Court is grateful to the parties for their helpful oral and written submissions.

3.        The Plaintiff is a Jersey company.  The Defendant is a publicly owned private company whose registered address is at Jersey Airport.

The Licence Agreement

4.        Although the Plaintiff company has previously carried out a similar or identical service at the airport (since the late 1980s), on 15 June 2017 the Plaintiff and the Defendant entered into a Licence Agreement which provided for the Plaintiff to occupy and operate the Executive Lounge at the airport.  The Licence Period, as defined in the Agreement, commenced on 1 October 2015 and it was provided that the Licence Period would not end so long as the Plaintiff continued to operate the Executive Lounge, unless terminated in accordance with Clause 9 of the Agreement. 

5.        Clause 9 provides:

"9.1 In the event that the Licensed Premises are required by Her Majesty's Government or by the Licensor for the purpose of: (a) National Defence; (b) a National Emergency; or (c) a Civil Emergency (each such event being a "Force Majeure Event") the Licensor shall be entitled to immediately terminate this licence and to retake possession of the Licensed Premises without any prior notice and without payment of any compensation whatsoever.

9.2 If at any time the Licensor shall decide that it is necessary for the Licensor to retake possession of the whole or any part of the Licensed Premises in order to carry out any improvement of the Airport, the Licensor shall be entitled to terminate this Licence or to amend the same so as to remove from the licensed premises such part or parts thereof as may in the circumstances be required by the Licensor and to retake possession of the Licensed Premises or any part thereof upon giving Due Notice in writing to this effect.

9.3 If Due Notice is given in accordance with Clause 2.2.5, this Agreement (and the Licence Period) shall terminate on the date specified in such notice.

9.4 The Agreement shall terminate if the Licensee shall no longer operate the lounge facilities at Jersey Airport.

9.5 Should the Licensee fail or neglect to perform or observe any of the covenants, stipulations or conditions on its part to be performed or observed or commit any act indicative of Insolvency then the Licensor will be entitled immediately to terminate this Agreement by serving written notice upon the Licensee to that effect.

9.6 The exercise of the rights contained in Clause 9.5 shall be without prejudice to any right of action or remedy of the Licensor to claim damages and costs for breach of any of the covenants stipulations or conditions on the part of the Licensee herein contained and the recovery of any rents or other monies owing under the terms of this Agreement."

6.        In the Order of Justice, the Plaintiff seeks a declaration that the Agreement has been not lawfully terminated by the Defendant upon any of the grounds advanced by the Defendant and that it remains extant.

The preliminary issue

7.        The preliminary issue that the Court was required to determine was:

"Whether the Agreement between the parties which forms the subject matter of the dispute was terminated by operation of law and / or Clause 9.4 of that Agreement on the dissolution of the Plaintiff and, if so, whether the Plaintiff's restoration to the Register altered that fact."

The key facts

8.        The relevant facts are as follows.  On 16 June 2023, the Plaintiff was struck off the Register of Companies and thereby dissolved.  This was a consequence of administrative oversights in respect of the Plaintiff's statutory filing obligations.  A director of the Plaintiff, Mr Robert Wickings, explains that he was unaware of the dissolution or the oversight that led to it until 26 June 2023, when the matter was brought to his attention by the Plaintiff's accountants.

9.        He says that once he became aware of the dissolution of the Plaintiff, he took steps to remedy the position.

10.      Although the Defendant has not yet been required to file an Answer, its position is simple.  It is that the Agreement terminated as a consequence of the Plaintiff's dissolution.  The Defendant informed Mr Wickings of this fact in writing on 4 August 2023 in an email, saying that as a consequence of the Plaintiff's dissolution the licence had "dissolved" and the Agreement terminated.  The email concluded by saying that pending new arrangements, Mr Wickings use of the Executive Lounge was "only on the basis of a licence at will".  A meeting followed and the Defendant wrote to Mr Wickings again on 16 August 2023 saying that the primary responsibility of the Defendant was to ensure the safe, secure and regulatory compliant operation of the airport, and that the striking off and dissolution of the Plaintiff, which the Defendant became aware of on 2 August 2023, presented an "unacceptable level of risk" for the Defendant, its business partners and customers.

11.      The letter went on to detail a number of concerns arising from Mr Wickings' "purported continued operation of the dissolved company" in respect of insurance, employment of staff, aviation security, unlawful trading and third party agreements.  The Defendant re-iterated its position that Mr Wickings continued to occupy the Executive Lounge under a temporary licence at will and that the Agreement had terminated.  The letter also said:

"To confirm, your efforts to revive [the Plaintiff] as a legal entity does not alter our stance on this matter."

12.      In fact, two days later, by order of the Judicial Greffier, the Plaintiff was restored to the Register in that the Court ordered, pursuant to Article 213 of the Companies (Jersey) Law 1991, that the "dissolution of the Company be declared void".  The Court made this order on the footing that the Plaintiff had filed its outstanding annual returns, as required, and paid its outstanding fees and taxes.

13.      Regrettably, the Plaintiff has not produced to the Court the Representation placed before the Court which resulted in that order being made, still less the evidence, if any, in support.  The Act of Court recites that the Court was told that the Plaintiff "has been acting as a travel agent company", was dissolved on 16 June 2023 under Article 16(4) of the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020, and that it was "desired that the Company be reinstated as it presently has ongoing business with clients and holidays". 

14.      It does not seem that any third parties were convened to the hearing of the Representation, still less the Defendant - with whom the Plaintiff had been corresponding on this very issue.

15.      The affidavit sworn on behalf of the Plaintiff for the hearing before us speaks only to its business as occupant of the Executive Lounge at the airport and not its purported business as a travel agent.

The parties' contentions

16.      We note that in JSC Commercial Privat Bank v St John Limited [2021] JRC 189, the Royal Court, Commissioner Sir William Bailhache presiding, held at paragraph 51:

"It is apparent that if those who are legally interested in the reinstatement of a company are given notice of the proceedings, they are in a good position to consider what the consequences might be for any contracts or arrangements in place at the date of the dissolution..."

17.      At paragraph 52, the Commissioner went on to say that the Court has a discretion as to the identity of the parties to be convened to an application before it and that suitable affidavit evidence should be provided when the Representation is presented.  We do not know what, if any, evidence was provided to the Judicial Greffier but, in our judgment, the Plaintiff should have provided an affidavit which, at the very least, should have exhibited the correspondence between Mr Wickings and the Defendant so that the Court could expressly consider whether or not to convene the Defendant to the hearing of the application to reinstate the Plaintiff so that, if the Court thought appropriate, the Defendant's arguments could be heard. 

18.      What then is the effect of the order made by the Court on 18 August 2023 on the contractual relationship between the Plaintiff and the Defendant?  The Plaintiff argues that it continues as before as a consequence of the reinstatement of the Plaintiff.  The Defendant says that it came to an end on or about 16 June 2023 when the Plaintiff was struck off.  The Defendant argues, as set out in its email dated 20 August 2023, that pursuant to Clause 9.4 of the licence, the licence terminated as the Plaintiff no longer operated lounge facilities and that occurred as a consequence of the Plaintiff's dissolution.  Clause 9.5 provides that the Defendant is entitled to terminate the licence upon the failure of the Plaintiff to comply with its obligations under it.  On 23 August 2023, without prejudice to its previous correspondence, the Defendant gave notice of an immediate termination of the Agreement under Clause 9.5.  The Defendant's arguments were consolidated in a letter sent to Mr Wickings on 24 August 2023.

19.      This letter also claimed that the dissolution of the Plaintiff was "concealed" from the Defendant and came to its attention when its lawyers were carrying out a company search for the purpose of the Defendant giving notice that it would be terminating the Agreement in any event pursuant to Clause 10.2 on the grounds of planned redevelopment of the premises. 

The legal principle

20.      The relevant part of Article 213 of the Law provides:

"Power of court to declare dissolution of company void

(1) Where a company has been dissolved under this Law or the Désastre Law, the court may at any time within 10 years of the date of the dissolution, on an application made for the purpose by -

           (a) a liquidator of the company; or

           (b) any other person appearing to the court to be interested,

make an order, on such terms as the court thinks fit, declaring the dissolution to have been void and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the company had not been dissolved.

(2) Thereupon such proceedings may be taken which might have been taken if the company had not been dissolved."

21.      The notes to the annotated version of the Law on the Jersey Legal Information Board under the title "Procedure" says:

"An application for an order declaring the dissolution of a company to have been void may properly be made by an ex parte Representation and, if appropriate, the Court may direct an inter partes hearing."

22.      As to the meaning of the word "void", in Article 213, we were assisted by the only Jersey authority in this area, namely the JSC case, where at paragraphs 45 and 46 of the judgment, Commissioner Bailhache said:

"45. The first point to make about this Article is that it is permissive. The Court is given a discretion as to whether it should or should not make an order declaring the dissolution of the company to have been void. If the Court decides that it is right to make such an order, then the consequence is that the company is reinstated and is placed back in the same position as if the dissolution had never occurred. That must follow because if what was done is void, it prima facie has no effect.

46. The second part of Article 213(1) enables the court to give further directions and make such further orders as seem just, bearing in mind that the company and all other persons are as far as possible to be put in the same position as if the company had not been dissolved. It is right to focus on the potential orders the Court might make because the nature of those orders will affect who it is the Court considers ought to be convened to the application to reinstate the company, if anyone."

23.      We agree with these observations.  The Court has a discretion, and if the Court declares the dissolution to be void then that means void ab initio, i.e. the company is reinstated as if dissolution had never occurred.  As to the power of the Court to give further directions, the natural meaning of Article 213(1) is that those directions should be made at the same time as the declaration that the dissolution is void - see the reference to "the Court may by the order give such directions" (our emphasis) and we note that those directions are limited to such provisions as seem just for placing the company and all the persons in the same position "as nearly as may be if the company had not been dissolved".  There is no general power of the Court to make such directions as may be just so as, for example, to assist third parties who may be prejudiced by the order that the Court may make.

24.      We were invited to consider one English authority in particular, namely Bridgehouse (Bradford No. 2) v A E Systems Plc [2019] EWHC 1768 (Comm), a decision of Cockerill J, sitting in the Queen's Bench Division.  In order to consider any English authority, or indeed an authority of any other jurisdiction, it is necessary to consider the extent to which the statutory background is similar.  In the United Kingdom there are separate regimes in relation to administrative and Court restorations to the Register, although the provisions in relation to the effect of such restoration are in practically identical terms for these purposes.  Bridgehouse involved an administrative restoration.  The relevant provision in Article 1032 of the Companies Act 2006, which deals with court ordered restorations, are as follows:

"1032 Effect of court order for restoration to the register

(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.

....

(3) The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register."

25.      It can be immediately seen that the statutory provision at Section 1032(3) is mirrored in Article 213.  It was suggested on behalf of the Defendant that the wording in Article 1032(1) has a different effect to the reference in Article 213 to the effect of dissolution being declared "void".  It was suggested that the Defendant would have a more difficult task making the arguments that it put forward under English law owing to the different wording in the equivalent Jersey Article.  In general terms, we reject this argument and, for all practical purpose, Article 213 and Section 1032 have the same effect as a declaration that a dissolution was void does, in general terms, has the effect that the company is "deemed to have continued in existence as if it had not been dissolved or struck off the Register".

26.      In our view this is consistent with the decision of the Royal Court in JSC Commercial Bank referred to above.

27.      In Bridgehouse, the claimant and defendant had entered into an agreement for the sale and purchase of properties.  The claimant was struck off the Register of Companies.  The defendant served a notice terminating the agreement on the basis that the claimant being struck off was an event of default under the agreement.  The claimant was then restored to the Register administratively, pursuant to Section 1024 of the Companies Act 2008.  The claimant commenced arbitration proceedings challenging the validity of the defendant's termination of the agreement.  The arbitrator determined that the agreement had been validly terminated and the termination was not affected by the claimant's subsequent restoration to the Register.  The question for the Court was whether the relevant section in the 2006 Act, namely that the effect of restoration was that the company was "deemed to have continued in existence as if it had not been dissolved or struck off the Register" meant that the defendant's termination of the agreement had to be re-assessed retrospectively as a result of the claimant's restoration to the Register, such that the termination notice was to be ineffective.  The Court dismissed this argument saying that although the deeming provisions provided in the 2006 statute were of very wide effect, they were not mandatory and of universal application.  This did not mean that everything that had in fact happened at a time when the company was removed from the Register or dissolved prior to restoration, in particular acts by third parties in reliance on their knowledge of the then status quo, was deemed not to have happened and had to be unpicked.  The Court held that the deeming provision was directed towards the direct or automatic effects of the removal from the Register or dissolution prior to restoration, and that where a contractual party had a choice as to whether to terminate the contract upon a company's removal from the Register or dissolution, the termination of a contract did not flow from and was not directly a consequence of dissolution, but rather flowed from the decision of a party to terminate and that, accordingly, the deeming provision in the statute was not engaged and the defendant's termination did not fall to be re-assessed retrospectively.

28.      In Bridgehouse, the termination provisions in the Agreement included an event of default which was defined, inter alia, as including the claimant "being struck off the Register of Companies or being dissolved or ceasing for any reason to retain its corporate existence".  The claimant was struck off on 31 May 2016, an application for administrative restoration was made on 26 June 2016, and the claimant was restored to the Register on 28 July 2016.  The appeal to the High Court concerned the effect of that restoration.  The relevant statutory provisions which, as observed above, were to similar effect as to the Jersey equivalent, were set out at paragraphs 44 and 45 of the judgment.  Having set out the contentions of both parties, the Court set out the principles of statutory interpretation (at paragraph 53 onwards).  The competing positions were summarised as follows:

"65. In essence, it was Mr Lord's case that what one sees in the authorities is a single strand, whereby the courts emphasise the breadth of the deeming provision, and which he says equates to a conclusion that the deeming provision is there as a matter of public policy, that it is mandatory and that it always applies.

66. In contrast to this, Ms Parkin argued that the authorities have to be regarded as very much on their facts, and that they support no conclusion that the deeming provision is unlimited in its ambit. She contends that like circumstances to these have never arisen, and that there is nothing in the authorities which is inconsistent with the conclusion for which he contends.

67. In broad outline I prefer this latter view, for the reasons explained below."

29.      The judge went on to examine the relevant English case law.  It is not necessary or appropriate for the Court to repeat this exercise.  After a review of the authorities, he concluded:

"107. In the light of this review of the authorities I have concluded that there is nothing in them which deals directly with a situation such as the present one, or which produces a statement of principle which should be taken as binding here. It is clear that the deeming provision is of very wide effect and that, where it arises in situations where what is in issue is the validity of an act performed by a company at a time when it was removed from the register or dissolved prior to restoration, that restoration and the deeming effect of the restoration will operate to give force to acts which would not otherwise have had force.

108. As Vos J puts it neatly in the Hounslow Badminton Association case [2013] EWHC 2961 (Ch), "Everything that would have happened, had the company continued in existence, is effectively deemed to have happened". That is consistent with the statutory purpose, so far as it can be discerned, and with the wording of the section. It is also very different from saying: everything which has in fact happened, including acts by third parties in reliance on their knowledge of the then status quo, must be deemed not to have happened and unpicked.

109. In my judgment the authorities indicate ground for caution when one moves outside this territory. Firstly, they indicate that the deeming is directed towards the doing or undoing of "incidents, which if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it" or "consequences which followed from the company having been struck off or dissolved". It is directed to the direct or automatic effects of the removal from the register.

110. Secondly, there are the specific cautions both in the Orchidway Properties Ltd case [2002] EWHC 1716 (Ch) and the Contract Facilities Ltd case [2002] EWHC 2939 (QB). In the former Jacob J (i) accepted that a repudiation might lead to the contract being incapable of revival and (ii) expressed a degree of uncertainty about the result in a case of frustration.

111. In the latter Judge Weeks QC (i) held that a valid termination could not be deemed not to have occurred and (ii) indicated that while automatic forfeiture of a lease might be unwound, forfeiture for being unable to pay rent would not.

112. In my judgment these authorities reflect a line between direct and secondary consequences.

113. That line is also in my view consistent with two facets of the statutory wording. The first is the mismatch which exists between the wording of the statute and the words which are necessary to describe the effects which would be needed here if BB2 [the claimant] were right; BB2 described the exercise as to "render ineffective" the relevant clause while BAE [the defendant] referred to "temporary termination". There is also not, of course, within section 1028(1) the wording "for all purposes" which was the hallmark of BB2's argument.

114. The second is that there is within the wording of the Act itself a clear indication that deeming is not, as BB2 suggested, mandatory and of universal application. For, while it is true that section 1028(1) was unrestricted in its terms, this is not quite true of the section as a whole. That limitation is the wording of section 1028(3) and in particular the phrase "as nearly as may be". Although plainly of very limited application-in that it is plain that where possible the statutory regime will be looking to achieve an "as you were" solution-it is a clear indication that there will be some situations where an "as you were" solution cannot be achieved.

115. Ultimately and despite some discomfort about the position in relation to situations such as automatic forfeiture, I have reached the conclusion that this line between direct and indirect consequences is the line which the statute and the authorities indicate needs to be drawn. The deeming provision will have very wide application indeed. It will be (as it has been in the authorities) taken to undo the automatic consequences of a removal from the register or dissolution which is later undone in circumstances to which the deeming provision applies.

116. But there will be situations where consequences arise which are not automatic. A lease will become forfeit not because of the fact of the dissolution, but because, either consequent on that dissolution or independently of it, the lessee does not pay its rent. A contract will be repudiated for a similar reason and that repudiation will be accepted-as happened in the Contract Facilities Ltd case [2002] EWHC 2939 (QB). Or, as in this case, a contractual party will have a choice as to whether to terminate a contract simply because of the removal from the register. The termination will not flow from, or be automatically a consequence of dissolution. It will occur where the party decides to make that decision and takes the step necessary to bring about that termination. Such consequences are, in my view, outwith the deeming provision." [Our emphasis]

30.      The judge also referred to Bennion on Statutory Interpretation as follows:

"117. I reach this conclusion independently of Bennion on Statutory Interpretation, 6th ed (2013), and drawing most heavily, as BB2 did, on the authorities. However it seems to me that this conclusion coheres with what Bennion on Statutory Interpretation has to say at para 17.8 when discussing the correct approach to a deeming provision:

"The intention of a deeming provision, in laying down a hypothesis, is that the hypothesis shall be carried as far as necessary to achieve the legislative purpose, but no further.

Whenever an Act sets up some fiction the courts are astute to limit the scope of its artificial effect. They are particularly concerned to ensure that it does not create harm in ways outside the intended purview of the Act."

31.      Finally, the judge considered the consequences of what he had found the law to be under the title "Factual Consequences - Proof of the Pudding".  The judge considered the observation made by the arbitrator, whose decision was under appeal, to the effect that actions already done by a party to the contract in accordance with the contract cannot be undone.  The arbitrator said that if the statute had meant that the legitimate action of a party to a contract should be rendered illegitimate by an administrative act (in this case, of course, Act of the Court, although obtained ex parte) which might happen up to six years later (in our case, ten years), he would expect it to have said so in clear terms. 

32.      At paragraph 123, the judge said the "bottom line" was that the claimant's approach would have deprived the relevant clause in the lease of effect in circumstances where the clause gave desirable certainty, particularly having regard to the fact that restoration could occur up to six years after being removed from the Register.  In order to deal with the reasons for which such a clause may be included in the first place, the judge noted that it may be perfectly legitimate to enable a party to terminate a contract if the counterparty is insolvent or is dissolved for other reasons.  The judge said that "this kind of administrative shambles...is a kind of situation which a contractual counterparty might well regard as a hallmark of an undesirable partner.  This clause provides a form of risk management tool...". 

33.      The judge concluded at paragraph 127:

"All in all therefore I accept that the consequences arguments indicate that considerable practical difficulties might be caused if the deeming provision were to operate in cases such as the present one. The results might not quite be absurd, but they do present as anomalous and potentially unjust. Mr Lord himself struggled to rebut the charge of potential injustice save by reference to the small number of cases to which this issue will apply. The consequences arguments therefore in my judgment support the conclusion which I had reached on the first two steps."

34.      The judge referred again to Bennion at paragraph 12.6, where the authors say:

"The law can deem anything to be the case, however unreal.  The law brings itself into disrepute, however, if it dignifies with legal significance a wholly artificial hypothesis."

Accordingly, the appeal failed.

Discussion and decision

35.      Both parties relied on this case.  Counsel for the Plaintiff accepted in the course of argument that had there been no restoration of the Company to the Register then the contract would have come to an end on 16 June 2023 when the Plaintiff was struck off.  However, he observed, rightly on the evidence, that the Plaintiff had continued to comply with contractual provisions, albeit whilst dissolved and accordingly via Mr Wickings.  The Lounge continued to operate as before and the rent was paid.  Counsel for the Plaintiff also agreed that he would have been in difficulty in advancing the arguments which he did if the Licence Agreement allowed the Defendant to terminate on the grounds of dissolution - but it does not.  He correctly observed that there was no mention of dissolution in the Licence Agreement.

36.      He argued, and the Court agrees, that the services provided on behalf of the Plaintiff continued.  The termination provisions had focus on service provision, insolvency and particular emergencies. 

37.      The Court agrees with the decision in Bridgehouse.  The effect of an Article 213 order avoids the automatic consequences of dissolution. 

38.      But dissolution itself did not empower the Defendant to terminate the Licence Agreement under Clause 9.4 or at all.  Had it done so, then the Court's decision may well have been different in that the Licence Agreement may have been bought to an end, and in those circumstances the termination of the Licence Agreement would not have been affected by the dissolution being declared void on 18 August 2023. 

39.      Accordingly, the preliminary issue is answered as follows: the Agreement between the parties which formed the subject matter of the dispute was terminated by operation of law, but not by Clause 9.4 of the Agreement, on the dissolution of the Plaintiff.  The Plaintiff's restoration to the Register had the effect that the Plaintiff, on the facts of this case, continued its existence as if it had never been dissolved and, as the Licence Agreement between the parties could not be terminated on the grounds of dissolution, it was not terminated and remains in effect.  Accordingly, we grant the first and second declarations sought in the Order of Justice and declare

(i)        that the Licence Agreement has not been lawfully terminated by the Defendant and remains extant, and

(ii)       that the occupation of the Executive Lounge is pursuant to the terms of the Licence Agreement and not any other arrangement.

40.      The Court will hear, if necessary, argument on costs, but the Court's provisional view is that in light of the circumstances in which this matter arose and the fact that the Plaintiff should have informed the Court on oath of the Defendant's interest in the application to reinstate the Plaintiff in circumstances where it was possible, indeed likely, that the Court would have convened the Defendant, the Court's provisional view is that there should be no order as to costs.

Authorities

Companies (Jersey) Law 1991. 

Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020. 

JSC Commercial Privat Bank v St John Limited [2021] JRC 189. 

Bridgehouse (Bradford No. 2) v A E Systems Plc [2019] EWHC 1768 (Comm)