Jersey Unreported Judgments

[2011]JRC102

royal court

(Samedi Division)

19^th May 2011

Before     :

W. J. Bailhache, Q. C., Deputy Bailiff, and Jurats Clapham and Kerley.

 

IN THE MATTER OF THE BANKRUPTCY (DÉSASTRE)(JERSEY) LAW 1990

AND IN THE MATTER OF THE REPRESENTATION OF JERSEY HOME LOANS LIMITED

AND IN THE MATTER OF AN APPLICATION FOR A REMISE DES BIENS BY FRANCIS JOHN VENTON, SUSAN ANN VENTON, NEÉ LE CUIROT AND THE OLD STATION HOUSE LIMITED.

Advocate A. P. Begg for Mr and Mrs Venton and the Old Station House Limited.

Advocate M. H. Taylor for Jersey Home Loans Limited.

Advocate I. C. Jones for Mr and Mrs Le Lay.

Advocate J. M. Lawrence for Mr and Mrs Hervé.

judgment

the deputy bailiff:

1.        On Friday 11^th March, Jersey Home Loans Limited applied to declare Francis John Venton and Susan Ann Venton (Mr and Mrs Venton) and the Old Station House Limited ("the company") en désastre.  The application was resisted and Mr and Mrs Venton indicated that they wished to apply for a remise des biens.  The matter was therefore adjourned until 18^th March.  After brief argument on that day when the application for a remise des biens was presented, the matter was further adjourned until 21^st March, when the Court, differently constituted, appointed Jurats Tibbo and Fisher to examine the application for a remise and report back in accordance with the provisions of Article 2 of the Loi (1832) Sur la Remise des Biens. 

2.        The Jurats duly did report back.  It was perfectly apparent from their report that a very considerable amount of work had been done by them in the intervening ten days in seeking to establish and verify values in relation to the real property of Mr and Mrs Venton, whether held directly or through a company, and especially so in relation to land in Alderney. 

3.        The application for a remise was then argued before us on 4^th April.  After hearing the argument that day the Court announced its decision that the application for a remise des biens was not granted and indicated that reasons would follow.  We now give our reasons for the decision.  

4.        The principles which the Court should take into account on an application for a remise des biens received considerable attention in the Representation of Mickhael [2010] JRC 166A, where at paragraph 3 the Court set out some of the relevant factors which ought to be taken into account when considering the exercise of its discretion as to whether or not to grant a remise.  We note that these principles were endorsed by this Court, differently constituted, in Re Gibbins [2011] JRC 033.  What should be added however is that both the previous cases concerned an application for a remise des biens where the alternative was that of dégrèvement.  In those cases, a remise des biens could mitigate the rigours of the process of dégrèvement and provide either a return for unsecured creditors, or indeed a return of some equity to the debtor.  It is not obvious that the same concern arises where the choices are between a remise des biens and a declaration of désastre, because in the latter case, any equity left over after the Viscount has realised the assets and repaid the secured creditors will be available for unsecured creditors and, if sufficient, the debtor after payment of fees and expenses.  So although the same principles as set out in Re Mickhael need to be considered on any application for a remise, there is as a matter of discretion the additional factor that where the alternative is a declaration of désastre, the Court may be less inclined to grant the remise and will only be likely to do so on the production of some good and sound reason. 

5.        The assets of Mr and Mrs Venton and the company really fell directly or indirectly into these categories:-

(i)        Immovable property of Mr and Mrs Venton at Mont a la Brune, St Brelade.  This was relatively easy to value particularly as an offer of £1.2 million has been made for the property and accepted by the debtors. 

(ii)       The immovable property of the company namely Old Station House, La Rue de la Corbiere.  Obtaining a valuation on this property has not proved to be quite so easy and indeed over the last couple of years a wide range of valuations has been obtained.  An offer was in fact received in the sum of £1.6 million and the Jurats took this figure as being an appropriate valuation. 

(iii)      Jersey movable property of Mr and Mrs Venton was thought to amount to approximately £73,000.  No formal valuations have been obtained, but the amount is inconsequential in the context of the overall liabilities. 

(iv)      There is the possibility of obtaining a repayment as part of a compensation order following an investigation in the United Kingdom carried out by the Serious Fraud Office.  The monies which might be obtained would amount to £70,000, but no compensation order is likely to be concluded for some time. 

(v)       Finally, Mr and Mrs Venton are the beneficial owners of the company called Blue Horizon Limited ("Blue Horizon") an Alderney registered company which owns the Grand Hotel site in Alderney.  In order to assess the value of the shareholding, the critical factor is to make an assessment as to the value of the underlying real estate.  The land does carry the benefit of a development permission, although there are a number of conditions attached to that permission which might be regarded as onerous.  The development of this land in Alderney is of such a scale that it has been difficult to look for precedents.  Although some valuations have come out at £3 million, others have come out as low as £500,000. 

The value of the Alderney land is not the only uncertainty which remained in relation to this application.  There was also uncertainty as to the extent of the secured and unsecured creditors in relation to the Alderney project.  The Jurats report shows that the net asset position in relation to the Alderney land varied between £80,000 and approximately £670,000, depending upon how the various uncertainties might be resolved. 

6.      The relevance of the net position arising from a realisation of the Alderney assets is that a substantial sum needs to be realised from that estate if there is to be a sufficient balance to pay off in full the sums due to Jersey creditors who have charges against the Jersey real estate.  The total secured against the Jersey real estate is £3,072,781.73.  The value of the Jersey real estate, net, is £2,744,000.  In three of the four scenarios which the Jurats envisaged on the realisation of the Alderney property, the amount which would be available from that realisation would either be insufficient or very close to the amount which was required to repay the secured Jersey creditors.  Only in one of the Alderney scenarios would there be any form of net position obtained for the unsecured creditors. 

7.      These considerations are particularly relevant given the principle that the greater the degree of uncertainty the more likely it would be that a Court considering an application for a remise des biens would simply let the secured creditors do their worst.  Advocate Taylor firmly relied on this ground as one of the major planks for resisting the grant of the remise.  He also relied on the fact that the rationale for the grant of the remise is that it is an indulgence to assist the debtor where the alternative is dégrèvement, and no such assistance or indulgence is necessary where the alternative is a declaration of désastre. 

8.      Advocate Taylor's opposition was supported both by Advocate Jones and Advocate Lawrence on behalf of secured and unsecured creditors. 

9.        Having considered the very helpful report of the Jurats, and all the submissions made by counsel, this Court was not persuaded that it was necessary or appropriate to grant a remise des biens in this case.  We consider that we have jurisdiction to grant the remise because, at least on one analysis, there may be a surplus available for distribution amongst the ordinary creditors.  However, there did not seem to us to be any clear or significant equity in the debtors' property which would accrue to one of the creditors unfairly and be lost to the debtor if the remise were not to be granted; and particularly we are of the view that there may well be only a marginal equity and there would in any event be a potentially very complex process for the sale or other realisation of the assets.  The lack of certainty is such that it is highly doubtful that a remise would be appropriate. 

10.      Nor is the Court persuaded that the refusal to grant a remise will result in any hardship for the debtors.  The real significance of the Alderney project is that, if there had been sufficient cash flow to take the project to completion, there might have been the probability of a real return for Mr and Mrs Venton.  The absence of such cash flow means that some form of immediate bankruptcy process is inevitable.  On that basis the person realising the land will have to obtain the best value that can be obtained at the present stage, and certainly the administrator of the bankruptcy, whether it be the Jurats or the Viscount, would not be in a position to carry out a speculative development.  This militates very much in favour of refusing the application for a remise. 

11.      For all these reasons therefore the Court has reached the conclusion that the application for a remise was denied, and subsequently the Court therefore made an order declaring Mr and Mrs Venton and the company en désastre. 

Authorities

Loi (1832) Sur la Remise des Biens.

Representation of Mickhael [2010] JRC 166A.

Re Gibbins [2011] JRC 033.