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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> The Florida Foundation v Jeanne [2019] JRC 252 (20 December 2019) URL: http://www.bailii.org/je/cases/UR/2019/2019_252.html Cite as: [2019] JRC 252 |
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Before : |
T. J. Le Cocq, Esq., Bailiff, and Jurats Olsen and Averty |
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Between |
The Florida Foundation |
Plaintiff |
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And |
Roy Anthony Jeanne |
First Defendant |
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And |
Joan Clare Jeanne (née Benest) |
Second Defendant |
Advocate A. D. Hoy for the Plaintiff.
Advocate O. A. Blakely for the Defendants
judgment
the bailiff:
1. This is an application by the Florida Foundation ("the Plaintiff") for relief ancillary to its judgment against Roy Anthony Jeanne ("the First Defendant") and Joan Clare Jeanne, née Benest ("the Second Defendant") (collectively "the Defendants") of the 26th April 2019.
2. The background can be simply stated. On the 16th March, 2018, the Defendants entered into a loan agreement with the Plaintiff in the sum of £200,000 on certain terms and conditions. The sum was to be re-paid on the 17th March, 2021. The sum has been secured on the Defendants' home by means of a hypothèque judiciaire. Both the Plaintiff and the Defendants were legally represented during the negotiation of the loan.
3. It is not disputed that interest payable on the sum was at the rate of 7% per annum and that the Defendants have paid that monthly when due and continue to do so.
4. On the 18th October, 2018, the Attorney General obtained a Saisie Judiciaire against the First Defendant the effect of which, inter alia, was to vest the Defendants' house in the Viscount. The Saisie Judiciaire is continuing.
5. On the 16th April, 2019, the Plaintiff issued a summons claiming breach of the loan agreement between it and the Defendants. On the 26th April the Court gave judgment in favour of the Plaintiff in the sum of £200,000 against the Defendants jointly and severally. The judgment was given during the course of the Court's usual business on a Friday afternoon. The Defendants were represented by counsel and did not resist judgment. The Court adjourned the matter of costs and interest to a date to be fixed. It is the issue of costs and interest that is before us now.
6. The Plaintiff's summons by virtue of which it claimed the £200,000 was brought on the basis of the following clauses in the Acknowledgement and Bond ("the Bond") between it and the Defendants.
(i) Clause 2(i) of the Bond provides that:-
".... in the event of any default by the borrowers under the terms of this Bond the rate of interest stipulated at this clause shall increase forthwith from 7% per annum to 12% per annum, without prejudice to the rights of the lender under clause 2(10) hereof."
(ii) Clause 2(ii) of the Bond provides, amongst other things, that the borrowers shall:-
".... pay all fees and expenses incurred by the lender in connection with the recovery of any amount due under this Bond whether capital, interest, or otherwise."
(iii) Clause 2(ix) of the Bond provides:-
"If at any time the Borrowers shall fail to pay any sum or sums due by the Borrowers hereunder by way of capital or interest or otherwise on the date due for payment thereof or if the Borrowers shall break or fail to comply with any of the clauses, conditions or obligations on the part of the Borrowers herein or hereafter contained or should either of the Borrowers be declared en désastre, commit any other act indicative of insolvency or inability to conduct and manage their respective affairs, permit any judgment to be taken or have any judgment taken against either of them in any court, compound with creditors or suffer their respective goods to be taken in execution, or should either of the Borrowers die then and in any such event notwithstanding anything herein contained or stipulated it shall be lawful for the Lender to demand the immediate repayment of the Capital Sum or any balance thereof then outstanding together with all other sums due under this Bond and the interest thereon from the date of the said demand until the date of total repayment of all sums due to the Lender at the rate of interest payable on the Capital Sum from time to time under the provisions of Clause 2(i) above."
(iv) Clause 1 of the Bond provides that the Defendants may:-
"... repay the capital sum prior to the expiration of 36 months from the date of this Bond subject to the payment of an additional 3 months interest at the rate stipulated in Clause 2(i) hereof at the time of repayment."
7. In the Plaintiff's summons, in addition to the capital sum of £200,000, (therein referred to as item a)), the Plaintiff seeks the following relief:-
"Item b) interest on item a) above at the contractual rate of 12% per annum from 10 October 2018 to date of complete re-payment (the balance of which owing at the date of this Summons is £4,999.98 plus interest on such balance at 12% per annum) as per Schedule One hereto;
Item c) the sum of £6,000.00 in respect of 3 months' additional interest pursuant to Clause 1 of the Bond;
Item d) interest on Item c) above at the contractual rate of 12% per annum from the date of Judgment to the date of complete repayment pursuant to Clause 2(ix) of the Bond;
Item e) the Plaintiff's administrative costs arising in connection with the enforcement of the Bond in the sum of £2,001.00 pursuant to Clauses 2(ii) and (ix) of the Bond;
Item f) interest on Item e) above at the contractual rate of 12% per annum from the date of invoice (31 March 2019) to the date of complete repayment pursuant to Clause 2(ix) of the Bond;
Item g) the costs of and incidental to this present action on a Fixed Cost, Standard Cost or on an Indemnity Cost basis as the Court deems just; and
Item h) interest on Item g) above at the contractual rate of 12% per annum from the date of Judgment to the date of complete repayment pursuant to Clause 2(ix) of the Bond."
8. The Defendants claim that the Court should not give the relief claimed by the Plaintiff set out above or, at least, reduce the interest claimed.
9. Both parties rely on the principles set out in Doorstop Limited v Gillman and another [2012] JRC 199. We refer to the relevant extracts below.
10. On the matter of the maxim "la convention fait la loi des parties" and interest, the Court said:-
11. On the question of the periods in respect of which interest might be paid, the Court said:-
12. And on the matter of whether or not damages claimed might be excessive:-
13. Further, on the matter of compound interest, the Court at paragraph 75 referred to the case of Sempra Metals Limited (formerly Metallgesellschaft Limited) v Inland Revenue Commissioners and Another [2008] 1 AC 561 and then, after quoting from that judgment, at paragraph 79, concluded:-
14. Hard Rock Limited and another v HRCKY Limited [2013] JRC 244B was cited to us by the Plaintiff as illustration of the fact that the Court, in that case the Master, had awarded 12% interest and accordingly, so it was submitted, the Court could take that to be a reasonable rate in the circumstances.
15. There were also submissions made before us relating to cancellation of a Jersey contract and whilst we do not in this judgment explore that question at length we note that in the case of Grove and Briscoe v Baker [2005] JLR 348 at para 14, the Court said:-
16. The Plaintiff's argument can be expressed in quite simple terms. The Plaintiff relies on the "extremely strong principle" so described in Doorstop of "la convention fait la loi des parties".
17. Furthermore, so the Plaintiff argues, in Doorstop the Court acknowledged that an agreement between a creditor and a debtor could provide for compound interest which the Court would assess having regard to, as set out in Doorstop at paragraph 47 of that judgment (see para 10 above).
18. As already mentioned above, both the Plaintiff and the Defendants were legally represented at the time they entered into the Bond. It might be said that they were commercially sophisticated and there is no reason to suppose that their bargaining positions were other than even. Accordingly, so the Plaintiff argues, there is nothing in principle wrong with the Plaintiff's claim for compound interest and the Plaintiff relies on Sempra Metals Limited also referred to in Doorstop above.
19. Furthermore. under Item (c) of the summons set out in paragraph 7 above, the Plaintiff submits that such a sum is due under Clause 1 of the Bond which expressly applies, so it is argued, to a scenario where the capital sum is due and owing due to an event of default.
20. The Plaintiff also relies on the quote from Her Majesty's Viscount v Treanor cited in Doorstop above. It is argued that clauses such as Clause 1 of the Bond are not uncommon in loan agreements and it is further argued that early repayment has in effect denied the Plaintiff the benefit of its bargain.
21. In its skeleton argument, the Plaintiff says that if the Court does not see fit to grant the claim for three months' interest at the rate of 12% per annum which is claimed, the Court is invited to grant such a claim in the original contract rate of 7% per annum.
22. In essence the Plaintiff acknowledges that the Court has a discretion with regard to interest, but submits that 12% is not unreasonable. The Plaintiff argues that of the periods that might be considered, the date of default to the date of the judgment should quite clearly be 12% although the period running from the date of judgment to payment, whilst it should be at 12%, falls more within the discretion of the Court.
23. The main theme of the Defendants' argument is that the contract has become "frustrated" through no fault of the Defendants. The saisie judiciaire obtained by the Attorney General rendered the repayment of the loan impossible. Further, so the Defendants argue, the sums claimed by the Plaintiff by way of interest are subject to the Court's exercise of discretion and the Court should treat that claim as excessive and not allow it. The costs claim is an attempt by the Plaintiff to "trump" this Court's jurisdiction and discretion on the matter of costs.
24. The Defendants argue that authority in Jersey is sparse on the subject of frustration but cited the Hotel de France (Jersey) Ltd v The Chartered Institute of Bankers 21st December 1995 Jersey Judgments at page 256 which was a case involving a fire at the Hotel de France which was described by the Court as a "cas fortuit" which created a position where it was not possible to perform the contract in a particular room at the Hotel. The case, to the extent to which it explored the legal position, cites a text book, the French Law of Contract by Mr Barry Nicholas and Lawrence v Lawrence Colour Laboratories Limited (1968) JJ 1045 which appeared to us to touch upon the need to apply to the Court to cancel a contract in such circumstances. The suggestion that such a step was necessary, which was contained in an obiter comment by the Court, proved to be controversial and was clarified in subsequent jurisprudence. It is not, however, of assistance in connection with the question of frustration. The Defendant also cited the case of Mobil Sales and Supply Corporation v Trans Oil (Jersey) Limited [1981] JJ 143, which although of interest, does not appear to us to assist the Defendants in their arguments on the matter of frustration.
25. It appears that the Plaintiff in this case took judgment on the basis of Clause 2(ix) of the Bond set out above on the basis that by permitting the saisie judiciaire to be imposed upon them the Defendants had permitted a judgment to be taken which entitled the Plaintiff to apply for immediate repayment of the loan.
26. The Defendants appear to be arguing that the saisie judiciaire has frustrated the contract and made it impossible to perform. We find it curious, therefore, that the Defendants acceded to judgment for the capital sum on the basis apparently advanced by the Plaintiff because, following the logic of the Defendants' argument, if the position of the saisie judiciaire made the contract impossible to perform, there may not have been a basis for the Plaintiff to seek judgment as it did.
27. This point has not been argued before us, however, and we proceed on the basis that the Defendants acknowledge that the sum is due and payable at the point that the judgment was pronounced.
28. We also, in those circumstances, proceed on the basis that the Defendants accept that the imposition of a saisie judiciaire infringed Clause 2(ix) and entitled the Plaintiff to take judgment.
29. We can see that it may indeed be the case that the imposition of a saisie judiciaire, although it is more akin to an interim freezing order in a civil case rather than a judgment on the merits giving rise to a liability, might on a proper analysis be a judgment that falls within Clause 2(ix). We can see, also, that an argument might be advanced that of its nature it is not such a judgment and therefore the provisions of Clause 2(ix) were not engaged. It may be that there is no material distinction between a judgment taken in a civil claim caused as a result of mismanagement by Defendants of their financial affairs or an application made in a criminal case as a result of the actions or defaults on the part of one of the Defendants. We do not, however, express any settled view on that argument and have not been addressed on it.
30. It is urged on us by the Defendants that the saisie judiciaire should be considered as an event outside of the Defendants' control and that it has rendered impossible the completion of one part of the contract although the Defendants continue to pay interest at the contractual rate and, but for the judgment taken, the contract could continue to its term if nothing else occurred in the meanwhile.
31. In submissions before us the Defendants, through counsel, suggested that the imposition of a saisie judiciaire could not be construed as an act of default for the purposes of enforcement but, as we have indicated above, judgment was taken and there has been no application to set that judgment aside.
32. In support of their argument, the Defendants cite a further excerpt from the French Law of Contract by Mr Barry Nicholls (2nd edition) which is in the following terms:-
33. The Defendants argued that they are still capable of paying the contractual rate of interest and have continued to do so. At the end of the contractual term the Plaintiff will have the right to repayment of the money and accordingly the Plaintiff will get what the Plaintiff has bargained for.
34. The Defendants allege, in effect, that the Plaintiff is merely seeking an enhanced profit by means of penalty interest and is behaving in effect in an unconscionable way by taking advantage of the Defendants' misfortune where the Plaintiffs' interests have not been adversely affected. We are asked to declare that the performance of certain parts of the contract frustrated, although others continue, and as necessary to exercise our discretion to prevent an unduly heavy claim by way of interest being levied against the Defendants.
35. This is, to the Court's mind, an unusual case. The Defendants have been subject to a saisie judiciaire. This is a provisional order akin to a Mareva or freezing injunction and does not until ultimate confirmation do other than preserve assets in the hands of the Viscount against an eventual confiscation order if that is made.
36. As indicated above, we express no view as to whether it would, on that basis, have been open to the Defendants to resist judgment. They have not done so and have accepted judgment in the capital sum. It seems to the Court therefore, in those circumstances, that the provision of interest in accordance with the terms of the contract, freely entered into, should apply save where the Court should intervene because the claim does not accord with restitutionary principles and in the circumstances are excessive.
37. Leaving aside whether the actions of the First Defendant have brought these proceedings on himself in determining what the appropriate interest is, we bear in mind that in this case the saisie judiciaire is, as we have said, a provisional order and in reality it does not to us appear likely that the Plaintiff is going to be out of pocket. The Plaintiff will be entitled to claim repayment of its money out of the assets subject to the saisie judiciaire and the Defendants are continuing to make payment in accordance with the terms of the bond, specifically payment of interest at 7%. It seems likely that the Plaintiff will receive what it has bargained for.
38. Although not directed to it by counsel, we note that pursuant to Article 16(5) of the Proceeds of Crime (Jersey) Law 1999 the Plaintiff's rights in a matter such as this are protected. Article 16(5) states:-
39. We have considered whether or not it is appropriate to disallow payment at 12% between the date of default and the date of judgment but, the Defendants having accepted judgment it seems to us the Defendants must thereby have accepted that the debt falls due and payable by reason of the fact of the saisie judiciaire. In our judgment, therefore, the contractual terms apply, there is nothing inherently or intrinsically unacceptable in an interest rate of 12% in the current circumstances and this was the rate in the event of a default to which the Defendants specifically contractually agreed.
40. Applying the principles set out above, interest should be paid at the contractual rate of 12% per annum to the date of judgment. Thereafter, in the circumstances of the case, the Court does not agree that it is appropriate to apply that interest rate. This is a matter that falls within the Court's discretion and the Court does not think it appropriate to award interest of more than 7% per annum until the date of repayment. It does not seem to us to be equitable to award higher interest when the Defendants have continued to meet their interest repayment obligations in the unusual circumstances of this case.
41. Moreover, the Court does not agree that it is appropriate to award a three month penalty, in effect in the sum of £6000, and does not make that order.
42. The amount of £2001 claimed purportedly pursuant to clauses 2(ii) and (ix) of the bond is also not allowed. The Court has seen no evidence to suggest that this amount is properly quantified or payable and does not make an order in those terms. Nor, consequently, is an order made in the terms of (f) which is interest on that sum.
43. In summary, therefore, the Court's findings and orders with regard to the elements of the Plaintiff's claim set out in paragraph 7 above, are as follows:-
(i) Item b - The Plaintiff should receive interest at the contractual rate of 12% per annum from the date of the acknowledged act of default until the date of judgment but thereafter interest to be paid at 7%, the normal non-default contractual rate, until the date of repayment;
(ii) Item c - The sum claimed in respect of additional interest is disallowed;
(iii) Item d - Interest on that sum is accordingly inapplicable and is disallowed;
(iv) Item e - The Plaintiffs' claim for administrative cost is disallowed;
(v) Item f - Accordingly the claim for interest on that sum is disallowed;
(vi) Item g - Costs will be dealt with briefly hereunder;
(vii) Item h - Interest on costs will be dealt with hereunder
44. On the question of costs it seems to us that the Plaintiff should be entitled to its costs on first principles until the date of judgment for repayment of the capital sum. Thereafter, and the larger part of the argument, has been concerned with what the Plaintiff is entitled to claim by way on ancillary relief and what it is not. The decision of the Court has not gone all one way and to a significant extent, whilst not prevailing on substantial parts of their arguments, the Defendants have been successful. In our judgment the correct order is that each party bears their own costs of dealing with the arguments concerning matters ancillary to the judgment. We do not award interest on costs.
