The Application of Rosedale (J.W.) Investments Ltd

CourtRoyal Court
JudgeHamon, Deputy Bailiff and Jurats Myles and Herbert:
Judgment Date30 March 1995
Date30 March 1995
Hamon, Deputy Bailiff and Jurats Myles and Herbert:

R.J. Michel for the applicant;

M.M.G. Voisin for the respondent and his companies.

Cases cited:

(1) Barker, In re, Royal Ct., September 16th, 1984, unreported, doubted.

(2) Bowen, In re, ex p. The Debtor, [1924] B. & C.R. 32.

(3) Debtor, In re a (No. 17 of 1966), [1967] Ch. 590; [1967] 1 All E.R. 668; (1967), 111 Sol. Jo. 130, considered.

(4) Dyson v. Godfray (1884), 9 App. Cas. 726 ([1884] UKPC 26); 51 L.T. 580; 53 L.J.P.C. 94.

(5) European Life Assur. Socy., In re (1869), L.R. 9 Eq. 122, considered.

(6) Heyl, In re, ex p. D.P. Morgan Ltd., [1918] 1 K.B. 452; [1918-19] All E.R. Rep. 788; [1918-19] B. & C.R. 23; (1918), 118 L.T. 546; 87 L.J.K.B. 603.

(7) Overseas Ins. Brokers Ltd., Re, 1966 J.J. 547, considered.

(8) Solicitor, Re a (1987), 131 Sol. Jo. 1063, dicta of Hoffmann, J. considered.

Additional cases cited by counsel:

Cornhill Ins. PLC v. Improvement Servs. Ltd., [1986] 1 W.L.R. 114.

Debtor, In re a, ex p. Petitioning Creditor (1920), 89 L.J.K.B. 432.

Legislation construed:

Bankruptcy (Dsastre) (Jersey) Law 1990, art. 1(1): The relevant terms of this paragraph are set out at page 131, lines 15-16.

art. 3(1)(a): The relevant terms of this sub-paragraph are set out at page 131, lines 12-14.

art. 6: The relevant terms of this article are set out at page 134, lines 12-17.

art. 28: The relevant terms of this article are set out at page 132, lines 6-7.

art. 36: The relevant terms of this article are set out at page 132, lines 8-10.

Interpretation (Jersey) Law 1954, art. 2: The relevant terms of this article are set out at page 131, line 40 - page 132, line 3.

art. 13: "In every enactment, whether passed before or after the commencement of this Law, references to a person becoming bankrupt shall, unless the contrary intention appears, be construed as references to either

(a) the grant by the Royal Court of an application made by that person to place his property under the control of the Court . . . ; or

(b) the declaring of the property of that person to be 'en dsastre'; or

(c) the grant by the Royal Court of an application made by that person to make a general cession of his property . . . ; or

(d) a decision of the Royal Court adjudging the property of that person to be renounced . . . ; or

(e) the grant by the Royal Court of an application made by that person to make a composition with his creditors . . . ; or

(f) in the case of a company, the dissolution or winding-up of the company either compulsorily or voluntarily . . . or the appointment of a receiver or manager of the company's business or undertaking;

and references to bankruptcy shall be construed accordingly."

Texts cited:

Le Gros, Droit Coutumier de Jersey, at 75 (1943).

Pothier, Trait des Obligations, para. 628, at 341 (1861 ed.).

Civil Procedurehearingin camera proceedingswhether to order hearing in camera in discretion of courttest is whether excluding public is only way to do justice

Bankruptcydsastreproof of insolvencydebtor "insolvent" within Bankruptcy (Dsastre) (Jersey) Law 1990, art. 1(1) if unable to pay debts as fall duesufficient that single creditor and single debt since by Interpretation (Jersey) Law 1954, art. 2, reference to plural includes singular

Bankruptcydsastreproof of insolvency"insolvency" and "bankruptcy" not synonymousformer defined by art. 1(1) of 1990 Law; latter defined by Interpretation (Jersey) Law 1954, art. 13

Bankruptcydsastreproof of insolvencydebtor insolvent even though assets exceed liabilities if unable to pay debts as fall duetest is of "cash flow," not "balance sheet"

Bankruptcydsastreadjournment of hearingno adjournment of hearing if no doubt that debtor technically insolvent or that applicant entitled to dclaration

The applicant sought an order that the property of the respondent and of several companies owned by him be declared en dsastre.

The respondent wished to buy certain companies from the applicant but lacked the money to do so. The parties entered into an agreement by which the applicant retained a 10% stake in the companies and made a loan to the respondent to allow him to buy the remaining 90% share. While it sought no additional security, the applicant obtained guarantees from the respondent and each of the companies and registered them as charges. Under the agreement, the respondent was obliged to pay interest on the capital sum in quarterly instalments. It also stipulated that the entire capital sum would become due in a number of eventualities including, inter alia, the respondent's becoming bankrupt within the meaning of art. 13 of the Interpretation (Jersey) Law 1954 or his defaulting on the interest payments.

The respondent subsequently defaulted on an interest payment and it appeared likely that he would default on a second, as a result of allegedly temporary financial difficulties, although it did not appear that the companies themselves had any financial problems; indeed, the respondent provided evidence that they were operating as successful businesses of considerable value.

The applicant made the present application for a dclaration en dsastre in respect of the respondent and the companies in accordance with the provisions of r.2(3)(a) of the Bankruptcy (Dsastre) (Jersey) Rules 1991. It submitted that it was entitled to the order sought because, although it was the respondent's sole creditor and he owed only a single debt (now the entire capital sum), he was nevertheless "insolvent" within art. 1(1) of the Bankruptcy (Dsastre) (Jersey) Law 1990, being unable to "pay his debts as they [fell] due"; and by art. 2 of the Interpretation (Jersey) Law 1954, references to the plural included the singular (i.e., a single debt was sufficient).

The respondent submitted in reply that the application was misconceived in that the applicant should instead have sued him for the debt and sought execution of the judgment rather than adopt the present procedure, which would do unnecessary and irreparable harm to the undoubted trading ability of the companies. Furthermore, in the light of the fact that their assets were considerably greater than their liabilities and the fact that he had defaulted on only a single payment due to temporary financial difficulty, neither he nor the companies could be said to be "insolvent" or "bankrupt" (which terms were synonymous) within any of the meanings ascribed by art. 13 of the Interpretation (Jersey) Law 1954. Nor could it be said that he was unable to "pay his debts" (plural) within art. 1(1) of the 1990 Law and in any case, the purpose of that Law was to prioritize the debts of multiple creditors whereas here there was only one. Accordingly he submitted that the application should not be granted.

It appeared that the parties had agreed that the hearing of the case be held in camera and the court considered the propriety of adopting such a procedure. In addition, the court considered whether there was any justification for its exercising its discretion under art. 6(2) of the 1990 Law to adjourn the present hearing for it to receive further information (allowing the possibility that the debt might be paid in the meantime), in view of the information already before the court.

Held, granting the application:

(1) The...

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