The Désastre of Blue Horizon Holidays Ltd

CourtCourt of Appeal
JudgeCollins, Nutting and Sumption, JJ.A.:
Judgment Date11 April 1997
Date11 April 1997
Collins, Nutting and Sumption, JJ.A.:

The appellant appeared by Mr. D. Eves, a director.

The Viscount appeared in person.

D.F. Le Quesne as amicus curiae.

Cases cited:

(1) Baltic Partners Ltd., In re, 1996 JLR N-1, followed.

(2) McMahon v. Att. Gen., 1993 JLR 108.

Additional cases cited by counsel:

Rumasa S.A. v. W. & H. Trademarks (Jersey) Ltd., 1985-86 JLR 308.

Zuliani v. Veira, [1994] 1 W.L.R. 1149.

Legislation construed:

Bankruptcy (Dsastre) (Jersey) Law 1990, art. 1: The relevant terms of this article are set out at page 129, lines 21-24.

art. 6(3): The relevant terms of this paragraph are set out at page 129, lines 35-42.

art. 7: The relevant terms of this article are set out at page 129, line 44 - page 130, line 24.

Court of Appeal (Jersey) Law 1961, art. 12: The relevant terms of this article are set out at page 128, lines 19-40.

Text cited:

Matthews & Nicolle, Jersey Law of Property, para. 7.52, at 78 (1991).

Bankruptcydsastreappeal to Court of Appealappeal from dclaration en dsastre of Royal Court to Court of Appeal possible despite absence of specific appeal provisions in Bankruptcy (Dsastre) (Jersey) Law 1990 and existence of alternative remedies in arts. 6(3) and 7, since appeal presumed possible in absence of statutory exclusion

Bankruptcydsastredclaration en dsastreproperly sought ex parte and without notice to debtoraccompanying affidavit to make full disclosure of relevant circumstancescourt has power to rehear merits inter partes, using "cash-flow" test, not "balance-sheet" test applicable on application to recall dsastre under Bankruptcy (Dsastre) (Jersey) Law 1990, art. 7

The respondent obtained from the Royal Court a dclaration en dsastre in respect of the appellant company.

The appellant company was unable to pay its debts as they fell due and the respondent, a creditor, having failed to obtain payment for a considerable period of time, without giving notice to the appellant, obtained ex parte from the Inferior Number of the Royal Court a declaration that the appellant be placed en dsastre. The appellant subsequently applied unsuccessfully to the Royal Court to raise the dsastre on a number of occasions; these attempts were opposed by the respondent and the Viscount.

The appellant appealed to the Court of Appeal on the ground, inter alia, that the dsastre had been obtained wrongfully. It then applied for a stay of the dsastre pending the outcome of the appeal and the Royal Court (Hamon, Commr. and Jurats Orchard and Herbert) held that there was a right of appeal against a declaration of dsastre by the Inferior Number to the Court of Appeal, even though the Bankruptcy (Dsastre) (Jersey) Law 1990 made no provision for appeals. The court held that such appeals were provided by art. 12(2) of the Court of Appeal (Jersey) Law 1961, assuming that the reference in that paragraph to appeals from the Superior Number must have been a drafting error and that it should have stated that the Court of Appeal had jurisdiction to hear appeals from the Inferior Number in any civil cause or matter. However, it went on to refuse a stay on the ground that it would effectively allow the appellant to resume trading in circumstances in which it was not appropriate that the dsastre be lifted (in proceedings reported at 1994 JLR 173).

On appeal against the dsastre and the refusals to lift it, the appellant submitted, inter alia, that (a) the Royal Court should not have made the declaration on an ex parte application and without notice having been given of the respondent's intention to seek a dsastre, since to do so was contrary to the requirements of natural justice and prevented his having the opportunity to oppose the making of the declaration; and (b) taking into account all the evidence, not all of which had been put before the Royal Court, the declaration should not have been made because it was obtained for improper purposes and in circumstances in which there remained unexplored possibilities for the repayment of the debts.

The court also considered (a) the responsibilities of an applicant and of the court on an ex parte application for a dclaration en dsastre; (b) whether there was indeed a drafting error in art. 12(2) of the 1961 Law; and (c) whether there was a general right of appeal from declarations made by the Inferior Number of the Royal Court to the Court of Appeal, in view of (i) the lack of appeal provisions in the Bankruptcy (Dsastre) (Jersey) Law 1990; and (ii) the alternative remedies provided to a debtor by that Law, namely, the right given by art. 6(3) to sue a creditor for damages if at the time of its seeking the declaration the debtor was not in fact insolvent (i.e., if he could in fact pay his debts as they fell due, the "cash-flow" test); and the right given by art. 7 to seek a recall of the dsastre on the ground that the declaration should not have been made (which required that the debtor satisfy the court that his assets exceeded his liabilities, the "balance-sheet" test); the amicus curiae submitted that the existence of these remedies precluded the possibility of a general right of appeal.

Held, dismissing the appeal:

(1) The Royal Court had been wrong to assume that there had been a drafting error in the 1961 Law and that art. 12(2) accordingly provided an explicit right of appeal from a decision of the Inferior Number, not the Superior Number, in any civil cause or matter; indeed, there was no basis for that opinion. The Court of Appeal nevertheless had jurisdiction to hear the present appeal and it could not be said that either the lack of a statutory right of appeal in the 1990 Law or the existence of other remedies open to a debtor (namely, the right to bring an action for damages under art. 6(3) and to make an application for the recall of the dsastre under art. 7) precluded the existence of a general right of appeal in cases such as the present; rather, the court should presume the existence of such a right unless there were a clear statutory exclusion of it, which there was not. Moreover, this approach was consonant with the intention behind the 1961 Law, which was to create in the Court of Appeal an appellate tribunal exercising the jurisdiction formerly vested in the Superior Number, including for the present purposes the power to hear appeals from declarations of dsastre made by the Inferior Number (page 128, line 41 - page 130, line 24; page 130, line 32 - page 132, line 20).

(2) There was no reason to criticize the fact that the appellant had been given no notice of the respondent's intention to seek a dsastre, or that the application had been made ex parte; on the contrary, that method of proceeding was normal and in conformity with the rules. Indeed, it was clearly important that ex parte applications be possible, e.g. if warning the debtor of the intended application would risk the assets being hidden or transferred out of reach. Because, however, of the drastic effects of a dsastre on the business and livelihood of the debtor, and the possibility that any damages obtained under art. 6(3) of the 1990 Law might be insufficient compensation, (a) it was important that applicants for a declaration proceed carefully; (b) the affidavit accompanying the application had to make complete and candid disclosure of all relevant matters (and failure to do so could result in the setting aside of the declaration on that ground alone); and (c) the court had an inherent jurisdiction to re-hear inter partes any matter which it had originally dealt with ex parte and at the inter partes hearing, the debtor could not only seek a recall of the declaration under art. 7, which required him to satisfy a stringent "balance-sheet" test, but could also seek to show that the declaration should not have been made, on the easier "cash-flow" test. In the present case, however, by any test the appellant's case was totally without merit and it was clear...

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