The Remise De Biens of Super Seconds Ltd, G. Santer and J.E. Santer (Née Werrin)

JurisdictionJersey
CourtRoyal Court
JudgeLe Cras, Lieutenant Bailiff:
Judgment Date18 April 1996
Date18 April 1996
ROYAL COURT
Le Cras, Lieutenant Bailiff:

R.J. Renouf for the representors;

R.J.F. Pirie for the respondents;

C.M.B. Thacker for the principal creditor.

Cases cited:

(1) Bradshaw v. McCluskey, 1976 J.J. 335, considered.

(2) Cornish v. Roche (1957), 250 Ex. 401; 1951-58 T.D. 207, unreported, considered.

(3) Shield Invs. (Jersey) Ltd., In re, 1993 JLR N-3, applied.

Legislation construed:

Loi (1880) sur la proprit foncire, art. 13: The relevant terms of this article are set out at page 121, lines 35-40.

art. 14: The relevant terms of this article are set out at page 121, line 43 - page 122, line 2.

art. 101: The relevant terms of this article are set out at page 122, lines 25-28.

Loi (1839) sur les remises de biens, art. 6: The relevant terms of this article are set out at page 119, lines 30-35.

Ordre du Conseil (1696) pour remdier des abus dans la procdure, Minute: The relevant terms of this Minute are set out at page 123, line 44 - page 124, line 15.

art. 2: The relevant terms of this article are set out at page 123, lines 32-42.

Texts cited:

Basnage, Trait des Hipotques, 3rd ed., at 16; at 55; at 88 (1709).

Dalloz, Nouveau Rpertoire, 1st ed., vol. 2, Hypothque, para. 164, at 750-751; para. 340, at 759; paras. 357-361, at 760.

Dalloz, Rpertoire, vol. 37, Privilges et Hypothques, para. 2389, at 787.

Le Geyt, Privilges, Loix et Coustumes de L'Isle de Jersey, art. 4, at 78-79; art. 6, at 83 (1953).

Pothier, Trait de l'Hypothque, para. 13, at 574; paras. 45 & 46, at 390 (1817 ed.).

Bankruptcyremise de biensinterest on secured debtsinterest secured by hypothec securing principal sumunclear whether for three years or longer

The respondents were granted a remise de biens following their inability to pay their debts.

The respondents were indebted to a number of creditors. They were unable to maintain payments of the interest due on their principal debt, which was secured by judicial hypothecs. They were granted a remise de biens, in which the present representors were the autoriss, the value of the property in the remise at that time being sufficient to cover all their debts.

The autoriss subsequently discovered that due to a fall in property values generally, the value of the respondents' property was no longer sufficient to leave any balance to pay the unsecured creditors after payment of the principal debt, if that debt were to include the arrears of interest. They accordingly made the present representation for directions and the principal creditor, which was convened at the hearing of the representation, submitted that the remise could not continue, because (a) the interest on the principal debt was effectively part of that debt and was secured by the same judicial hypothecs; to clear the debt required that the interest also be paid in full and because after having done so no credit balance would be left to pay any other creditors, no remise was possible; and (b) by arts. 13 and 14 of the Loi (1880) sur la proprit foncire, which set out the procedure for granting a remise de biens, the secured sum impliedly included interest and there was no indication in that Loi that it was designed to change the previous Law, by which the principal debt and interest were secured by the same hypothec; furthermore, by art. 101 of that Loi, in the case of a decret, the interest on a debt was secured for three years and it would be inappropriate for this not also to be the case with a remise.

The respondents submitted in reply that it was proper for the remise to continue because (a) the interest was not secured by the judicial hypothecs that secured the principal debt and there would therefore be a credit balance to distribute among the unsecured creditors after payment of the principal debt; and (b) it was clear that this was the case because arts. 13 and 14 of the 1880 Loi, which operated as a coherent system which replaced and had no reference to the previous system of law relating to debts, defined judicial hypothecs as being created to secure a debt for a specific and certain sum for which judgment had been obtained, which precluded the payment of interest as part of that sum; furthermore, the securing of interest for three years by art. 101 of the Loi referred to decrets and had no reference to the case of a remise de biens.

Held, making the following ruling:

The remise de biens could not continue, since the value of the respondents' property was insufficient to leave a credit balance, however small, to distribute among the unsecured creditors after payment of the secured debt. It was clear that the 1880 Loi did not envisage a change in the previous law on the securing of interest on a debt, since it had used no express words to that effect. There was accordingly no doubt that the arrears of interest were secured by the same judicial hypothecs that secured the principal sum, although it was open to question (and did not currently fall to be decided) whether interest was secured for three years or for a longer period. In particular, to hold otherwise would result in a secured creditor's losing preference in respect of interest to debts owed to subsequent creditors, and that autoriss in a remise would have to decide whether the principal creditor be ranked with the other creditors in respect of the interest, or to refuse a remise altogether, which would fail to balance the needs of creditors and debtors (page 120, line 36 - page 121, line 11; page 127, line 7 - page 128, line 15).

LE CRAS, LIEUTENANT BAILIFF: On October 13th, 1995, the Royal Court granted applications by Super Seconds Ltd. and by Mr. &

Mrs. G. Santer for a remise de biens. There are bonds registered against the property of the company in the sum of 770,000 and of these, bonds amounting to 210,000 have been guaranteed by Mr. & Mrs. Santer against their own property, against which there is also secured a small mortgage. The larger indebtedness, that is, the 770,000, is due to Sparta Investments Ltd. ("Sparta").

At the time the remise was granted, a considerable sum in outstanding interest was due to Sparta. However, at that time, this was not thought to be material as the valuations obtained were sufficiently high to clear all the debts. Unfortunately, the valuations have proved to be optimistic and the proposed sale prices so much reduced that the problems raised by the unpaid interest have caused the autoriss to come to the court to seek directions. The problem arises in this way. Article 6 of the Loi (1839) sur les remises de biens reads as follows:

"Si les biens remis entre les mains de la Justice ne sont pas suffisans pour acquitter toutes les dettes et redevances, les autoriss de Justice pourront, si les hritages sont suffisans pour acquitter les rentes et hypothques, faire...

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