When "all" does not mean "all"...

21 Mar 2014

The Royal Court of Jersey has determined a novel point of insolvency law in relation to the vesting of claims in a désastre, Jersey's unique bankruptcy regime for personal and corporate debtors.

Although the Bankruptcy (Désastre) (Jersey) Law 1990 ("Désastre Law") expressly provides that "all property" of the debtor vests in the Viscount upon a declaration of désastre, which definition includes "things in action", following submissions from Advocate Edward Drummond of Bedell Cristin on behalf of the Viscount, who administers all désastres in Jersey, the Royal Court held that purely personal claims are excluded from its ambit as a matter of customary law, following venerable English law principles.

Two Jersey individuals had made a claim for damages for libel. They lost at trial and were ordered to pay the defendants' costs. They wished to appeal but the relevant time period had expired, so they applied to the Court of Appeal for an extension of time. Upon the failure of that application, one of the defendants petitioned for their bankruptcy on the basis of its unpaid costs order, and they were declared en désastre. The bankrupts wished to appeal further to the Privy Council, and if necessary, to the European Court of Human Rights. Could they do so?

According to the Désastre Law, subject to two statutory exceptions (trust assets and pension rights), all the bankrupt's property and powers, as widely defined, vest in the Viscount. Similar definitions appear in the Insolvency Act 1986 ("Insolvency Act"), albeit with more wide-ranging statutory exclusions.

The English courts have however recognised as a matter of common law, since as long ago as the 1840s, that property of a nature peculiarly personal to the bankrupt does not vest - despite no express provision to this effect in the Insolvency Act or its predecessors. A claim for defamation is the paradigm example. One can imagine that a bankrupt may have every incentive to clear his or her name, but there is little incentive for the trustee-in-bankruptcy to spend what is effectively creditors' time and money in doing so. But Jersey and English insolvency law is not the same – should these principles apply in Jersey?

The Royal Court held that they should. The Désastre Law was not a codification. The customary law was not fixed and indeed other exceptions existed in practice which did not find statutory expression in the Désastre Law.  The rationale for the English position was persuasive. The Royal Court granted declarations that a bare right of appeal could not be treated separately from the underlying cause of action, and that the defamation claim was personal to the bankrupts and did not vest in the Viscount.

For further information please contact Edward Drummond.

Bedell Cristin has a dedicated insolvencyteam which deals with every aspect of contentious and non-contentious insolvency and restructuring, as well as asset tracking, disclosure and freezing orders.

The Bedell Cristin insolvency team will be attending the INSOL International One-Day Seminar in Jersey on 12 June 2014, and looks forward to seeing you there.