Vol 10 (2013) - Issue 4

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Tambrook Jersey: There but for the Grace

The Bailiwick of Jersey – a British Crown Dependency consisting of the island of Jersey, together with two groups of smaller islands – nestles off the coast of Normandy in the English Channel. Jersey is a picturesque island with a benign climate, an even more benign tax regime, and an airport which (in my experience) tends to be prone to fog. Interest in the tax advantages outweighing potential travel inconvenience, Jersey is frequently the domicile of choice for single purpose vehicles for property developments and other investments in the UK.
Jersey is constitutionally separate from the UK, with its own legal system, ruled today, as it has been ruled for a thousand years, by the Duke of Normandy (nowadays, the English Queen wearing one of her other crowns). As Lord Maugham explained in the Privy Council in 1936:
'… the Island of Jersey is not a colony, or, to use the old phrase, "a plantation." It is part or parcel of the ancient Duchy of Normandy, which came into the possession of William, Duke of Normandy, in A.D. 933, and remained attached to the English Crown when Philip II of France conquered the rest of Normandy from King John. It has its own constitution, and is governed by its own laws.'

It is well-known that Jersey has relatively undeveloped insolvency laws. A form of compulsory liquidation (and a personal insolvency equivalent) is available under the graphically-named Bankruptcy (Désastre) (Jersey) Law 1990, and a procedure broadly similar to an English creditors’ voluntary liquidation may be commenced by resolution of the shareholders under the Companies (Jersey) Law 1991. When a company is en désastre, its assets are in effect sequestered and vest in the Viscount, an official of the court, to be sold subject to any security interests.
There is no direct equivalent in Jersey to administration under the English Insolvency Act 1986 or the US Chapter 11 regime; Jersey has yet to embrace the 'rescue culture' in that sense. There is a process which the Jersey Court has said is in some senses similar, under the Loi (1839) sur les Remises de Biens, which establishes a process by which a debtor can surrender his assets into the control of the court whereby he hopes to achieve a more orderly administration of his estate for the benefit of ordinary creditors, and possibly for his own benefit as well.
For some years, over a number of cases, a well-trodden path to address this lacuna has become established where the significant assets are in the UK. The creditor asks the Jersey Court to seek the assistance of the English Court under section 426 of the Insolvency Act 1986 ('the 1986 Act') and the making of an English administration order. For a fateful fortnight in April of this year, it seemed an inconvenient decision of Mr Justice Mann in the Companies Court in London might throw a spanner in the works, but fortunately our Court of Appeal moved swiftly to confirm the correct analysis, and normal service has been resumed. As a by-product, we have a further useful appellate authority on the proper construction of, and approach to, section 426 of the 1986 Act.
Section 426 is a very helpful statutory provision, where it applies, but in some respects it is a discriminatory and therefore rather odd one to find in a modern insolvency statute. It has its roots in section 122 of the Bankruptcy Act 1914, which required and therefore enabled, 'The High Court, the county courts, the courts having jurisdiction in bankruptcy in Scotland and Ireland, and every British court elsewhere …' to 'severally act in aid of and be auxiliary to each other in all matters of bankruptcy …'.