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Book Review

Jersey Insolvency Law In Practice by Anthony Dessain and Michael Wilkins.  Published Key Haven Publications plc.

The issue of this Review published a year ago contained a review of the Solicitor General’s Origin and Development of Jersey Law:  an Outline Guide.  Advocate Dessain and the Viscount have now followed with the present book on the Jersey law of insolvency.  Two books in two years may not seem very many.  In fact, it is remarkable that the law of a tiny jurisdiction of less than 100,000 people should generate text books at all.  These books have two fold significance.  They demonstrate the present condition of Jersey’s legal system; and, by rescuing the law from the mystery which has so long surrounded it and making it accessible to the interested reader, they improve the chance (for it is not a certainty) that the law of Jersey will continue as a living and developing body.

The law of insolvency is an interesting and exceptional example of Jersey legal development.  The origin of the system of désastre, apparently, was an innovatory procedure devised by the Royal Court at the end of the 18th century, to cope with the many competing claims arising from a particular financial failure.  The procedure was developed and its shape increasingly defined by decisions of the Court all through the 19th century.  In the 20th century this process went on, and the Royal Court (“Désastres”) (Jersey) Rules, 1964 introduced a degree of development by legislation.  This was taken further by the Bankruptcy (Désastre) (Jersey) Law, 1990.  This Law did not codify the system, but extended and modified it very considerably.  The result is a body of bankruptcy law, starting with the response of the Royal Court to a local emergency, developed over two centuries by decisions of that court and by Jersey legislation, and in 1998 awarded by Mr Andrew Edwards the accolade of ‘a unified modern procedure for persons and companies’.

The purpose of the present book is to describe the practical working of this procedure, and to describe it in a way helpful not only to lawyers but also to others who become involved in problems arising from insolvency.  The greater part of the book is accordingly devoted to the practice and consequences both of désastre and of the winding up of companies under part XXI of the Companies (Jersey) Law, 1991.  This part is preceded by chapters dealing with the rights of creditors prior to insolvency and the duties and liabilities of officers and directors of companies.  The method followed throughout is to state the law on each successive point as clearly and succinctly as the subject allows, with admirably plentiful references to the statutes (and statutory rules) and decisions of the Courts.  There are also some references to the practice of the Viscount’s Department, and occasional discussions of the best course to adopt where the law allows a choice.  The texts of the Bankruptcy Law of 1990 and part XXI of the Companies Law of 1991 are printed in appendices, with amendments consolidated up to the end of 1998.  There is a good index.

These features make it easy to consult the book upon questions which arise in the administration of the law of insolvency.  It will be a useful and convenient guide for those who become involved in any capacity with the intricacies of that law.

The guidance given will become still better if some passages are reconsidered before the time comes for a second edition.

On page xxxv, in a description in the Glossary of the position of the Attorney General, appears this:

‘In cases of conflict of interest between the Crown and the States, the Attorney General would represent the Crown and the Solicitor General the States.’

This assertion has often been made, but it is baseless.  The Law Officers of the time investigated the matter for the Judicial and Legal Services Review Committee in 1990, and the Attorney General told the Committee they could find no evidence that the Solicitor General had ever advised the States in such a case.[1]

The following appears on page 82:

‘Criminal prosecutions by indictment are not subject to limitation of action by common or statutory law but prosecutions arising under statutory authority are.  Under the Law Reform (Miscellaneous Provisions) (Jersey) Law, 1978 (Article 2), statutory offences are barred by prescription if not prosecuted within three years from the date of the commission of the offence’.

The Law of 1978 does not confine prescription of prosecutions to statutory offences.  Prescription applies, by virtue of article 2(1), to prosecutions for ‘any délit and any infraction or contravention of an enactment.’

On page 70 the authors quote article 34 of the Bankruptcy Law, dealing with set off, and then observe:

‘While the above statutory language as to set off is similar to that found in s.323 of the Insolvency Act, 1986 of the U.K., in the case of Guidon Investments Ltd v de Carteret (1980), J.J. 109 the Royal Court preferred to look at the matter from the standpoint of compensation, an analogous term well known to Jersey law.’

It is difficult to understand the relevance of this.  In 1980, when the Guidon Investments case was decided, there was no statutory provision in Jersey for set off.  The Court was asked to apply by analogy the provisions of the Bankruptcy Act, 1914, which then was still in force in England.  It declined to do this, and instead based its decision on the principle of compensation.  The position is quite different now.  There is local statutory provision for set off – article 34 of the Bankruptcy Law.  That provision, rather than any doctrine of common law, must now govern questions of set off.

At pages 77-79, the authors discuss article 17 of the Bankruptcy Law and article 176 of the Companies Law, both of which deal with transactions at undervalue and preferences.  This passage prompts a more general comment.  The two articles are almost identical in their terms, and attach considerable significance to cause.  Article 17(9) of the Bankruptcy Law and article 176(9) of the Companies Law provide:

‘For the purposes of this Article, cause has the meaning assigned to it by the customary law of the Island.’

There are, the authors say, ‘difficulties in interpreting this’; cause is not the same as consideration in English law, but its boundaries ‘are not entirely settled’.

The Royal Court has stated several times that cause is not the same as consideration.  It has also held in several cases that in particular circumstances cause is present.  What is nowhere to be found is a discussion in positive terms of what, in principle, cause is.  In Gallichan v Gallichan[2], a learned Judge of an earlier generation referred to passages on cause in the Ancienne Coûtume, in Poingdestre and in Le Geyt.  What is needed now is a survey covering these passages and the relevant judgments of the Royal Court, and deducing from this material some principle of what constitutes cause.  The need is the greater now that the States, by enacting article 17 of the one Law and article 176 of the other, has made cause an important factor in the identification of transactions at undervalue.

(At the time of writing, the Bankruptcy (Désastre) (Amendment no.5) (Jersey) Law, which has been prepared in the Viscount’s Department and approved by the Finance and Economics Committee of the States, awaits lodging au Greffe.  If enacted, it will make extensive amendments to the Bankruptcy Law, including new articles 17 and 17A replacing the existing article 17.  It will not, however, affect the need just discussed, because it will preserve the significance of cause and its somewhat mysterious definition in the existing article 17(9).)

It would not be fair to criticize the present authors for not supplying this need in a practical manual.  Nevertheless, the task is there and presents a challenge to Jersey lawyers.  Will somebody take it up?

J.G. Le Quesne was a judge of the Jersey Court of Appeal between 1964 and 1997.