| Return to Contents Incidents Of Corporate Status - Personal Liability Of Memebers Of An Incorporated Body Steven Pallot On 18th July, 1997 the Loi (1997)(Amendment No.3) sur les teneures en fidéicommis et l’incorporation d’associations was registered in the Royal Court. This addressed a perceived deficiency in the Loi (1862) sur les teneures en fidéicommis et l’incorporation d’associations (‘the Fidéicommis Law’) in relation to a number of so-called housing trusts recently incorporated as associations in line with the policy approved by the States to encourage the provision of housing. The perceived deficiency was the lack of explicit provision about any limitation of liability of officials or members of housing associations (who are unpaid volunteers). Whilst Article 7 of the Fidéicommis Law provided that the personal assets of a fidéicommissaire were (unless agreed otherwise) generally exempt from the debts and hypothecs of the fidéicommis, it did not make similar provision in respect of an association. Article 11, on the other hand, clearly set out the parameters of the personal liability of members of an industrial or commercial association incorporated under the same Law. The amending Law provides comfort. It inserts a new Article 8A which now makes it crystal clear that the personal property of a member or officer of an incorporated association (other than a commercial or industrial association) is not available to the creditors of the incorporated body unless otherwise specifically agreed. This amendment provides reassurance, but would the position really have been any different had no amendment at all been made to the Fidéicommis Law? The question is relevant because it bears also upon co-ownership associations under the Loi (1991) sur la copropriété des immeubles bâtis. Such an association is, according to Article 5 of that Law "une association incorporée". Moreover the question bears upon those bodies incorporated by Act of the States. Almost 30 have been incorporated, amongst them the Société Jersiaise, certain golf clubs, the Jersey Heritage Trust and the Jersey Football Association. What, therefore, are the incidents of corporate status in Jersey law in so far as the personal liability of individual members is concerned? If no provision is made by the statute as to limited liability, are the personal assets of members available to creditors of a body corporate? Why, if the personal property of members was not available to creditors of a body corporate anyway, was it necessary to provide in the Loi (1861) sur les sociétés à responsabilité limitée for limited liability? Albeit that we tend to associate these questions with developments flowing from the growth of commercial legislation in the 19th century, it is submitted that, as a matter of earlier customary law, the assets of individual members were not ordinarily available to creditors of a cate body [1] . Essential to an acceptance of this view is a recognition that Jersey law knows the concept of "le patrimoine" taken, presumably, to be at the heart of (at the very least) our laws of succession. Professor Barry Nicholas [2], describes patriine in the following terms - "... the totality of an individual’s economic assets and liabilities, i.e. those rights and duties which are capable of valuation in money terms. The nearest analogy in English law is the rather imprecise notion of the ‘estate’ of a deceased person. The patrimoine consists of property (biens) and obligations. Biens are rights in rem (droits réels), obligations are rights in personam (droits personnels) and the duties correlative to such rights. The patrimoine is thought of in terms of a balance sheet, the assets constituting the actif, and the liabilities the passif. Biens occur, of course, only in the actif, but obligations may appear on either side. For obligation, in spite of what the word suggests, is a two-sided concept. In the passif it is a debt (dette),in the actif it is a credit (créance) ... It is thus in the patrimoine that property and obligation meet and merge". The Royal Court in Parish of St. Manning [3], in holding that a parish was a legal entity separate from its individual parishioners, quoted with approval a passa Pothier [4] in the following terms - "Les corps et communautés Établis suivant les lois du royaume sont considérés dans l’État comme tenant lieu de personnes: veluti personam sustinent; car ces corps peuvent, à l’instar des personnes, aliéner, acquérir, posséder des biens, plaider, contracter, s’obliger, obliger les autres envers eux. Ces corps sont des êtres intellectuels, différents et distincts de toutes les personnes qui les composent ... ...ce qui est dû à un corps, n’est dû aucunement à aucun des particuliers dont le corps est composé. Le créancier de ce corps ne peut donc point exiger de chacun des particuliers de ce corps ce qui lui est dû par le corps. Il ne peut faire condamner au paiement que le corps; il ne peut faire commandement qu’au corpsnne de son syndic [5] ou procureur; et il ne peut saisir que les effets qui appartiennent au corps." Planiol [6] makes clear the link between the pple articulated by Pothier and the later application of the same concept in France - "The old French writers adopt the word communautés (Pothier, Traité des personnes) for what modern France calls ‘civil persons.’ They confine themselves to saying that these corps or communautés are ‘considered in the State as taking the place of persons.’ They add that corps or communautés ‘are intellectual beings that may, like persons, acquire, alienate, contract and stand in justice’ (Pothier, ibid). Domat himself had no idea of the importance that this concept would assume in modern times. Bourjon (Droit commun de la France, Bk I, Tit. 4, Chap. I, sec.3) says: ‘the things of a communauté do not belong to the individuals who compose it, but they belong to the communauté, which is by nature perpetual if [statute] [7] does nopress it’. The expression ‘gens de mainmorte’ .... formerly very common (Pothier, Traité de la prescription), now corresponds more or less to the modern phrase ‘civil person’. It designates the abstract personalities of communautés possessing property subject to mainmorte". Planiol goes on [8] to deal with tht of the ‘fiction of personality’ - "When any group, possessor of a collective patrimoine, is represented by a fictitious person, all that is necessary is to regulate the patrimoine of that abstract being, as if it were that of a real person. Any group of persons may accordingly be indicated by the formula n + 1 being the number of the members of the group, the supplementary person being none other than the group itself, personified. This fictitious person is reputed to be possessor of all the rights and of all the charges of a collective nature. At the same time the members of the group are reputed to be strangers to all these rights and all these charges. A complete line of cleavage is drawn between that which is personal to each and that which is common to them. (Comp.Pothier, Traité rsonnes)". [9] Applying this (with all its striking imagery) in the context of Article 7 of the Fidéicommis Law, as it was originally drafted, it becomes clear why the draftsman, g explicit provision protecting the property of trustees of non-incorporated trusts [10], saw absolutely no need to make any such provision about the assets of members of incorporated associations. The patrimoine of une association incorporée was already separate and distinct from that of each of its members. The same, it is submitted, is now true of co-ownership associations under Article 5 of the Loi(1991) sur la copropriété des immeubles bâtis. The association is a corporate entity, thus implying a patrimoine separate and distinct from that of each of its constituent members. By the same token, the incorporation of the 30 or so bodies by Act of the States implied in each case the constitution of a patrimoine of the incorporated body separate and distinct from that of each of its members. The assets of the latter are not therefore available to creditors of the corporate entity unless otherwise agreed or unless a member otherwise does something to render himself personally liable, in the same way that the Fidéicommis Law already provides for in respect of fidéicommissaires. Why, therefore, it may be asked, was it necessary - if corporate status effects this scission of liability - to make express provision for limited liability in the Loi (1861) sur les sociétés à responsabilité limitée? In this context, it is important to understand that a joint stock company was at that time not so much a corporate body as an elaborate form of partnership. Although it could sue and be sued separately from its members, the latter were still liable in full for its debts. Even after limited liability was allowed in England in 1855, the leading authority cfied companies as partnerships and so did not consider them to be persons like corporations [11] . Only towards the end of the century, however, and under the influence of continental theories, did English lawyers become clear that a limited company was as much England as on the continent. [12] The evidence given to the Civil Commrs in Jersey on 2nd August, 1859 by the then Deputy Viscount, Helier Simon, has to be read in that light [13] . The analysis of Mr. Simon’s evidence at page cxx is as follows - "A Limited Liability Act required; no law to protect those who take shares in companies, so that many useful works are prohibited in consequence, for instance, waterworks; in France there are two kinds of partnership, the société en commandite and the socété anonyme; a person taking shares in a company without such a law is subject to great inconvenience; the Jersey Joint Stock Bank is the only one here, but it is not one in the English sense of limited liability; each shareholder is subject to the whole liability of the company; he is subject to the ordinary English law of partnerships; there have not been many failures under the present system, but a Limited Liability Act would work much better." It may be said therefore that the Jersey Companies Law of 1861 was enacted very much with the earlier view in mind of a joint stock company as a special form of partnership rather than as a special form of corporation; hence the need to spell out the limited extent of personal liability. However, nothing in this affected the underlying principle of the customary law regarding corps et communautés articulated by Pothier - and now adopted by the Royal Court - that bodies corporate were "... différents et distincts de toutes les personnes qui les composent" with the clear implications flowing from it insofar as the personal liability of members is concerned. Steven Pallot is an advocate of the Royal Court and a legal adviser in the Law Officers’ Department, Jersey. |
Footnotes - (Top) [1] - It is important of course to distrporate associations under the Fidéicommis Law from earlier non corporate ‘associations’ or ‘societies’ in respect of which evidence was given to the Civil Commissioners (leading to the enactment of the Fidéicommis Law). These were no more than trusts with an imprecise line drawn between individual and collective assets and liabilities. See eg Minutes of Evidence in the 1861 Report paras. 10,817 et seq and paras. 14,712 et seq. [2] - The French Law of Contract ition) at page 29 [3] - 1982 JJ 183 at pa [4] - Traité des personnes et des chositre VII [5] - In the context of the Loi (1991) sur la cop immeubles bâtis, the association representative is in effect the syndic referred to in the French Loi (1965) fixant le statut de la copropriété des immeubles bâtis. [6] - Traité élémentaire de droit civil (translation na State Law Institute) Vol.1 (Part 2) para 3010 [7] - The original text was a refer Prince [8] - Op cit., p5 [9] - See also G. Baudry Lacantinerie-Préct civil (11th Edition) paras. 146 et seq. under the heading ‘des personnes morales’ for an even clearer statement of the principle [10] - The draftsman was of course respon the recommendations of the Civil Commissioners: 1861 Reportpage 1xxviii under the heading "Uses and Trusts" [11] - Wood Renton in his Encyclopedia of ws of England (1897) puts the advent of limited liability into context - "‘Limited liability’ is in law merely a special kind of contract which anyone may enter into if the party with whom he contracts consents: unlimited insurance companies often limited the claims of policyholders to the assets. The peculiarity of the privilege which the Legislature has conferred on companies under the Companies Act, 1862, is in allowing a company to import this term of limited liability into all its contracts merely by notice; but in granting the privilege the Legislature has taken all possible precautions to ensure that everyone dealing with the company shall be made aware of the limitation. It is for this reason that it requires the company always to add the word ‘Limited’ to its name." [12] - See Professor Peter Stein: Legal Institutions - The Devet of Dispute Settlement(1984 Ed.) p.137 [13] - See Report of the Civil Commissioners (1861) . 4379-4391 |