To proceed against a debtor's personal property in Guernsey, customary law remedies are used. These start with the arrest of a debtor's goods and enable all creditors to share in the proceeds in the event that the monies owed are greater than the debtor's assets.
Once judgment is obtained against a debtor, the arresting creditor will either:
- provide a certified copy of the Act of Court to Her Majesty's Sheriff, who will then arrest as much of the debtor's personal property as amounts to the debt value (arrêt execution); or
- prior to judgment, obtain permission from the Bailiff to arrest goods (arrêt conservatoire).
The arrest is usually carried out through an inventory and the debtor's undertaking not to dispose of the assets listed. The arresting creditor will summons the debtor to court to confirm the arrêt and ask permission for the arrested goods to be sold at public auction after placing notices in La Gazette Officielle.
If no further creditors come forward in response to the official notice, once the sale of the goods has taken place, the arresting creditor will action Her Majesty's Sheriff by summons to be paid the sale's proceeds after costs have been deducted.
If other creditors have responded to the official notice, Her Majesty's Sheriff will declare this in the reply to the arresting creditor's summons. If there are several creditors and insufficient funds from the proceeds of the auction, désastre proceedings will be commenced.
Désastre is a customary law procedure that shares features with bankruptcy, such as the inability to pay debts, but does not in fact constitute bankruptcy. In Guernsey, when a person (or corporate entity) has current liabilities exceeding the value of their assets, they are declared "en etat de désastre". The main difference compared with bankruptcy is that désastre does not constitute a discharge for the debtor of their liabilities; if a creditor uncovers more assets at a later point, new désastre proceedings may be started. Further, désastre applies only to the debtor's personalty arrested within Guernsey. Under désastre, the debtor can continue to do business and is not required to make a full disclosure of their assets.
If the proceeds of the auction are insufficient to fully satisfy the arresting creditor's debt, the court will order that notice is to be given for the arresting creditor, debtor and all other known creditors to appear before a Jurat acting as Commissioner of the court to establish their claims and preferences.
The Commissioner will fix a date for the creditors' meeting. It is the responsibility of the arresting creditor to publish the time, place and date of the meeting for two consecutive weeks in La Gazette Officielle and the Royal Court building notice.
At the creditors' meeting, the creditors present will submit their claims to the Commissioner, who will determine whether their debt is accepted; any disputes will be referred to the Royal Court. The Commissioner will verify the debts and, once the accepted claims are established, the Commissioner will marshal them according to the preferences governed by the Preferred Debts (Guernsey) Law 1983 as well as the Preferred Debts Désastre Proceedings and Miscellaneous Provisions (Guernsey and Alderney) Law 2006. Proceeds are generally paid as dividends in the following order:
- costs of proceedings to Her Majesty's Sheriff, the arresting creditor and other creditors (including legal costs);
- secured debts on the arrested personalty (ie, a security interest);
- landlord hypothecation (which may apply to any personal property found on the premises that appear to be owned by the debtor);
- preferred debts (eg, wages and tax contributions) – provided that the proceeds from the sale of the seized assets are sufficient to pay all in full. If there are insufficient funds, the debts will abate in equal proportions due to them all ranking equally; and
- any unsecured debts.
At the conclusion of the creditors' meeting, estimates will be provided of the dividends payable to the creditors as outlined above. The Commissioner will produce a report for the Royal Court, which will provide orders to Her Majesty's Sheriff to make the relevant payments.
Désastre proceedings do not remove the possibility of remedies relating to any realty belonging to the debtor via saisie proceedings (for further details please see "Snapshot: enforcement against real property – saisie"). Although there will be clear financial consequences for the debtor due to their loss of assets, désastre does not hold any punitive repercussions for the debtor.
For further information on this topic please contact Sandie Lyne or Chloe Gill at Ogier by telephone (+44 1481 721 672) or email ([email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.