In a judgment handed down on 4th January 2011 in the case of Jubilee Scheme 3 Limited Partnership v Capita Symonds Limited the Guernsey Court of Appeal has provided clarification on a means by which a Plaintiff can obtain security for its claim which is unique to Guernsey.
The case concerns a construction dispute with a claim brought by Capita against Jubilee in excess of £1.6 million for the provision of architectural and engineering services rendered in connection with the construction of a development known as "Royal Terrace" in Guernsey. Jubilee is a special purpose vehicle established by the Longport Group with no assets other than the Royal Terrace which comprises of some 50 residential apartment units plus some commercial development.
In Guernsey, it possible for a plaintiff who has commenced proceedings to register a claim for security in the Livre des Hypothéques, Actes de Cour et Obligations (the “Livre des Hypothéques”) against real property held by the defendant in the Bailiwick of Guernsey. Such registration places a charge over that property to the extent of the claim so as to prevent the defendant from being able to sell. An application for registration is made ex parte to the Royal Court.
In this particular case Capita had been granted leave by the Royal Court to register its claims in the Livre des Hypothéques. A substantial counterclaim was then brought on behalf of the Jubilee (together with associated companies) against Capita in the sum of approximately £70 million. Jubilee then sought the permission of Capita to release part of the property comprising the Royal Terrace from the registration on the Livre des Hypothéques in order that sales could proceed and the monies realised used to finish off construction of the entire development. Correspondence between the parties did not go well and no agreement was reached. Consequently, Jubilee lodged an application that the registration on the Livre des Hypothéques be varied so as to permit sale of units at the Royal Terrace up to a value of approximately £63.5 million.
At the first hearing before the Royal Court, Jubilee asserted that it could not finish the development unless the application was granted and any refusal to do so would amount to an unreasonable fetter on its ability to carry out its commercial activities. It also asserted that Capita would not be prejudiced by this. Conversely, Capita asserted that it would be willing to release its charge to permit the sale of units provided that some alternative security was forthcoming. Capita submitted that there was no satisfactory evidence as to the value of Royal Terrace and whether there was any equity in the developments. The Lieutenant Bailiff at first instance decided in favour of Capita - Jubilee had not produced proposals with sufficient clarity and precision to justify the Court directing Capita to embark on a programme of release of up to £63 million in value of Jubilee's realty without any clear provision for the Capita’s ongoing protection as a registered claimant against that realty.
In their lengthy judgment the Court of Appeal examined in detail the legal background to the means of registration in the Livre des Hypothéques. It noted evidence of the practice going back to at least the beginning of the 19th century and the protections put in place against spurious claims being registered by the Law Reform (Miscellaneous Provisions) (Guernsey) Law 1987 ("the 1987 Law"). In exploring this unique way of obtaining security the Court of Appeal entertained submissions in relation to ancient law and practice of the Duchy of Normandy which provides the basis for the customary law in the Bailiwick of Guernsey.
An outside commentator would probably find it most unusual for a modern Court to be hearing submissions on works written in Norman French dating from 1583 and before. However, the uniqueness of this remedy and the historical origins of the Law of Guernsey demonstrate how important it is to not make any assumptions that Guernsey law will follow that of common law jurisdictions such as England.
The Court of Appeal concluded that it was clear that a registration of an interlocutory act in proceedings before the Royal Court created a charge against the real property of the defendant. They further noted that this rule of customary law appeared to be well established for some 200 years in the Bailiwick of Guernsey. Indeed, it was held that the ultimate effect of registration upon the enjoyment of a defendant's real property was not significantly different from that caused by a Mareva injunction and, with the protections in place under the 1987 Law, it would not constitute a breach of Article 1 of the first Protocol of the European Convention of Human Rights.
Whilst the registration process is different from an injunction, when considering an application to vary or revoke registration the Court will have to consider many of the same factors as are considered when hearing an application to vary or discharge an injunction. In particular, the Court must hold a fair balance between a plaintiff who seeks security for what is, at that stage, an unproven claim and a defendant who wishes to dispose or deal with real property. The Court of Appeal stressed, though, that whilst it was important for Guernsey that bona fide commercial development should be able to proceed to completion without any undue fetters that was not to say that all the developer had to do was turn up in court and assert that it needed to realise its developments. A defendant who wishes to seek a variation of registration needs to provide full information to the person holding the registration and the Court so that the right course of action could be considered. In this case the Court of Appeal found that Jubilee had failed to provide sufficient information to enable it to properly consider the effect of varying the registration as requested.
This case provides clarification on an interesting and unique means of obtaining security for a claim against real property in Guernsey and reflects the different sources of law that we enjoy in Guernsey in contrast to England.