The Land and Conveyancing Law Reform (Amendment) Bill 2019 (the “Bill”) proposes to broaden the factors that the courts can consider in refusing orders for possession sought by lenders.

The Bill has its roots in the Keeping People in their Homes Bill, 2018, introduced by Kevin “Boxer” Moran T.D., as a private member’s bill. However, the Bill does not go as far as Mr Moran’s bill and, for instance, does not require disclosure of the price paid by a purchaser of the loan.

Background

Zone of insolvency - directors in the firing line

Happy New Year?

2018 saw a number of high profile insolvencies around the world, including in Guernsey. The climate for many sectors remains extremely challenging with the UK further hindered by continuing uncertainty around Brexit. EY's Profit Warning Stress Index hit its joint highest level for two years in the third quarter of 2018 with 68 UK quoted companies issuing profit warnings.

Overall 2018 has produced a number of positive judgments from the perspective of lenders and insolvency practitioners.

In particular, the courts delivered many useful judgments disposing of numerous challenges to the enforceability of loans and security and, also, restricting abuse of the courts’ processes.

Contemptuous McKenzie Friends

The Court of Appeal has helpfully confirmed that a judgment creditor can seek an order appointing a receiver by way of equitable execution where:

• the debtor holds a legal or equitable interest in property; and
• execution against the property is not available at law by one of the usual methods, for instance via the sheriff or by a garnishee order.

There was previously doubt as to whether such a receiver could be appointed where the debtor held a legal, as opposed to an equitable interest, in property.

In March 2017, the States of Guernsey approved the reform of Guernsey’s insolvency laws, which afford greater protection to creditors and investors. The necessary legislative amendments are currently being drafted although the date of issue is yet to be determined.

Key changes proposed include:

The High Court has recently expressed concern that distressed borrowers are being duped into paying money to the anonymous promoters of schemes, which purport to protect them from enforcement by lenders but are actually ‘utterly misguided and spurious’.

There are a number of schemes being promoted at the moment that supposedly protect borrowers in arrears from enforcement by their lender.

This briefing note provides an outline of the different processes of voluntary winding up and striking off under the Companies (Guernsey) Law, 2008 (as amended) (the “Law”). It does not cover compulsory winding up or the specific provisions on winding up of protected cell companies and incorporated cell companies. Further information on the effect of the Law on the winding up of these company structures can be found in our separate briefing notes on those subjects.

Voluntary Winding Up

Simple retention of title clauses are commonplace and generally effective in contracts for the sale of goods. However, extending their effect to the proceeds of sale of such goods requires careful drafting.

The Court of Appeal has provided some further clarity around the creation and effects of fiduciary obligations in relation to such clauses.[1]

Proceeds of sale clauses

Our Restructuring and Insolvency team has had further significant success, recently securing the discharge of an administration order over a Guernsey Protected Cell Company to facilitate its voluntary winding up. The team, led by Guernsey based counsel David Jones and including associate Luke Sayer, acted for local insolvency practitioners Tim Le Cornu and Andrea Harris of KRyS Global. 

To our knowledge this is the first time that the Royal Court of Guernsey has ordered that an administration order in Guernsey be discharged so as to facilitate a voluntary winding up. 

The High Court has reiterated that cross-examination will not generally be permitted on an interlocutory application, or where there is no conflict of fact on the affidavits.

In McCarthy v Murphy,^[1] the defendant mortgagor was not permitted to cross-examine the plaintiff (a receiver) or a bank employee who swore a supporting affidavit.

Background