As an important international finance centre Jersey is used to dealing with the enforcement of judgments from other jurisdictions. This article provides an introduction to the principal options available to a foreign judgment creditor.
Registration of a foreign judgment in Jersey
Before a foreign judgment may be enforced in Jersey it must first be recognized by the Royal Court.
The Registration of judgments made in "reciprocal" countries is governed by the Judgments (Reciprocal Enforcement) (Jersey) Law 1960 (the “Law”), which provides that the Royal Court will recognize judgments made by the superior courts of the following reciprocal countries: England and Wales, Scotland, Northern Ireland, Isle of Man and Guernsey.
Where the judgment is not from a reciprocal country and so the Law does not apply, a foreign money judgment may still be enforced in Jersey by commencing fresh proceedings applying customary law principles. In order to enforce a foreign judgment under the customary law in Jersey:
(a) The judgment must be in personam rather than in rem;
(b) The foreign court that made the judgment must have had jurisdiction over the party against whom the judgment is being enforced, for example, where the judgment debtor submitted to the foreign court's jurisdiction or the judgment debtor participated as a party in the foreign proceedings;
(c) The judgment must be final and conclusive and for a debt or definite sum of money. It is important to note, however, that a judgment can be considered to be final for the purposes of this test even though it may still be subject to an appeal in the foreign courts;
(d) The judgment must not be solely payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty; and
(e) The judgment must not be impeachable under common law rules. The key grounds on which a judgment could be impeached would be if: (i) it was obtained fraudulently; or (ii) it was contrary to the public policy of Jersey; or (iii) the judgment was made in circumstances contrary to the principles of natural justice.
Non-money judgments fall outside the scope of the Law and have historically been unenforceable under the customary law. However, more recently the Royal Court held in Brunei Investment Agency v Fidelis [2008] JRC 152 that in the interests of comity and to reflect modern commercial practices, the Royal Court had the discretion to enforce non-money judgments in certain circumstances. This discretion was noted as one which should be exercised "cautiously".
Enforcement Options
Once a foreign judgment is recognized by the Royal Court it may be enforced in the same way as a Jersey judgment. The judgment may be registered in the Public Registry and provide security for the judgment creditor over any real property held by the debtor in Jersey. The Viscount, who is the executive officer of the Royal Court, is responsible for enforcing judgments against a debtor's movable property in Jersey upon request from a judgment creditor.
Arrêt entre mains
An arrêt entre mains is a type of order which can be sought by a creditor against the moveable assets of a debtor in Jersey. Examples of assets that can be caught by an arrêt include shares in a Jersey incorporated company and debts owed to the judgment debtor by a third party where the situs of the debts is Jersey.
An arrêt application is brought on an ex parte basis, following which an interim arrêt entre mains can be obtained. The interim arrêt acts as an immediate arrest on the assets in question and prevents the debtor from dealing with those assets. Failure to comply with the terms of the arrêt would place the debtor and its officers, if a corporate body, in breach of the arrêt and at risk of being held to be in contempt by the Royal Court. The Royal Court has wide ranging powers to punish anyone who is found to be in contempt.
The arrêt maythen subsequently be confirmed at an inter partes hearing. Once the arrêt is confirmed the assets vest absolutely in the Viscount who is able to exercise a wide range of powers to realise payment of the debt.
Pauline Action
The Royal Court, in Re Esteem Settlement (2002) JLR 53, confirmed an ability, in certain circumstances, to set aside transfers which have taken place in fraud of a debtor’s creditors. This is known as a Pauline action. This can be a useful option for a creditor who is seeking to recover assets in the hands of a third party.
For a Pauline action to be successful the following key elements need to be established:
(f) The Plaintiff must be a creditor of the alleged fraudster;
(g) There must be a transfer of assets from the debtor to a third party recipient;
(h) The Plaintiff must show that the debtor intended to defraud his creditors; and
(i) The Plaintiff must establish that the transfer has caused them actual prejudice.
A creditor bringing a Pauline action must also prove that the debtor was insolvent at the time of the disposition or became so as a result of it. The test for insolvency applied in Esteem was the balance sheet test, although this matter was not the subject of argument and it is possible that the Court would consider arguments based on the cash flow test.
Where the third party gave cause (similar to consideration) for the assets transferred to it the creditor will need to show that the third party and the debtor were aware that the purpose of the transaction was really to defeat the debtor's creditors.
James Turnbull
Walkers