Jersey: Shades Of The Prison-House; Non-Payment Of Judgment Debts

In the time of Dickens, there were three prominent debtor's prisons in London: The Fleet, where Mr. Pickwick was held, The King's Bench, where Micawber was an inmate, and the Marshalsea, where Dickens' father was imprisoned, as well as the fictional William Dorrit (in Little Dorrit).

Typically, a debtor was accused by the person to whom money was owed. The accused was held several days in a sponging house, such as Coavin's in Bleak House or Moss's, in which Rawdon Crawley is held in Thackeray's Vanity Fair. If, in a few days, the money could not be raised, the debtor was imprisoned until the debt was paid. Colourful history yes, but imprisonment for debt is surely now confined to the pages of Victorian novels? The Jersey answer to that question is....almost.

The International Covenant on Civil and Political Rights ("ICCPR") is a United Nations multilateral treaty which extends to Jersey. Article 11 is in these terms: "No-one shall be imprisoned merely on the ground of inability to fulfil a contractual obligation." So, no imprisonment for debt? Almost, but not quite. As will be seen, there is nowadays a difference between can't pay and won't pay.

Historically, an unsatisfied creditor could apply to the Court for an acte à peine de prison, a remedy developed through the common law of Jersey, the existence of which was recognized and confirmed by the States as a legislative body in 1886 by the enactment of the Loi (1886) sur l'Emprisonnement pour Dettes, by which a maximum period of imprisonment of one year was laid down.

The reason for non-payment mattered not. It lay at the option of light-hearted creditors to cause their debtors to be imprisoned , to reduce them to 'petit depends' (effectively bread and water) and to leave them to meditate on the inscrutable workings of fate and society's moral opprobrium of a dishonoured debt.

Times and circumstance change. Enter Article 11 of the ICCPR – no prison 'merely on the ground of inability to fulfil a contractual obligation' I have added that emphasis because 'inability' is the key to the modern position about imprisonment for debt in Jersey. A person will not be sent to prison for debt if he or she is making appropriate efforts to pay in good faith, or is unable to pay at all and is in good faith. There is a genuine inability to pay. BUT the Court may well order imprisonment of a debtor where it is satisfied that he or she is perfectly capable of paying the debt, but is simply choosing not to do so. There is the ability to pay, but a refusal to do so. The differing treatment for 'can't pay' on one hand and 'won't pay' on the other seems perfectly fair and is certainly treaty compliant. For an exposition of the governing principles see Benest v Le Maistre [1998 JLR 213] and, as regards ECHR, D v United Kingdom [1998 JLR 236].

How might all this affect a company director whose company is refusing to pay an outstanding debt? It is certain that on the international front the Jersey Courts are determined that the Island should not be a bolt-hole for recalcitrant debtors. "... the point made by Advocate Baker that in a post judgment case, the use of the Island's financial services to hide assets so as to defeat a judgment creditor is as a matter of policy something to be discouraged, is a strong one. The reality is that assets can be and are sometimes moved around the world with speed and secrecy, and the courts should endeavour to ensure judgment debtors cannot escape those judgments with impunity." (Dalemont v Senatorov and Others [2012] JRC 014)

It is easy to suppose therefore that in a case of deliberate evasion of a debt the Court would use every power at its disposal to secure proper payment. There seems little doubt that personal imprisonment of a director is one such option. One possible route to that outcome is provided by Art 217 of the Companies (Jersey) Law 1999. The article is in these terms:

'General powers of the court

(1) Where, on the application of the Attorney General or the registrar, the court is satisfied that any person has failed to comply with any requirement made by or pursuant to this Law, or has committed any breach of duty as an officer of the company, it may order that person to comply with that requirement or, so far as the breach of duty is capable of being made good, make good the breach.

(2) The court shall not make an order against any person under this Article unless the court has given that person the opportunity of adducing evidence and being heard in relation to the matter to which the application relates.'

Refusal to make good the breach could be treated as contempt of the order to do so, and imprisonment could follow. It seems there can be no argument against the proposition that it is the duty of an officer of the company to ensure that the company meets its legal obligations – like obeying an order of the Court to pay over a sum of money to a judgment creditor. In the light of the Dalemont dictum there is every reason of public policy to suppose that the AG / Registrar would make the necessary application to the Court supposing continuing refusal by the director.

Also available is the analysis that the recalcitrant director is party to the contempt by which the company deliberately does not pay the debt ordered against it. As a participant in the contempt by aiding and assisting the company, the director could be imprisoned for contempt.

The strong statement of intent given in Dalemont v Senatorov and Others (supra) chimes well with the policy of the English Courts towards directors who act so as to put the company in breach of its obligations. See for example JSC BTA Bank v Ablyazov [2012] [2012] EWCA Civ 1411in which the court found that Ablyazov (the former chairman of the bank) had lied during cross-examination and had failed to disclose certain assets contrary to a freezing order and so was sentenced to 22 months imprisonment. See also Companaia Sud Americana de Vapores S.A. v Hin-Pro International Logistics Ltd [2013] EWHC 987 (Comm), in which the company was found to have acted in breach of the court order and the sole director of the company was held to have knowingly assisted or permitted the breach, so that the Court imposed a 3 month custodial sentence on the director. The Court held that it would be "failing in its duty if it did not impose a custodial sentence, both to punish the contempt for the Court's authority, and to deter the director from continuing to lead the company to be in breach of the order."

The Jersey Courts' determination to assist judgment creditors in the international enforcement of judgment debts is well evidenced by the decision in ENRC NV v Zamin Ferrous Limited [2015] JRC 217.

For present purposes, there is no apparent distinction between an order originating with the Jersey Court or an outside order being recognized and enforced by the Jersey Court.

Against these broad backgrounds, the position for Jersey directors can be bluntly put: if your Company is ordered to pay a sum of money, do all in your power to obey that order or face the prospect of imprisonment. The shades of Micawber and Dorrit have not quite vanished.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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