In a recent decision of the Royal Court in In Re Tantular  JRC 114 the Court stated at para.34 that an injunction or saisie judiciaire made against a Trustee to prevent any dealing with a foreign asset also prevented a bank/mortgagee from dealing with its mortgage that was secured on such asset. Unless overturned on appeal, this decision could have enormous repercussions for lenders outside Jersey, making it necessary for them to go to the cost of applying to the Royal Court for permission to transfer or enforce their security despite the fact that such an injunction has been made against a separate third party. But was the Royal Court right?
This particular case involved an application by the Attorney General of Jersey (acting upon behalf of the Indonesian government) for a saisie judiciaire under article 16 of the Proceeds of Crime (Jersey) Law 1999 as modified under certain regulations. It is not actually clear whether or not these statutory provisions are intended to apply to property outside Jersey and there is a conflict in the approaches so far taken in Jersey (Re Kaplan) with that taken in Guernsey (King v HM Procureur.) Certainly when article 16(5) refers to Jersey property remaining subject to existing Jersey security, an extra territorial jurisdiction is not hinted at in these provisions. However, this issue remains for another day.
This month the case came before the Jersey Court of Appeal where Advocate Timothy Hanson appeared for the Appellants. It was submitted on appeal that:
(1) the overarching effect of article 16(5) clearly conveyed the legislative intention that the saisie judiciaire (and asset) is subject to existing security rights which may be enforced or transferred without further order of the court;
(2) there was no logical reason for a stricter approach to foreign assets where indeed, the court had to be careful not to act oppressively against third parties;
(3) the rights of a mortgagee represent separate property to that of a mortgagor (who was subject to the injunction) and article 16(4)(1)(b) further meant that the saisie could only extend to realisable property held by the Trustee;
(4) the mortgagee’s rights (being its own property) were not tainted or “realisable;”
(5) accordingly, the saisie judiciaire did not prevent the bank/mortgagee dealing with its own property and, for example, transferring its mortgage to a third party.
These submissions appear to have been favourably received by the Court of Appeal. It is anticipated that the Court of Appeal will express its judgement, on this important point of public interest, in the near future.