Carey Olsen Secures Landmark Judgment Under New Creditors' Winding Up Regime In Jersey

• Published date: 22 December 2022
• Subject Matter: Finance and Banking, Insolvency/Bankruptcy/Re-structuring, Debt Capital Markets, Financial Services, Insolvency/Bankruptcy
• Law Firm: Carey Olsen
• Author: Mr Marcus Pallot, Dean Robson and Jamie Guyan

In the first judgment of its kind in Jersey, Advocate Marcus Pallot successfully obtained a winding up order in a contested creditors' winding up.

In this case the debtor argued the underlying debt was disputed. The Royal Court agreed with Carey Olsen that a claim is not disputed for the purposes of a creditors' winding up application unless it is the subject of a 'substantial dispute'.

New regime

On 1 March 2022 a new creditor instigated insolvent company winding-up regime came into force in Jersey. Carey Olsen discussed it in detail here. From that date a creditor - for the first time in Jersey - may apply to the Royal Court for an order to commence a creditors' winding up of a Jersey company, where they have a liquidated claim of '3,000 or more and: (i) the company is unable to pay its debts; (ii) the creditor has evidence of the company's cash flow insolvency; or (iii) the creditor has the consent of the company.

This concept will be extremely familiar to those who have dealt with insolvent winding up provisions in England and Wales and has brought Jersey in step with many other major jurisdictions. The regime is contained in Article 157A - D of the Companies (Jersey) Law 1991. A part of the new process is that a company is deemed unable to pay its debts for the purposes of (i) above if: (i) the creditor has served on the company a statutory demand in a prescribed form requiring it to pay the sum due; and (ii) the company has for 21 days after service of that demand on the company failed to pay the sum or dispute the debt due to the reasonable satisfaction of the creditor.

Background

Carey Olsen represented the successful creditor, Vidya A.G., (the 'Creditor') in its application for a creditors' winding up of Sumner Group Holdings Limited (the 'Debtor') as set out in the Royal Court's judgment of 28 November 2022.The Creditor had a liquidated claim for $120,000 against the Debtor in respect of a consultancy agreement whereby it would provide consultancy services in return for a monthly fee of $20,000. The monthly payments were not paid, and the agreement had a minimum 6-month term, therefore the Creditor was owed $120,000. The Creditor served a statutory demand but the Debtor disputed the debt on three grounds:

1. $20,000 had in-fact been paid for the first tmonth of the consultancy agreement;
2. The agreement was terminated by agreement with effect from the end of the third month of the agreement: and
3. The Creditor had failed to provide any of the services...