Representation of Gardner and Yuill and Aspin: [2025] JRC 144

The case concerned the administration of several companies within a corporate group subject to cross-guarantees and a contractual netting mechanism triggered under the Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005.  Upon insolvent, intercompany balances were adjusted automatically via netting.  This caused the assets of one group company to extinguish the liabilities of another.

The appointed liquidators applied to the Royal Court for direction, including a ruling on whether subrogation formed part of Jersey law and whether any rights of subrogation arose in the circumstances.

The Court held that subrogation is an established principle of Jersey’s customary law.  It also affirmed the decision of the English courts in Cheltenham & Gloucester v Appleyard that: (1) subrogation is a flexible remedy aimed at doing justice; (2) the subrogated party cannot gain more than the original creditor; and (3) it operates to prevent unjust enrichment and should be applied contextually.

The Court concluded that subrogation is available in Jersey law by operation of law, contract, or request and applicable in insolvency where one entity pays the debt of another.

This is a welcome clarification to the position of creditors and guarantees in Jersey insolvencies and affirms the compatibility of Jersey law with established English subrogation doctrines.