Restructuring & Insolvency analysis: The debtor admitted owing a substantial debt to the petitioning creditors but disputed the court’s jurisdiction over the debtor under section 265 of the Insolvency Act 1986. The petitioning creditors claimed that the debtor’s centre of main interests (COMI) was in England and Wales and/or that the debtor had had a place of residence in England and Wales at any time in the period of three years ending on the day on which the petition was presented (the relevant time). The court rejected these arguments and dismissed the petition, despite the debtor living in London and owning two vacant residential properties there during the relevant time. Like all jurisdiction cases, the decision was heavily fact-dependent. The judgment nevertheless contains useful analysis of all relevant decisions on both COMI and place of residence. Insolvency and Companies Court (ICC) Judge Greenwood addressed issues such as the date on which COMI should be assessed, the meaning of habitual residence, and the essential requirements of a place of residence.
What are the practical implications of this case?
This case constitutes a warning to creditors not to assume the court has jurisdiction just because their dealings with the debtor were in England and Wales and the debtor owns property there. Where the debtor has a foreign connection, a creditor may find it worthwhile to investigate the debtor’s business and living arrangements before presenting a bankruptcy petition.
The law concerning bankruptcy jurisdiction is complex and nuanced. Decisions are relatively rare. Practitioners may find this judgment useful to assess the current position of the authorities in respect of COMI and place of residence.
What was the background?
The debtor owns a very valuable property in London. In 2017, the petitioning creditors entered an exclusivity agreement to purchase the property and paid a deposit. The agreement provided for the debtor to repay the deposit in circumstances which occurred.
The petitioning creditors obtained judgment for the repayment of the deposit, costs, and interest. The debtor failed to pay costs and interest and the petitioning creditors served a statutory demand and bankruptcy petition, both by leaving them at the property. The petition was served on 18 April 2022.
The debtor challenged jurisdiction before the first hearing of the petition and evidence was filed on this issue. The debtor stated that she was a permanent resident of Ukraine where she retained very significant business interests. The debtor had two investment properties: the first (P1) was the one she had tried to sell to the petitioning creditors, and the second (P2) had been repossessed in 2020. Both were unoccupied and the sales particulars showed P1 to have been unfurnished since 2014. The debtor had rented a flat (P3) for her and her family to stay in when in London but returned it prior to the relevant time.
The debtor had come to London in 2021 for medical reasons but was unable to return because of the war. The debtor was currently staying with friends.
The petitioning creditors relied on documents which gave the debtor’s address as P1 or the UK, including contracts, witness statements, Companies House entries, and correspondence from previous solicitors. The petitioning creditors also relied on notes of conversations by the debtor where she referred to P2 as ‘home’.
In cross-examination, the petitioning creditors asserted that P1, P2, and/or P3 were places of residence within the relevant time. From this, the petitioning creditors argued that the debtor’s habitual residence (and therefore COMI) was in England and Wales on the date the petition was presented and that she had a place of residence in England and Wales at some time during the relevant time.
The petitioning creditors did not argue:
- that the debtor had a place residence in England and Wales by reason of her stay with friends
- for the purpose of COMI that the debtor was an individual exercising an independent
business or professional activity, or
- that the debtor had carried on a business in England and Wales during the relevant time
What did the court decide?
COMI by habitual residence
ICC Judge Greenwood considered in depth the authorities on an individual debtor’s COMI. He agreed with Counsel that this should be assessed on the date the petition was presented, contrary to the decision of Lord Justice Chadwick in Shierson v Vlieland-Boddy  1 WLR 3966. The judge decided that the recent Court of Justice decision in MH v OJ, Case C-253/19,  1 WLR 2498 emphasised points made in previous judgments. He also considered the recent Court of Appeal decision in Re Melars Group Ltd  EWCA Civ 1419. The judge rejected criticism of the reasoning in Kooter v OR  EWHC 2683 (Ch) and Stojevic v OR  BPIR 141.
The court accepted the debtor’s evidence as generally credible. It accepted that the debtor lived in a substantial property in Kyiv and with partners owned substantial businesses in Ukraine. This was despite the lack of documentary support. The judge rejected the argument that the debtor’s COMI was in England and Wales because the publicly available material supported this connection. This was outweighed by objective circumstances of the debtor’s life in Ukraine, even if unknown to the petitioning creditors.
Place of residence
ICC Judge Greenwood also considered in depth the authorities on a place of residence. There was no single test. He referred specifically to Re Nordenfelt  1 QB 151 where the Court of Appeal
refused to reverse the dismissal of a petition against a debtor who had moved abroad, sold some furniture and packed the remainder, and unsuccessfully attempted to let his English property, finally selling the same just within the then period of 12 months. Although the property remained available for his occupation, by the time he had packed his furniture, the debtor had abandoned it as his dwelling house.
The court considered and rejected each of P1, P2, and P3 as places of residence for The debtor. Although P1 was unoccupied, it was unfurnished. It was not a residence for The debtor, it was an asset in the course of being sold. P2 was similarly an investment and the debtor’s use of the word ‘home’ was not significant. P3 was a place of residence but had been returned by the debtor prior to the relevant.
- Court: Insolvency and Companies List (ChD), Business and Property Courts of England and
Wales, High Court of Justice
- Judge: Insolvency and Companies Court Judge Greenwood
- Date of judgment: 28 June 2023