This case centred around Mr Jones, who lived and worked in Austria, and who was made bankrupt following his own application in England & Wales for a bankruptcy order.
When Mr Jones initially applied for bankruptcy, his application was refused by an Adjudicator on the ground that his COMI was outside the jurisdiction and none of the other jurisdictional requirements had been met. Mr Jones subsequently requested a review in which he presented new evidence to support his COMI being in England. This evidence included: reference to a 2018 Family Court decision determining Mr Jones' domicile to be within the English jurisdiction; a statement by him that he had been using a friend's house in England as a base to visit his children; and an Austrian residency document recording his address in Austria as a "secondary residence". The review determined that, as nothing had significantly changed to affect Mr Jones' domicile since 2018 (i.e. when the Family Court decision was determined), he met the jurisdiction requirements; and a bankruptcy order was made.
Trustees were appointed on 8 February 2022 and subsequently applied for recognition of the bankruptcy order in Austria as a first step towards realising assets there. Mr Jones objected to recognition and made an application pursuant to section 242(3) of the Austrian Insolvency Ordinance asserting that the basis on which the Trustee was seeking recognition (namely, that his main residence had been in Austria since 3 October 2012 and that he retained joint ownership of a UK property with his ex-wife) did not fulfil the registration requirements set out in section 240 of the Austrian Insolvency Ordinance . Those requirements, as set out in the application for registration, being: " (a) The centre of the debtor's main interests is in [England and Wales] and (b) The insolvency proceedings are generally comparable to Austrian insolvency proceedings; more specifically, Austrian creditors are treated as creditors from the country in which the proceedings were opened." Mr Jones' objection to recognition was successful, and the Austrian Courts refused to recognise the bankruptcy.
The absence of assets within England and the refusal by the Courts of Austria to recognise the bankruptcy caused the Trustees to question whether Mr Jones should have been made bankrupt in the English jurisdiction in the first place. Relying on section 282(1)(a) of the Insolvency Act 1986 ("the IA86"), the Trustees applied for annulment of the bankruptcy on the basis that the correct COMI had always been Austria and that the bankruptcy order ought not to have been made. Mr Jones argued inter alia that the Trustees did not have standing to make an annulment application.
Judgment
Standing
The Judge found that section 282 IA86 contains no express limitation on who may bring an annulment application. Since Parliament could have restricted standing in its drafting of section 282 but chose not to, the Court was satisfied that Parliament has conferred on the Court the power to decide standing. In so deciding whether a trustee has standing, the Court must decide whether it has a legitimate interest in the annulment application. The Judge in this case held that, if a trustee is unable to carry out their statutory functions and duties, for example, because there are no assets within the jurisdiction and the assets in the bankruptcy estate cannot be recovered from within foreign jurisdictions, a trustee will have a legitimate interest to seek annulment should that be the proper course for the bankruptcy taking into consideration the interests of creditors.
COMI
The Judge held that Mr Jones' COMI was Austria. Mr Jones had not provided any evidence of regular administration of his interests through management, organisation and control within the English jurisdiction. He had also provided no evidence of creditors having notice of the English jurisdiction being his COMI.
Annulment
As the Adjudicator's decision relied on Mr Jones' domicile, rather than COMI, to make a bankruptcy order, the Judge decided it would not be fair or just to ignore this fact when determining the annulment. In its annulment application, the Trustee relied on COMI and only gave notice of their reliance on an absence of domicile as a ground for annulment in their skeleton argument.
The Judge did find that the Trustee would be able to pursue absence of domicile as grounds for annulment and that there was a good arguable case that, by the date of the bankruptcy order, Mr Jones had intended to permanently reside in Austria. However, the Judge ultimately decided he could not make a decision on the domicile ground until Mr Jones had an opportunity to address this in further evidence. On this basis, an annulment order was not made at the hearing.
Key Takeaway
The Court will likely find that a trustee has standing to apply for annulment where the trustee has a legitimate interest in doing so. Such interest will typically arise where the trustee is unable to discharge their statutory duties and where annulment would be both appropriate in all the circumstances and in the best interests of creditors. However, other instances may also arise, such as cases where there has been payment in full, and it is convenient and proportionate for a trustee to seek the application rather than respond to it.
