BR-2024-000795 - [2025] EWHC 2652 (Ch)

Fecha: 16-Oct-2025

Legal Background

Legal Background

18.

The Court’s power to annul conferred by section 282 of the Act provides as follows:

“282 Court’s power to annul bankruptcy order.
(1)
The court may annul a bankruptcy order if it at any time appears to the court—
(a)
that, on any grounds existing at the time the order was made, the order ought not to have been made, or ....
(3)
The court may annul a bankruptcy order whether or not the bankrupt has been discharged from the bankruptcy.
(4)
Where the court annuls a bankruptcy order (whether under this section or under section 261 in Part VIII)—
(a)
any sale or other disposition of property, payment made or other thing duly done, under any provision in this Group of Parts, by or under the authority of the official receiver or a trustee of the bankrupt’s estate or by the court is valid, but
(b)
if any of the bankrupt’s estate is then vested, under any such provision, in such a trustee, it shall vest in such person as the court may appoint or, in default of any such appointment, revert to the bankrupt on such terms (if any) as the court may direct;
and the court may include in its order such supplemental provisions as may be authorised by the rules.”
18.1
The law concerning the application of this provision will be addressed to the extent necessary within the decision below but it is to be noted at this stage:
a.
Bankruptcy is a class remedy and the Court must properly investigate the facts before exercising its unfettered discretionary power to annul.
b.
When considering whether the order ought not to have been made, the Court may address facts and circumstances not presented to the decision maker provided they existed at the time of the order but it will only be in exceptional circumstances that arguments made and rejected when the order was made (or at an earlier hearing) can be relitigated. Otherwise, rescission may be an available remedy.
c.
If section 282(1)(a) of the Act is successfully invoked because a bankruptcy order was made without territorial jurisdiction, the judicial discretion to exercise the power to annul will inevitably be exercised in favour of annulment.

19.

Territorial jurisdiction is identified within section 263I of the Act. It requires one of three options to be satisfied for an adjudicator to have jurisdiction to determine a bankruptcy application:

Option 1 – (“The COMI Option”)

“(1)(a) the centre of the debtor's main interests [having the same meaning as Article 3 of the EU Insolvency Regulation, 2015/848] is in England and Wales”.

There has been extensive case law concerning the test of COMI and it is unnecessary to repeat the many formulations that have arisen except to the extent necessary when considering the application of that test to this application. I will apply, for example, the decisions of: O’Donnell v The Governor and Company of the Bank of England [2012] EWHC 3749, [2013] BPIR 509, Newy J., as he then was; Re Budniok [2017] EWHC 368 (Ch), Mr Registrar Baister, as he then was; and Mr Justice Snowden’s (as he then was) decision in Re Videology Limited [2018] EWHC 2186 (Ch).

Option 2 (“the Establishment Option”) – COMI in a Member State and an Establishment (as inserted by The Insolvency (Amendment) (EU Exit) Regulations 2019 (SI 2019/146 from 31 December 2020):

“(ab) the centre of the debtor's main interests is in a member State (other than Denmark) and the debtor has an establishment [as defined by Article 2(10) of the EU Regulation] in England and Wales”.

This is not relied upon.

Option 3 (“the Domicile etc Option”) – This requires one of the following tests to be satisfied (as amended by the above-mentioned Regulations):

“(b)
the [following] test in subsection (2) is met [namely] .
(2)(a) the debtor is domiciled in England and Wales, or
(2)(b) at any time in the period of three years ending with the day on which the application is made to the adjudicator, the debtor—
(i)
has been ordinarily resident, or has had a place of residence, in England and Wales, or
(ii)
has carried on business in England and Wales”.

19.1

There is no need to dwell on residence or business. Although raised positively by Mr Jones in evidence, they were not pursued in submissions, and rightly so. No one asserts territorial jurisdiction on those bases. There is an issue whether the annulment application’s grounds assert that Mr Jones was not domiciled within the jurisdiction. However, as will be seen, for the purposes of the Domicile etc Option, domicile features heavily and the relevant law needs to be addressed.

19.2

People are born with a domicile of origin. Unless the child is abandoned at birth, this will be the father’s or mother’s domicile at the time of birth which one depending on whether the child is legitimate and born during the father’s lifetime. No-one suggests that Mr Jones’s domicile of origin is other than England.

19.3

Domicile may change by adoption or parental order and/or if a domicile of choice (“Domicile of Choice”) is acquired by a combination of residence and an intention of permanent or indefinite residence (see Rules 11 and 12 of Dicey, Morris & Collins, “The Conflict of Laws” as referred to me by Mr Pennington-Benton). The editors opine upon the Domicile of Choice test as follows in Chapter 6 (excluding the footnotes) (my underlining for emphasis):

6–038 Residence. For the purpose of this Rule ‘‘residence’’ means very little more than physical presence. But it does mean something more: thus a person is not resident in a country in which he or she is present ‘‘casually or as a traveller.’’ ‘Residence in a country for the purposes of the law of domicile is physical presence in that country as an inhabitant of it.’ A person’s state of mind may be relevant to the issue whether he or she is present in a country as a traveller or as an inhabitant; but, subject to this point, residence may be established without any mental element. There is no requirement of animus residendi....

6-039 It is not, as a matter of law, necessary that the residence should be long in point of time: residence for a few days or even for part of a day is enough.... The length of the residence is not important in itself: it is only important as evidence of animus manendi [i.e. the intention of an individual to establish a permanent residence in a particular location]....

6–042 Intention. The intention which is required for the acquisition of a domicile is the intention to reside permanently or for an unlimited time in a country. ‘‘It must be a residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation.’’ This intention must be directed exclusively towards one country. Thus a person who leaves the country of the domicile with the intention of settling in one of several other countries does not acquire a domicile in any of those countries. It is not necessary to prove an intention to acquire a domicile: indeed a lay person is unlikely to form such a juristic intent. A person who determines to spend the rest of their life in a country clearly has the necessary intention even though he or she does not consider that determination to be irrevocable. It is, however, rare for the animus manendi to exist in this positive form: more frequently a person simply resides in a country without any intention of leaving it, and such a state of mind may suffice for the acquisition of a domicile of choice. The fact that a person contemplates that he or she might move is not decisive: thus a person who intends to reside in a country indefinitely may be domiciled there although he or she envisages the possibility of returning one day to their native country ... If a person intends to reside in a country for a fixed period only, they lack the animus manendi, however long that period may be. The same is true where a person intends to reside in a country for an indefinite time but clearly intends to leave the country at some time. In deciding whether a person has the intention to reside permanently or indefinitely in a country it is relevant to consider whether he or she became a naturalised citizen of that country, but it is now settled that this consideration is not decisive as a matter of law ... Residence without intention is insufficient: this is shown by the many cases in which residence was clearly established and in which the decisions turned solely on the question whether the propositus had the necessary intention.”.

19.4

In a nutshell, therefore, the domicile test for the Domicile etc Option has two requirements: residence as an inhabitant of the country, not, for example, as a traveller; and an intention, whether express or implied from the facts, to reside there permanently or for an indefinite period.

20.

Those three Options have applied since 31 December 2020 when the transition period for the UK leaving the EU single market ended. This departure has caused the difficulties faced by the Trustees. As a matter of the law of England and Wales, the Bankruptcy Order applies to all the assets of Mr Jones’s bankruptcy estate wherever situated in the world. All creditors, wherever located, must prove in the bankruptcy rather than pursue their own remedies. In practice, however, the Trustees must seek to recover assets located abroad through the application of the laws of the relevant country. Provided the insolvency proceedings are recognised, the Trustees should be able to exercise their powers in Austria, subject to them adhering to Austrian law (in particular, regarding dealings with the debtor’s assets and the provision of information to employees). If not, they must look to other recovery and enforcement remedies whether relying upon personal jurisdiction or the jurisdiction of the country where the assets are.

21.

Prior to 31 December 2020, the UK was able to obtain recognition of its insolvency proceedings through EU Membership under the EU Insolvency Regulation 2015 (2015/848) (“the EU Regulation”). Now, each EU State is a foreign jurisdiction to be treated in the same manner as any other foreign country subject to specific legislation and (to the extent relevant) treaty. Therefore, any application for recognition of the bankruptcy will have to be made in accordance with the laws of the EU State concerned. The UNCITRAL Model Law on Cross Border Insolvency has been adopted by only four EU Member States (Greece, Poland, Romania and Slovenia). Recognition of Mr Jones’s bankruptcy is dependent upon the laws and decisions of Austria and its Courts.

22.

The UK Government’s on-line guide to recognition and enforcement includes the following information (which, whilst extremely useful, is only for guidance and has no force in law):

“Recognition is available by operation of law under the Austrian Insolvency Code, which recognises the effects of foreign insolvency proceedings provided the “centre of main interests” is in the foreign state and the proceedings are comparable to Austrian insolvency proceedings (which in particular means that Austrian creditors are not discriminated against). However, this recognition will not be available to the extent that insolvency proceedings have already been opened, or interim measures imposed, in Austria, or if recognition would violate Austrian public policy. Additional requirements apply if enforcement measures are to be taken in Austria.”

23.

This appears consistent with the Trustees’ understanding. There is no reference to domicile either within the Guide or (more pertinently) within section 240 of the Austrian Insolvency Ordinance. However, the extent to which domicile is relevant to bankruptcy jurisdiction and recognition in Austria is a matter of Austrian law and, therefore, of expert evidence before this Court. The evidence for the application includes certain communications from lawyers in Austria but no direction for expert evidence has been sought by either side. Nevertheless, the only evidence available leads to the conclusion that COMI must be established. Whether that is at the date of the application for recognition, as posited (albeit surprisingly) on behalf of Mr Jones is not something addressed by expert evidence and can be left as a moot point without expert opinion.

24.

Refusal of recognition means the Trustees must find alternative legal remedies if they are to recover the bankruptcy estate. Whether they can, and what those remedies may be is also a matter for Austrian law. It is the Trustees’ position that there are no such remedies, that they can no longer carry out their functions and that there should be annulment. This stymies the creditors. They cannot avoid the consequences of the Bankruptcy Order. They cannot bring their own proceedings or execute for themselves, at least not without delivering up the proceeds to the Trustees for distribution following the statutory waterfall. This outcome of the law means on the face of it, as the Trustees assert, that the Bankruptcy Order is detrimental to the interests of the creditors and only beneficial to Mr Jones because it has enabled him to retain control and receive the benefits of the bankruptcy estate.