(1) Connecting Factor - Where is the debtor's Centre of the Main Interests ('COMI')

Given the definition of 'centre of the debtor’s main interests' in section 263I(1)(a) and (ab) has 'the same meaning as in Article 3 of the EU Regulation' (section 263I(4); i.e. the Retained Insolvency EU Regulation), it is necessary to go straight to considering how Article 3 defines 'centre of the debtor’s main interests'[8].

At the top level, the location of an individual's COMI is '...the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' (Article 3). This is ultimately what determines where a individual's COMI is. But Article 3 also contains provisions, which create some preceding stages to addressing/answering this test. In Kooter No.1, Deputy ICC Judge Agnello KC referred to the elements here as COMI 'attributes', deriving the following (Kooter No.1 involved a pre 31.12.20 version of Article 3, but this makes no difference here[9a]), which she set out, at paragraph 17:

'(a) The place where the debtor conducts the administration of its interests on a regular basis;

(b) A place ascertainable by third parties, and in particular creditors and prospective creditors;

(c) For an individual engaged in a business or professional activity, rebuttably presumed to be that individual's principal place of business;

(d) For any other individual, rebuttably presumed to be the place of the individual's habitual residence.'

The Alternative Presumptions

In terms of working through the relevant test, the starting point is to discern which of the two rebuttable[9b] presumptions applies to the individual debtor? These two rebuttable presumptions will be labelled, for convenience, respectively as:

(a) the individual's 'Principal Place of Business' Presumption; and

(b) the individual's 'Habitual Residence' Presumption.

The relevant test to apply, to determine which of the two presumptions apply, is: On the relevant date, was the '...individual exercising an independent business or professional activity'?

If yes, then one presumption applies; if no, a other presumption applies. In other words, if the individual:

(1) was '...exercising an independent business or professional activity', then the Principal Place of Business Presumption will (subject to the disapplying provision dealt with below) apply;

(2) was not '...exercising an independent business or professional activity', then the Habitual Residence Presumption will (subject to the disapplying provision dealt with below) apply;

In determining this, as with other aspects,'COMI is very much a factual investigation.' and 'In order to ascertain which of the rebuttable presumptions applies, the starting point is to consider what is set out in [the bankrupt's] application for bankruptcy.' (Kooter No.1, paragraph 18). An illistration of a judge going through the evidence on '...individual exercising an independent business or professional activity', can be found in Kooter No.1[10].

Disapplying Provision - If there has been movement in the last 3/6 months back

As will be apparent, these two presumptions do not apply where there has been a movement in the individual's: (i) 'principal place of business'; or, as the case maybe, (ii) 'habitual residence':

(1) within the period immediate preceding the date of the 'request for the opening of insolvency proceedings'. The length of that period immediately preceding the relevant date, is:

(a) 3 months, for the Principal Place of Business Presumption; and

(b) 6 months, for Habitual Residence Presumption; and

(2) as between the United Kingdom and a Member State (other than Denmark[11]) (it matters not whether it was to, or from, the United Kingdom, to the Member State).

The location of the individual's COMI

Where the relevant would-be presumption does not apply (because of the individual's: (i) 'principal place of business'; or, as the case maybe, (ii) 'habitual residence', has moved in the relevant preceding period), the individual's COMI will simply be '...the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' (Article 3).Where a presumption does apply, the location of the individual's COMI will again ultimately be '...the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' (Article 3). But the structure requires the presumption to be applied, unless the presumption is rebutted (since of course, the presumption is rebuttable rather than irrebutable). In other words, while there will be a presumption that the place where the individual's (i) 'principal place of business'; or, as the case maybe, (ii) 'habitual residence' is, will be the place where that individual '...conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' (and so is that individual's COMI), a Court can be persuaded, by evidence, that that is not the case. That, while the individual's (i) 'principal place of business'; or, as the case maybe, (ii) 'habitual residence' is in one place, the evidence shows that the individual's '...conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' from a different place. And it is that (different, second) place, which determines the individual's COMI.

Where the Individual is exercising an independent business or professional activity?

Where: (i) the individual is 'exercising an independent business or professional activity', and (ii) the Principal Place of Business Presumption is not disapplied, then, in accordance with the Principal Place of Business Presumption, the next question is: where is the individual's 'principal place of business'? since wherever that is, is presumed (rebuttably) to be where the individual '...conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' and so be the individual's COMI.

Where the Individual is not exercising an independent business or professional activity?

Where: (i) the individual is not 'exercising an independent business or professional activity', and (ii) the Habitual Residence Presumption is not disapplied, then, in accordance with the Habitual Residence Presumption, the next question is: where is the individual's 'habitual residence'? since wherever that is, is presumed (rebuttably) to be where the individual '...conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' and so be the individual's COMI.

Assistance here can be obtained from Kooter No.1, wherein the Deputy Judge said, under the subheading 'Habitual Residence'. However, before setting out what the Deputy Judge said, it should be noted that:

(1) the law report contains apparent errors:

(a) the words in brackets are missing;

(b) the '17' before 'the person's situation' should be '(b)';  with '(a)' coming before the words 'duration and continuity...'

(2) Regulation No 987/2009 is a reference to: Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems (Text with relevance for the EEA and for Switzerland) (Retained EU Legislation). Article 11 was entitled 'Elements for determining residence' but Article 11 was repealed on 31.12.20 (repealed by Social Security Co-ordination (Revocation of Retained Direct EU Legislation and Related Amendments) (EU Exit) Regulations 2020/1508 Pt 2 reg.3(b) (December 31, 2020: revoked subject to savings specified in SI 2020/1508 Pt.3)). The Deputy Judge describes the list in Article 11 as merely a 'useful guide' so, in the author's view, the fact Article 11 has now been repealed, should not affect the law here - that the list is a 'useful guide' to determining 'habitual residence'.

With those points noted, the relevant passage from the Deputy Judge in Kooter No.1 can be quoted. The Deputy Judge said, paragraphs 27 and 28:

'Habitual residence in the applicable EU context is a factual exercise having regard to all the circumstances as to a person's real choice of country as a state of residence. The principles are well known and I only provide a short summary in this judgment. A distinction is drawn between a short term stay or presence and habitual residence. Non exhaustive criteria include the following (article 11 of Regulation No 987/2009):-

"the duration and continuity of presence on the territory of the Member [States concerned]

17 the person's situation, including:

(i) the nature and the specific characteristics of any activity pursued, in particular the place where such activity is habitually pursued, the stability of the activity, and the duration of any work contract;

(ii) his family status and family ties;

(iii) the exercise of any non-remunerated activity;

(iv) in the case of students, the source of their income;

(v) his housing situation, in particular how permanent it is;

(vi) the Member State in which the person is deemed to reside for taxation purposes."

Using the above as a useful guide...' [the Deputy Judge then went on an consider the facts in Kooter No.1]

Other points the Deputy Judge made in In Kooter No.1, include:

(1) 'The cases make it clear that...evidence of permanent residence needs to be genuine, not be an illusion and have a quality of presence.' (paragraph 35);

(2) 'A change of habitual residence needs to be, in my judgment, genuine.' (paragraph 37) and that '...an attempt ... to create an illusion of habitual residence in England and Wales' will not be sufficient. (paragraph 37)

How the Deputy Judge analysed the evidence on habitual residence in Kooter No.1, can be found in the footnote[12a].

In Portrait (a section 265 creditors bankruptcy case), ICC Judge Greenwood considered Art 3(1) of the Retained Insolvency Regulation where the debtor: (a) was not alleged (by any party) to have been 'an individual exercising an independent business or professional activity' (when the petition was presented; paragraph 41); and (b) the Habitual Residence Presumption was not disapplied (paragraph 41). ICC Judge Greenwood:

(1) noted that the parties agreed that the earlier, pre-Brexit authorities, remained applicable (paragraph 44);

(2) said that Re Budniok [2017] EWHC 368 ('Budniok') (a decision of Mr Registrar Baister (as he then was)) contained 'a broad and useful summary' (paragraph 44 of Portrait) of the law here, at paragraphs 80-81 of Budniok. ICC Judge Greenwood in Portrait quoted that summary (so far as material):

“81. I turn next to the relevant law. Although it is set out in many cases I will take a short cut by recycling a summary I made relatively recently of the relevant provisions of the EC Regulation and related material and by way of attempt to draw together the factors to be taken into account as they emerged from the case law (see Doyle v Quinn [2015] BPIR 226 ….

"…

[ 38 ] Recital (13) [of the Regulation] provides:

'The "centre of main interests" should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.'

[ 39 ] The Virgós-Schmit report comments on 'centre of main interests' (in para 75):

'The concept of "main interests" must be interpreted as the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.

The rationale of this rule is not difficult to explain. Insolvency is a foreseeable risk. It is therefore important that international jurisdiction (which, as we shall see, entails the application of the insolvency laws of that Contracting State) be based on a place known to the debtor's potential creditors. This enables the legal risks which would have to be assumed in the case of insolvency to be calculated.

By using the term "interests", the intention was to encompass not only commercial, industrial or professional activities, but also general economic activities, so as to include the activities of private individuals (e.g. consumers). The expression "main" serves as a criterion for the cases where these interests include activities of different types which are run from different centres.

In principle, the centre of main interests will in the case of professionals be the place of their professional domicile and for natural persons in general, the place of their habitual residence.'

[ 40 ] It will be seen from the foregoing (a) that the 'interests' to which the Regulation refers are primarily economic: they include commercial, financial and professional activities, but also consumer activity; (b) that the word 'main' is important: a debtor may administer his interests in more than one centre; (c) that a professional person's centre of main interests is likely to be the place of his professional domicile, but that otherwise for natural persons it is likely to be that person's habitual residence.

[ 41 ] The leading English authority on the application of the EC Regulation remains Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170. A number of important principles emerge from that case.

[42] The first [this comment dealt with the issue of date of assessment...]... Secondly, the location of the centre of main interests falls to be determined in the light of the facts as they are at the relevant time, but those facts include historical facts. Thirdly, the court must have regard to the need for the centre of main interests to be ascertainable by third parties, in particular creditors and potential creditors. But, as Chadwick LJ noted (at para 55):

'There is no principle of immutability. A debtor must be free to choose where he carries on those activities which fall within the concept of "administration of his interests". He must be free to relocate his home and his business. And, if he has altered the place at which he conducts the administration of his interests on a regular basis, by choosing to carry on the relevant activities (in a way which is ascertainable by third parties) at another place, the court must recognise and give effect to that.'

Chadwick LJ went on to note that a debtor's freedom to move could be for a self-serving purpose, even where insolvency was threatened. He also noted, however, that:

'In circumstances where there are grounds for suspicion that a debtor has sought, deliberately, to change his centre of main interests at a time when he is insolvent, or threatened with insolvency, in order to alter the insolvency rules which will apply to him in respect of existing debts, the court will need to scrutinise the facts which are said to give rise to a change in the centre of main interests with that in mind. The court will need to be satisfied that the change in the place where the activities which fall within the concept of "administration of his interests" are carried on which is said to have occurred is a change based on substance and not an illusion; and that that change has the necessary element of permanence.'

[ 43 ] There is also a significant body of first instance case-law dealing with the factors the courts will take into account when dealing with what appears to be forum shopping, but the most comprehensive list is, I think, to be found in the judgment of HHJ Purle QC, sitting as a High Court judge, in Sparkasse Hilden Ratingen Velbert v (1) Benk (2) The Official Receiver [2012] EWHC 2432 (Ch), [2012] BPIR 1258, ChD (paras [19] and [22]), which, not for the first time, I gratefully adopt (with minor editorial changes):

(a) An individual's COMI [centre of main interests] is where he can be contacted; this will normally be his habitual place of residence (see Geveran Trading Co Ltd v Skjevesland [2003] BPIR 73, [2003] BCC 209, ChD, at 89; upheld on appeal Skjevesland v Geveran Trading Co Ltd [2002] EWHC 2898 (Ch), [2003] BPIR 924, ChD);

(b) A person's COMI must have an element of permanence (see Official Receiver v Mitterfellner [2009] BPIR 1075, ChD at paras [5] and [6]);

(c) The COMI must be ascertainable by third parties (see Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at para [54]);

(d) an individual is free to re-locate his COMI, even on the eve of insolvency; what a court must determine on the facts is whether the change in COMI is one of substance or a mere illusion (see Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at para [55]);

(e) A debtor can only have one COMI;

(f) A debtor's COMI is, in the case of professionals, the place of their professional domicile and for natural persons in general, the place of their habitual residence (Virgos-Schmidt Report, at para 75 and Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170 , at para [47]);

(g) 'A man's habitual residence is his settled, permanent home, the place where he lives with his wife and family, […] the place to which he returns from business trips elsewhere or abroad …' (Stojevic v Official Receiver [2006] EWHC 3447 (Ch), [2007] BPIR 141, ChD at para [59] and Re Eichler (No 2) (A Bankrupt); Steinhardt v Eichler [2011] BPIR 1293, at para [142](iv));

(h) Whilst a debtor's choice as to where he conducts the administration of his affairs may be subjective, where he actually carries on the administration of his affairs on a regular basis such that it is ascertainable by third parties and by the court is an objective question ( Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at para [43] and [47]; Re Eichler (No 2) (A Bankrupt); Steinhardt v Eichler [2011] BPIR 1293, at para [141](viii));

(i) 'Regular administration' of a debtor's interests means that the court must look for the place from which the debtor exercises the management, organisation and control of his interests (Stojevic v Official Receiver [2006] EWHC 3447 (Ch), [2007] BPIR 141 , at para [28] and Re Eichler (No 2) (A Bankrupt); Steinhardt v Eichler [2011] BPIR 1293, at para [142](i));

(j) The term 'on a regular basis' indicates 'a quality of presence', 'a degree of continuity', 'an idea of normality', 'a stable link with the forum' and 'a degree of permanence' (Stojevic v Official Receiver [2006] EWHC 3447 (Ch), [2007] BPIR 141, at para [29] and Re Eichler (No 2) (A Bankrupt); Steinhardt v Eichler [2011] BPIR 1293, at para [142](ii));

(k) Particular regard must be had for the COMI to be ascertainable by third parties, in particular creditors and potential creditors (Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at para [55]);

(l) Whilst the date on which the COMI is to be established is the date of presentation of the petition, evidence as to a debtor's activities and actions at other times may be significant in that they cast light on the truth or otherwise of his claim to have had his COMI in England at the relevant time ( Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at paras [47] and [55]);

(m) If the debtor relocates in the face of potential insolvency, the court must scrutinise the facts and determine whether the change in the place of the administration of interests is based on substance or is an illusion (Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170 , at para [55]);

(n) That change must also have an element of permanence (Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 3966, [2005] BPIR 1170, at para [55] and Re Eichler (No 2) (A Bankrupt); Steinhardt v Eichler [2011] BPIR 1293, at para [141](vi)).

To those matters I would add:

'[A] debtor does not appear to be obliged to advertise his centre of main interest but nor may he hide it. It should be reasonably or sufficiently ascertainable or ascertainable by a reasonably diligent creditor' (per Deeny J in Irish Bank Resolution Corporation Ltd v Quinn [2012] NICh 1, [2012] BPIR 322 , NI ChD at para 28)".[12b]

ICC Judge Greenwood in Portrait noted that there is now the ECJ decision in MH v OJ (Case C-253/19)[12c], where the ECJ considered 'the nature of an individual debtor’s relevant administered “interests”, and the rationale of the presumption based on his or her habitual residence' (paragraph 45). At paragraph 46, ICC Judge Greenwood noted that the ECJ in MH v OJ emphasized:

'i) first, that a debtor’s COMI is to be established by reference to matters both “objective and ascertainable by third parties”, to “ensure legal certainty and predictability”...

ii) second, that in assessing “ascertainability”, special consideration should be given to creditors, and to their perception of the place of administration by the debtor of his or her interests;

iii) third, that the COMI is to be determined following an “overall assessment” of all the objective criteria ascertainable by third parties, and in particular, by creditors;

iv) fourth, that the interests in question are financial and economic, and entail a consideration of the debtor’s economic activities, including economic decision making, earning and spending revenue, and holding assets;

v) fifth, the rationale of the presumption based on habitual residence is that there is a “strong possibility” that the place of habitual residence is the place where the debtor’s interests are administered.'

Expanding on point ii above, ascertainability, ICC Judge Greenwood in Portrait said:

(1) ascertainability is 'an important aspect of COMI' (paragraph 48), but this begged the question 'ascertainable by whom, how and by reference to which facts or matters?' (paragraph 48)

(2) Re Melars Group Ltd ('Melars') consider these interrogatories about ascertainable, at each stage of the case (1st instance before Deputy ICC Judge Baister; on first appeal before Miles J [2021] EWHC 1523 (Ch); and second appeal before the Court of Appeal [2022] EWCA Civ 1419). The judgments are considered in a footnote, but the answer is, essentially, typical creditors of the debtor[12d].

Expanding on point iv above, ICC Judge Greenwood in Portrait said:

(1) 'the question ultimately at issue concerns matters economic and financial, rather than social and familial' (paragraph 47) and that '...factors relating to a debtor’s social or family situation are material only insofar as they have economic implications (and may in any event not be “ascertainable” in the relevant sense)' (paragraph 47); further

(2) of “family status and family ties” in order to determine a debtor’s habitual residence:

'In my view, such matters are undoubtedly relevant to the determination of a debtor’s habitual residence, albeit that the ultimate issue concerns the place of administration of economic and financial interests by reference to matters both objective and ascertainable, in particular from the perspective of creditors – habitual residence creates merely a presumption.' and

(3) the sense or gist of the concept express by Mr Registrar Jacques in Stojevic v OR [2007] BPIR 141 ('Stojevic'), at paragraph 59, 'continues to be useful and relevant' (paragraph 47), namely:

“Essentially … a man’s habitual residence is his settled, permanent home, the place where he lives with his wife and family, until, in the case of the younger members of the family, they grow up and leave home, the place to which he returns from business trips elsewhere or abroad.”

(2) Connecting Factor - COMI in a Member State (not Denmark) and Establishment in England and Wales

Where a individual's COMI is not in England and Wales (and so, section 263I(1)(a) does not apply), a section 263I(1)(ab) Connecting Factor might still be established. For this Connecting Factor to be established, the individual must have:

(1) a COMI in a Member State (other than Denmark); and

Establishing COMI in a Member State (other than Denmark) (as distinct from any other country in the world) will involve the same question of identifying the place where the individual '...conducts the administration of its interests on a regular basis and which is ascertainable by third parties.' (Article 3).

(2) an 'estabilshment' in England and Wales.

The word 'establishment', which 263I(1) of the 1986 Act/Article 2(10) of the Retained Insolvency EU Regulation states that 'establishment' here '...means any place of operations where a debtor carries out or has carried out in the 3-month period prior to the request to open insolvency proceedings a non-transitory economic activity with human means and assets.' In other words, has the individual, in the 3-month period prior to the request to open insolvency proceedings, carried out in England or Wales, a 'non-transitory economic activity with human means and assets' operation.

Two things:

(1) this is a newly introduced Connecting Factor. Section 263I(1)(ab), with subsection 263I(5) providing the accompanying definition, was inserted into the 1986 Act by the Insolvency (Amendment) (EU Exit) Regulations 2019 (SI 2019/146)[13], as from IP completion day (namely, 11pm on 31 December 2020), subject to transitional and saving provisions in reg.4 (in light of Brexit); and

(2) as far as the author is aware, there are no reported authorities on this newly introduced provision (the bankruptcy order in Kooter No.1 was on 27.3.19, so prior to 31.12.20, and so this Connecting Factor was not available then[14]), nor are there, as far as the author is aware, any reported authorities on the equivolent provision inserted in section 265 of the 1986 Act (section 265(1)(ab) by Insolvency (Amendment) EU Exit) Reguations 2019 (SI 2019/146) reg.1(3), Schedule paragraphs 16 and 33)). No further guidance is therefore available.

The Section 263I(2) 'Test' - 4 Alternative Connecting Factors

Section 263I(1)(b) brings in section 263I(2), and the 4 alternative Connecting Factors contained therein. For convenience, the reader is reminded that section 263I(2) reads:

'(a) the debtor is domiciled in England and Wales, or

(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.'

The 4 Connecting Factors are therefore:

(1) the individual/debtor is domiciled in England and Wales;

(2) the individual/debtor has been, during the 3 year period, ordinarily resident in England and Wales;

(3) the individual/debtor has, during the 3 year period, had a place of residence, in England and Wales;

(4) the individual/debtor has, during the 3 year period, carried on business, in England and Wales;

These are the last of the Connecting Factors created in section 263I. It will be noted that there is no connecting factor of:

(1) being physically present in England and Wales. There used to be, but the legislature decided that mere physical presence in England and Wales should not be a Connecting Factor. The removal of physically present in England and Wales, as a Connecting Factor, occurred on 6.4.16 (prior to the whole bankruptcy adjudication system being introduced[15])

(2) nationality or citizenship;

While these are not Connecting Factors, it should be noted, for the avoidance of doubt, that:

(1) physically presence and/or nationality and/or citizenship (or absence of the same) are likely to be relevant as to whether one of the 6 Connecting Factors does exist between the individual and England and Wales; and

(2) the absence of physically presence and/or UK nationality and/or UK citizenship, will not be a bar to one of the 6 Connecting Factors existing.

Substantiality and Continuity

As to these 4 Connecting Factors, Bacon J in Lakatamia said, at paragraph 29:

'The conditions of domicile, ordinary residence and carrying on business all connote a degree of substantiality and continuity of the connection of the debtor with the jurisdiction.'

(3) Connecting Factor - Section 263I(2) Domiciled

The key word in the test of 'the debtor is domiciled in England and Wales' is the word 'domiciled'. The concept of 'domicile' was considered by the Court of Appeal in Henwood, the leading case on this Connecting Factor.

Firstly, some facts about Henwood. The Court of Appeal consisted of Arden LJ, with whom Moore-Bick LJ[16a] and Waller LJ agreed. It allowed an appeal against a first instance judge's determination that:

(1) a judgment debtor must have acquired a domicile of choice in Mauritius as the judgment debtor has abandoned his domicile of choice in the Isle of Man; and so

(2) the judgement debtor was not domicile in England and Wales (as would be the case if his domicile of origin had applied) on the key date - namely, when a creditors bankruptcy petition was presented against the judgment debtor by the judgment creditor; and so

(3) by virtue of section 265 of the 1986 Act, the courts of England and Wales had no E&W Bankruptcy Jurisdiction over the judgement debtor, to make a bankruptcy order against the judgment debtor (paragaph 1); and

(4) he (the first instance judge) should make a declaration - that the courts of England and Wales held no E&W Bankruptcy Jurisdiction over the judgement debtor and, that being so, he should therefore dismiss the pending bankruptcy petition against the judgment debtor (paragraphs 1 and 2).

As part of her judgment, Arden LJ in Henwood, under the heading 'Relevant principles of the law of domicile' and subheading 'General principles', set out the following principles, at paragraph 8:

'The following principles of law, which are derived from Dicey, Morris and Collins on The Conflict of Laws (2006) are not in issue:

(i) A person is, in general, domiciled in the country in which he is considered by English law to have his permanent home. A person may sometimes be domiciled in a country although he does not have his permanent home in it (Dicey, pages 122 to126).

(ii) No person can be without a domicile (Dicey, page 126).

(iii) No person can at the same time for the same purpose have more than one domicile (Dicey, pages 126 to128).

(iv) An existing domicile is presumed to continue until it is proved that a new domicile has been acquired (Dicey, pages 128 to 129).

(v) Every person receives at birth a domicile of origin (Dicey, pages 130 to 133).

(vi) Every independent person can acquire a domicile of choice by the combination of residence and an intention of permanent or indefinite residence, but not otherwise (Dicey, pages 133 to138).

(vii) Any circumstance that is evidence of a person's residence, or of his intention to reside permanently or indefinitely in a country, must be considered in determining whether he has acquired a domicile of choice (Dicey, pages 138 to143).

(viii) In determining whether a person intends to reside permanently or indefinitely, the court may have regard to the motive for which residence was taken up, the fact that residence was not freely chosen, and the fact that residence was precarious (Dicey, pages 144 to151).

(ix) A person abandons a domicile of choice in a country by ceasing to reside there and by ceasing to intend to reside there permanently, or indefinitely, and not otherwise (Dicey, pages 151 to153).

(x) When a domicile of choice is abandoned, a new domicile of choice may be acquired, but, if it is not acquired, the domicile of origin revives (Dicey, pages 151 to 153).'

Waller LJ pithily summarised the position in Henwood, at paragraph 147, as follows:

(1) 'Unlike a domicile of origin, a domicile of choice can simply be abandoned by giving up residence and no longer having the requisite intention, or it can be abandoned by acquiring another domicile of choice.' (paragraph 147). The requisite intention being 'the intention to reside there permanently' (paragraph 149)

(2) The law is not that a domicile of choice can only be abandoned if an alternative domicile of choice is acquired. Where a domicile of choice is abandoned but no new domicile of choice is at the same time acquired, then the person's domicile of origin revives and applies. On this, Waller LJ criticised the first instance judge. Waller LJ said 'In thinking that a domicile of choice can only be lost by the acquisition of another domicile of choice the judge was in error. A domicile of choice can be abandoned and, if abandoned, the domicile of origin revives.' (paragraph 148). The upshot of the law being that the domicile of origin revives and applies, if a domicile of choice is abandoned, is that '...there is no compulsion to find the acquisition of another domicile of choice.' (paragraph 149) in such cirucmstances - i.e. to find the requisite intention existed, when such intention was weak/non-existent.

The authors of Dicey, Morris and Collins on The Conflict of Laws (2006) ('Dicey') made the same point, this way:

'On abandoning the domicile of choice, a person may acquire a new domicile of choice, or he may return to and settle in the country of his domicile of origin. He may also simply abandon his domicile of choice without acquiring a home in another country. It was at one time thought that in such a case the previous domicile was retained until a new one was acquired. But it is now settled that where a person simply abandons a domicile of choice his domicile of origin revives by operation of law…' (p.152). Arden LJ in Henwood also commented on this[16b]

In Henwood, it was common ground that the judgment debtor bore '...the onus of showing that he had a domicile different from his domicile of origin.' (paragraph 22; also paragraph 117)

Arden LJ expanded, from paragraph 9 in Henwood, three of the 'General Principles' she identified in the quote above (i.e. paragraph 8 of Henwood):

(1) The intention required for a domicile of choice (Henwood general principle (vi) above, from paragraph 8 of Henwood)

In paragraphs 10 to 15, Arden LJ in Henwood said:

'The intention of residence must be fixed and must be for the indefinite future. It is not enough for instance that at any given point in time its length has not been determined.

In the leading case of Udny v Udny (1869) LR 1 Sc & D 441, the issue was as to the domicile of the respondent's father at the time of his (the respondent's) birth. His father had been born in Scotland but had left Scotland and taken a lease of a house in London. He had a castle in Scotland but that was not habitable. He visited Scotland frequently but had no residence there. In 1844, he sold the lease and his personal possessions and left London for France to avoid his creditors. But he did not intend to reside permanently in France. His first wife died in 1846, and he formed a liaison with the respondent's mother who, in 1853, gave birth to the respondent in London. He married her and went back to Scotland thinking that he would thereby legitimise the respondent, avoid his creditors and bar the entail on his estates. He intended to stay in Scotland because he thought he would be safe from his creditors.

The House of Lords held that the respondent's father had lost his domicile of choice in England and that his domicile of origin had revived. One of the issues was whether revival of his domicile of origin was precluded by the fact that he had a possible intention to leave Scotland again if his creditors pursued him there. At 449, Lord Hatherley L.C. held that this possible intention did not mean that he could not have a domicile in Scotland if he had decided that Scotland would be “his chosen and settled abode”. Lord Hatherley held that the acquisition of a domicile of choice was best described as “settling” in a place:

“A change of [a person's domicile of choice] can only be effected animo et facto - that is to say, by the choice of another domicile, evidenced by residence within the territorial limits to which the jurisdiction of the new domicile extends. He, in making this change, does an act, which is more nearly designated by the word “settling” than by any one word in our language. Thus we speak of a colonist settling in Canada or Australia, or of a Scotsman settling in England, and the word is frequently used as expressive of the act of change of domicile in the various judgments pronounced by our Courts.”

At 458, Lord Westbury made the following observations about the acquisition of a domicile of choice which also emphasise the fixed nature of the requisite intention:

“Domicil of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicil, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that the residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicil is established.” (emphasis added)

Given that a person can only have one domicile at any one time for the same purpose, he must in my judgment have a singular and distinctive relationship with the country of supposed domicile of choice. That means it must be his ultimate home or, as it has been put, the place where he would wish to spend his last days. Thus, in Bell v Kennedy (1868) LR 1 Sc and Div 307, 311, Lord Cairns, having held that it was unnecessary for him to examine the various definitions that have been given of the term “domicile”, held that the question to be considered was in substance whether the appellant:

“had determined to make, and had made, Scotland his home, with the intention of establishing himself and his family there, and ending his days in that country?” (emphasis added) 

In my judgment this test by its reference to ending one's days usefully emphasises the need for the subject to have a fixed purpose that he will live in the country of his domicile of choice.' [words in bold are in italics in original]

(2) All the facts which throw light on the subject's intention must be considered (Henwood general principle (vii) above, from paragraph 8 of Henwood)

In paragraphs 16 to 19, Arden LJ in Henwood said:

'A finding as to domicile requires a careful evaluation of all the facts. This point is illustrated by a memorable passage from the judgment of Mummery LJ in Agulian v Cyganik [2006] EWCA Civ 129 at [46(1)]:

“Positioned at the date of death in February 2003 the court must look back at the whole of the deceased's life, at what he had done with his life, at what life had done to him and at what were his inferred intentions in order to decide whether he had acquired a domicile of choice in England by the date of his death. Soren Kierkegaard's aphorism that “Life must be lived forwards, but can only be understood backwards” resonates in the biographical data of domicile disputes.”

Some commonly occurring facts call for special mention. The fact that residence is precarious or illegal is a circumstance that is relevant to the question of intention (but the fact that presence is illegal does not prevent residence): Mark v Mark [2006] 1 AC 98.

A person can acquire a domicile of choice without naturalisation. (Dicey, page 136.). On the other hand, citizenship is not decisive: Wahl v Wahl [1932] 147 LT 382. An intention to be buried in a particular place has in some circumstances been treated as an important factor, but in other cases discounted (Dicey, page 140). If a person leaves a country to evade his creditors, he may lose his domicile there, unless he plans to return as soon as he had got rid of his debts.

Frequently the subject of a dispute as to domicile (often called “the propositus”) will make statements or declarations as to what he intends. But the court should not rely on these statements unless corroborated by action consistent with the declaration. Thus Dicey states:

“The person whose domicile is in question may himself testify as to his intention, but the court will view the evidence of the interested party with suspicion. Declarations of intention made out of court may be given in evidence by way of exception to the hearsay rule. The weight of such evidence will vary from case to case. To say that declarations as to domicile are “the lowest species of evidence” is probably an exaggeration. The present law has been stated as follows: “Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the persons to whom, the purposes for which, and the circumstances in which they are made and they must however be fortified and carried into effect by conduct and action consistent with the declared expressions.”. Thus in some cases the courts have relied to some extent on declarations of intention in deciding issues as to domicile; indeed, in one case, the declaration was decisive. But in other cases the courts have refused to give effect to the declarations on the ground that they were inconsistent with the conduct of the propositus: a domicile cannot be acquired or retained by mere declaration. The courts are, in particular, reluctant to give effect to declarations which refer in terms to “domicile” since the declarant is unlikely to have understood the meaning of the word. Declarations which are equivocal have little effect: thus a declaration of intention to reside permanently in the United Kingdom is no evidence of acquisition of a domicile of choice in any of the countries which are included in the United Kingdom; although it may be evidence of the abandonment of a domicile elsewhere.” (pages 142 to 143)'

Arden LJ dealt with a further point:

(3) Revival of the doctrine of origin on loss of domicile of choice provides a default position (Henwood general principle (x) above, from paragraph 8 of Henwood)

Arden LJ in Henwood said, at paragraph 21:

'The revival of the domicile of origin (see (x) above) occurs as a matter of law. As no person can be without a domicile, the law attributes a domicile to a person who does not have one. A domicile of origin provides the domicile if there is no clear evidence as to a domicile of choice elsewhere (as in [Winans v Attorney General (No.1) [1904] A.C. 287, [1904] 5 WLUK 23]). The rule, that the domicile of origin revives where a domicile of choice has been abandoned and another domicile of choice has not yet been obtained, represents therefore a default rule. The rule about revival removes the need to come to the conclusion in any particular case that a person had a domicile of choice.' 

In a similar vein, Moore-Bick LJ in Henwood said, at paragraph 140:

'...It is necessary for the application of certain rules of law that a domicile be ascribed to every person and therefore the law provides that if a domicile of choice is abandoned in circumstances where no substitute domicile of choice is acquired the domicile of origin revives. That is so even though the person concerned has no intention of taking up residence in the country of his domicile of origin.'

Where a domicile of origin operates, Moore-Bick LJ in Henwood said, at paragraph 141:

'...the weight of evidence required to displace the domicile of origin where that has revived merely by operation of law is no greater than that which is required to displace an existing domicile of choice.'

Where a person maintains homes in more than one Country 

Moore-Bick LJ in Henwood said, at paragraph 141:

'where a person maintains homes in more than one country the question must be decided by reference to the quality of residence in each of those countries, since it is only by considering the quality of residence that one can decide which is his real home.' [bold added]

Henwood - on the facts

On the facts in Henwood, the judgment debtor had:

(1) abandoned his domicile of choice in the Isle of Man;

(2) not acquired any domicile of choice in Mauritius, nor in France: 'he had not formed an intention to make a permanent home in any specific location.' (Moore-Bick LJ, paragraph 140) and so,

(3) the judgment debtor's domicile of origin had revived, which it had been common ground was England and Wales. Consequently, the courts of England and Wales did have E&W Bankruptcy Juridiction over the judgment debtor. 

For a different case where domicile was in issue, see Revenue and Customs Commissioners v Stayton [2018] EWHC 3183 (Ch)[17]

Connecting Factors - Section 263I(2) - 3 Connecting Factors - 'Ordinarily Resident', 'Place of Residence' and 'Carried on Business'

Moving on to section 263I(2), there are in sectoin 263I(2) 3 (disjunctive) Connecting Factors. They can be shortened to:

(1) 'ordinarily resident';

(2) 'a place of residence' and

(3) 'carried on business'.

Each is in respect to a trailing time period:

(1) the time period is the 3 years immediately back from the day the bankruptcy application was made (section 263I(2)(b) of the 1986 Act);

(2) the the test is whether, 'at any time' during this 3 year period, any of the 3 Connecting Factors existed. In Al Saud 744, Roth J noted that the statutue refers to 'at any time' in the three year period - which Roth J said '...means that a period which is not de minimis is sufficient' (paragraph 42 (iv))

See also Re Akaydin [2013] BPIR 539, wherein Chief Registrar made a similar point. 

2 Connecting Factors - 'Ordinarily Resident' and 'A Place of Residence' - tests differ but there is overlap

Focusing on 'Ordinarily Resident' and 'A Place of Residence' for the moment:

(1) the tests are (clearly) different, for each Connecting Factor. Registrar Baister in Khan said, at paragraphs 23:

'Just as habitual and ordinary residence differ, so the terms “ordinarily resident” and “place of residence” are different things: the sub-section of the Act itself makes this clear, as do the authorities (see, for example, Hecquard, Re (1890) L.R. 24 Q.B.D. 71, [74] and Skjevesland v Geveran Trading Co Ltd (No.4) [2002] EWHC 2898 (Ch); [2003] BCC 391; [2003] BPIR 924, [5]).' however, 

(2) while the tests are different, there is substantial overlap in the factors that can go toward establishing them. Bacon J made this point in Lakatamia, while making 'some brief comments' (which he emphasised, were 'without in any way suggesting that the following should be regarded as an exhaustive exposition' (paragraph 31)). Bacon J said, at paragraph 31:

'...it is clear that there is a difference between the concept of “ordinarily resident” and the alternative and disjunct test of having a place of residence under section 263I. That does not mean that the two tests are wholly separate. As Chief Registrar Baister noted at para 27 of Khan [2016] BPIR 722, it may be that similar factors are relevant to both tests. But it does not follow that all of the factors that may be relevant to the assessment of whether a debtor is ordinarily resident in England and Wales will necessarily be relevant to the separate question of whether the debtor has a place of residence in England and Wales. If that were the case, then the existence of two separate tests would be meaningless.' What Registrar Baister in Khan said, at paragraph 27 was '...there is some overlap in the factors ..., even if the tests differ...'.

In Durkan, Deputy ICC Judge Baister (formerly Registrar Baister) said, at paragraph 5:

'The concept of being "ordinarily resident" and "having a place of residence" for the purposes of jurisdiction are not the same (Reynolds Porter Chamberlain LLP v Khan [2016] BPIR 722), although the same evidence and similar considerations may bear on or apply to both.'

(4) Connecting Factor - Section 263I(2) - Ordinarily Resident

The key case here is Khan. The case is a creditor's bankruptcy petition case under section 265 of the 1986 Act, but that is, in the author's view, not material. After quoting section 265(1)(c) of the 1986 Act, the equivolent of section 263I(2)(a), and surveying the authorities on point[18], Registrar Baister in Khan said, at paragraph 25:

'The following seem to be relevant to “ordinarily resident” (or its predecessor “ordinarily resided”):

(1) the expression is not to be treated as a term of art in a legal sense (Skjevesland [2002] EWHC 2898 (Ch), [13]).

(2) ordinary residence is a question of fact and degree (Norris (1888) 5 Morr. 111 113, Bright (1903) 19 T.L.R. 203, 204, Skjevesland [2002] EWHC 2898 (Ch), [20]).

(3) such residence must have a degree of permanence; the person concerned must intend to and actually reside for a substantial period of time; casual visits will not suffice (Skjevesland [32]). (I pause at this point respectfully to question the relevance of intention, but the learned judge does mention it.) It must be of some duration: two or three days do not suffice (Bright). A period of 92 days in a year was held to be sufficient in Skjevesland (see [18] and [19]; cf. Stojevic [2006] EWHC 3447 (Ch), [45]);

(4) “[g]eneral staying at an hotel” is probably not sufficient to amount to residence for the statutory purpose, although the court did not express a definite opinion on the point; but where a person has “exclusive use of lodgings and pays for them he does reside” (Norris, 114). Constant movement from, say, one boarding house to another would not suffice (Brauch [1978] Ch. 316);

(5) a person may have more than one usual residence (Skjevesland [33] and [34]) and may even be ordinarily resident in more than one country (Skjevesland [38]);

(6) it is not necessary to be able to specify the places at which the debtor is said to have ordinarily resided, although inability to do so may be a circumstance which tells against ordinary residence (Brauch, 333);

(7) ordinary residence does not necessarily require the person residing to be the landlord or tenant under any lease or tenancy agreement (Skjevesland [10] and [13]);

(8) ordinarily residing may include residing with family members (Skjevesland [12]). It is fair to note also, however, the use of the word “exclusive” in some of the authorities...'

(9) care is needed as to the weight to be attached to documentary evidence such as parking permits and letterheads, but documentary evidence does have a role to play especially if it gives an address for official purposes, e.g. for a firearms certificate or as an address for service (Skjevesland [40ff]);

(10) having access to a key kept at premises is “not without significance” (Skjevesland [45]);

(11) the purpose of a visit or visits to the jurisdiction may be relevant (Bright);

(12) it is important to distinguish between using a residence as such and using it to carry on corporate activity (Stojevic [53ff]);

(13) being capable of being telephoned at premises may be a factor (Brauch); and

(14) the cumulative effect of the evidence, which I take to mean both the oral and documentary evidence, is important (Skjevesland, [47]).'[19]

Registrar Baister in Khan did caution against treating this list of propositions, as an exhaustive list. Registrar Baister in Khan stated, at paragraph 23, that:

'The case law sets out a number of principles as well as dealing with the factors to which the courts have had regard from time to time and the weight that may be attributed to them. I list them ... but do not pretend that the list is exhaustive (there may be factors not contemplated which could be relevant in certain circumstances), that I have mined the cases for all their learning or that each factor I have identified will necessarily fall to be considered in every case.[20].

On the facts[21] in Khan, the 'ordinary resident' Connecting Factor was found (paragraph 39).

(5) Connecting Factor - Section 263I(2) - A Place of Residence 

Khan - Summary

Registrar Baister in Khan, also summarised some relevant propositions in respect 'A Place of Residence', at paragraph 26:

'(1) having a place of residence is a de facto situation rather than a matter of legal right (Skjevesland, [50] and the passage from Brauch there cited). So a licensee may have place of residence (Brauch, [334]);

(2) a moral claim to premises may be sufficient (Skjevesland, [52]);

(3) the person concerned may well have to phone to make arrangements to occupy because others use the premises as well as him but this is no obstacle to a finding of having a place of residence (Skjevesland, [53]);

(4) it is possible to have a dwelling house without being in occupation in the relevant period (Brauch, [335]) but the greater the occupation the more likely the finding; but not perhaps if the relevant property has been abandoned (Nordenfelt and Brauch, [335]); and

(5) living in a place with one’s family as a tenant in rooms makes those rooms a dwelling house (Hecquard, [74]).'

On the facts in Khan, the 'a place of residence' Connecting Factor was found (paragraph 41)[22]

Al Saud 1144 - Summary

In Al Saud 1144, ICC Judge Barber went through the authorites in this area, under the heading 'A Place of Residence', from paragraphs 53 to 85. While this is large number of paragraphs to quote, given it is: (1) so recent (18.5.23); and (2) a comprehensive survey of the authorities, it is worth quoting in full. Here then, is paragraphs 53 to 85 of Al Saud 1144:

'53. The question of what constitutes a place of residence for the purposes of s.265 IA 1986 has been considered in a number of authorities. It is clear from the Roth Judgment that the term 'dwelling house' used in s.4 of the Bankruptcy Act 1914 (the predecessor provision of s265) is to be treated as the same concept as a 'place of residence' under s.265 .

54. I shall start with the case of In re Brauch [1978] Ch 316. This was not a 'service out' case but a jurisdictional challenge to a bankruptcy petition where the debtor, who did not have an English domicile, worked much of the time from an office in London. He was the lessee of a house in London occupied by the mother of his son whom he visited there. The Court of Appeal dismissed an appeal from the registrar's decision finding that there was jurisdiction over the debtor on the basis that during the relevant 12-month period, the debtor had ordinarily resided, carried on business and had a place of business in England within the meaning of s.4 BA 1914. Any of those grounds was sufficient to dispose of the case.

55. The relevance of In re Brauch in the current context concerns the approach adopted by the registrar and appellate court on whether the 'dwelling house' ground had also been established. At first instance the registrar had not accepted that the debtor also had a dwelling house in England and that conclusion was challenged by a respondent's notice. Goff LJ (Orr and Buckley LJJ concurring) dealt with this aspect fairly briefly at the end of his judgment, confirming, among other things:

'I do not see why a licensee should not be held to have a dwelling house': 334G;

and

'I think it may be possible to find that the debtor had a dwelling house in England although he was not in fact in occupation of it at any time during the year. If it be established that he had a dwelling house to start with but he happened to be away throughout the year for a temporary purpose but with intent to return, it may be that on the facts of a particular case one could find he had a dwelling house, but the more there is actual occupation, the easier it is to reach the conclusion that there was a dwelling house, and the shorter the actual occupation, the more difficult it becomes': 335A-B.

56. At 335D Goff LJ continued:

'In my judgment, here again one has to look at all the facts and see whether or not they do lead to the conclusion that within the relevant year the debtor had a dwelling house in England. In the present case it is pointed out that whilst the debtor was not in fact in residence at 51, Connaught Street for any part of the year, he had installed the mother of his son there, and it appears from the evidence that he did at least go to see her there and may well have stayed nights, although whether he ought to be regarded as her guest or she as his might be a somewhat difficult question. I do not think, however, that we really can reach a conclusion from these matters. The registrar said the petitioning creditors fail because they know so little. In my judgment, that is a correct appraisal of the situation in this case. In my view, there is insufficient evidence upon which to form a conclusion whether or not the debtor had a dwelling house within the meaning of the section, and, in my judgment, therefore the respondents' notice fails'.

57. Reflecting on these conclusions in the Roth Judgment, Roth J observed at [29]:

'I do not regard Goff LJ's observation that it was unclear whether the debtor there may have stayed in the property that he owned (as lessee) as the guest of the mother of his son who was living there or whether she was there as his guest as establishing a rule that if a person in occupancy of a property is as a guest of someone else, the person cannot be said to have a place of residence in the property. In my judgment, what Re Brauch makes clear is that the determination depends on all the evidence and is very much a matter of fact and degree.'

58. Skjevesland v Geveran Trading Co Ltd (No 4) [2003] BCC 391 was a case concerning an appeal by a debtor from a decision that a bankruptcy petition could be presented against him in England, inter alia, because he had a place of residence in England during the relevant time. A company controlled by the debtor held a lease on a flat in London which provided that the flat was for the occupation of the debtor and his family. The debtor's son was living at the flat but the debtor would stay at it when he came over from Switzerland. Before he planned to come over, the debtor would call his son, who would move out for the short period involved to enable the debtor to stay there.

59. At first instance in Skjevesland, the registrar had noted that in In re Brauch, 'Goff LJ clearly considered that a licensee, which effectively is what Mr Skjevesland is, could be held to have a place of residence in the premises of which he was a licensee'.

60. On appeal, Judge Howarth (sitting as a judge of the High Court) stated at [50]:

'I do not find fault with the registrar's comment about what is to be found in the case of Re Brauch … It seems to me where you are saying that a person has a place of residence, you are looking at a de facto situation, not necessarily matters of legal right.'

61. At [52] Judge Howarth continued:

'It seems to me that a moral claim is quite sufficient in a family context.'

62. Judge Howarth went on to find that the flat was the debtor's place of residence for the purposes of s265, reasoning at [53]:

'Flat 8, in this case, was normally occupied first of all by Anna [the debtor's daughter], and then by John [the debtor's son], and finally by John and Charlotte [John's fiancée] together. But the evidence seems to be clear that Mr Skjevesland would phone up on a regular basis, and he and John between them would discuss when Mr Skjevesland could come over and stay there. On those times, first of all, John would move out to Charlotte's flat. Then after Charlotte had given up her flat, they would both move out and go somewhere else. It seems to me on those facts it was open to the registrar to conclude that Mr Skjevesland called the tune in regard to that flat. If he decided that he wanted to go there and stay there for a period of three or four days in a week or two weeks' time, he would get his own way. It was certainly open to the registrar to conclude that. Thus it seems to me that the registrar was entitled to conclude that Flat 8 was a place of residence in this country for Mr Skjevesland,… That being so, that ground of appeal must fail.'

63. In Reynolds Porter Chamberlain LLP v Khan [2016] BPIR 722, Chief Registrar Baister dealt with both ordinary residence and having a place of residence, noting that there was an overlap between the factors relevant to the two concepts although the concepts were distinct. He summarised at [26] some principles which he derived from earlier authorities:

'(1) Having a place of residence is a de facto situation rather than a matter of legal right (Skjevesland paragraph 50 and the passage from Brauch there cited). So a licensee may have a place of residence (Brauch 334).

(2) A moral claim to premises may be sufficient (Skjevesland paragraph 52).

(3) The person concerned may well have to phone to make arrangements to occupy because others use the premises as well as him but this is no obstacle to a finding of having a place of residence (Skjevesland paragraph 53).

(4) It is possible to have a dwelling house without being in occupation in the relevant period (Brauch, 335) but the greater the occupation the more likely the finding; but not perhaps if the relevant property has been abandoned (Nordenfelt and Brauch, 335).

(5) Living in a place with one's family as a tenant in rooms makes those rooms a dwelling house (Hecquard 74)'.

64. On the facts, the court in Khan held that the conditions for both ordinary residence and place of residence were satisfied. The debtor was resident in Pakistan where he had business and political interests. His children were being educated in England and he came here to visit them and also came to England for business. The debtor did not himself own any property in England but he was able to stay during his visits to London in one or more flats in an apartment building in Knightsbridge that was owned by given companies and he received mail addressed to him at that address. The Chief Registrar stated, at [31]:

'… it is plain from the oral evidence that the respondent was able to and did reside in one or more of the flats when he was here.'

65. At [40] the Chief Registrar went on to observe in Khan :

'It is of no significance that the respondent did not own the property or have a tenancy or licence agreement or anything of that kind. It is plain from his evidence that he could get a key and enter and use a flat in the building whenever he wished to. There is no evidence to suggest that he required permission to reside in or use one or more of the flats.'

66. As previously noted, in the Roth Judgment, Roth J (at [37]) confirmed that he did not regard these and other authorities as establishing that de facto control of the property is a necessary condition. His view was that In re Brauch of itself showed that the imposition of de facto control as a necessary condition would be inappropriate.

67. The reference to 'Nordenfelt' in paragraph 26(4) of RPC v Khan was a reference to In Re Nordenfelt 1895 QB 151. In Nordenfelt, a debtor had resided in a house of his own in England but had then gone to reside abroad in November 1891, leaving instructions with a house-agent to let the house, furnished or unfurnished. A board was put up announcing that the house was to be let. In May 1892, the house not having been let, the furniture was offered for sale by auction. A large part of it was then sold. The unsold furniture was packed up ready for removal. The debtor sold the house in December 1892. The petition was presented in November 1893. According to the report, at first instance the judge found that the debtor had left the house in 'circumstances which shewed an intention of never coming back to reside there – that he had left the house for good – and the house had therefore ceased to be his dwelling-house'. The creditor's appeal was dismissed, the Court of Appeal upholding the judge's conclusion that the debtor had abandoned the house as his dwelling house for more than a year prior to presentation of the petition.

68. In PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch), ICC Judge Burton considered that period of occupation was a relevant factor when considering the place of residence test, but that it was not solely determinative.

69. The concept of a place of residence was recently considered in Lakatamia Shipping Co Ltd v Su [2021] Bus LR 1285. This concerned an application by the debtor (Mr Su) for a bankruptcy order under s263I of the IA 1986, but the same qualifying conditions apply under that provision as for a creditor's petition under s265.

70. In Lakatamia, the debtor, who was domiciled abroad, arrived in England in January 2019 and lived in various hotels and serviced apartments before serving a prison sentence. After his release from prison in April 2020, the debtor, who was prohibited by a court order from leaving the jurisdiction, stayed first with a friend for a few weeks, and then from late April 2020 in a small flat in Maida Vale which had been leased by someone he met in prison. He applied for a bankruptcy order under s263I of the IA 1986 on 4 July 2020. The bankruptcy order was made and a creditor sought its annulment on the basis that the insolvency adjudicator had lacked jurisdiction to make it. The creditor's application for summary judgment on his annulment application was refused, the deputy ICC Judge holding that at times in the three year period running up to the application for the bankruptcy order, the debtor had had a place of residence in England and Wales for the purposes of s263I(2) (b)(i) and that accordingly, the jurisdictional test was satisfied. The creditor appealed on the ground that the deputy ICC Judge had erred in his construction of the term 'place of residence' and/or had failed to take account of the wholly involuntary nature of the debtor's occupation of some of the places in which he had stayed while in England.

71. Giving judgment on the appeal, Bacon J observed at [19]:

'The judge did, however, decide that Mr Su had a place of residence in England and Wales during the relevant period, which he said must necessarily mean something different from having a place of ordinary residence. While the judgment did not make clear exactly which of Mr Su's addresses were considered to be his place of residences, para 55 of the judgment recorded the submissions of Mr Su's solicitor as having been that Mr Su was resident at HMP Pentonville, followed by a stay at his friend's property in Surrey, and subsequently his occupation of the flat in Maida Vale. It appears, therefore, that the judge considered that Mr Su had a place of residence in the jurisdiction on the basis of one or more of those locations.'

72. The debtor did not positively contend on appeal that HMP Pentonville was a place of residence. Nor did he contend that he 'resided' as such in any of the places that he occupied since his arrival in England. Rather, his submission was that the statutory language 'has had a place of residence in England and Wales' has to be interpreted as meaning no more than that the debtor had an entitlement, which could be a licence or moral entitlement rather than a legal entitlement, to occupy a place that was capable of being described as a place of residence of someone, whether or not the residence was that of the debtor. On that basis, the debtor maintained that he had places of residence at the Intercontinental Hotel, the Cromwell Apartments, the friend's house in Surrey and the current flat in Maida Vale. All those premises, he said, were places in which somebody was capable of residing, and where Mr Su had some sort of entitlement to stay: Lakatamia, [21]-[22].

73. Addressing these submissions, Bacon J reasoned as follows:

'[24] On the basis of the submissions made before me today the appeal comes down to a very short point of statutory construction: does the test of having a place of residence in section 263I simply mean, as Mr Underwood submitted, that the debtor should have had an entitlement of some sort to occupy a place that is capable of being described as someone's place of residence or does it require an assessment of the quality of the residence of the debtor, as Mr Phillips submitted?

[25] On that point I have no hesitation in rejecting Mr Underwood's submission. In the first place, it is not supported by the statutory language. As set out in section 263I(2), the test is that "the debtor … has had a place of residence". On the plain meaning of those words, therefore, the residence must be that of the debtor not someone else. Mr Underwood's construction effectively asks the court to rewrite the statutory language and replace the concept of residence with one of mere occupation. But that is not the wording used in section 263I.

[26] Secondly, Mr Underwood's construction is not supported by any authority whatsoever. Mr Underwood referred me to the judgment of Chief Registrar Baister in [RPC v Khan] in which the judge considered both the concept of ordinarily resident and the alternative test of having a place of residence for the purposes of section 263I. At para 26 of that judgment the Chief Registrar summarise some of the applicable principles, noting in particular that having a place of residence is a de facto situation rather than a matter of legal right such that a licensee may have a place of residence; that a moral claim to premises may be sufficient; that the premises may also be occupied by others; and that it is possible to have a dwelling house without being in occupation during the relevant period.

[27] Nothing in that summary, however, remotely suggests that a debtor may have a place of residence where the debtor has not in fact ever resided, but which is the residence of a third party which the debtor is temporarily occupying with the permission of that third party.

[28] Thirdly, Mr Underwood's construction would diminish the test in section 263I to complete triviality, in a way that would make no sense in the context of the statutory provision. As Mr Phillips pointed out, the primary jurisdictional test under section 263I is that the centre of the debtor's main interests should be in England and Wales. As a derogation from that test, jurisdiction is established where one of the four conditions in section 263I(2) is satisfied, namely that (1) the debtor is domiciled in England and Wales, (2) the debtor has during the relevant three-year period been ordinarily resident in England and Wales, (3) the debtor has had a place residence in England and Wales during that period, or (4) the debtor has carried on business in England and Wales during that period.

[29] The conditions of domicile, ordinary residence and carrying on business all connote a degree of substantiality and continuity of the connection of the debtor with the jurisdiction. By contrast, on Mr Underwood's case a debtor could invoke the jurisdiction of the insolvency adjudicator simply on the basis that they had permission to occupy the residence of a third party for some period of time during the three years preceding the bankruptcy application, no matter how fleeting and transient that occupation was - and indeed on Mr Underwood's submission irrespective of whether the debtor even did occupy those premises at all. That would be an absurd result that would render effectively nugatory the jurisdictional test in section 263I of the Insolvency Act 1986 .

[30] I therefore reject Mr Underwood's construction of section 263I. On that basis the appeal must succeed, since Mr Underwood's statutory construction point was the only point on which Mr Underwood relied to oppose the appeal.'

74. Bacon J went on (at [31]-[38]) to make some 'brief comments' on what she considered the correct approach to be, 'without in any way suggesting that the following should be regarded as an exhaustive exposition' ([31]):

(1) While there is a clear difference between the concept of 'ordinarily resident' and a separate test of having a 'place of residence', that does not mean that the two tests are wholly separate; it may be that similar factors are relevant to both tests. It did not follow however that all of the factors that are relevant to one of those tests will necessarily be relevant to the other ([32]).

(2) The starting point should be that the phrase 'has had a place of residence' should be given its natural meaning. In that regard it was relevant to have regard to authorities on the interpretation of the concept of residence even if those authorities arose in different statutory contexts. In this regard, Bacon J noted that:

(a) In Levene v Comrs of Inland Revenue [1928] AC 217, 222, a tax case, Viscount Cave LC defined the word 'resided' by reference to the OED definition of 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

(b) In Dubai Bank Ltd v Abbas [1997] IL Pr 308, Savile LJ said of the Levene case 'Although this was a tax case, it is clear that the meaning given to the word in that case was its ordinary meaning, uncoloured by the fact that it was used in a revenue context' and held that a person was resident for the purposes of the relevant statutory provision in a particular part of the United Kingdom 'if that part is for him a settled or usual place of abode'.

On this basis, Bacon J (at [36]) considered that in determining whether a debtor has had a place of residence in England and Wales during the relevant period for the purposes of establishing whether there is jurisdiction to make a bankruptcy order, it is 'relevant to ask' whether the place was for the debtor 'a settled or usual place of abode or home'.

(3) On the basis of the Court of Appeal's judgment in Revenue and Customs Comrs v Grace [2009] STC 2707, citing with approval at para 6 the summary given by Lewison J at first instance, residence: "connotes some degree of permanence, some degree of continuity or some expectation of continuity".

(4) Whether a person was involuntarily in England and Wales was a relevant factor as to whether that person has a place of residence in the jurisdiction but was not determinative: [38]-[39].

75. At [40] – [41] Bacon J concluded:

'40. Applying those principles to the facts of the case, as I have noted Mr Underwood accepts the evidence does not indicate that Mr Su "resided" at any of the properties that he occupied during the period since he arrived in England in January 2019. His presence at each of them was temporary and transient with no degree of permanence or expectation of continuity. The longest period of time appears to have been spent at the Maida Vale flat, which Mr Su's own evidence describes as a "squalid little flat" that his prison cell mate allowed him to use. Mr Su says that he has very few possessions at the flat and feels like he is still living in a prison.

41. It follows that Mr Su cannot be described as having had a place of residence at any of the places that he has occupied since arriving in England for the purposes of section 263I. In concluding otherwise, the deputy judge, respectfully, in my judgment, fell into error.'

76. Addressing Lakatamia in the Roth Judgment, Roth J observed at [41]:

'I respectfully agree that the factors set out by Bacon J are relevant considerations but I do not read her judgment as specifying that any of those factors are essential requirements for a debtor to be held to have "a place of residence" for the purpose of these provisions of the insolvency regime. For example, I think it is well-established that a debtor may have a place of residence in the jurisdiction although his home is elsewhere: see RPC v Kahn and PJSC Bank Ltd v Laptev. I note that the reference to "a settled or usual place of abode" is derived from a Court of Appeal decision on whether the defendant was "resident" in the jurisdiction for the purpose of s41(3) of the Civil Jurisdiction and Judgments Act 1982, so as to satisfy the test for domicile: Dubai Bank v Abbas [1996] EWCA Civ 1342 … However, being "resident" in England and Wales is not the same as having "a place of residence" in England and Wales: the former is closer to the alternative test under s.263I(2)(b) and 265(2)(b) IA 1986 of being ordinarily resident here'.

77. Roth J went on to consider whether the Debtor had a place of residence in England and Wales in the First Relevant Period.

78. First, Roth J took account of the fact that the Debtor had stayed for several years at York House in the 1980s and 1990s while a student at LSE. At 42(i) he observed:

'Although a long time ago, Mr Wardell realistically accepted that it would have been difficult to contend that at that time the Debtor did not have a place of residence in the jurisdiction (although I do not think that the Debtor had de facto control of the property where his mother was living).'

79. Second, York House was a 'substantial apartment' and the express finding of the judge below that the Debtor had permission from his mother to stay there at any time could not be challenged on appeal (permission to appeal against the judge's appraisal of the evidence having been refused). That said, quite independently of the finding of the judge below, Roth J went on to observe on the evidence that the Debtor's mother had said that the Debtor, his wife and their children have stayed at York House 'over the years'. This was a reference to the 2019 Statement. Roth J considered it legitimate to conclude from such evidence 'that the permission which the Debtor had while a student continued after he had his own family' and that 'it appears that this was his and his mother's expectation': [42](ii).

80. Third, the Debtor had not occupied York House at any time during the First Relevant Period. This, Roth J considered, was 'clearly relevant'. Whilst his lack of occupation after August 2018 was readily explicable (since if he came to England he would have gone to prison to serve the sentence imposed for contempt), there had been a period of 18 months in the First Relevant Period prior to the imposition of the prison sentence and he did not occupy York House then. That, Roth J considered, was a 'factor pointing against it qualifying as his place of residence'.

81. Fourth, the Debtor had argued that since he was appointed governor in a province of Saudi Arabia in April 2017 and travelled with a large entourage, York House was too small to accommodate them all and therefore it could not be his place of residence. Roth J observed that there was a two-month period at the start of the First Relevant Period before his appointment as governor, noting that the statute refers to having a place of residence in the jurisdiction "at any time" in the three-year period, which in Roth J's view 'means that a period which is not de minimis is sufficient'.

82. He continued at [42](iv):

'In any event, if someone has a permanent place where they can stay on their visits to London, but chooses instead to stay in a hotel, e.g. because they would like the benefit of a hotel's facilities or because they accompanied by too many friends or relations to accommodate, I do not consider that they cease on that account to have a place of residence in London. When the Debtor came to England after being appointed governor in February/March 2018 with his entourage, when 24 York House was therefore too small for them, he stayed at 1 Phillimore Terrace…. That was possible because a nearby property (which as I understand it similarly belonged to the Debtor's wife and three of his children) was vacant, so that they could use that to provide extra accommodation. So for a visit when 24 York House was unsuitable, the Debtor was able to use other properties belonging to his family.'

83. Fifth, Roth J noted that York House was not the Debtor's settled or usual place of abode or home.

84. Sixth, Roth noted that the Debtor had been registered for Council Tax in relation to York House while he was a student and that he continued to be so registered until December 2019. Roth J observed: 'As Mr Wardell had to accept, a person does not undertake the liability to pay Council Tax on a property with which they have no connection'. He considered that explanations given in witness evidence filed by Princess Noorah and her solicitor, Mr Wood (to the effect that the Debtor's registration for Council Tax assisted as proof of address for the purposes of opening bank accounts and applying for visas for members of the Debtor's family and their staff) to be 'very unsatisfactory'; noting in particular, that it was obviously 'not a requirement to be registered for Council Tax in order to obtain a visa to visit this country or to open a bank account; nor is it a requirement that your father is registered here for Council Tax to obtain a student visa'. Roth J considered the registration of the Debtor for Council Tax purposes at York House 'a significant factor pointing to this address being a place of residence for the Debtor'.

85. Roth J also took into account the fact that he was dealing with a case of service out and that a number of the authorities which he had considered fell to be decided on the balance of probabilities. In both RPC v Khan and PJSC VTB Bank v Laptev, for example the debtor had been cross-examined on his evidence. As matters stood before Roth J, the Debtor had given no evidence at all, still less had he been cross-examined on the same. At [43] he concluded:

'Applying the lower standard of proof which I have held here applies and taking all the above matters into account, I have no doubt that the Creditor has shown a good arguable case that the Debtor has a place of residence in the jurisdiction, or that it has "the better of the argument" on the material available. At the hearing of the petition, the Court will have to assess the matter on the balance of probabilities and it will be open to the Debtor to give evidence explaining matters more fully.'

Durkan - Summary

In Durkan (decided 25.5.23), Deputy ICC Judge Baister considered some of the caselaw, and attempted '...to distil some of the may points that arise from it', at paragraphs 6 to 10:

'In Re Brauch (A Debtor) Ex parte Britannic Securities & Investments Ltd [1978] Ch 316...Goff LJ held that:

(1) It was possible for a debtor to have a place of residence in the jurisdiction even though he was not in actual occupation during the relevant period.

(2) The shorter the period of actual occupation of premises, the more difficult it would be to hold it to be a "dwelling house" (the relevant term under the Bankruptcy Act 1914).

(3) It was doubtful whether a debtor had to have a legal or equitable interest in a place of residence to satisfy the test.

Re Brauch remains good law on "place of residence", there being no real difference between a "dwelling house" the expression used in the Bankruptcy Act 1914, and a "place of residence" the expression used in the Insolvency Act 1986 (see HRH Prince Hussam Bin Saud Bin Abdulaziz Al Saud v Mobile Telecommunications Company KSCP [2022] EWHC 744 (Ch), [2022] BPIR 1001).

The "place of residence" limb of jurisdiction was recently considered by Bacon J in Lakatamia Shipping Co Ltd v Su [2021] EWHC 1866 (Ch), [2022] BPIR 181, at paragraphs 24-26 and 36-37, from which [counsel for the debtor] derives a number of principles ... which I gratefully adopt, adapt and supplement as follows, continuing the numbering used in paragraph 6 above:

(4) The concepts "ordinarily resident" and "having a place of residence" are not totally separate, so that similar factors may be relevant to both tests; but it does not follow that all factors that may be relevant to one will be relevant to the other (para 32).

(5) The phrase "has had a place of residence" should be given its natural meaning (para 33).

(6) Regard may be had to authorities on the interpretation of the expression, even if they arose in different statutory contexts (para 33).

(7) The nature of a person's presence in and connection to a particular place is a relevant factor in determining residence.

(8) The test of "having a place of residence" requires an assessment of the quality of the debtor's residence. It does not simply mean that the debtor has an entitlement of some sort to occupy a place that is capable of being described as someone's place of residence (para 24).

(9) The residence must be that of the debtor, and not someone else (para 25).

(10) Thus, the residence cannot merely be the residence of a third party that the debtor is temporarily occupying with the third party's permission (para 26).

(11) In determining whether a debtor has had a place of residence in England and Wales, it is relevant to ask whether the putative place was a "settled or usual place of abode or home" for the debtor (para 36).

(12) Residence connotes "some degree of permanency, some degree of continuity or some expectation of continuity" (para 37).

(13) The nature of a person's presence may be a relevant factor: for example whether it was voluntary or not (paras 38-39).

The last point was of particular relevance to the unusual facts of the case before Bacon J. She followed it with the observation that any assessment will turn on the facts of the case, which is of general significance.

In HRH Prince Hussam Bin Saud Bin Abdulaziz Al Saud v Mobile Telecommunications Company KSCP Roth J made much the same point (para 41): he accepted that the factors set out in Lakatamia were relevant considerations, although he did not think they should be regarded as indispensable requirements. That must be right, and indeed, is very much the point I think Bacon J herself was making: much will depend on the facts of each case, in the context of which many of the factors in all the authorities may be significant, whilst others may play little or no part. I am reinforced in that view by Roth J's comments at para 37 of his judgment:

"I do not regard these cases [In Re Hecquard (1889) 24 QBD 71, KT Skjevesland v Geveran Trading [2002] EWHC 2898 (Ch), [2003] BPIR 924, Reynolds Porter Chamberlain LLP v Khan [2016] BPIR 722, or PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch), [2020] BPIR 624] as setting out or supporting any single or conclusive test for what constitutes a "place of residence". In particular, they do not in my view establish that de facto control of the property is a necessary condition. That concept does not feature in the list of potentially relevant factors set out by the Chief Registrar in RPC v Khan nor does it appear in the most recent authority, Lakatamia Shipping Co Ltd v Su [2021] EWHC 1866 (Ch), to which I return below. In my judgment, these cases are simply illustrations of the broad range of factual considerations which may be relevant in determining whether an individual has "a place of residence" in this country within the meaning of the statute. The expression should be given its ordinary meaning and the assessment depends on all the facts[...]."

The absence of a need to establish control of a property is another factor that should be added (as (14)) to the list of those I have already noted.

...I do not pretend that the factors I have listed above are exhaustive. They are illustrative. I simply say that they are the ones that appear to me to be most commonly relevant.'

Later, Deputy ICC Judge Baister in Durkan said, at paragraph 21:

'...there is a difference between having an address and having a place of residence.' 

On the facts in Durkan, Deputy ICC Judge Baister rejected the contention that the debtor had had, in the relevant 3 year period, a 'place of residence' in England and Wales (paragraph 23), rejecting various points as insufficient, whether individually, or cumulatively[23a].

Portrait - Summary

ICC Judge Greenwood in Portrait (decided 28.6.23), also set out a summary of the law here (set out in a footnote[23b]).

(6) Connecting Factor - Section 263I(2) Test - Carried on business

Seemingly the only section 263I(2)(b)(ii) case on this Connecting Factor is the Brauch case (i.e. Brauch (A Debtor), Ex p. Brittanic Securities & Investments [1978] Ch. 316; [1977] 3 WLR 354; [1978] 1 All ER 1004 ('Brauch')), a decision of the Court of Appeal of course, with Goff LJ giving the lead judgment. Brauch was a creditors bankruptcy petition and the Connecting Factors were contained in section 4(1)(d) of the Bankruptcy Act 1914 (now obsolete). The key words for present purposes, for the 'carried on business' Connecting Factor, was: 

'...within a year before the date of presentation of the petition...has carried on business in England, personally or by means of an agent or manager, or ...is or within the said period has been a member of a firm or partnership of persons which has carried on business in England by means of a partner, or an agent or manager...'

In Brauch, the second part (about 'member of a firm or partnership') was not applicable, and so Goff LJ considered only the first part. Goff LJ concluded:

(1) '...it would be wrong to hold that section 4(1)(d) applies to a man who is running his company's business even though he be the sole beneficial shareholder and in complete control.' (at 328); however, 

(2) a person can be running a company's business (which would not establish this Connecting Factor) and also be conducting a separate independent business of his own (which would establish this Connecting Factor) - see In re Charles Bright (1901) 18 T.L.R. 37, at 328.

In Brauch, the debtor was running the company's business, but also carrying on a separate independent business - which established the Connecting Factor 'carried on business'. The separate independent business was 'carrying on personally the business of promoting companies, or acquiring shell companies, to speculate in land...'. Basically, his separate independent business was to undertake all the preliminary stages, before the companies acquired the land[23c].

(3) as to what that business is exactly, 'It is not necessary to be precise, and... the definition or description which I have given is completely adequate.' (at 329)[24]

On the analogous section 265, there are some authorities, namely:

(1) Anglo Irish Bank Corp Ltd v Flannery [2013] BPIR 1 (Chief Registrar Baister), and the appeal [2012] EWHC 4090 (Ch); [2013] BPIR 165 (Newey J); and 

(2) Durkan (Deputy ICC Judge Baister - formerly Chief Registrar Baister);

In Durkan, Deputy ICC Judge Baister made the following observations about 'carrying on business', at paragraphs 24 to 31:

'Whether someone is carrying on business gives rise primarily to a factual inquiry (Anglo Irish Bank Corporation Ltd v Flannery [2013] BPIR 1), although it is necessarily a mixed question of fact and law. [Counsel for the debtor] submits that the court must decide (a) what the debtor did; (b) when he did it; and (c) whether what he did amounted to carrying on business (see Masters v Barclays Bank plc [2013] EWHC 2166 (Ch), [2013] BPIR 1058). I agree.

Although the petitioner initially sought to rely on some of the debtor's activities in the form of doing business connected with a company, [counsel for the petitioner] accepted at the hearing that carrying on business through a company or being a director or shareholder of a company did not amount to carrying on business as an individual. He also accepted that the fact that the debtor owed money to Long Compton Project Limited on his director's loan account could not have amounted to his doing business with the company without establishing whether, for example, making loans was the company's business or, I suppose, borrowing from a company could be said to be a business. I should also mention that [counsel for the petitioner] abandoned the suggestion that the petitioners' case was assisted by either Re a Debtor (No 784 of 1991) [1992] Ch 554 or Wilkinson v Inland Revenue [1998] BPIR 418. For the avoidance of doubt, I should say that had he pressed them I would have rejected them. That left him with the allegation that the debtor carried on the business of property letting, namely as joint landlord with his wife of The Grange, which, as we have seen, was let to [the tenants]

To the extent that the debtor did carry on business as the petitioners suggest, he plainly did so in the relevant period. That leaves the questions exactly what it was he did and whether what he did amounted to carrying on business.

What constitutes carrying on business is hard to define. In Charlton v Funding Circle Trustees Ltd & Anor [2019] EWHC 2701 (Ch), [2020] BPIR 125 Barling J noted that the authorities failed to provide a "magic touchstone of what amounts to carrying on a business" but that they did contain helpful guidance in the form of examples of what had been held to amount to doing so (para 21). He went on to give some of those examples. Unfortunately none enables me to latch onto it and apply it directly to the facts of this case.

The term 'business' similarly elusive. I was referred by both [counsel for the petitioner] and [counsel for the debtor] to the judgment of Judge Berner in Ramsay v Revenue and Customs Commissioners [2013] UKUT 226 (TCC), [2013] STC 1764 in which he said this:

"[25] As [counsel for HMRC] pointed out, the word 'business' has been described, by Lord Diplock in Town Investments Ltd v Department of the Environment [1977] 1 All ER 813 at 819, [1978] AC 359 at 353, as 'an etymological chameleon; it suits its meaning to the context in which it is found.' That case concerned whether a lease to a government ministry, where the premises were occupied by civil servants was a business tenancy within the meaning of then-applicable counter-inflation legislation. By reference to the mischief of those provisions, 'business' was construed broadly, so as to have no less wide a meaning than that applicable in covenants regarding the use of demised premises.

[26] That construction followed from Rolls v Miller (1884) 27 Ch D 71, where Lindley LJ pointed out ((1884) 27 Ch D 71 at 88) that the dictionary meanings of 'business', where the word means almost anything which is an occupation, as distinguished from a pleasure, or anything which is an occupation or duty which requires attention, were not of great assistance. The word must be construed according to its ordinary sense, having regard, in that context to the object of the covenant, and in this to the purpose of the legislation.'

The learned judge went on to say a great deal more, but much of it is directed to issues of tax law, so I should be wary of drawing too heavily on a judgment that is not about the issue which I have to decide.

It does seem to me that just as Roth J said that the expression "place of residence" should be given its ordinary meaning, so too the expression "carrying on business" should be construed according to its ordinary sense, having regard to the context (cf the passage from Rolls v Miller cited by Judge Berner above).

[Counsel for the petitioner] says that Ramsay v Revenue and Customs Commissioners establishes that residential property letting is a business. [Counsel for the debtor] counsels greater caution. I agree with [counsel for the debtor]. I think I should be cautious of adopting for the purposes of insolvency legislation any holding that relates to taxation, although it is plainly a consideration. I think it is more appropriate to ask what exactly the debtor did and whether, on the ordinary meaning of the words, that appears, on the balance of probabilities to amount to carrying on business.'

On the facts in Durkan, the debtor was found to be renting out a property he owned. Did this amount to 'carrying on business'? Deputy ICC Judge Baister said that it did (paragraph 34). He said, at paragraph 35:

'I hesitate to attempt a definition of "business" or "carrying on business" where better legal minds have not done so. I do, however, think that as a matter of ordinary sense the foregoing activities did and do amount to carrying on the business of letting property. I think most people contemplating activity in the form of the provision of goods or services for profit or gain (or perhaps, as [counsel for the petitioners] pointed out, some other benefit) would conclude that it amounted to carrying on business. I do. The business which the debtor carried on may not have been on a grand scale, but it has been going on, it seems, for some time, starting at about the time [the debtor's wife] was facing bankruptcy and continuing, it seems, even now. The monthly rent is not an insignificant amount: it is an income many people would be happy to have.'

Later, Deputy ICC Judge Baister put forward another way of approaching the question of whether an activity carried on, qualifies as a 'business'. Deputy ICC Judge Baister said, at paragraph 36:

'There is another way of looking at the matter, which is to ask what the debtor was doing if he was not carrying on business.' discounting alternatives to business.

Highlighting what alternative categories exist, Deputy ICC Judge Baister continued, at paragraph 36, in relation to the facts in Durkan:

'He was not engaged in charitable work, nor was he engaged in a pastime or hobby.' Deputy ICC Judge Baister also rejected the submission that the debtor was an 'investor' (paragraph 36).

Deputy ICC Judge Baister went on, at paragraph 37 of Durkan, to reject the debtor's submissions that 'carrying on business' Connecting Factor was not established, because:

(a) this was at a modest scale - the debtor owned 1 property in England, and rent it out to one set of tenants for about 34 months, at £3500 per month; that therefore 'The necessary 'degree of substantiality and continuity' is plainly lacking.' (paragraph 38)

(b) there was a lack of any employees; and 

(c) lack of any corporate structure.

Addressing (a) and (c), Deputy ICC Judge Baister said:

(a) the rent paid by the tenants '...was not modest by the standards of most people' (paragraph 38); he went on to '...reject the idea that a business has to be conducted to any specific scale: the sums of money involved cannot be determinative, nor can the number of properties involved.' (paragraph 39)

(c) 'Many people carry on business as sole traders and without any corporate structure; indeed the absence of any corporate structure is, in my view, precisely an indicator of carrying on business on one's own account.' (paragraph 38)

ANNULMENT APPLICATIONS

Applications to annul a bankruptcy order because it ought not have been made, are made under section 282(1)(a) of the 1986 Act. Section 282(1)(a) of the 1986 Act provides:

'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 …'

Further, annulment application are governed by 10 rules contained in the Insolvency Rules 2016, namely, rules 10.132 to 10.141, which are contained in Chapter 16, entitled 'Annulment of bankruptcy order', which is within Part 10 Bankruptcy of the Insolvency Rules 2016.

Determining such an application involves a 3 stage exercise, as follows (see JSC Bank of Moscow v Kekhman [2015] EWHC 396 (Ch); see Kooter No.1 paragraph 12[25]):

(1) What grounds existed for making the order when it was made;

(2) Whether on those grounds the order ought not to have been made, and

(3) If it determines that the order ought not to have been made, whether to exercise its discretion to annul.

The usual rule is that the annulment applicant bears the burden of proof in respect to stages (1) and (2) - that is, of establishing '...the order ought not to have been made and this includes establishing that the [bankrupt's] COMI was not in England and Wales at the time that the bankruptcy order was made.' ([26a] Kooter No.1, paragraph 15). The Court may annul a bankruptcy order whether or not the bankrupt has been discharged from the bankruptcy, or not (section 282(3) of the 1986 Act; see Deutsche Apotheker-Und Arzebank EG v Leitzbach [2018] EWHC 1544 (Ch); [2018] BPIR 1299 ('Leitzbach')).

The law in relation to stage (3), the discretionary stage, requires some additional commentary now, as a result of a recent decision of Miles J in Dusoruth 1050. The issue, which requires some additional commentary because it has been somewhat unsettled by Miles J, is as to whether the discretion bestowed up the Bankruptcy Court by Parliament, is a discretion which is:

(a) 'full', 'real' or 'two-way' - that is - a discretion which the Bankruptcy Court is at liberty, to go either way upon[26b]; or

(b) effectively closed - that is - a discretion which the Bankruptcy Court is effectvely obliged to find in one way.

Update: what cases have which type of discretion, was recently considered in Khan v Singh-Sall [2023] EWCA Civ 1119; CA ('Singh-Sall'). In essence, where the Court:

(i) ought not to have exercised its power to make the bankruptcy order, because certain statutory requirements were not met, but if those requirements has been met, it could have made the order - here the discretion is category (a) 'full', 'real' or 'two-way

(ii) lacked the pwer to make a bankruptcy order at all against the debtor/bankrupt - here the discretion is category (b) - effectively closed[26c].

Prior to Dusoruth 1050 - Miles J

Prior to Dusoruth 1050, a decision of Miles J on 18.4.23, it could be said that the law as generally understood, was that (b) above applied. Where a bankruptcy order was made without territorial juridiction (which an absense of a Connecting Factor, would be), the Bankruptcy Court is effectvely obliged to exercise its discretion in favour of acceding to the annulment application, and setting aside the bankruptcy order. 

This was seen as a modification to the typical position, which was that (a) above applied - that is, typically the Bankruptcy Court has a 'real', 'full' or 'two way' discretion. The exception being for a bankruptcy order made in absence of a territorial jurisdiction, where, the annulment applicant was entitled to have the bankruptcy order set aside, as of right[27]. In Kooter No.1, at paragraph 3, Deputy ICC Judge Angello KC said:

'In so far as [the bankrupt's] COMI was not in England and Wales as at the time of the bankruptcy order, then the order made stands to be annulled. A challenge relating to a lack of jurisdiction falls to be determined under section 282(1)(a) of the Insolvency Act 1986 on the grounds that the order ought not to have been made. In so far as I determine that, at the time, [the bankrupt's] COMI was not in England and Wales, then the cases of Raiffeisenlandesbank Oberosterrich AG v Meyden [2016] EWHC 414 (Ch), Munks v Munks [1985] FLR 576, Sparkasse Hilden Ratingen Velbert v Horst Konrad Benk [2012] EWHC 2432 (Ch) and Deutsche Apotheker-Und Arzebank EG v Leitzbach [2018] EWHC 1544 (Ch) establish that the order ought to be set aside or annulled as of right.' [bold added] (the quote mispells 'Meyden' as 'Mayden' - this mistake has been corrected in the quotation) 

The decision of Miles J in Dusoruth 1050

The decision of Miles J in Dusoruth 1050 at least raises an element of doubt about this now.

In Dusoruth 1050, at first instance, ICC Judge Mullen heard an annulment application, and had decided that, while s.267(2)(b) had not need satisfied at the date of the original bankruptcy order (because ICC Judge Mullen found 'the debt was not, in fact, liquidated' (paragraph 6 of Dusoruth 1050), he would not exercise his discretion in favour of the annulment applicant, and annul the bankruptcy order.

The debtor/bankrupt appealed, and the application for permission to appeal came for oral hearing before Miles J, who refused permission to appeal. In his judgment, Miles J:

(1) said that though his judgment was a permission to appeal judgment, '...this judgment may be cited in later cases as it turns on a point of law.' ;

(2) said a Bankruptcy Court hearing an annulment application, in respect to a bankruptcy order made when the (later annulment) Bankruptcy Court determines s.267(2)(b) was not satisfied, holds a 'full', 'real' or 'two-way' as to whether to annul the bankruptcy order. This is because the pre-conditions in s.267(2)(b) can not be rationally parcelled out. The pre condition that the debt must be unsecured, and the pre condition that the debt must be liquidated, as two requirements that must be met. Neither is a more 'threhold' requirement than the other. They are both pre conditions for the presentation of a valid petition. And that for the pre condition that the debt must be unsecured, the Court of Appeal had decided in Owo-Samson v Barclays Bank Plc (No.1) [2003] EWCA Civ 714; [2003] BPIR 1373; [2003] 5 WLUK 624 ('Owo-Samson') that the Bankruptcy Court has a 'full', 'real' or 'two-way' discretion on an annulment application, at the discretionary stage, there.[28]

(3) recorded that counsel for the debtor/bankrupt in Dusoruth 1050 had argued that there should be no discretion at the discretionary stage, drawing on Nugee J's decision in Raiffeisenlandesbank Oberosterrich AG v Meyden [2016] EWHC 414 (Ch) ('Meyden'). In essence, drawing no distinction between an absence of: (1) territorial jurisdiction; as against (2) s.267(2)(b) jurisdiction. But Miles J only thought there 'may well be important differences' between the two types of cases, warranting a different approach to nature of discretion held by the Bankruptcy Court hearing the annulment application.

Miles J said in Dusoruth 1050, at paragraph 30:

'It also seems to me that there may well be important differences between that kind of case and a case where the court lacks territorial jurisdiction even to open bankruptcy proceedings because the debtor's COMI is elsewhere. But that is not this case.'[29a]

It is noteworth that Miles J did not refer to any of the other post Owo-Samson authorities on territorial jurisdiction, namely Sparkasse Hilden Ratingen Velbert v Horst Konrad Benk [2012] EWHC 2432 (Ch); [2012] BPIR 1258 (HHJ Purle QC sitting as a High Court Judge) (in effect, a s.265 case)[29b] and Leizbach (HHJ Hodge QC sitting as a High Court Judge)[30]

What then is the upshot? seemingly, though not without doubt now, the law is as summarised by in Kooter No.1, at paragraph 3, by Deputy ICC Judge Angello KC. 

Update: In Singh-Sall, the Court of Appeal considered the law in relation to the territorial jurisdiction cases (there referred to as "the COMI cases') of: (1) Raiffeisenlandesbank Oberösterreich AG v Meyden [2016] EWHC 414 (Ch) ('Meyden'); and Leitzbach. Nugee LJ in Singh-Sall (with whom Snowden LJ and Lewis LJ agreed) set out, at paragraphs 20 to 23 of Singh-Sall, that:

(1) in Meyden, he had decided (at first instance, as Nugee J) that '...the Court has no choice but to set the order aside' (paragraph 37) where the bankruptcy order was made without jurisdiction; and

(2) in Leitzbach, HHJ Hodge QC sitting as a Judge of the HIgh Court, had followed his (Nugee J's) decision in Meyden on this point;

and that, in Singh-Sall:

'Neither advocate before us submitted that the decision in these cases was wrong.' (paragraph 23)

and so, as a result,

'I will therefore proceed on the basis that what I said in re Meyden, followed by HHJ Hodge QC in re Leitzbach, does represent the law.' (paragraph 23).

Later, Nugee LJ affirmed in Singh-Sall that, where the Court lacked all jurisdiction to make a bankruptcy order (which is the case in territorial jurisdiction cases (called in Singh-Sall, COMI cases)), the order will fall to be set aside as of right (paragraph 58).
 

Annulment Applications - Official Receiver + Trustee in Bankruptcy Roles and Costs

Following the annulment of the bankruptcy adjudication in Kooter No.1, the Deputy ICC Judge '...directed that a subsequent hearing be listed ... to enable the Trustees in Bankruptcy...to make such application in relation to costs and or remuneration and expenses as advised' (paragraph 2). Such an application was made, and necessitating a determination as to 'whether the Trustees were entitled to an order for all or part of their costs, remuneration and expenses from Mr Kooter.' It will be recalled that it was Ms Radeva who had issued a debtor's bankruptcy application and who had obtained a bankruptcy order against herself, and it was Mr Kooter, a creditor of Ms Radeva, who had successfully applied for an order annulling that bankruptcy. The application was therefore that an adverse costs order be made against the successful creditor annulment applicant (paragraph 17), on a joint and several basis (paragraph 13) with the Ms Radeva, for: (i) the Trustee's costs of the annulment (known as limb (d) or limb 2 - paragraph 11(b)); and (2) 'The costs and expenses of the trustee in bankruptcy in acting as such from the time of his appointment to the order for annulment' (known as limb (d) or limb 2 - paragraph 11(d))[31].

The Deputy ICC Judge decided, in the first instance, to split the issue, dealing with the principle of costs first, leaving the quantum of such costs for a subsequent hearing (paragraph 2)[32]

The Deputy ICC Judge addressed the issue ('(paragraph 7) as follows, at paragraphs 8 and 9:

Generally, a trustee in bankruptcy is not involved in any meaningful sense in a section 282(1)(a) application with the known proviso that the trustee will seek that one or both of the parties before the court will be made liable for the costs of the trustee. The Trustees in this case attended the first hearing of the annulment application and had prepared, filed and served a witness statement which declared that the Trustees' position was one of neutrality. Whilst the Trustees do of course have a statutory obligation, pursuant to Insolvency Rule 10.137, to attend the annulment application hearing, the Court almost invariably dispenses with the attendance of the trustee in section 282(1)(a) cases. No such application was made by the Trustees at the first directions hearing. This was, in my judgment, precisely the type of case on its facts, where office holders should seek at the earliest possible moment to have their attendance at the hearings dispensed with and for their attendance and any representations to be confined to when the case has terminated and the issue of costs becomes live.

The Trustees did eventually seek such a direction, but at a later date rather than at the first hearing. In the meantime, the Trustees had sought and obtained an entitlement to file further evidence if so advised. There is a clear distinction, in my judgment, between the role of a trustee in bankruptcy in section 282(1)(a) and section 282(1)(b) annulment applications. In relation to section 282(1)(a) cases, as recognised early on in this case by the Trustees in asserting that their role was neutral, there is in general, no role or necessity for the trustee to be involved. In this particular case, the Trustees' involvement was even more limited because effectively this was a jurisdiction challenge. There is effectively in jurisdiction cases, no real discretion to be exercised by the Court which will, if satisfied on the issue, annul the bankruptcy order and dismiss the petition/application'

After much discussion, in her discretion, she determined to capped Mr Kooter's possible liability; she held, at paragraph 35:

'...I direct that Mr Kooter should be liable to pay the sum of £7,500 plus VAT by way of a proportion of the overall costs of the Trustees under limbs 2 and 4.'

Note, the Deputy ICC Judge made other costs orders as well[33].

SIMON HILL © 2023*

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