Shierson v Vlieland-Boddy

A debtor’s centre of main interests is ordinarily determined when the court decides whether to open insolvency proceedings. Current circumstances must be assessed objectively, but the court may consider the history which produced them.

A centre of main interests can change. The new centre must be ascertainable by third parties and possess an element of permanence. A suspected insolvency-driven relocation requires critical scrutiny to ensure that the change is substantive rather than illusory.

Territorial jurisdiction requires an establishment: a place where the debtor conducts non-transitory economic activity with human means and goods. A multi-let commercial property may satisfy that definition where it is operated for the debtor through a company acting as the debtor’s front or nominee.

A trustee in bankruptcy petitioned for a bankruptcy order against the bankrupt’s brother. The debtor had previously lived and worked in England but claimed that he had moved his home, work and centre of main interests to Spain.

The registrar made a bankruptcy order, treating the proceedings as main insolvency proceedings under Article 3.1 of Council Regulation (EC) No 1346/2000 on insolvency proceedings. Mann J allowed the debtor’s appeal in [2004] EWHC 2752 (Ch). He held that the petitioner had established neither a centre of main interests in England nor an establishment supporting territorial proceedings under Article 3.2.

The trustee appealed. The principal questions were when and how a debtor’s centre of main interests should be determined, whether the move to Spain changed that centre, and whether a multi-let English property operated through an offshore company constituted an establishment of the debtor.

1. Appeal allowed. The debtor’s centre of main interests had moved to Spain, so jurisdiction to open main insolvency proceedings under Article 3.1 of Council Regulation (EC) No 1346/2000 on insolvency proceedings was not established. The debtor nevertheless possessed an establishment in England for Article 3.2 purposes. The bankruptcy order was restored and varied to record that the proceedings were territorial insolvency proceedings.

2. Chadwick LJ held that a debtor’s centre of main interests is determined when the court must decide whether to open proceedings. For a bankruptcy petition this will normally be its hearing, although an earlier jurisdictional application may itself supply the relevant time. The court considers the facts existing then, including the historical facts which produced the current position.

3. The inquiry is objective. The court asks where the debtor regularly administers his interests, viewed in a manner ascertainable by creditors and other third parties. This requirement entails an element of permanence. A debtor may relocate and may change his centre of main interests, even for a self-serving purpose when insolvency threatens. Where such motives cause suspicion, the court must scrutinise the asserted change and be satisfied that it is substantive, not illusory, and sufficiently permanent.

4. The High Court was entitled to find that the centre had moved to Spain. The debtor’s evidence about living and working there was not plainly incredible. In the absence of cross-examination, it could not fairly be disbelieved merely because other aspects of his affairs generated suspicion.

5. An establishment under Article 2(h) requires a place of operations at which the debtor carries out non-transitory economic activity with human means and goods. Mere possession of assets is insufficient. The letting and management of a multi-let commercial property amounted to the required activity.

6. The only reasonable inference from the unexplained transfers and the debtor’s relationship with Millennium Investment International Ltd was that the company acted as his front or nominee when territorial jurisdiction was assumed. The company’s operation of the property was therefore attributable to him. Longmore LJ and Sir Martin Nourse agreed on establishment and on the disposition.

7. Longmore LJ, with Sir Martin Nourse agreeing on the first point, reserved whether service of a petition might sometimes be the relevant jurisdictional time. Longmore LJ also reserved whether a good arguable case, rather than proof on the balance of probabilities, might suffice. Sir Martin Nourse doubted that the lower standard could govern main insolvency proceedings without a ruling from the European Court of Justice.

1. Court of Appeal (Civil Division): By [2005] EWCA Civ 974, allowed the trustee’s appeal, restored the bankruptcy order and varied it to record that the proceedings were territorial insolvency proceedings.
2. High Court, Chancery Division: Mann J allowed the debtor’s appeal in [2004] EWHC 2752 (Ch), set aside the bankruptcy order and dismissed the petition.
3. High Court, bankruptcy registrar: Mr Registrar Rawson made a bankruptcy order on 13 July 2004, holding that the proceedings were main insolvency proceedings and, alternatively, that the debtor possessed an English establishment.