Bridging Finance Inc v Anthony Lyons

For bankruptcy jurisdiction based on business carried on in England and Wales, the debtor must have carried on a personal business during the statutory three-year period. Incorporation, shareholding, directorship, guarantees or control of companies do not, without more, establish that the debtor was carrying on business personally.

The court must examine the substance and totality of the activities and identify acts attributable to the debtor rather than to the companies. A single transaction may suffice. Property development, letting and sale may amount to carrying on business where undertaken as part of the debtor’s investment project.

A bankruptcy petition should be dismissed only where there is a genuine and substantial dispute with a real prospect of success. A cloud of weak objections does not satisfy that test.

Bridging Finance Inc petitioned for a bankruptcy order against Anthony Lyons in respect of liabilities under a personal guarantee given in connection with finance for the Dissington Garden Village project.

Mr Lyons, domiciled and resident in the Bahamas, challenged the court’s jurisdiction. The petitioner relied on alleged business carried on through companies controlled by Mr Lyons and on his personal ownership, letting and sale of a London property, Hamilton Terrace.

Mr Lyons also disputed the debt, alleging misrepresentation, a collateral agreement not to enforce the guarantee, estoppel, waiver and non-disclosure of a freezing injunction. He further relied on delay and non-compliance with rule 10.7(2) of the Insolvency (England and Wales) Rules 2016. The central issues were whether jurisdiction existed and whether any dispute or procedural defect required dismissal of the petition.

1. Jurisdiction. Section 265 of the Insolvency Act 1986 required the petitioner to show that, during the relevant three-year period, Mr Lyons had carried on business in England and Wales. The statutory reference to business included business carried on by a firm, partnership, agent or manager, but did not remove the need to identify business attributable to the debtor.
2. The principles in Re Brauch established that an individual may carry on a business distinct from the business of companies used as vehicles for the individual’s projects. However, incorporation or promotion of companies were essentially one-off acts and had to occur within the relevant period. Activities carried out as investor, shareholder, guarantor or corporate officer could not be treated as personal business without sufficient clarity as to the capacity in which the debtor acted.
3. The general-business case failed. The evidence did not permit the court to isolate acts showing that Mr Lyons acted solely or predominantly in a personal capacity. The corporate structure, use of the title CEO and description as a shadow director pointed towards corporate involvement. The court therefore respected the distinction between Mr Lyons and his companies.
4. The Hamilton Terrace case succeeded. Development, refurbishment, letting, receipt of rent and sale of a personally owned property were business activities. They were undertaken as part of Mr Lyons’s investment project, and Matterhorn’s personnel acted as his agents. At least letting and sale occurred within the relevant period. A single transaction could suffice, and no minimum scale or value of business was required.
5. Disputed debt. The court adopted the genuine-triable-issue test applicable to statutory demands. There was no substantial dispute where allegations were inherently or commercially implausible, unsupported by contemporaneous documents, raised late, or amounted to a cloud of objections. The misrepresentation, collateral-agreement, estoppel, waiver and non-disclosure arguments did not meet that threshold.
6. Rule 10.7(2) of the Insolvency (England and Wales) Rules 2016 had not been complied with, but the delay was explained by the need to investigate service out of the jurisdiction. There was no prejudice, so the defect was waived. A bankruptcy order was made.