Ann Nilsson & Anor v Timothy Edward Jones

On an application to annul a bankruptcy order made by an adjudicator, the court may consider whether the order ought not to have been made because the court’s discretion to refuse a bankruptcy order should have been exercised. That discretion requires a balance between the debtor’s interest in discharge and rehabilitation and the creditors’ interest in an effective, fair and pari passu distribution. Where the debtor’s principal assets are abroad and the relevant foreign jurisdiction will not recognise the English bankruptcy, the court must consider whether the estate is reasonably likely to be recovered and distributed. A real risk that creditors will be restrained in England while unable to benefit from foreign assets may justify annulment. The discretion whether to annul is separate and permits consideration of post-order circumstances.

Joint trustees in bankruptcy applied to annul a bankruptcy order made against Timothy Edward Jones by an adjudicator on 21 December 2021. They first argued that Mr Jones was domiciled in Austria, so the English court lacked jurisdiction. Alternatively, they argued that the order ought not to have been made because the court should have declined, in its discretion, to make a bankruptcy order. The trustees also relied on the absence of substantial English assets, the location of the principal assets in Austria, Austria’s refusal to recognise a bankruptcy founded on domicile, and the practical effect on creditors. The central issues were whether Mr Jones had acquired an Austrian domicile of choice and whether the order should be annulled under section 282 of the Insolvency Act 1986.

1. First Issue. The application failed on domicile. The trustees bore the burden of proving, on the balance of probabilities, that Mr Jones’s domicile of origin had been superseded by an Austrian domicile of choice. Domicile is an objective conclusion inferred from all relevant circumstances. Residence, permanent residence, habitual residence, citizenship and declarations of intention are relevant but not decisive. The evidence showed that Austria was Mr Jones’s home and centre of main interests, but the continuing custody dispute and financial uncertainty created a state of flux inconsistent with a settled intention to reside there indefinitely. His domicile of origin therefore remained unchanged (paras [62]-[74]).

2. Jurisdiction to consider the alternative case. Section 282 of the Insolvency Act 1986 applied to a bankruptcy resulting from an adjudicator’s decision. Although the administrative scheme required an adjudicator to make an order when the statutory conditions were met, it did not remove the court’s separate jurisdiction on an annulment application to decide whether the order ought not to have been made because the court’s discretion to refuse an order should have been exercised (paras [84]-[89]).

3. Discretion to make a bankruptcy order. The court had to balance Mr Jones’s interest in discharge and rehabilitation against the creditors’ interest in an orderly and fair distribution. Relevant considerations included sufficient connection with England, the reasonable possibility of benefit, the practical effect of the order, the location and recoverability of assets, the interests of creditors, and the risk of an unequal foreign free-for-all. At the date of the order there was no evidence that the Austrian assets would be delivered up, recovered, or dealt with through parallel insolvency proceedings. Creditors in England would be restrained by section 285 while creditors abroad could pursue the Austrian assets. The order ought not to have been made in those circumstances (paras [90]-[119]).

4. Discretion to annul. The discretion whether to annul was distinct from the question whether the order ought not to have been made and permitted consideration of subsequent events. No realistic plan had been proposed for recovery and distribution of the estate, the trustees had realised nothing, and no creditor identified prejudice from annulment. The discretion not to annul should therefore not be exercised. The application succeeded and the bankruptcy order was annulled (paras [120]-[126]).