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BUJ Architects LLP v Investin Quay House Ltd – Coronavirus and COMI

In BUJ Architects LLP v Investin Quay House Ltd) [2021] EWHC 2371 (Ch), the Court was obliged to consider a Jersey registered company’s centre of main interests (COMI) along with the financial impact of coronavirus in a petition presented on in summer 2020.

Investin Quay House Ltd (the Company) is a Jersey registered company. BUJ Architects LLP (the Petitioner) presented a petition based on a debt of £354,000 following an order of Mr Justice Waksman in proceedings in the Technology and Construction Court.

The Company did not dispute the judgment liability. However, it opposed the petition on the grounds that:

  1. coronavirus had had a financial effect on the Company such that the Court was not entitled to make a winding up order pursuant to Schedule 10 of the Corporate Insolvency & Governance Act 2020 (as then applicable) (CIGA); and;
  2. as a Jersey registered company with its COMI in Jersey, for the purposes of the recast EU Regulation on Insolvency Proceedings, the Court had no jurisdiction to make a winding up order in respect of the Company.

Subsequently, the Company went into voluntary liquidation in Jersey.

The Coronavirus Test

As detailed in our previous articles here and here, Schedule 10 of CIGA prevents a petitioner from presenting a petition against a company unless the petitioner has reasonable grounds for believing that either coronavirus has not had a financial impact on the company, or (ii) the facts by which the grounds of the petition apply would have arisen even if coronavirus had not had a financial impact on the company

The evidential burden of showing that coronavirus had had a financial effect is on the company in the case of (i), and on the petitioner to show that the grounds would still apply if coronavirus had had no effect in the case of (ii).

The Company’s position was that, notwithstanding the judgment on which the petition was based having fallen due for payment several months before the pandemic, the Company was financially affected by coronavirus because its founder’s business interests were adversely affected, meaning he was unable to financially assist the Company.

Judgment

The matter came before ICC Judge Mullen in June 2021. The judge acknowledged that the first element to the test, i.e. whether coronavirus had a financial impact on a company, has a low threshold, but did not consider the Company had met this test with the bare assertion that support would have been forthcoming from the founder but for coronavirus.

Accordingly, the question of the Court’s jurisdiction to make a winding up order fell to be determined.

COMI

The Petitioner contended that the Company’s COMI was in England. The Company’s principal purpose was to develop a property in London, acquired in 2014 for £11million. The Company appointed the Petitioner as architects to the project and the contract between them was expressed to be subject to the law of England & Wales and to the exclusive jurisdiction of the Courts of England & Wales.

It was the EU Regulation as incorporated into UK law (and amended by the European Union (Withdrawal) Act 2020) that applied to the petition, notwithstanding that the petition was presented prior to the end of the transition period following the UK’s withdrawal from the EU. The question for the Court was therefore whether the company’s COMI was in England. (Whether COMI was in Jersey with an establishment in the UK was not relevant to the EU Regulation as Jersey is not part of the EU).

It is well understood that the definition of COMI corresponds “to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties” (the EC Regulation). COMI is presumed to be in the jurisdiction where a company’s registered office is located but this presumption can be rebutted if factors which are both (i) objective and (ii) ascertainable by third parties establish it in a different location. Our previous article usefully summarises the factors a court takes into account when assessing COMI.

In this case, the Court heard evidence that the Company’s principal purpose was the development of the property in London, that meetings at which the Company was represented were in London, that the Company appointed agents in the UK to carry out large parts of the Company’s administration, and that the key staff on the project were based in Solihull, at the founder’s offices.

The Company sought to demonstrate that the administration of the company took place in Jersey, providing copies of minutes of meetings of the board in Jersey. However, the Judge noted that these were formal records only, with nothing to show actual discussion or dissent.

Ultimately, the judge determined that, viewed objectively, the Company pursued its economic activities, held assets and exercised management functions in such a way that pointed to its COMI being in England, and therefore the Court had jurisdiction to make a winding up order. Even if that were not correct, the judge considered that there was a sufficient connection with the jurisdiction of England & Wales to allow the Court to make a winding up order as an unregistered company pursuant to section 221 of the Insolvency Act 1986.

Our comment

This decision serves as a useful reminder that while the threshold for a company to meet the first strand of the coronavirus test for a winding up petition is low, it is not so low that a bare assertion will suffice.

On COMI, the judge helpfully outlined the objective factors likely to be taken into account by third parties considering where a company’s COMI is located.

For further information on this article, please contact Katie Farmer or another member of our Restructuring & Insolvency team.

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