Debtor's 'Forum Shopping': don't judge a book by its cover
In the recent case of JSC Bank of Moscow and ZAO Sberbank Leasing v Vladimir Kekhman and Others, the English Bankruptcy Court held a foreign debtor's request to be made bankrupt under the English jurisdiction should not be automatically labelled as a self-serving opportunistic request. Rather, consideration should be given to all the circumstances of the individual case when deciding whether an English Order would serve any utility.
On 25 September 2012, Vladimir Kekhman ("the Respondent"), a Russian citizen, presented a Bankruptcy petition to the English Court. The Respondent claimed jurisdiction pursuant to s.264(1)(b) and s.265(1)(b) of the Insolvency Act 1986 on the basis that he was personally present in the country on the day he presented the petition. While there was no real connection with the jurisdiction, the Respondent was only personally present for two days, the Court decided to exercise its discretion in favour of the Respondent by making a bankruptcy order.
On 31 January 2013 and 27 March 2013 respectively, the Russian JSC Bank of Moscow and ZAO Sberbank Leasing ("the Applicants") issued applications to annul or rescind the bankruptcy order. The Applicants submitted that the Respondent was trying to evade Russian law by choosing a more lenient venue for his insolvency proceedings.
They sought annulment of the order on the basis that it served no utility and did not benefit creditors as (a) Russian law would not recognise and/or enforce the English order, (b) the Respondent's assets in Russia were subject to an arrest and as such could not be realised by the English Trustee, (c) the limited nature of the assets in England meant there was little to realise for the benefit of creditors. The Applicants further argued the order should be annulled or rescinded in view of the Respondent's alleged non disclosure or provision of misleading information to the Court and to the Trustee.
Dismissing the application, Chief Registrar Baister held that, in the absence of a personal bankruptcy regime in the Russian Federation, the English court was entitled to fill the lacuna by providing a system that enabled proper investigation of the Respondent's affairs and an orderly realisation of assets for the benefit of creditors. In striking a balance between the competing interests of the parties, the Court further held that Mr Kekhman was entitled to seek rehabilitation from his insolvency proceedings and this did not prejudice the Applicants' interests as they would receive a distribution from the realisation of any assets in England, and would still be able to pursue claims against assets located in Russia through the Russian regime.
With regard to the Applicants' allegation the Respondent had provided misleading information, the Court further held that, whilst this might warrant annulment, the threshold had not been met as Mr Kekham's alleged acts of non disclosure where not regarded as deliberate and, most importantly, did not prevent the Trustee from proceeding with his investigation and realisation of assets.
Practitioners will be interested to note that Chief Registrar Baister applied principles derived from company cases such as Re Magyar Telecom BV  which show the English Courts are prepared to accept cases of legitimate forum shopping.
Capita Asset Services -v- Gulldale Limited (2014)
The English High Court places an Isle of Man Company into Administration following a Letter of Request from the Isle of Man High Court.
Under section 426 Insolvency Act 1986 ("IA1986"), Courts in certain designated countries can ask the English Court for assistance in insolvency proceedings.
Commercial properties were registered in the names of two English companies but the beneficial interests belonged to Gulldale Limited, a company incorporated in the Isle of Man. The two English companies went into Administration and it was considered preferable for the Manx company to be under the control of the same Administrators. This gave rise to a jurisdictional issue. As the Company was incorporated, and had its COMI in the Isle of Man, the English High Court had no jurisdiction as it did not fall within the definition of a "company" in paragraph 111(1A) of Schedule B1 of the IA1986.
The Company asked the High Court of the Isle of Man to issue a Letter of Request. The Court had regard to the interests of the claimant, the defendant, the creditors and the public interest. It also appears to have been a significant factor that the Isle of Man company had connections with England. Finally, the Court noted that Isle of Man law did not provide for the appointment of Administrators. Having considered all of the evidence and concluded that it was in the best interests for the companies to all be under the control of the same Administrators, the High Court of the Isle of Man issued a Letter of Request to the English High Court which then placed Gulldale Limited in to Administration.
In considering whether to issue the Letter of Request, the Isle of Man High Court considered the Jersey and English High Court decisions in HSBC v Tambrook .
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