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Introduction
In this case the court considered the test for establishing whether a statutory demand had been properly served. The court also considered whether the debtor’s habitual residence had been established outside of England, for the purpose of determining the debtor’s centre of main interests (COMI).
The court found that where the debtor had provided an address for service in a standstill agreement, and had not notified the petitioner of a purported change to that address in accordance with the provisions of that agreement, the petitioner had carried out all reasonable steps to serve the demand by serving it at that address. However, an address for the purpose of valid service is a separate matter to a debtor’s COMI, and based on the evidence the petitioner failed to show that the debtor’s habitual residence was in England and Wales for the purpose of COMI.
Background
A creditor (the Petitioner) purported to serve a statutory demand on the debtor. When the sums due remained outstanding, the Petitioner presented a bankruptcy petition, commencing bankruptcy proceedings in the courts of England & Wales.
The underlying debt was based upon a settlement agreement dated from 2015 and signed by the Petitioner, the debtor and a third party. Under the terms of the settlement, the debtor was required to make payments to the Petitioner in the event the third party failed to make the payments under the settlement agreement.
The Petitioner claimed that the required payments were not made pursuant to the settlement agreement by either the third party or the debtor.
In December 2020, all three parties entered into a standstill agreement in relation to claims arising out of the settlement agreement.
The Petitioner then sought to serve a statutory demand on the debtor in November 2021 in respect of the debt. The debtor did not make an application to set aside the demand. The Petitioner then presented a bankruptcy petition to the court in January 2022.
The debtor challenged the service of the statutory demand and the Petitioner’s decision to commence proceedings in England, alleging that he had been resident in France since 2018.
Service of the statutory demand
The debtor provided a London address in both the 2015 settlement agreement and the 2020 standstill agreement.
The standstill agreement provided for the parties to notify each other if they changed address.
The debtor and his solicitors did not indicate that his address had changed.
The Petitioner’s solicitors asked the debtor’s solicitors to confirm whether his address had changed and they received no substantive response.
The Petitioner sought to serve the demand at the London address.
It was confirmed to the process server by the porter at the London address that post left there for the debtor was collected and retained for him.
COMI (Habitual Residence)
The debtor’s COMI is presumed to be the country where they are habitually resident.
The debtor claimed to be habitually resident in France on the basis that the London property was owned by his parents, he only used that address for correspondence, and he was in fact living at his wife’s property in France.
The debtor relied on the following evidence to support his asserted habitual residence in France.
- The debtor’s car was insured in France.
- The debtor’s dogs had French passports.
- A witness statement was provided by a supermarket owner in France saying the debtor was a regular customer.
- A witness statement was provided by a neighbour saying that he regularly sees the debtor in the apartment complex where the debtor’s wife’s apartment is.
- A witness statement was provided by a French doctor saying he has been treating the debtor in France.
- A witness statement was provided by a friend of the debtor in France, claiming to regularly socialise with the debtor.
- A witness statement was provided by a restaurant manager in France asserting that he has regularly seen the debtor in the restaurant.
- A witness statement was provided by a business associate of the debtor which does not demonstrate any business interests in England.
The Petitioner sought to rely on the following evidence in asserting that the debtor was actually habitually resident in England.
- The debtor had an English mobile phone on an English plan.
- The debtor was domiciled in England.
- The debtor was registered with a doctor in England.
Issues
The main issues considered by the court were as follows.
- Was the demand served on the debtor as required by Rule 10.2 IR 2016?
- Was the Debtor’s COMI in England & Wales?
Decision
Service of demand under Rule 10.2
The court held that the demand had been served on the debtor. In reaching this conclusion, the court placed significance on the address provided by the debtor in the standstill agreement (which was entered into after the date he claimed to have moved to France). The court paid particular attention to the fact that the standstill agreement contained provisions requiring the parties to notify each other of a change of address and the fact that the Petitioner’s solicitors asked the debtor’s solicitors whether his address remained the same and were not informed of a change of address. Further, the court considered it relevant that the evidence indicated that correspondence sent to the address was collected by the debtor.
On this basis, by personally serving the demand at the London address, the Petitioner had carried out all reasonable steps in seeking to serve the demand. Accordingly, the demand had been properly served on the debtor.
COMI
The Court considered the available evidence and found that the Debtor’s evidence presented a picture of the Debtor being habitually resident in France. There was no evidence to displace this presumption.
Conclusion
The court noted that there was no evidence of further links to England (i.e. evidence of expenditure or bank statements).
On this basis, the court found that the debtor was habitually resident in France, and therefore that the Petitioner had failed to establish that his COMI was in England & Wales.
This case demonstrates the court’s approach to establishing whether a statutory demand has been properly served, by reference to the address of service, and establishing a debtor’s COMI, for the purpose of commencing insolvency proceedings. The case also confirms the differences between the tests and how they must be considered independently. Establishing a valid service address alone, does not establish COMI.
The case demonstrates the variety of different evidence the court will consider when assessing a person’s COMI and highlights the danger of making assumptions based on an address for service and failing to investigate the full picture of the debtor’s circumstances.
Should you wish to discuss any of the issues raised in this article, please contact Sacha Pickering.
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