Bankruptcy Order Annulled Following Debtor’s Emigration to Australia

travelThe jurisdiction of the English courts is not limitless and a debtor who is resident and domiciled overseas cannot be made bankrupt in this country unless it is shown that he ‘carried on business’ here. The High Court analysed the meaning of that phrase in a ruling of importance to insolvency practitioners.

The case concerned a businessman who was declared bankrupt after failing to make good on a personal guarantee he had provided in respect of a loan advanced to a company of which he was a director. He applied under Section 282(1)(a) of the Insolvency Act 1986 to annul the bankruptcy order on the basis that the courts of England and Wales lacked jurisdiction to make it.

Having emigrated to Australia with his family more than three years prior to the issue of the bankruptcy petition, he successfully argued that he was neither resident nor domiciled in England and Wales. However, in rejecting his application, a judge found that he had nevertheless carried on business in this country during that period.

In upholding his appeal against that ruling and granting the order sought, the Court noted that, although the company was registered in England, he was not its sole director or shareholder. The fact that Companies House had recorded his usual country of residence as England and Wales was also not decisive.

The Court noted detailed and unchallenged evidence that he had permanently made his home in Australia. The only business-related activity he had conducted in this country during the relevant period was to vainly explore options for rescuing the company from financial distress. That, by itself, was insufficient to establish that he was carrying on business in England and Wales at the material time.