Vol 2 (2005) - Issue 6

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Malcolm Brian Shierson (trustee in bankruptcy of Martin Vlieland-Boddy) v Clive Vlieland-Boddy - EC Regulation on Insolvency Proceedings - Shifting the COMI after Debts are Incurred - Bankruptcy Proceedings: Court of Appeal Decision

Introduction

This case review is further to my previous case review of the judgment of Mr Justice Mann in the High Court.
Since Council Regulation (EC) No 1346/2000 on Insolvency Proceedings (‘the Regulation’) came into force in the UK on 31 May 2002, the meaning of ‘centre of main interests’ (‘COMI’) has been frequently considered by the courts, as there is no definition of the term within the Regulation itself. The situation of the COMI is crucial in determining which EC country has jurisdiction to open main insolvency proceedings in cross-border disputes. In the Court of Appeal in Malcom Brian Shierson (trustee in bankruptcy of Martin Vlieland-Boddy) v Clive Vlieland-Boddy (‘Vlieland- Boddy’), the issue of change of COMI in bankruptcy proceedings arose on appeal from the decision of Mr Justice Mann. He had reversed the decision of the Registrar to accept jurisdiction under the Regulation and make a bankruptcy order against Mr Vlieland-Boddy (‘the Debtor’).
Mr Justice Mann considered whether or not the COMI (or alternatively an establishment) of the Debtor could, or indeed should (as a matter of policy), remain situated in England or Wales or was now situated in Spain. He allowed the appeal of the Debtor and made the following findings:

(i) the relevant time for assessing the COMI of the debtor in accordance with the Regulation is the time of the opening of proceedings, which is the date on which the relevant order is made;

(ii) there had been a change of COMI from England to Spain prior to the opening of proceedings;

(iii) the debtor did not have an establishment in England or Wales.

The Court of Appeal was concerned with reviewing the above findings in order to determine whether the centre of the Debtor’s main interests was in fact within the territory of the United Kingdom at the relevant date and if not, whether the debtor possessed an establishment here.

The Regulation

There is no definition of COMI in the Regulation. References to the COMI are made primarily in Article 3:

3.1 the courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.

3.2 where the centre of a debtor’s main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State.

There is further reference to the COMI and the need to prevent debtors from seeking the most favourable forum in the Recitals to the Regulation, see especially Recitals 4, 12 and 13.
An establishment is defined in Article 2(h) of the Regulation: ‘establishment shall mean any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’.