Now that the dust has settled after the verdict from the High Court in Belfast on Tuesday annulling Sean Quinn’s bankruptcy, it is perhaps an opportune time to analyse the Judgment and see where this leaves cross border applications for bankruptcy.
The Judgment from Mr Justice Donal Deeny deals with whether Mr Quinn has established his centre of main interest (COMI) in Derrylin, as he claimed, and also the extent to which someone seeking to go bankrupt in the UK should make their whereabouts ascertainable to creditors. It does not mean that everyone seeking to go bankrupt in the UK needs to worry that they will find their bankruptcy being challenged; it just means that they have to ensure they don’t make the same mistakes as Mr Quinn.
The Irish Bank Resolution Corporation’s (IBRC) challenge revolved around their claim that there had been misrepresentation and non-disclosure on the Statement of Affairs, and that, due to ongoing legal challenges against Sean Quinn, it would save costs to keep all the proceedings together in the Republic.
Firstly the Judge had to decide where Mr Quinn’s COMI was. It was not in dispute that his residence was in the Republic of Ireland, in fact he stated on his petition that he was not resident in Northern Ireland, but that he conducted his business from there and, therefore, was entitled to his bankruptcy as he carried out his economic activities in the North, which he said were dealing with his complex litigation and tending to some forestry issues. The Judge noted that dealing with his litigation may be enough to establish a COMI in the North, if indeed he was actually doing that in Fermanagh.
Upon coming to his decision the Judge noted that there was no definition of what a COMI is. The courts instead have had to rely on the primary legislation. The Judge was guided that the “centre of main interest” should correspond with the place where the debtor conducts the administration of his interests on a regular basis and is, therefore, ascertainable by third parties.
The Judge, on weighing the evidence, decided that Mr Quinn had not carried out these activities in the North and hence, on that basis, his centre of main interest was in the Republic.
Given that decision, it was not strictly necessary for the Judge to consider whether Mr Quinn’s whereabouts was ascertainable, but nevertheless he chose to do so. The Judge commented that ascertainablility did not mean that a bankrupt had to tell his creditors where he was living or working. Neither did he have to advertise it, but he should not hide it either, and it should be reasonably ascertainable by a creditor. The Judge further concluded that any office Mr Quinn may have had in the North was simply not ascertainable by his creditors.
So what can we learn about future applications for bankruptcy by Irish citizens in the UK?
We know for sure that it is possible for anyone in any EU state to open proceedings for bankruptcy in another EU country, if they have established their centre of main interests in that country and their whereabouts is reasonably ascertainable.
We know that if you are to establish your centre of main interests it can be done by being resident in a jurisdiction. That would entail living and working and carrying out your affairs in that jurisdiction. Part of the problem Mr Quinn faced was that he continued to maintain a home and family life in the Republic. This limited his scope for using the full extent of the EU legislation in his favour. If he had uprooted himself for as little as four months and based himself and his affairs North of the border, living and working in the North, it is my contention that he could have rightly claimed that his habitual residence was in the North.
We know that it will be a requirement to make your whereabouts ascertainable by those to whom you owe money. The Judge pointed out that, as a matter of public policy, the purpose of any proper legal system of commercial law is to ensure, as far as possible that debts lawfully owed should be paid. Those seeking to obtain monies owed to them must therefore be able to find those owing the money.
With this in mind how is someone contemplating bankruptcy in the UK to proceed? At Irish Bankruptcy UK our advice has always been that to ensure that EU regulations are complied with, all those seeking bankruptcy in the UK must become resident there for the majority of the six months before declaring bankruptcy. It is a big decision to take to move to a new country, however, it is fundamental in order to participate in the UK’s bankruptcy process, where bankrupts are automatically discharged from bankruptcy after only 12 months, as opposed to 12 years in the Republic. After which time they can return home to Ireland debt free and with their future earnings protected from existing creditors.
It seems it will now be the case that creditors will need to be able to easily ascertain the address of any debtor. Does this in fact mean that we have reached the position that they need to be advised of a change of address? The Judge specifically stated that the address need not be advertised, but if not, how will a creditor know you have moved? This also raises the vexed question of the reaction of lenders to knowledge that a debtor is no longer in the Republic. Will they take steps themselves to pursue bankruptcy as IBRC is in the current case, or will they take a more measured approach?
Many of those with very large liabilities will understandably be concerned that if they advise their creditors that they are moving to the UK for new opportunities, the creditors may instigate bankruptcy proceedings in Dublin as a way to take further control of the debtor. There is no guidance from the Judge on what precisely would constitute making your address readily ascertainable. He mentioned that Mr Quinn’s office was not in the phone book, in trade directories or on the web. From that can we infer that for someone starting a business in the UK, by listing their businesses contact details and posting them on their website that could be enough to make his presence ascertainable.
But, what would be the situation for someone who took up a paid position? The same opportunities would not apply. Perhaps the only solution, which protects the debtor and also alerts the creditor, would be to notify a change of address a short time prior to bankruptcy proceedings being filed.
Whilst the majority of the judgment is welcome, as it helps to clarify the legal definition of a centre of main interests, it does raise some significant questions that need answering. In light of this, potential Irish bankrupts to the UK need to tread carefully and do everything by the book.
Steve Thatcher is a legal adviser with Irish Bankruptcy UK (http://www.irishbankruptcyuk.com)
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