Bankruptcy – debtor’s petition – annulment under section 282 – foreign bankrupt – sufficient connection with jurisdiction
Mr Kekhman, a Russian citizen, domiciled and resident there, but with significant international interests, visited England for 2 days, during which time he successfully petitioned for his own bankruptcy. JSC applied to annul his bankruptcy under section 282(1)(a) of the Insolvency Act 1986. Chief Registrar Baister declined to annul the bankruptcy.
Upholding that decision on appeal, but for different reasons, Morgan J held that in order to petition for his own bankruptcy, Mr Kekhman had to show: (1) that the English court had jurisdiction (which it was accepted it did by his personal presence on presentation); (2) he had a sufficiently close connection with England and Wales; (3) there was a reasonable possibility of benefit (for creditors and the debtor) resulting from the making of the order; and (4) one or more persons interested in the distribution of assets were persons over whom the English court had jurisdiction.
Only if JSC showed that the court ought not to have made the order, because one of these elements was missing, did the court’s discretion whether to annul under section 282 become relevant. Morgan J held that the Chief Registrar erred in principle in conflating the question about whether the court ought to have made the order with the exercise of the discretion.
Morgan J held that Mr Kekhman could show a sufficiently close connection with England and Wales, as he had a liability of £86 million to an English creditor under an agreement governed by English law. The fact that Russian law would not recognise Mr Kekhman’s bankruptcy did not prevent it being of benefit to him, or to other creditors, as it would prevent a “free-for-all” in any jurisdiction which recognised the order. Further, the fact that it transpired after the bankruptcy order that Mr Kekhman had no assets in England did not mean the order ought never have been made. Accordingly, he was satisfied that the order ought to have been made. He was not, therefore, required to exercise a discretion.
This case is useful for all those dealing with bankruptcies with an international dimension for its extensive discussion of the factors English courts will take into account. It confirms the willingness of English courts to allow international individuals to choose English bankruptcy to manage the administration of their debts and assets.
