Notwithstanding Brexit, COMI rears its head again

The debtor company had been incorporated in BVI but subsequently moved its registered office to Malta. The petitioner creditor entered into a contract with the debtor which was governed by English law and provided for dispute resolution by arbitration in London.

The petitioner obtained default judgment in BVI and then applied for and obtained a winding up order in England on the ground that the debtor had its COMI there. The petition was decided prior to the end of the Brexit transition period such that the Recast European Insolvency Regulation still applied. At that hearing, ICC Judge Baister held that the debtor had its COMI in England. This was overturned on appeal by the debtor by Mr Justice Miles and the petitioner appealed that judgment to the Court of Appeal.

The Court of Appeal held as follows:

  • Agreeing with Miles J that, contrary to Judge Baister's view, a lack of evidence that the debtor actually carries out any activities at the place of its registered office does not allow the court to ignore the presumption under Article 3(1) of the Insolvency Regulation to the effect that a debtor company’s COMI is at its registered office.
  • What the court is entitled to do is to treat the presumption that the COMI is in the same place as the debtor’s registered office as being more easily rebutted if the evidence shows that no relevant acts of administration are actually carried out there but, even in such a case, the presumption will still apply unless there is sufficient contrary evidence.
  • Miles J had held, applying dicta of the Court of Appeal in In re Stanford [2011] Ch 33, that the use of English law and dispute resolution clauses in most of the debtor’s commercial contracts should be discounted as a factor on the ground that there was no reason to think such contractual clauses were publicly and readily ascertainable by typical third party creditors. However, the Court of Appeal held, contrary to Miles J, that it should not invent a hypothetical third party creditor with "average" characteristics and form a view on what might have been apparent to that creditor in the course of a notional dealing by him with the company. The fact that the contractual terms upon which any one creditor dealt with the company would not be known or disclosed to other creditors in the ordinary course of their dealings with the company, should not mean that (if otherwise relevant) evidence of those terms should necessarily be excluded from consideration by the court.
  • Miles J’s judgment could not otherwise be faulted however and the appeal accordingly failed

East-West Logistics LLP v Melars Group Limited; Court of Appeal (Civil Division); 28 October 2022

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