Making someone bankrupt part 1

We have seen a number of the legal aspects relating to winding up companies. Some provisions we have seen also apply in bankruptcies.

The only people in respect of whom a bankruptcy petition can be presented are persons to whom the provisions of section 265 of the Insolvency Act 1986 apply. The first point to note is that for a person to be made bankrupt they have to be domiciled in England and Wales. This is a complex concept, but essentially amounts to deciding where has become their permanent home. As it was put in the case of Re Bird 1962 1 WLR 686 "As to the question of domicile, the bankrupt asserted that in 1957 he left this country permanently with the intention of residing thereafter in Jersey and that thus he abandoned his domicile of origin, which was admittedly English, and acquired a domicile of choice in Jersey. There was no application to cross-examine the bankrupt on his affidavit and, in the upshot, the registrar has not dealt with this matter. In the circumstances it appears to me that this is not a matter on which the court can adjudicate, although, as the matter stands, it seems difficult to see how the contention of a Jersey domicile could be rejected. The bankrupt had every motive for leaving this country and, though he had less for choosing a new domicile in Jersey, he has in fact lived there for the last five years and has done various acts which indicate an intention to make his residence permanent. However, having regard to other views which I hold on a different part of this case, it is not essential that I should come to a conclusion on that matter, even if we could do so, and I say no more about it."

If someone abandons their domicile of choice then their domicile of origin revives as for example, with the defendant in Barlow Clowes International Limited v Henwood 2008 BPIR 778 where the defendant had originally been from England, and had acquired a domicile of choice in Mauritius. This was part of the proceedings which followed from the substantial Barlow Clowes collapse, in consequence of which the liquidators of that company were pursuing various people for monies said to be owed to it. In her judgment Lady Justice Arden summarised the principles regarding domicile at paragraph 8: "The following principles of law, which are derived from Dicey, Morris and Collins on The Conflict of Laws (2006) are not in issue:

(i) A person is, in general, domiciled in the country in which he is considered by English law to have his permanent home. A person may sometimes be domiciled in a country although he does not have his permanent home in it (Dicey, pages 122 to126).

(ii) No person can be without a domicile (Dicey, page 126).

(iii) No person can at the same time for the same purpose have more than one domicile (Dicey, pages 126 to128).

(iv) An existing domicile is presumed to continue until it is proved that a new domicile has been acquired (Dicey, pages 128 to 129).

(v) Every person receives at birth a domicile of origin (Dicey, pages 130 to 133).

(vi) Every independent person can acquire a domicile of choice by the combination of residence and an intention of permanent or indefinite residence, but not otherwise (Dicey, pages 133 to138).

(vii) Any circumstance that is evidence of a person's residence, or of his intention to reside permanently or indefinitely in a country, must be considered in determining whether he has acquired a domicile of choice (Dicey, pages 138 to143).

(viii) In determining whether a person intends to reside permanently or indefinitely, the court may have regard to the motive for which residence was taken up, the fact that residence was not freely chosen, and the fact that residence was precarious (Dicey, pages 144 to151).

(ix) A person abandons a domicile of choice in a country by ceasing to reside there and by ceasing to intend to reside there permanently, or indefinitely, and not otherwise (Dicey, pages 151 to153).

(x) When a domicile of choice is abandoned, a new domicile of choice may be acquired, but, if it is not acquired, the domicile of origin revives (Dicey, pages 151 to 153). "

As can be imagined, people who have lived out of the jurisdiction are often very eager to distance themselves from the jurisdiction of the courts here as regards potential bankruptcy. Not least because, apart from the effect on them, for practical purposes all of their assets then vest (or in other words legally belong to) in the trustee in bankruptcy who can control them with a view to paying as much as possible to creditors. We will see in a later article how that works, but one does not get as far as that unless jurisdiction for bankruptcy is established. Assuming domicile is shown, there are other conditions for jurisdiction which we will look at next week.