Sparkasse Hilden Ratingen Velbert v Benk & Anor [2012] EWHC 2432 (Ch)

Case No 957 of 2010[2012] EWHC 2432 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BIRMINGHAM DISTRICT REGISTRY
Civil Justice Centre
The Priory Courts
33 Bull Street
Venue Birmingham B4 6DSDate Wednesday, 29 th August 2012
Before
HIS HONOUR JUDGE PURLE QC(Sitting as a High Court Judge)
IN THE MATTER OF THE INSOLVENCY ACT 1986
IN BANKRUPTCY
Between
SPARKASSE HILDEN RATINGEN VELBERTApplicantHORST KONRAD BENKRespondentTHE OFFICIAL RECEIVERRespondent
Mr Marc Brown (instructed by The Wilkes Partnership) appeared for ApplicantMr Donald Lilly (instructed by Zimmers) appeared for First Respondent for The Second Respondent did not appear and was not representedHearing Hearing Dates: 19-20 April 2012
JUDGMENTJUDGE PURLE QC:
[1]By this application, Die Sparkasse Hilden Ratingen Velbert (“the Bank”) asks for an annulment under section 282(1)(a) of the Insolvency Act 1986 (“the Act”) of the bankruptcy order made in relation to the First Respondent, Mr Horst Konrad Benk (“Mr Benk”), on 17 June 2010 (“the Order”). The Bank is one of Mr Benk’s creditors, owed more than €3 million. The ground for seeking an annulment is that this court had no jurisdiction to make the Order.[2]The issue is: where was Mr Benk’s centre of main interest (“COMI”) at the relevant time – England or Germany? The relevant petition was a debtor’s petition, presented by Mr Benk on 9th April 2010, and the Order was made on 17th June 2010. The bankruptcy was discharged automatically 12 months later.[3]Council Regulation (EC) No 1346/2000 of 29th May 2000 on Insolvency Proceedings (2000) OJ L 160/1 (“the Regulation”) governs jurisdiction.[4]Article 3 of the Regulation provides as follows:
“(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 its registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary; (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 effect of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State; (3) Where insolvency proceedings have been opened under paragraph 1, any proceedings opened subsequently under paragraph 2 shall be secondary proceedings. These latter proceedings must be winding up proceedings; (4) Territorial insolvency proceedings referred to in paragraph 2 may be opened prior to opening of main insolvency proceedings in accordance with paragraph 1 only – (a) where insolvency proceedings under paragraph 1 cannot be opened because of the conditions laid down by the law of the Member State within the territory of which the centre of main interest is situated; or (b) where the opening of territorial insolvency proceedings is requested by a creditor who has his domicile, habitual residence or registered office in the Member State within the territory of which the establishment is situated, or whose claim arises from the operation of that establishment.” (a) where insolvency proceedings under paragraph 1 cannot be opened because of the conditions laid down by the law of the Member State within the territory of which the centre of main interest is situated; or (b) where the opening of territorial insolvency proceedings is requested by a creditor who has his domicile, habitual residence or registered office in the Member State within the territory of which the establishment is situated, or whose claim arises from the operation of that establishment.”
[5]Whilst the concept of COMI is not defined in Article 3 itself, paragraph 13 of the Preamble to the Regulation states that it: “should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”.[6]Recital 4 indicates that one of the objectives of the Regulation is the avoidance of forum shopping:
“It is necessary for the proper functioning of the internal market to avoid incentives for the parties to transfer assets or judicial proceedings from one Member State to another, seeking to obtain a more favourable position (Forum Shopping).”
[7]Forum Shopping is particularly relevant in the present context. The period of bankruptcy is much longer in Germany, and there is no automatic discharge from bankruptcy debts, a court order being required. Mr Benk in his oral evidence clearly regarded German law as outdated and English law as more civilised. There is room for more than one view on that score, at least if you are a creditor. I am not concerned with that. I am only concerned with where Mr Benk’s COMI was at the relevant time. Whenever there are differences between one bankruptcy system and another, the less harsh system will inevitably attract the attention of those wishing to avoid the stricter system. There is nothing necessarily wrong with that. It was common ground before me that the motive in acquiring an English COMI does not invalidate the resulting bankruptcy process, so long as the new COMI is a genuine one. Nevertheless, the potential for abuse requires the court to scrutinise the evidence with some care.[8]It is not disputed that Mr Benk was formerly a German resident practising as a notary, and that his COMI then was in Germany. He claims that he moved from Germany to England, by the latest, on 10th June 2009 and that his COMI was at all material times in England thereafter, though he has now returned to Germany. By 10 June 2009, as regards severing his ties with Germany, it is said that Mr Benk:(i) deregistered as a resident of Velbert, Germany, on 9th June 2009;(ii) was suspended from his notarial position in Germany on the same date and thereby prevented from carrying on his normal economic activities there; and(iii) as regards his real property interests in Germany, he no longer had any management or control of them as they were or had been the subject of enforcement proceedings by the Bank. At the same time, Mr Benk claims to have established his COMI in England. He was working here as a sports photographer, had rented a flat, owned and insured a car, had obtained a national insurance number and undertook normal day-to-day life in England, such as grocery shopping. He opened in February 2009 an English bank account to deal with day-to-day expenditure, and (later) to receive most of the income from his photographic activities.[9]In answer to this, the Bank contends that Mr Benk’s COMI was in Germany, not England, at the time the relevant bankruptcy petition was presented and the Order was made. Accordingly, the Bank contends that the Order was not properly made under Art. 3(1) of the Regulation and should therefore be annulled. Mr Benk’s presence and activities here were both temporary and contrived, in the sense of constituting the illusion without reality of an English COMI, so as to allow him to take advantage of the more favourable insolvency regime here. Mr Benk on the Bank’s case intended at all times to return to Germany and retained unsevered ties with that country which remained his COMI throughout.[10]Section 282(1) of the Insolvency Act 1986 relevantly provides as follows:
“The Court may annul a bankruptcy order if it at any time appears to the Court - (a) that, on any grounds existing at the time the order was made, the order ought not to have been made...”
[11]Section 282(3) provides that the Court may annul a bankruptcy order whether or not the bankrupt has, as here, been discharged from the bankruptcy.[12]The power to annul is discretionary. Once it appears, however, that an order has been made without jurisdiction, the presumption must, in a case such as the present, be in favour of annulment. Mr Benk petitioned on the express basis that England was his COMI. If, as the Bank contends, he did no more than create the illusion of an English COMI, he has presented a petition upon a false basis and there is little room for sympathy if his plans come unstuck once the illusion is exposed.[13]I should also mention that Mr Benk had previously petitioned in England for his bankruptcy, and an earlier order was made, on 21st May 2009. That bankruptcy order was subsequently annulled on 11th March 2010 upon the application of the Official Receiver, on the grounds that Mr Benk had provided false information in support of the petition, and that the court as a result made an order it had no jurisdiction to make. At that stage, he remained a practising notary in Germany and was residing with his partner there, though he also had an available residence in Birmingham. He also claimed to be carrying on business as a sports photographer here, though his later evidence accepts that he did not actively commence business until after his suspension as a notary in June 2009.[14]It does not follow from any of this that the later petition (with which I am now concerned) was also flawed. On the contrary, it might be said that, having got off on the wrong foot first time round, Mr Benk could be expected to be more careful next time. Nevertheless, I must be alive to the risk that, having misled the court once, Mr Benk might have done so again.[15]The second petition was opposed by the Official Receiver. District Judge Davies was nevertheless persuaded that by the time that petition came to be presented, Mr Benk’s COMI was in England. His order was appealed (and came before me on 15th October 2010) upon the ground that he had regard to the wrong date and should have focussed instead on a date in March 2010 when the Bank had requested the opening of bankruptcy proceedings in Germany, immediately following the earlier annulment. It was also argued that the District Judge should have stayed the petition to await the outcome of that request. I dismissed the appeal upon the basis that, on the facts found by the District Judge, the position had not changed between the two dates. I also held that the decision to refuse an adjournment was a case management decision which the District Judge was entitled to reach. By the time of the appeal, the German proceedings had also got the Bank nowhere. The German court had declined jurisdiction, though this was in part as a result of the Order.[16]The matter has now been revisited upon much fuller evidence. Whilst it was initially suggested on Mr Benk’s side that the present application was an abuse of process in the light of the bankruptcy order and appeal, and the German proceedings, that point was not ultimately pursued. Nor is any point made on issue estoppel or the like.[17]I have seen and heard Mr Benk under cross-examination. I found him to be a very unsatisfactory witness. I take into account that German is his native tongue, and that, though his witness statements were in English (which he reads perfectly well) his oral evidence was given with the help of an interpreter. Making full allowance for that disadvantage, I found him to be a witness who was often evasive and whose uncorroborated statements could not safely be relied upon. More specifically:(i) Mr Benk was wholly unrepentant about the false information in his first petition, and appeared still unable to accept the falsity of that information;(ii) He was unable to explain satisfactorily the failure in his second petition to reveal his previous German address (where he had incurred undischarged debts) notwithstanding the clear requirement in the standard form petition to provide this information. Instead, he gave as his only relevant previous address the furnished room in Birmingham he had rented in September 2008;(iii) He pretended that he only came to England at the suggestion of his partner, when it became obvious from a consideration of the contemporaneous documentary evidence that his coming to England was prompted by his looming insolvency. Mr Benk was questioned at length on this point, and was unable to dispel the very clear impression that he came to England because of his impending financial collapse;(iv) He pretended that a friend had helped him re-locate, ignoring the fact that the friend and a company connected with him advertised the provision of relocation services to England of Germans facing bankruptcy. Many of the supposed indicia of his COMI in England were provided by this connection – e,g., the provision of accommodation and a car;(v) He made much of his English business as a photographer without revealing initially that he did not even own a camera (a point that he tried to explain away with breathtaking nonchalance). He accepted that, as a photographer, he only had one “main” client, but even that “main” client turned out to be his only client, a German (Oliver Schmidt) whom he had known since 1983 (and had in 2001 employed) and whose mother had been employed by him for many years. Mr Schmidt set up a publishing company in July 2009, after the first bankruptcy order;(vi) In explaining the losses made by that photography business, he was unable to identify any of the start-up costs to which he referred expressly in his witness statement. It became obvious that there were none. The business was loss-making, irrespective of the impact of start-up costs. His evasion on this point was particularly noteworthy.[18]Despite these deficiencies in his evidence, I remind myself that the onus is on the Bank, as this is an annulment application, to establish that the Order should not have been made. None of the points upon which I have criticised Mr Benk’s evidence necessarily indicates that his COMI was in Germany at the relevant time. They do however cause me to approach Mr Benk’s evidence with caution. Nevertheless, it is for the Bank to establish that Mr Benk’s COMI was not in England and Wales at the time of the second petition.[19]The legal principles for determining an individual’s COMI were not seriously disputed. They were summarised by Mr Lilly (who appeared for Mr Benk) as follows:a. an individual’s COMI is where he can be contacted; this will normally be his habitual place of residence (see Geveran Trading Co v Skjevesland [2003] BCC 209, at 223; upheld on appeal [2003] BCC 391);b. a person’s COMI must have an element of permanence (see Official Receiver v Mitterfellner [2009] BPIR 1075 at paras 5 and 6);c. the COMI must be ascertainable by third parties (see Shierson v Vlieland-Boddy [2005] 1 WLR 3966, at 3985F);d. an individual is free to re-locate his COMI, even on the eve of insolvency; what a court must determine on the facts is whether the change in COMI is one of substance or a mere illusion (see Shierson, at 3986A).[20]Mr Lilly relies, as confirming that Mr Benk’s COMI was in England at the material time, upon the fact that Mr Benk has provided:a. tenancy agreements from December 2008 for his flats in Birmingham (as mentioned, he previously rented a furnished room in Birmingham from September 2008);b. full bank statements from February 2009 showing purchases in England at the relevant times;c. details of the purchase and insurance of his cars in England;d. sample receipts from English stores;e. utilities and Council tax payments;f. evidence of his National Insurance contributions; andg. evidence as to the nature of his photography business in England including receipts of business trips and details of the cameras he has used.[21]All these are doubtless indications of an English COMI, but may also be explicable by the desire of Mr Benk, which Mr Brown for the Bank urges upon me as the correct interpretation of the evidence, to create the illusion of a permanent presence here against the background of an intention to return to Germany once the English bankruptcy was behind him.[22]Mr Brown enunciated the following propositions, with which Mr Lilly did not demur:a. A debtor can only have one COMI;b. A debtor’s COMI is, in the case of professionals, the place of their professional domicile and for natural persons in general, the place of their habitual residence (Virgos-Schmidt report This is the explanatory report on the then proposed EU Convention (which never came about) on insolvency proceedings of Professor Miguel Virgos and Mr Etienne Schmidt. para 75 & Shierson para 47);c. “A man’s habitual residence is his settled, permanent home, the place where he lives with his wife and family, […] the place to which he returns from business trips elsewhere or abroad…” (Official Receiver v Stojevic[2007] BPIR 141 para 59 and Re Eichler (No 2) [2011] BPIR 1293 para 142(iv));d. Whilst a debtor’s choice as to where he conducts the administration of his affairs may be subjective, where he actually carries on the administration of his affairs on a regular basis such that it is ascertainable by third parties and by the court is an objective question (Shierson paras 43 & 47; Re Eichler (No 2)para 141 (viii));e. “Regular administration” of a debtor’s interests means that the court must look for the place from which the debtor exercises the management, organisation and control of his interests (Stojevic para 28 and Re Eichler (No 2) para 142(i));f. The term “on a regular basis” indicates “a quality of presence”, “a degree of continuity”, “an idea of normality”, “a stable link with the forum” and “a degree of permanence” (Stojevic para 29 and Re Eichler (No 2) para 142(ii));g. Particular regard must be had for the COMI to be ascertainable by third parties, in particular creditors and potential creditors (Shierson para 55);h. Whilst the date on which the COMI is to be established is the date of presentation of the petition, evidence as to Mr Benk’s activities and actions at other times may be significant in that they cast light on the truth or otherwise of his claim to have had his COMI in England at the relevant time (Shierson paras 47 and 55);i. If the debtor relocates in the face of potential insolvency, the court must scrutinise the facts and determine whether the change in the place of the administration of interests is based on substance or is an illusion (Shierson at para 55);j. That change must also have an element of permanence (Shierson para 55 and Re Eichler (No 2) para 141(vi)).[23]I was also referred to the decision of Deeny J in the Northern Ireland case of Irish Bank Resolution Corporation Ltd v Quinn [2012] NICh 1. That case concerned an individual who was habitually resident in the Republic of Ireland but who claimed to have a professional domicile in Northern Ireland, where the insolvency regime is much more favourable for a debtor than in the Republic. The Northern Ireland bankruptcy was annulled on the basis that, on the evidence, the debtor’s COMI was in the Republic. His main recent interests were litigation which he and his family were embroiled in and the salvaging of what he could from the situation in which he found himself, all of which took place in the Republic. Mr Brown says that there are similarities with that here, and refers to German litigation which Mr Benk has been involved in concerning his notarial status, real estate and pension fund there.[24]In considering the potential of professional domicile to have precedence over habitual residence, Quinn is also useful for citations suggesting that the business or professional activities in question must be at the root of the insolvency for the professional domicile to have precedence, and for its acceptance that the ascertainability of a person’s COMI should not normally require actual notification by that person to his creditors (though it may do so sometimes) but nor should a debtor hide his COMI. COMI should be ascertainable by a reasonably diligent creditor, but no creditor should be required to search through every phone book in Europe.[25]In my judgment, Mr Benk’s COMI was, at all material times, in Germany. I say that for the following reasons:-a. Mr Benk was at all material times a professional notary in Germany. When agreeing on 22nd May 2009 to repay loans to an individual (Mr Berkenkopf) Mr Benk confirmed that he would “in all likelihood continue to at least temporarily continue his notarial position”, and gave security over German assets. This was despite his then bankruptcy and probability (as in fact happened) of suspension from practice. He was preliminarily suspended on 9th June 2009. After such suspension, an administrator, Advocate Rüssmann, was installed to carry on Mr Benk’s notarial practice, although Mr Benk himself was no longer permitted to practice himself, and has not done so since;b. He appealed that suspension (unsuccessfully) in Germany the next day (10th June 2009), and again when that appeal was dismissed. He also appealed his final suspension in January 2011. There remains an outstanding challenge to his suspension to the European Court of Human Rights;c. Though his appeals have got him nowhere, they indicate that Mr Benk’s real purpose throughout may have been to opt for an English bankruptcy and resume his activities as a notary in Germany once that bankruptcy was discharged. He appears to have relied on his English discharge (potential or actual) in pursuing his appeals;d. Mr Lilly for Mr Benk characterised his challenges to his suspension as no more than keeping his options open in the long term. I cannot accept that. Mr Benk had no viable means of support in England other than a dependence on his partner (Ms Erley). His activities as a sports photographer were loss-making from the word go, and offered no long-term prospect of economic survival. His best option was to resume his notarial practice, if he could;e. Mr Benk has also brought proceedings in Germany attempting (unsuccessfully) to prevent the Bank from enforcing its rights against his real estate and pension fund there. In so doing, he has relied upon his English bankruptcy. One application was brought the very day after his discharge. Whilst he recognised in the witness box that had these proceedings been successful the beneficiary would have been his English bankrupt estate, and claims to have told the Official Receiver what he was doing, he was plainly, at the time, motivated by self-interest. I do not accept that he was in any sense intending to act for the benefit of his bankrupt estate. He was pursuing his own economic interests in Germany, albeit misguidedly;f. His activities as a sports photographer (supplemented by occasional article-writing) were window-dressing, calculated to create the illusion of permanence here, but that was not the reality. They involved him taking (mainly) golfing tours, not always in England, which coincided with his favourite hobby. Recreation was the main purpose of those tours. The taking of photographs was incidental. Two of the tours were arranged around court hearings – one straddled the annulment hearing, another took place immediately following presentation of the second petition. This was a contrivance, and not a response to market demand. Similar points can also be made about other trips, which Mr Benk said were to research English culture for his writings, or to photograph other (not golf-related) places of interest or natural beauty. These were essentially pleasure trips. Mr Benk also established a website for the photography business, but this also was window-dressing;g. By the time the first (and, so far as the evidence goes, only) tax return relating to his photographic activities was put in (for the period down to November 2009) he had made a loss in excess of £4,000. Whilst he claimed that the loss was referable to start-up costs, he could not say what they were. The truth is that the business was always loss-making. He claims to have tried to develop the business by approaching publishers, other than Mr Schmidt, but came up against what he regarded as a closed shop. I have seen no evidence of those approaches, but, even assuming them to have been made, it must have been obvious to him from the negative reaction that his career (such as it was) as a sports photographer had no future;h. He had registered as a self-employed photographer with HMRC by early 2009. This was itself misleading, as his own evidence was that he could not (and did not) carry on any business activities other than “preparatory operations” (whatever they were) until his suspension as a notary in June 2009. That notwithstanding, he described himself falsely as carrying on business as a sports photographer in Birmingham in his first bankruptcy petition (which pre-dated his suspension). This deceptive description, it seems to me, is relevant not only to the first petition, but to the second petition also, where he also described himself as carrying on business as a sports photographer in Birmingham. Given that his assumption of that role was initially an illusion created for the purpose of the first petition, I need to proceed cautiously before accepting that things had changed significantly by the time of the second petition;i. By the time of the second petition (April 2010) the loss-making nature of the business was established, and Mr Benk must also have known by then (if he did not know before) that finding publishers other than Mr Schmidt was a fruitless endeavour. Mr Schmidt himself was, according to Mr Benk’s second witness statement, experiencing cash-flow difficulties by the time of the April 2010 golf tour, which was why he had to rely upon Ms Erley to finance this tour, though(i) elsewhere in the same witness statement he said that the cash flow difficulties occurred in mid-2010;(ii) in his third witness statement, he identified another earlier trip in the autumn of 2009 which he said was again financed by Ms Erley for the same reasons as given in his second witness statement (which can only be a reference to Mr Schmidt’s cash-flow problems);j. As Mr Schmidt was his only client, this must have made the future of the business even more unpromising. I doubt whether Mr Schmidt, with or without cash-flow problems, was ever going to finance any of Mr Benk’s tours or trips, and does not appear ever to have done so. I do not consider that anyone (least of all Mr Benk) could have regarded the photography business as a serious business having a real future at any time, still less as having a sufficient degree of permanence to effect a change of COMI. It is perhaps unsurprising that Mr Benk, who had no previous interest in photography, never acquired a camera of his own, instead borrowing a camera from either Mr Schmidt or Ms Erley, his partner;k. Mr Benk has at all material times lived with Ms Erley, and has been financially dependent upon her since coming to England. They jointly entered into tenancy agreements for their Birmingham flat. Mr Benk points to a number of “loans” made by her to him, some of which pre-dated the second bankruptcy. He claims to have repaid some of these loans even after the second bankruptcy. Whatever the true nature of the arrangement, the reality is that Ms Erley chose to support their joint lifestyle. It would have been very helpful in those circumstances to have heard from Ms Erley, who could be expected to have shed light on their joint circumstances, especially the degree of permanence with which they came to England, and the extent if at all to which Mr Benk was working when on golf tours or other trips. On Mr Benk’s evidence, she was the source of the idea of moving to England, though, as I have already said, I am unable to accept this evidence. Nevertheless the close dependence (both emotional and financial) on Ms Erley means that it is appropriate to consider her circumstances when deciding where Mr Benk’s COMI was at the material times. They were in every sense a couple living together and their habitual residence rather than temporary presence was likely to be the same;l. The indications are that Ms Erley’s habitual residence and COMI have been in Germany throughout. Whilst she came to England with Mr Benk, and accompanied him on his golf tours and other trips, the funding of their joint lifestyle, including direct funding of Mr Benk, has been achieved through the use of her German credit cards and bank account (or that of her German company) and she appears to have arranged the golf tours using her German address or her German company. She retained her residential address in Germany (Kantstrasse 51, 42553 Velbert) and returned to Germany not long after Mr Benk’s automatic discharge. Mr Benk followed her in due course, and now lives for most of the time in Germany. Whilst Mr Benk came up in the witness box with an explanation for Ms Erley’s return to Germany, the fact that he followed her back demonstrates to my mind the appropriateness of considering them together. It is clear from what Mr Benk told me that she was never happy here, as their living arrangements were unsatisfactory. It can have come as no surprise to him that she returned to Germany permanently, and, whilst he rented new accommodation in October 2011, Ms Erley returned to Germany, which is where they, as a couple, are habitually resident, and where he now spends most of his time;m. Kantstrasse 51, 42553 Velbert was also Mr Benk’s registered residential address down to June 2009. It seems to me that the ties Ms Erley retained with Germany and her resumption of full-time residence there clearly indicate that she never regarded England as her habitual residence. In addition, Mr Benk’s financial dependence on her, and their mutual emotional dependence as a couple, make it unrealistic for me, in the particular circumstances of this case, to regard them each as having a habitual residence or COMI separate from the other. I can properly regard her unsevered ties with Germany as Mr Benk’s ties also;n. I should also add that I am unable to accept Mr Benk’s uncorroborated explanation for her (and therefore his) return to Germany. The reasons (which I need not relate) were given only in supplemental evidence in chief. He said that Ms Erley did not want them to come out, but they did come out voluntarily, and Ms Erley was not called, though available to give evidence. In my judgment, Ms Erley and Mr Benk were never anything more than temporary residents here, which was why they returned. Mr Benk told me that he felt “homeless” in England. In my judgment, that reflected the fact that he was temporarily away from home, which was in Germany. It was always likely that he would return there once his bankruptcy was behind him. As it happens, he was away from Germany longer than expected because of the annulment of his first bankruptcy, which meant that he had to go through the whole process all over again, but that did not give his presence here a permanence which it never had;o. Most of Mr Benk’s creditors are in Germany, yet he appears to have taken no formal steps to notify them of his change of COMI to England. He said that they knew where he was, which I am prepared to assume was the case, as it is likely that the first English bankruptcy would have been notified to them by the Official Receiver. If I make that assumption in Mr Benk’s favour, I must also assume that the Official Receiver would have notified creditors of the annulment also. Knowledge of a flawed bankruptcy is not sufficient, in my judgment, to establish a change of COMI, even if coupled with a known change of residence, which might just be temporary;p. Mr Benk remained on the Register of Notaries in Germany at the time of the second petition. He could not, however, practice as a notary at all after his preliminary suspension in June 2009. The business had a number of bank accounts, though these appear, at least according to Mr Benk, to have come under the control of Advocate Rüssmann, who is independent of Mr Benk. His notarial practice also continued to maintain a website, though Mr Benk says this was a regulatory requirement complied with by Advocate Rüssmann rather than an act attributable to Mr Benk himself. Nevertheless, these were indications to the outside world that Mr Benk’s professional domicile remained in Germany, which made it all the more important that he should notify German creditors of any new COMI I note from Mr Benk’s Statement of Affairs, sworn at the same time as the second bankruptcy petition, that he notified a number (but not all) of his German creditors “again” by registered mail. No reference was made to this at the hearing, and the Statement of Affairs does not reveal precisely what creditors were told. . Mr Benk’s history of appeals against his suspension and his attempts to prevent the Bank from exercising any rights against his German assets (including the property from which the notary’s business had been conducted) are additional indications of economic activity in Germany, notwithstanding his lack of success in any of those endeavours;q. In considering Mr Benk’s professional domicile, I discount the evidence of the photography business. For the reasons I have given, that was no more than a stop-gap measure, with no long-term future, calculated to create the illusion of meaningful economic activity in England during his temporary presence here. Moreover, his only client was in Germany and the so-called business trips appear to have been arranged by Ms Erley, using a German address or addresses, and paid for by her either out of bank accounts in Germany or by use of German credit cards. So even if the photography business had more substance than I have given it credit for, the activities of Ms Erley establish German connections with the organisation of that business. Finally, the photographic business was not at the root of the insolvency, which was caused by Mr Benk’s previous business activities in Germany.[26]To conclude, Mr Benk’s COMI was in my judgment in Germany at the time of the presentation of the second bankruptcy petition, and when the Order was made. That is where he was habitually resident, though living temporarily in England. He accepted that he did return to Germany after coming to England, though he said this was not very often. However, habitual residence does not require presence at any particular time, only habit. He had no professional domicile here, as the photography business was window-dressing, with no potential for any significant degree of permanence, and was not at the root of his insolvency. Moreover, it was organised (at least in part) using German connections.[27]Having seen and heard Mr Benk in the witness box, I do not consider that he ever saw his presence in England as anything other than a convenient short-term arrangement. His real objective was to facilitate his return to Germany free of historical debt and thereby (hopefully) enable himself to resume his practice as a notary sooner rather than later, and enjoy if he could the fruits of his German real estate and pension fund.[28]Germany was also where most of Mr Benk’s creditors were, and where his professional domicile prior to his suspension had been. His creditors had no way of knowing that Mr Benk’s COMI had changed to England, though they may have come to know of the previous bankruptcy and its annulment, and his presence here. As, however, the annulment was occasioned by a false claim of an English COMI, that can hardly, on an objective basis, be taken as indicating a genuine new COMI in England. In so far as Mr Benk carried on any serious economic activity after his coming to England, that was in Germany, represented by his litigation to protect his status as a notary, and to preserve his German assets.[29]Against all this, Mr Lilly urged upon me various extracts from the German bankruptcy proceedings, and the reports of experts appointed in those proceedings, as supporting his case on COMI. As, however, no case is advanced based on abuse of process or estoppel, it seems to me that I am required to determine this application on the evidence I have read and heard, and not be influenced by anything the German court, or any court-appointed expert, has said. This is particularly so as the German court decisions and expert reports have paid regard to and have clearly been influenced by the extant Order. This includes the latest decision refusing to open secondary proceedings in Germany. That proceeded on the hypothesis that the Order was correctly made, and that Mr Benk’s COMI was in England. On that hypothesis, it could not be said that Mr Benk had the necessary “establishment” in Germany at the relevant time. That is a different question to the one I am considering, and proceeds on a hypothesis which is now challenged. A person may be habitually resident in one territory without having any presence there, still less an establishment, at any given moment.[30]Mr Lilly also contends that, as Mr Benk has been through the best part of 2 bankruptcies here, I should not in my discretion annul the Order. I reject that contention. Mr Benk has persuaded the English court – twice – to make bankruptcy orders based on a false assertion of an English COMI. This court had no jurisdiction to make either Order. The first order has already been annulled. The same should apply in the case of the second order. If this seems harsh on Mr Benk, he is the author of his own misfortune.[31]In the result, the Order is annulled.

Cited in 6 later judgments