Bulletins | April 11, 2022

Service of petition out of the jurisdiction HRH Prince Hussam Bin Saud Bin Abdulaziz Al Saud v Mobile Telecommunications Company Kscp [2022] EWHC 744 (Ch)

HRH Prince Hussam Bin Saud Bin Abdulaziz Al Saud v Mobile Telecommunications Company Kscp [2022] EWHC 744 (Ch) deals with service of a bankruptcy petition out of the jurisdiction. The petitioning creditor had been awarded US$817 million in arbitration proceedings. Costs orders made against the debtor in ensuing High Court proceedings amounted to £639,874.65. That sum was the subject of the statutory demand which gave rise to the petition.

The petition was presented on 21 February 2020. On 14 December 2020 Deputy ICC Judge Schaffer dismissed an application to set aside permission to serve the petition out of the jurisdiction which had been granted, ex parte, by ICC Judge Jones. The judgment of Roth J deals with an appeal against that order.

For the purpose of jurisdiction, the petitioning creditor relied on s. 265(2)(b)(i) Insolvency Act 1986. Its position was that the debtor had had, within the three years prior to the petition, a place of residence in England and Wales. The question in the appeal was whether the deputy judge had applied the correct test and criteria in upholding permission to serve out of the jurisdiction having regard to that jurisdictional basis.

The first question Roth J addressed was the correct standard to apply. In the light of the 2020 Insolvency Practice Direction, para 5.2 of which applies CPR Part 6 to the service of court documents, and Sch 4 Insolvency (England and Wales) Rules 2016, which make clear that a bankruptcy petition is a court document for that purpose, he held that the approach which the court had to apply in determining whether the grounds of jurisdiction for service out were satisfied was that which applied under CPR Part 6, even if the grounds for a bankruptcy petition differed from those in PD 6B to the CPR.

On the standard of proof he said:

“It is well established that the standard of proof which has to be satisfied to show that the claim falls within one of the heads of jurisdiction is not the balance of probabilities but the lower standard of ‘a good arguable case.’ This standard applies both where the issue going to jurisdiction will also be an issue at trial and where it will not be. The correct approach to determining those jurisdictional requirements has been the subject of recent consideration by the Supreme Court and the Court of Appeal. In Brownlie v Four Seasons Holdings Inc, Lord Sumption, referring to the explanation of ‘good arguable case’ test in terms of finding that ‘one side has a better argument on the material available’.”

He went on to cite Lord Sumption:

“What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.”

Roth J noted the dicta of the Supreme Court in Goldman Sachs International v Novo Banco SA and the observations of the Court of Appeal in Kaefer Aislamientos SA v AMS Drilling Mexico SA in which Green LJ said, with regard to limb (ii):

“Limb (ii) is an instruction to the court to seek to overcome evidential difficulties and arrive at a conclusion if it ‘reliably’ can. It recognises that jurisdiction challenges are invariably interim and will be characterised by gaps in the evidence. The Court is not compelled to perform the impossible but, as any Judge will know, not every evidential lacuna or dispute is material or cannot be overcome. Limb (ii) is an instruction to use judicial common sense and pragmatism, not least because the exercise is intended to be one conducted with ‘due despatch and without hearing oral evidence’….”

Roth J then turned to the grounds of appeal:

i) the judge had erred in distinguishing Re Brauch on the basis that it was decided under the old law and in holding that a more flexible approach now applied because of the change in statutory wording from “dwelling house” in the Bankruptcy Act 1914 to “place of residence” in the Insolvency Act 1986; and
ii) the judge had been wrong in failing to consider the degree of control which the debtor exercised over the property in relation to which jurisdiction was asserted: in particular, the debtor asserted, it could not be his place of residence because he did not exercise de facto control over the occupancy of the property.

He disagreed with the deputy judge’s conclusion that he was not bound by Re Brauch because it was decided under the BA 1914:

“Apart from the significant change of extending the reference period from 12 months to three years, the only change is the substitution of the expression ‘place of residence’ for ‘dwelling house.’ In particular, given that in Re Brauch the Court of Appeal indicated that for a person to have a dwelling house he or she does not need to have a legal or equitable interest in the property, I accept [the] submission that there is no substantive distinction between the two expressions, and that the change was probably made simply in order to use a more modern term […] I note that in RPC v Khan, Chief Registrar Baister relied on Re Brauch to derive the principles that he articulated (and to some of which the Judge here indeed referred) without any suggestion that Re Brauch was no longer fully binding.”

After reviewing a number of well known cases, including In re Hecquard, RPC v KhanPJSC VTB Bank v Laptev and Lakatamia Shipping v Su, he found that they did not set out or support any single or conclusive test for what constitutes a “place of residence”. “In particular,” he said, “they do not in my view establish that de facto control of the property is a necessary condition.” Rather, the cases were simply illustrations of the broad range of factual considerations which may be relevant in determining whether an individual had “a place of residence” in this country within the meaning of the statute. “The expression should be given its ordinary meaning and the assessment depends on all the facts.”

The judge turned next to the question whether the debtor had a place of residence in England and Wales in the relevant period, listing a number of factors which led him to conclude, on the basis of the test articulated above, that he had. He emphasised, however,

“[T]hat none of the authorities under the IA 1986 to which I have referred were cases of service out: they all fell to be decided on the balance of probabilities. In both RPC v Kahn and PJSC VTB Bank v Laptev the debtor was cross-examined on his evidence. As the Judge emphasised, on the present application the Debtor has given no evidence at all. Applying the lower standard of proof which I have held here applies and taking all the above matters into account, I have no doubt that the Creditor has shown a good arguable case that the Debtor had a place of residence in the jurisdiction, or that it has ‘the better of the argument’ on the material available. At the hearing of the petition, the Court will have to assess the matter on the balance of probabilities and it will be open to the Debtor to give evidence explaining matters more fully.”

Accordingly, the appeal was dismissed.