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International Corporate Rescue

Journal Issues

  • Vol 1 (2004)
  • Vol 2 (2005)
  • Vol 3 (2006)
  • Vol 4 (2007)
  •         Issue 1
  •         Issue 2
  •         Issue 3
  •         Issue 4
  •         Issue 5
  •         Issue 6
  • Vol 5 (2008)
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  • Vol 10 (2013)
  • Vol 11 (2014)
  • Vol 12 (2015)
  • Vol 13 (2016)
  • Vol 14 (2017)
  • Vol 15 (2018)
  • Vol 16 (2019)
  • Vol 17 (2020)
  • Vol 18 (2021)
  • Vol 19 (2022)

Vol 3 (2007) - Issue 2

Article preview

Re Stojevic: The Heresies of Mr Registrar Jaques

Stephen Robins, 3-4 South Square, Gray’s Inn, London, UK

Introduction

A recent unreported decision of Mr Registrar Jaques has illustrated the continuing uncertainties surrounding
certain aspects of the interpretation and operation of Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (‘the EC Regulation’).

Background

The case concerned a Croatian national, Mr Stojevic´, who was found by Mr Justice Toulson to have been a fraudster and ordered to pay the sum of USD 103,223,341 to Komercni Banka AS (‘the Bank’). Mr Justice Toulson said: ‘I was left in no doubt that on significant issues Mr Stojevic´ was evasive and untruthful … On detailed examination, Mr Stojevic´’s account did not stand up, and he was driven on numerous occasions to what I have concluded were lies and evasions’. On a subsequent application by Mr Stojevic´ for permission to appeal, Lord Justice Potter held that the judgment of Mr Justice Toulson against Mr Stojevic´ ‘was in respect of a very large and sophisticated fraud proved to the hilt’.
On 15 November 2002, the Bank served Mr Stojevic´ with a statutory demand. On 16 December 2002, the Bank served Mr Stojevic´ with a bankruptcy petition. On 4 March 2003, Ms Registrar Derrett ordered Mr Stojevic´ to file and serve written evidence concerning his centre of main interests. Mr Stojevic´ failed to comply with that direction. On 25 March 2003, he filed and served a witness statement in which he sought an adjournment. At a hearing on 27 March 2003, Ms Registrar Derrett dismissed the application for an adjournment and made a bankruptcy order. The bankruptcy order stated that the proceedings were main proceedings within Article 3 of the EC Regulation.
Subsequently, on 28 January 2004, further main proceedings were opened in Austria by the Commercial Court of Vienna, which was unaware of the prior English main proceedings. Mr Stojevic´ appealed against the Austrian bankruptcy order on the grounds that his centre of main interests was not in Austria. That appeal was subsequently withdrawn, and, after various procedural wrangles involving the English trustee in bankruptcy, the Austrian Supreme Court held that the English main proceedings were the prior main proceedings
which were to be recognised in Austria pursuant to Article 16 of the EC Regulation. The Austrian proceedings were therefore secondary. The Austrian bankruptcy proceedings were eventually terminated on 2 December 2005 on the basis that Mr Stojevic´ had no assets within Austria.

Annulment application

On 13 December 2004, Mr Stojevic´ applied to the English Court for the annulment of the English bankruptcy order. In his affidavit in support of the application, he contended that his centre of main interests under Article 3 of the EC Regulation was not in England when the bankruptcy petition was presented. He alleged (for the first time) that his centre of main interests was actually in Austria on that date and that the English Court had lacked jurisdiction under Article 3 of the EC Regulation to open main proceedings.
The Bank opposed Mr Stojevic´’s application. The evidence adduced by the Bank showed that Mr Stojevic´’s interests before the making of the English bankruptcy order included two expensive properties in London, which were owned indirectly by Mr Stojevic´ through offshore companies, and the London-based trading business of Stone & Rolls Limited, which was also owned indirectly by Mr Stojevic´ through a further limited company. The contemporaneous documentary evidence illustrated that Mr Stojevic´ administered these interests from London. Mr Stojevic´’s own case was that he spent almost half his time in London and only a quarter of his time in Austria. The Bank contended that Mr Stojevic´ was likely to have been spending more than half his time in London and less than a quarter of his time in Austria. It was also clear that third parties tended to send communications for Mr Stojevic´’s attention to London.

The legal framework

Jurisdiction to open main proceedings is conferred by Article 3(1) of the EC Regulation, which provides: ‘The courts of the Member State within the territory of which the centre of the debtor’s main interests are situated shall have jurisdiction to open insolvency proceedings.
In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary’. Main proceedings are to be contrasted with ‘secondary proceedings’ which may be opened in accordance with Article 3(2).1 The hierarchical scheme of the EC Regulation was summarised in Geveran Trading Co Ltd v Skjevesland.

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International Corporate Rescue

"Among a vast variety of insolvency and restructuring journals, International Corporate Rescue is unparalleled in its depth of coverage of issues relevant to practitioners in all corners of the globe today."

Paul Kirk, Collins Pitt Associates, Melbourne

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