Hsiao-Mei Lin v Audun Mar Gudmundsson (a bankrupt)
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 06 April 2021 |
| Neutral Citation | [2021] EWHC 820 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BR-2019-001475 |
| Date | 06 April 2021 |
[2021] EWHC 820 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building
Fetter Lane
London
EC4A 1NL
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Case No: BR-2019-001475
Rex Howling QC (instructed by Richard Nelson LLP) for the Applicant
Mr Gudmundsson in person
Steven Fennell (instructed by DLA Piper UK LLP) for the Second and Third Respondents
Hearing dates: 23, 24 March 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
CICCJ
Mr Gudmundsson was adjudicated bankrupt at 11:23 on 26 February 2020 on a petition presented by Nikolaus Ortlieb, a friend and business associate of Mr Gudmundsson. The second and third Respondents (the “Trustees”) were appointed trustees-in-bankruptcy of Mr Gudmundsson's estate by the Secretary of State for Business, Energy & Industrial Strategy in April 2020.
This is the trial of a hostile application to annul the bankruptcy made by Hsiao-Mei Lin (“Miss Lin”) the ex-wife of Mr Gudmundsson.
The Family Court made an order for financial relief in March 2020 and shortly after a decree absolute. As the financial relief was granted after the order of bankruptcy, a transfer of Mr Gudmundsson's interest in the matrimonial home to Miss Lin, ordered by the Family Court, has been frustrated.
Miss Lin asserts that the bankruptcy order ought not to have been made. The witness statement in support of the annulment (the “Annulment Application”) raises two grounds, which may be taken together:
4.1. “Mr Ortlieb, and Audun have colluded in this bankruptcy by failing to declare all of Audun's assets and introducing inflated debts”;
4.2. “It is my case that Audun was not technically bankrupt at the time that the order was made”.
In counsel's skeleton argument produced on behalf of Miss Lin, a jurisdictional challenge is added: “it is submitted that the bankruptcy order should not have been made…because England was not the First Respondent's COMI…”.
Miss Lin and Mr Gudmundsson expressed a hope that they would receive a quick decision from the Court on the Annulment Application. There had, for one reason or another, been considerable delay in the family financial relief proceedings and both parties wish to “get on with their lives”. The Trustees are neutral as to the outcome.
At the end of the trial I was able to inform the parties that I had reached the decision to dismiss the Annulment Application and would provide my reasons in a written judgment.
This judgment is not concerned with the details of the marriage breakdown. Nevertheless some context is required. The structure of my written reasons for dismissal is as follows:
8.1. the end of a marriage (paras 9–14);
8.2. events leading up to the making of the bankruptcy order- the judgment of the Family Court (para 15–27);
8.3. the petition debt and bankruptcy hearing (paras 28–36);
8.4. the financial circumstances of Mr Gudmundsson (paras 37–43);
8.5. the legal principles engaged (paras 44–52);
8.6. discussion on jurisdiction (paras 53–57);
8.7. discussion of collusion and solvency (paras 58–77); and
8.8. Conclusion (paras 78–84).
The end of a marriage
Miss Lin was born in Taiwan, attended the Royal Academy School of Arts in London, obtained citizenship in the United Kingdom, and met Mr Gudmundsson in 2006. Mr Gudmundsson was born in Iceland and has two siblings. After his father died his mother gifted to each of her children a small sum of money received from her late husband's estate. Mr Gudmundsson used his gift to start a mezzanine finance business, raising capital from outside private investors. Mr Gudmundsson gave evidence that the mezzanine finance provided through corporate structures incorporated in England and Jersey was aimed at companies that required extra capital leveraging or capital for shareholder buyouts. The finance could be viewed as either expensive debt or less expensive equity due to the higher coupon.
Mr Gudmundsson and Miss Lin have two young children. Miss Lin explains that Mr Gudmundsson acquired a drug habit. In her position statement provided to the Family Court she states: “the Father was diagnosed with ADHD on 17.3.16. He also has a long-standing addiction to methamphetamine and significant cocaine use”.
She describes a change of his behaviour that included “outbursts of temper and emotional abuse and violence”. The change of behaviour led to his arrest and a charge for assault in 2016. There was an arrangement in mid-2016 and after separation that Mr Gudmundsson would have unsupervised visits with his children including overnight stays. The arrangement came to an end in early 2017 after Miss Lin asserted that the flat, where Mr Gudmundsson stayed, housed “drugs paraphernalia” and there was “inappropriate sexual behaviour”. Mr Gudmundsson's evidence is that Miss Lin had become a committed Christian and they had different values which led to argument. In mid-2017 Mr Gudmundsson spent some time in hospital after testing positive for methamphetamines. He was required to demonstrate that he was free of drugs before resuming contact with his children. Happily he was able to do so until an incident that is said to be relevant to the Annulment Application.
In October 2019 one of the children told Miss Lin that there was “drug paraphernalia” in Mr Gudmundsson's flat and drew a picture for illustration purposes. Mr Gudmundsson's response was to submit to a voluntary drug test.
The test showed he was drug free but Miss Lin noticed anomalies in the report and asked the drug testing company to confirm the authenticity of the report. The test company informed Miss Lin's solicitors that the report did not originate from the company. That led to an ex-parte application to prevent contact on the basis that Mr Gudmundsson had forged the negative drug report and could not be trusted to look after the children. Mr Gudmundsson admitted to falsifying the report in the family proceedings and admitted to it again in cross examination conducted in this Annulment Application. A later incident took place outside the matrimonial home and ended with Mr Gudmundsson's arrest. He said in evidence that he felt he had been treated unfairly and had come to fear the English legal system.
The marriage was brought to an end by a decree absolute on 30 April 2020.
The judgment of the Family Court
The events leading to the judgment given by the Family Court on 4 March 2020 (the “FCJ”) are a little unusual in that there was a delay between the date of the hearing and handing down due in part, to several requests made by Mr Gudmundsson. Looked at retrospectively Miss Lin views the events with an eye of cynicism. Mr Gudmundsson was tested as to his motives and tested as to the reasons for seeking adjournments prior to the handing down of the judgment.
The hearing for financial relief took place over three days in February 2019. The court ordered that Mr Gudmundsson transfer all his interest in the matrimonial home situated at 9 Southcote Road London N19 (“Southcote Road”) to Miss Lin but he: “retain, in his sole name, his business interests in Iceland, his interests in Carta Capital, his property at Hafrathing 5, 203 Kopavogur, Iceland, his pensions with Old Wealth and Frjalsi and any interest that he may have in either the Gudmundsson Family Settlement or the Gudmundsson Family Trust Foundation.”
The FCJ recorded the history of the relationship, gave information about the children of Mr Gudmundsson and Miss Lin and set out their respective financial resources. The analysis of financial resources was not confined to that stated in the Form E financial statements which had to be provided to the court in advance of the hearing. The judge heard evidence from Mr Gudmundsson regarding trust assets and his businesses. The judge found that the financial resources and obligations of Miss Lin were relatively straight forward whereas he described Mr Gudmundsson as setting up “deliberately opaque” financial structures [116]:
“The complex and deliberately opaque structures set up by the husband with the assistance of Mr Jones made it particularly difficult to understand the realities of the husband's position.”
The judge had difficulty with understanding the financial position [117]:
“Events since the end of the hearing have made the already difficult task of defining the husband's resources, intentions and true needs yet more difficult”.
The judge explains [30]:
“The hearing completed on 20 February 2019, and I invited written submissions which were provided. I had hoped to give judgment on 6 March 2019. I will set out below developments since the hearing which have greatly prolonged the proceedings.”
Those developments included e-mail exchanges between (at first) solicitors for Mr Gudmundsson and the court, and later direct from Mr Gudmundsson. The judge said that by September 2019 he had “almost completed the judgment” when the court was notified of a development that may have had an effect on the outcome:
“In May 2019 Jirehouse had been closed by the Solicitors Regulation Authority because of suspected dishonesty by Mr Stephen Jones, Jirehouse Partners LLP and Jirehouse Trustees Ltd in connection with their business; and subsequently in August 2019 Mr Jones had been...
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Re Gudmundsson - Annulment And Divorce
...Gudmundsson [2021] EWHC 820 (Ch) was an application by the debtor's ex-wife to annul a bankruptcy order made against her former husband on 26 February 2020 following the service on him of a statutory demand and presentation of a petition by a creditor. The Family Court made an order for fin......