Paul Kemsley, whose Rock property empire collapsed in 2009, will face claims in the US courts from Barclays after a US judge refused to recognise Kemsley’s UK bankruptcy and a high court judge declined to restrain the proceedings.
Barclays is suing Kemsley in both New York and Florida over a £5m loan granted in 2008, but in March 2012 he was made bankrupt in the UK on his own petition.
In a ruling today, Roth J gave his reasons for refusing to restrain the US proceedings, and said that the US Bankruptcy Court had now refused an application from Kemsley’s trustee-in-bankruptcy, Mark Fry, for recognition of the English bankruptcy, on the basis that his centre of main interests (COMI) was not in the UK, but the US.
Explaining the position in the US, Roth J said that Judge Peck in the US Bankruptcy Court has now held that at the time when Mr Kemsley filed his bankruptcy petition, or alternatively when the bankruptcy order was made, his COMI was in the United States. The court also found that Mr Kemsley did not have an establishment in England at the material time so the English bankruptcy also did not qualify as “foreign non-main proceedings”.
He added: “It is perhaps material to the position of Barclays in seeking to pursue the NY Proceedings that Judge Peck noted in his judgment: ‘Mr Kemsley is a bankrupt who does not live like one. Since leaving his debts behind and coming to the United States, his financial difficulties have not diminished his high standard of living. He earns personal income from certain business activities (he has worked for Planet Hollywood and currently represents the iconic Brazilian soccer star Pele through a marketing business with offices in New York known as Legends 10) and rather conveniently also has ready access to abundant free cash (principally in the form of loans or gifts from generous friends) enabling him to live very well.’”
Roth J said that, while Judge Peck made clear that there was no suggestion that Mr Fry was not acting in good faith, he observed that Mr Kemsley, with the aid of surrogates, has been providing indirect financial support to Mr Fry to cover the trustee’s legal expenses in pursuing recognition.
Judge Peck commented: “This financial support may indicate that the trustee’s petition for recognition is an aspect of a coordinated trans-Atlantic litigation strategy orchestrated by Mr Kemsley and his advisers to shield [Mr Kemsley’s] assets from enforcement actions by Barclays (notably his Florida real estate).”
Noting that granting the application for recognition would benefit Mr Kemsley by stopping the NY Proceedings brought by Barclays, Judge Peck added: “The working arrangement between the trustee and Mr Kemsley is an unlikely one. These are parties who would ordinarily be opposed to each other with respect to claims to recover [Mr Kemsley’s] assets located in the United States for the benefit of UK based creditors. [Mr Kemsley] and the trustee have formed what amounts to a joint venture – with funding from sources loyal to [Mr Kemsley] – to achieve a result that is adverse to the interests of one of its major creditors.”
Roth J said that, at least until late 2008, Mr Kemsley was a “very wealthy individual”, which explained why, in June 2008, Barclays granted him a personal loan of £5m on an unsecured basis.
He said that, following the collapse of his business here, Mr Kemsley moved with his wife and family to a house in Boca Raton, Florida, in 2009. They moved to New York City in about May 2010 but subsequently Mr and Mrs Kemsley became estranged and Mrs Kemsley moved back with their children to England in about June 2012.
In November 2011, Her Majesty’s Revenue and Customs presented a bankruptcy petition based on a debt of £3m, but Kemsley was adjudicated bankrupt on his own petition in the UK on 26 March 2012.
However, earlier that month, Barclays commenced proceedings against him under the loan agreement in the Supreme Court of the State of New York. Those proceedings were stayed pending the application for recognition of the UK bankruptcy, in which Mr Fry estimated Mr Kemsley ‘s debts at between $10m-$50m and claimed that the majority of Mr Kemsley ‘s primary assets and creditors are in England.
In November last year, Barclays also commenced proceedings in the Florida State Court against Mr and Mrs Kemsley, seeking to set aside certain transfers of the Florida property as fraudulent transfers designed to defeat the interests of creditors.
Roth J said that, had the US Bankruptcy Court granted Mr Fry’s petition for recognition, the NY proceedings would have been stayed and Barclays may not effectively be able to pursue the Florida Proceedings founded on the same debt.
Giving his reasons for refusing Mr Kemsley’s application to restrain Barclays’ US proceedings, he said that either Mr Kemsley’s COMI was in England, in which case an anti-suit injunction was unnecessary, or it was in the United States, in which case he regarded an injunction as “wholly inappropriate”.
Kemsley v Barclays Bank and ors Chancery (Roth J) 15 May 2013
Simon Mortimore QC (instructed by Lawrence Stephens) for the Applicant
Robin Dicker QC and Richard Fisher (instructed by Clifford Chance LLP) for the 1st Respondent
Paul Kemsley, whose Rock property empire collapsed in 2009, will face claims in the US courts from Barclays after a US judge refused to recognise Kemsley’s UK bankruptcy and a high court judge declined to restrain the proceedings. Barclays is suing Kemsley in both New York and Florida over a £5m loan granted in 2008, but in March 2012 he was made bankrupt in the UK on his own petition. In a ruling today, Roth J gave his reasons for refusing to restrain the US proceedings, and said that the US Bankruptcy Court had now refused an application from Kemsley’s trustee-in-bankruptcy, Mark Fry, for recognition of the English bankruptcy, on the basis that his centre of main interests (COMI) was not in the UK, but the US. Explaining the position in the US, Roth J said that Judge Peck in the US Bankruptcy Court has now held that at the time when Mr Kemsley filed his bankruptcy petition, or alternatively when the bankruptcy order was made, his COMI was in the United States. The court also found that Mr Kemsley did not have an establishment in England at the material time so the English bankruptcy also did not qualify as “foreign non-main proceedings”. He added: “It is perhaps material to the position of Barclays in seeking to pursue the NY Proceedings that Judge Peck noted in his judgment: ‘Mr Kemsley is a bankrupt who does not live like one. Since leaving his debts behind and coming to the United States, his financial difficulties have not diminished his high standard of living. He earns personal income from certain business activities (he has worked for Planet Hollywood and currently represents the iconic Brazilian soccer star Pele through a marketing business with offices in New York known as Legends 10) and rather conveniently also has ready access to abundant free cash (principally in the form of loans or gifts from generous friends) enabling him to live very well.’” Roth J said that, while Judge Peck made clear that there was no suggestion that Mr Fry was not acting in good faith, he observed that Mr Kemsley, with the aid of surrogates, has been providing indirect financial support to Mr Fry to cover the trustee’s legal expenses in pursuing recognition. Judge Peck commented: “This financial support may indicate that the trustee’s petition for recognition is an aspect of a coordinated trans-Atlantic litigation strategy orchestrated by Mr Kemsley and his advisers to shield [Mr Kemsley’s] assets from enforcement actions by Barclays (notably his Florida real estate).” Noting that granting the application for recognition would benefit Mr Kemsley by stopping the NY Proceedings brought by Barclays, Judge Peck added: “The working arrangement between the trustee and Mr Kemsley is an unlikely one. These are parties who would ordinarily be opposed to each other with respect to claims to recover [Mr Kemsley’s] assets located in the United States for the benefit of UK based creditors. [Mr Kemsley] and the trustee have formed what amounts to a joint venture – with funding from sources loyal to [Mr Kemsley] – to achieve a result that is adverse to the interests of one of its major creditors.” Roth J said that, at least until late 2008, Mr Kemsley was a “very wealthy individual”, which explained why, in June 2008, Barclays granted him a personal loan of £5m on an unsecured basis. He said that, following the collapse of his business here, Mr Kemsley moved with his wife and family to a house in Boca Raton, Florida, in 2009. They moved to New York City in about May 2010 but subsequently Mr and Mrs Kemsley became estranged and Mrs Kemsley moved back with their children to England in about June 2012. In November 2011, Her Majesty’s Revenue and Customs presented a bankruptcy petition based on a debt of £3m, but Kemsley was adjudicated bankrupt on his own petition in the UK on 26 March 2012. However, earlier that month, Barclays commenced proceedings against him under the loan agreement in the Supreme Court of the State of New York. Those proceedings were stayed pending the application for recognition of the UK bankruptcy, in which Mr Fry estimated Mr Kemsley ‘s debts at between $10m-$50m and claimed that the majority of Mr Kemsley ‘s primary assets and creditors are in England. In November last year, Barclays also commenced proceedings in the Florida State Court against Mr and Mrs Kemsley, seeking to set aside certain transfers of the Florida property as fraudulent transfers designed to defeat the interests of creditors. Roth J said that, had the US Bankruptcy Court granted Mr Fry’s petition for recognition, the NY proceedings would have been stayed and Barclays may not effectively be able to pursue the Florida Proceedings founded on the same debt. Giving his reasons for refusing Mr Kemsley’s application to restrain Barclays’ US proceedings, he said that either Mr Kemsley’s COMI was in England, in which case an anti-suit injunction was unnecessary, or it was in the United States, in which case he regarded an injunction as “wholly inappropriate”. Kemsley v Barclays Bank and ors Chancery (Roth J) 15 May 2013Simon Mortimore QC (instructed by Lawrence Stephens) for the ApplicantRobin Dicker QC and Richard Fisher (instructed by Clifford Chance LLP) for the 1st Respondent
