(1)Aabar Block Sarl (2) Edgeworth Capital (Luxenbourd) Sarl –v- Glenn Maud (2015)


18th December 2015


Barristers:

Niall McCulloch


(1) AABAR BLOCK SARL (2) EDGEWORTH CAPITAL (LUXEMBOURG) SARL –v- GLENN MAUD (2015)

High Court (Chancery Division - Bankruptcy Ct)
INSOLVENCY - ADJOURNMENT : BANKRUPTCY PETITIONS
[2015] EWHC 3681 (Ch)

 

It was appropriate to adjourn the hearing of a bankruptcy petition to enable a sale of the debtor's main asset to proceed. Such a sale was likely to benefit the creditors as a whole, albeit not the petitioning creditors, who had an ulterior purpose in seeking an immediate bankruptcy order.


The respondent debtor sought an adjournment of the hearing of the bankruptcy petition which had been presented against him by the two petitioning creditors.

 

The respondent had operated as a property entrepreneur in conjunction with another man (Q). Through shareholdings in three companies (R, D and M), the two men had acquired an office complex in Madrid which, according to the respondent, had a current market value of between €3 and 3.5 billion. They had acquired the complex with the aid of bank loans which had been assigned to the petitioning creditors. The petition debt was £51 million. R, D and M had entered into liquidation in Spain in February 2015. The Spanish court had recently approved a liquidation plan providing for the sale of the companies. The respondent was part of a consortium which had put forward an offer to buy the companies which, he claimed, would result in the discharge of all of his debts. He sought an adjournment to allow the sale to proceed. He also claimed that the petitioning creditors were pursuing a collateral purpose in seeking to make him bankrupt: by a deed entered into with Q, they had obtained effective control over Q's shares in R; his bankruptcy would trigger Q's rights of pre-emption over his shares in R; that would enable the petitioning creditors to gain control of R and therefore of the office complex as well. He also relied on the fact that he had issued proceedings claiming that one of the petitioning creditors had reneged on an agreement for him to purchase its claims against him.

 

HELD: (1) It was necessary to decide whether the petitioning creditors had an ulterior object in pursuing the petition. If they did, the burden would shift to them to show that an immediate bankruptcy order would benefit the class of creditors as a whole, Bula Ltd, Re [1990] 1 I.R. 440 applied. The facts of the case overwhelmingly led to the inference that the petitioning creditors did have an ulterior object in pursuing the petition. Among other things, they had admitted that they wished to acquire the office complex. Further, they would obtain it by reason of a bankruptcy order, not as a class right in the bankruptcy, but in their capacity as a contractual party to the deed entered into with Q. The burden having shifted to the petitioning creditors to show that an immediate bankruptcy order would benefit the creditors as a whole, they had not discharged that burden. The respondent had explained that he had no assets to enforce against; the petitioning creditors had examined him in court and had no evidence of available assets other than his shares in R. The realisation of the R shares at a proper price and under proper conditions could benefit all the creditors. An immediate bankruptcy order would benefit only the petitioning creditors. It would also stifle the proceedings which the respondent had issued. Even if the conclusion about the presence of an ulterior object was wrong, it would be appropriate to grant an adjournment, as there was a reasonable prospect of the petition debt being paid in full within a reasonable time. The bidding process under the liquidation plan was likely, on the balance of probabilities, to produce the best opportunity for the creditors. Moreover, the majority in value and number of the creditors supported an adjournment, and the consortium bid appeared serious. The petition would be adjourned to the date when the final bids would be known in the first or second week of April 2016 (see paras 71, 77-78, 80-81, 94, 103 of judgment).

 

(2) The respondent had made an unsuccessful application to set aside the statutory demand served on him by the petitioning creditors. The judge had rejected his submission that the collateral purpose relied on would render the presentation of a bankruptcy petition an abuse of process. However, the inquiry as to purpose could continue at the hearing of the bankruptcy petition even where an abuse of process was not found to exist at the statutory demand stage. There might be more evidence before the court at that hearing (para.75).

 

Application granted



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