Maud v Aabar Block S.A.R.L. & Anor

Insolvency proceedings based on an undisputed debt amount to an abuse of process only where the petitioner does not genuinely seek the insolvency relief, but uses it to pressure the target, or where the petitioner acts outside the interests of the creditor class or disadvantages that class. A collateral benefit and the petitioner’s motive do not suffice where the relief is objectively beneficial to the petitioner as creditor. The jurisdiction is exercised sparingly. A speculative allegation that commercial arrangements discharged a debt does not create a substantial dispute where the documents assume continuing indebtedness, security and liability.

Glenn Maud applied to set aside a statutory demand served by Aabar Block S.A.R.L. and Edgeworth Capital (Luxembourg) S.A.R.L. The demand concerned an unsecured debt of approximately £41.4 million, comprising a judgment debt arising from a 2011 consent order and accrued interest.

Mr Maud argued that his joint and several liability had been extinguished when Derek Quinlan entered into arrangements involving the transfer of shares and the release of security. He also alleged that the demand was pursued for the collateral purpose of triggering pre-emption rights over shares in Ramblas. The central issues were whether the debt was substantially disputed and whether the alleged collateral purpose justified setting aside the demand.

1. Application dismissed. The statutory demand was not set aside.
2. On the alleged discharge of the judgment debt, the September 2011 arrangements did not state that Mr Quinlan’s personal loan or the judgment debt had been paid. Their terms instead assumed continuing indebtedness. They provided for the release of security, defined the relevant indebtedness as continuing, and included an undertaking not to present a bankruptcy petition which would have been meaningless if the debt had been extinguished. Uncertainty about the value of the Ramblas shares did not justify departing from the clear documents. There was therefore no substantial dispute under Insolvency Rules 1986 r 6.5(4)(b).
3. On collateral purpose, the court applied the principle in In Re Majory a debtor [1955] 1 Ch 600 that insolvency proceedings must not be used to obtain a collateral advantage. The jurisdiction may apply where the petitioner does not genuinely seek bankruptcy or liquidation but uses the proceedings to pressure the target, or where the petitioner acts outside the interests of the creditor class or the proceedings disadvantage that class. The jurisdiction must be exercised sparingly. Re Leigh Estates (UK) Ltd [1994] BCC 292 illustrated the latter situation.
4. Following Ebbvale Ltd v Hosking [2013] UKPC 1, the petitioner’s motive was irrelevant where bankruptcy was objectively advantageous to the petitioner as creditor. The respondents genuinely sought Mr Maud’s bankruptcy, and there was no evidence that it would prejudice his other creditors. The alleged purpose of triggering pre-emption rights therefore did not constitute an abuse under r 6.5(4)(d).