Aabar Block SARL & Anor v Maud

At a bankruptcy petition hearing, the court has a broad statutory discretion to adjourn, stay or dismiss proceedings. An adjournment may be granted where credible evidence shows a reasonable prospect that the petition debt will be paid in full within a reasonable and proportionate period.

Bankruptcy is a collective process. Where a petitioning creditor has an ulterior objective of obtaining an advantage over the general body of creditors, the burden shifts to that creditor to show that an immediate bankruptcy order is required in the interests of the class or is otherwise necessary. The court may give less weight to creditors connected with the debtor and must consider the quality, quantity and value of creditors supporting or opposing the petition.

Aabar Block SARL and Edgeworth Capital (Luxembourg) SARL presented a bankruptcy petition against Glenn Maud based on substantial judgment debts. Mr Maud sought a further adjournment while a Spanish liquidation process concerning companies holding the Santander Asset proceeded.

Mr Maud, supported by creditors including Navarro Ventures SARL and GA Capital (Europe) LLC, argued that the Spanish sale process could discharge all creditors and preserve value for the estate. The petitioners sought an immediate bankruptcy order, arguing that an independent trustee was urgently required and that the petition was properly brought.

The central issues were whether the petitioners had an ulterior objective, whether there was a reasonable prospect of payment in full within a reasonable time, and whether an immediate investigation justified making a bankruptcy order.

1. Disposition. The hearing of the bankruptcy petition was adjourned until the final bids in the Spanish liquidation process were known, expected in the first or second week of April 2016.
2. Section 266(3) of the Insolvency Act 1986, together with rule 6.25(1) of the Insolvency Rules 1986, gives the court a broad discretion to adjourn a bankruptcy petition even where the petition debt is established. The discretion should be exercised judicially. Credible evidence is required to show a reasonable prospect that the debt will be paid in full within a reasonable period.
3. The court distinguished between a collateral purpose, which may amount to an abuse of process, and an ulterior object. An ulterior object exists where proceedings have been properly brought but the petitioner seeks an additional advantage over the general body of creditors. If that objective is established, the burden shifts to the petitioner to prove on the balance of probabilities that an immediate order benefits the class or is otherwise necessary.
4. The petitioners’ contractual arrangements gave them a favourable position in acquiring Mr Maud’s principal valuable asset if bankruptcy triggered pre-emption rights. Their proposed recovery was substantially greater than the petition debt, while the Consortium’s funded bid offered a realistic prospect of paying all creditors. The court therefore inferred an ulterior objective and found that an immediate order would not benefit creditors generally.
5. The views of opposing creditors were relevant. Although less weight was given to creditors connected with Mr Maud than would have been given to an independent creditor such as HMRC, the connected creditors remained members of the class. The regulated and court-supervised Spanish process, together with the serious funded bid, made a further adjournment reasonable and proportionate.
6. The petitioners’ CPR Part 71 examinations did not establish an urgent need for an independent investigation. The petition itself afforded statutory protection to the estate, and the examinations had already enabled extensive investigation of Mr Maud’s affairs.