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

A bankruptcy petition is a class remedy. The court must assess the interests of creditors as a class, rather than treat the petitioning creditor as automatically entitled to an order on an undisputed debt.

A petition may be abusive where the petitioner seeks bankruptcy solely for an extraneous purpose, or where its collateral purpose would prejudice the general body of creditors. A genuine collateral purpose is not abusive merely because it is not shared by every creditor, provided it causes no detriment to the class.

Where a debt is jointly owned, one joint creditor cannot insist on an immediate bankruptcy order against the genuine contrary view of the other, unless the latter is acting in breach of trust. The petition was adjourned because the creditors’ interests were better served by preserving a realistic prospect of value emerging from related foreign insolvency proceedings.

Aabar and Edgeworth petitioned for Mr Maud’s bankruptcy on the basis of a judgment debt arising from a personal loan. The petition followed an earlier bankruptcy order by the registrar, which was set aside on appeal because the class interest had not been fully considered.

At the renewed hearing, Edgeworth sought an immediate order. Aabar, the joint owner of the petition debt, supported a further adjournment. Other creditors opposed immediate bankruptcy, arguing that Mr Maud’s continued involvement in Spanish insolvency proceedings might produce value for creditors.

The issues were whether the petition was an abuse of process, whether Edgeworth could proceed contrary to Aabar’s position, and whether the class interest favoured an immediate bankruptcy order or an adjournment.

1. Abuse of process. The court could revisit the purpose of the petition because the evidence had materially changed since the statutory-demand proceedings and the issue concerned the class interest rather than merely the existence of the debt. A petition is abusive where the petitioner does not genuinely seek bankruptcy, or where its purpose is adverse to the general body of creditors. A collateral purpose which causes no such detriment is not necessarily abusive.
2. The petitioning creditors genuinely retained an interest in recovering the personal-loan debt. Their additional purpose of removing Mr Maud’s influence over litigation and the Spanish insolvency process was not shown to prejudice creditors. Nor was there reliable evidence that any valuable payment from AGC would be lost by bankruptcy. The abuse argument therefore failed.
3. Joint petitioners. Aabar and Edgeworth jointly owned the judgment debt. Joint owners of a debt hold their rights in a trust-like relationship and ordinarily must act unanimously. Edgeworth could not assert an entitlement to a bankruptcy order against Aabar’s genuine contrary view. Edgeworth had not shown that Aabar was acting irrationally or in breach of duty.
4. Class interest. Bankruptcy is not determined by counting creditors or debt values. The court had to weigh the competing commercial judgments. There was a realistic, though uncertain, prospect that the Spanish insolvency process or a related proposal might produce value through Mr Maud’s shareholder loans or shares. No immediate benefit from bankruptcy had been established.
5. The petition was neither dismissed nor immediately granted. The court declined to make a bankruptcy order and directed the parties to address further directions, including updated evidence about developments in Spain.

• High Court (Chancery Division): Mr Registrar Briggs made a bankruptcy order in June 2016.
• High Court (Chancery Division): Mr Justice Snowden allowed Mr Maud’s appeal because the registrar had not fully considered the class interest, and directed a rehearing.
• High Court (Chancery Division): the renewed hearing resulted in the petition being neither dismissed nor immediately granted; further directions were invited.