Edgeworth Capital (Luxembourg) S.A.R.L. & Anor v Maud

A bankruptcy petition is an abuse of process where it is pursued for a purpose alien to the class remedy, or where a collateral purpose is likely to prejudice the general body of creditors. A petition is not abusive merely because the petitioner also seeks to trigger a share-sale mechanism, provided the mechanism is designed to secure fair value and the petitioner has a genuine payment purpose. A court may reconsider an intended order before it is perfected where new material has emerged and no party has relied on the judgment to its detriment. In deciding the class question, the court weighs the views of appearing creditors and excludes the debtor from that creditor contest. Costs receive priority in the bankruptcy only where the applicable insolvency rules permit it, generally in relation to the petition on which the order is made.

The judgment concerned two bankruptcy petitions against Glenn Maud, presented by the Libyan Investment Authority and Edgeworth Capital (Luxembourg) S.A.R.L. The court had previously indicated that it would make a bankruptcy order on the LIA petition and had refused to strike out Edgeworth’s petition as an abuse of process: [2020] EWHC 974 (Ch). Before the consequential hearing, Mr Maud relied on new evidence concerning a Spanish interest claim said potentially to increase the value of shares in Ramblas.

The court reconsidered the relevant parts of its intended decision, considered the prospects of appeal, determined the creditor class question, addressed the timing and effect of the bankruptcy order, and decided the competing applications for priority costs. The central issues were whether Edgeworth’s collateral purposes made its petition abusive, whether the new material justified changing the intended order, and how the creditors’ competing views should be weighed.

1. Reconsideration and appeal. The court exercised the Barrell jurisdiction to reconsider its intended bankruptcy order before it was perfected. No party had acted in reliance on the judgment, and the new evidence gave a fuller account of the Spanish interest claim. Section 375 of the Insolvency Act 1986 was not an appropriate alternative route because it presupposed an order and was not intended to subvert an appeal where there had been no material change after the order.
2. Abuse of process. The applicable test was whether the petition was pursued for a purpose contrary or alien to the nature of the bankruptcy class remedy. A genuine purpose of recovering the petition debt through bankruptcy was sufficient even though the petitioner also had a collateral purpose, unless that collateral purpose was likely to prejudice the general body of creditors. Ebbvale v Hosking did not establish a separate test requiring an objective assessment of substantial advantage. It explained the purposes present on its facts, one of which need not have been the petitioner’s principal purpose.
3. Share-sale mechanism and creditor prejudice. Triggering the Ramblas articles did not establish likely prejudice. The articles provided a valuation mechanism involving independent experts and prevented sale below the agreed or determined fair value. A contingent claim could be valued at fair market value by discounting for the likelihood of success; it was unnecessary to await the final outcome of the Spanish litigation. If the share proceeds discharged Ramblas’s debt to Edgeworth, the trustee in bankruptcy would have a subrogation claim against Ramblas ranking before distributions to shareholders. The alleged further purpose of acquiring the shares therefore did not make the petition abusive.
4. Class question. The LIA was entitled to a bankruptcy order ex debito justitiae, and there was no basis for a further adjournment. The class question was a discretionary assessment of the weight to be given to the appearing creditors’ views. The debtor was not a member of that class and had no voice in the contest. The independent receivers supporting the LIA carried significant weight. Edgeworth’s support was rational. Navarro’s position was discounted because it had not brought an independent and objective mind to the commercial issues. The balance of the class interest favoured bankruptcy.
5. Orders and costs. Mr Maud was made bankrupt on the LIA petition, but the order was postponed to preserve the position pending any application for permission to appeal. The Edgeworth petition was adjourned pending final disposal of any appeal concerning the LIA petition. The LIA’s and Edgeworth’s costs of pursuing or supporting the LIA petition were payable as bankruptcy expenses under rule 10.149(i) of the Insolvency (England and Wales) Rules 2016. Costs relating to the Edgeworth petition ranked only as unsecured claims, and specified costs arising from inaccurate evidence before the Registrar were excluded. Permission to appeal was refused.

The judgment reconsidered an intended bankruptcy order following the earlier decision reported at [2020] EWHC 974 (Ch). It was a first-instance consequential and review decision. Permission to appeal was refused.