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

A bankruptcy petition is a class remedy. The court must consider the value of debts supporting and opposing the petition, together with the commercial rationality of the creditors’ reasons and any extraneous factors affecting their views. The majority position is important but is not mechanically decisive.

The court may refuse a bankruptcy order where it is obvious that no possible benefit can result for creditors, including no reasonable prospect of an investigation producing assets. The debtor bears a heavy evidential burden.

A petition is abusive where the petitioner does not genuinely seek bankruptcy or recovery through the insolvency process, or where its purpose is likely to prejudice the general body of creditors. A collateral purpose does not establish abuse if it causes no such detriment.

Two bankruptcy petitions were before the court against Glenn Maud. The first was presented by the Libyan Investment Authority and the second by Edgeworth Capital (Luxembourg) S.A.R.L. Both petitions concerned undisputed debts arising from guarantees and loans connected with the Marme Group’s Spanish insolvency.

The petitions had been adjourned through earlier proceedings while the parties pursued litigation and attempted to realise value from Mr Maud’s shares and related interests. At the 2019 hearing, the principal questions were whether the general body of creditors favoured an immediate bankruptcy order, whether bankruptcy would serve any useful purpose, and, in relation to Edgeworth, whether it had standing and whether its petition was an abuse of process.

1. The LIA Petition. The court made a bankruptcy order on the LIA Petition. The class remedy required assessment of the value of debts on each side, the reasons advanced, their commercial rationality, and any extraneous personal considerations. The court was not required to formulate the view of a hypothetical rational creditor or substitute its own commercial judgment for that of the class. By the time of decision, the proposed Spanish insolvency routes offered no realistic prospect of benefit to creditors. The LIA and Edgeworth were rationally in favour of an order, and Navarro had no rational basis for opposing it.
2. The court declined to adjourn for time to pay. Under the approach in Sekhon v Edgington [2015] 1 WLR 4435, there was no credible evidence of a reasonable prospect that the petition debt would be paid within a reasonable time.
3. The exceptional jurisdiction to refuse an order because it would be pointless was not engaged. The debtor bears a heavy burden of proving that there is no possible benefit to creditors and that investigation by a trustee would be pointless. The court need not accept uncorroborated evidence of destitution. The evidence concerning Mr Maud’s assets and affairs was inconsistent, and a trustee would possess investigatory powers not previously available to creditors.
4. Article 97.2 of the Spanish insolvency law could not discharge Edgeworth’s €40 million English judgment on the Personal Guarantee. The issue had already been determined between the parties and could not be reargued.
5. The security over the Shareholder Loans secured Ramblas’s liabilities under the Junior Loan, not Mr Maud’s personal liabilities under the Personal Loan or guarantee. The monies received by the Receivers were therefore properly directed towards the Junior Loan.
6. Edgeworth’s petition was not abusive. It genuinely sought recovery through bankruptcy proceedings, although it also had a collateral purpose of removing Mr Maud from influence over the Spanish insolvency. That collateral purpose was not shown likely to cause detriment to the general body of creditors. If the LIA Petition had not succeeded, the court would have made an order on the Edgeworth Petition.
7. No order was made on the Edgeworth Petition because the bankruptcy order was made on the earlier LIA Petition. Both petitions and consequential matters were adjourned to a further hearing.

The judgment described earlier stages of the same bankruptcy proceedings. A bankruptcy order made by Mr Registrar Briggs was appealed and considered in [2016] EWHC 2175 (Ch). The Edgeworth Petition was subsequently considered in the First Judgment, [2018] EWHC 247 (Ch), reported at [2019] Ch 15. The present judgment determined the petitions after the February 2019 hearing.