Charles Roberts v Kseye Capital No.1 Limited & Anor

For a bankruptcy petition to be dismissed, the debtor must show a genuine dispute on substantial grounds, analogous to the realistic-prospect test under Civil Procedure Rules 1998, Part 24. A judge’s occasional reference to the balance of probabilities does not establish a misdirection where the judgment, read as a whole, shows that the correct test was understood and applied.

On appeal, factual findings and evaluative conclusions should not be disturbed absent the recognised grounds for appellate intervention. A contractual phrase such as “any other reason” is not limited by the ejusdem generis principle unless the preceding specific words form a sufficiently identifiable genus. On the proper construction of the guarantee, insolvency occurring after its execution could trigger liability as principal debtor.

The respondents provided bridging finance to GBQ Investments Ltd, supported by securities and a guarantee given by the appellant. The guarantee made liability as guarantor subject to a valid demand complying with its notice clause. GBQ subsequently entered administration, and the respondents presented a bankruptcy petition against the appellant.

The County Court at Croydon, by judgment dated 6 July 2023 and order dated 7 July 2023, adjudged the appellant bankrupt. The District Judge concluded that the appellant had not shown a genuine dispute on substantial grounds concerning whether a demand had been sent in accordance with the guarantee.

On appeal, the appellant challenged the test applied, the factual findings and the evaluation of the demand evidence. The respondents relied additionally on the guarantee’s provision making the appellant liable as principal debtor.

1. Appeal dismissed. The District Judge had applied the correct test: whether the appellant had raised a genuine dispute on substantial grounds. References to the balance of probabilities in the discussion of the demand issue were imperfect wording, not evidence that a different test had been applied. The judgment had to be read as a whole, consistently with the approach in Piglowska v Piglowski [1999] 1 WLR 1360.
2. The District Judge was entitled to conclude that the evidence, including the demand letter and the witness evidence, was sufficient to show that the demand had been sent to the specified address by prepaid first-class post. The fact that better evidence might have been available, or that parts of the evidence were hearsay, did not itself create a genuine dispute on substantial grounds. There was no defective evaluation justifying appellate intervention under the principles discussed in Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2003] 1 WLR 577 and Re Sprintroom [2019] EWCA Civ 932.
3. Although unnecessary to the disposition, the narrowed Principal Obligor Case was considered. Whether a demand is required before liability as primary debtor arises depends on the proper construction of the relevant instrument. Clause 2.2 was not limited by ejusdem generis. The listed words did not constitute a sufficiently common and dominant genus. The words “or any other reason” were expansive and included insolvency occurring after the loan and guarantee, so that the appellant’s liability as principal debtor would have been triggered.
4. The Discretion Case was not determined. The court expressed no final view on whether, under Civil Procedure Rules 1998, Part 52, it could keep the bankruptcy order in place after allowing the appeal.

• County Court at Croydon: District Judge Coonan, judgment dated 6 July 2023 and order dated 7 July 2023; the appellant was adjudged bankrupt.
• High Court, Chancery Division: appeal dismissed.