Islandsbanki HF v Stanford [2019] EWHC 307 (Ch)

The appellant bank (IB) successfully appealed against a decision that three separate bankruptcy petitions (presented at different times) in relation to the same debtor should be heard together.

Background to the three petitions

The debtor, Mr Kevin Stanford, is a well-known businessman who founded leading fashion brands such as All Saints with his former wife, Karen Millen.

IB, an Icelandic bank, presented the first bankruptcy petition on 6 April 2017. The petition was founded on unsatisfied execution, based on an unpaid Icelandic judgment for circa £1.3 million. This petition was disputed on procedural grounds.

HMRC (unbeknown to IB) presented the second petition on 22 August 2017 for circa £7 million. The debtor disputed this petition essentially on the grounds of an unreasonable refusal of an offer.

The third petition was then presented by Shineclear on 20 September 2017 for circa £6 million. This petition was also disputed by the debtor.

After several adjournments, IB’s petition was listed for a final hearing on 20 December 2018 and HMRC’s petition was listed for a final hearing on 22 February 2019 (a date when it was thought the outcome of IB’s petition would have been known).

Interestingly, the debtor had also applied for a stay of the HMRC petition so that the Shineclear petition could be heard before HMRC’s petition. The idea behind the debtor’s application being that if he could dismiss the petitions presented by Shineclear and IB first, he would then be able to pay HMRC (due to an offer of funding conditional on these events occurring).

At the final hearing of IB’s petition on 20 December 2018, the Judge adjourned IB’s petition to 22 February 2019 (alongside HMRC’s petition) and required Shineclear to attend on that date to resolve the outstanding issues in the third petition. The Judge indicated his intention to perform a case management review of all three petitions. However, despite a request from Counsel for IB, the Judge would not confirm which petition would be dealt with first.

The appeal

Permission to appeal was granted after, unusually, all three parties considered that the Judge had erred in principle.

IB’s grounds of appeal were that the Judge had erred by (1) adjourning IB’s petition having not given judgment or indicating when judgment would be given; and (2) adjourning IB’s petition so that it was listed for hearing with two other later-in-time petitions.

The appeal was subsequently allowed for the following reasons:

• the Judge had failed to give proper reasons for his decision. The Judge had also failed to hear submissions from the parties before making an order which neither party had asked for;
• adjournments should be granted sparingly (IB’s petition had already been subject to numerous adjournments and delays) and IB’s petition should be disposed of without undue delay;
• the Judge should have given judgment or indicated when he would do so, and at the very least, that it would be prior to HMRC’s petition being heard;
• the Judge’s decision meant that neither of the first two petitions would be disposed of in February 2019, with time being wasted resolving different issues from different petitions;
• It was in the interests of creditors as a whole that IB’s petition should be heard first and not listed with the other petitions, otherwise it might limit the scope of recovery. Particularly given that some of the reviewable transactions (the debtor sold a Ferrari on 1 May 2015 for more than £1 million and transferred the balance of the sale proceeds to his then wife) were within two years of IB’s petition being presented but not the other petitions; and
• The overriding objective, especially proportionality, was a relevant consideration - the effect of the Judge’s decision leads to costs of preparing and dealing with subsequent petitions, when the debtor might be made bankrupt in IB’s petition.

It was therefore ordered that IB’s petition should be heard first, with the court noting that this case goes beyond a simple case management order.

For more information contact our Restructuring and Insolvency Team.