(1) Edgeworth Capital Luxembourg SARL (2) Aabar Blocks SARL v Glenn Maud [2016] EWHC 1016 (Ch)

Further to our updates in December and January, there has been a further development in relation to this case. The High Court heard the second adjourned hearing of the bankruptcy petition in relation to Glenn Maud. The Court considered whether the Petitioners had an ulterior motive in bringing the bankruptcy petition, but ultimately a Bankruptcy Order was made.

Aabar Block SARL and Edgeworth Capital (Luxembourg) SARL (together "the Petitioners") petitioned for the Bankruptcy of Glenn Maud in July 2015. The petition was initially adjourned on the basis that there was a reasonable prospect of payment of the Petition Debt in full by September 2015.

Mr Maud is a director and 50% shareholder in a Dutch company, Ramblas Investments BV ("Ramblas"). Ramblas owns the entire shareholding of Delma Projectonwikkeling BV who wholly own Marme Inversiones 2007 SL (together "the Marme Group"). Marme owns a valuable office complex in Madrid which is occupied solely by Banco de Santander on a 40 year lease ("the Santander Asset") which has a market value of between €3 and €3.5bn. In March 2014, the Madrid District Court opened concurso voluntario (voluntary insolvency proceedings) in respect of the Marme Group.

Mr Maud and his opposing creditors formed a Consortium seeking to purchase the Marme Group from the Spanish Liquidator for €2.8bn, which Mr Maud maintained would settle all of the Marme Group's external debts in full and enable him to settle the petition debt. An adjournment of the earlier hearings had been granted on the basis that the adjournment was reasonable, proportionate and had certainty of time, and there was a reasonable prospect of paying the Petition Debt. There was a delay in the Spanish proceedings which was further exacerbated by the Judge being placed on medical leave for 3 months, and this caused further delay in the proposed purchase of the Marme Group.

Mr Maud alleged that the bankruptcy petition was part of Aabar and Edgworth's strategy to take control of the Santander Asset. Aabar had previously purchased 50% of the shareholding in Ramblas for €1 from the other director shareholder, Mr Quinlan. The Articles for Ramblas include pre-emption rights which trigger if a shareholder of Ramblas is made bankrupt. Mr Maud alleged that the bankruptcy petition was being pursued for an illegitimate purpose, in order to take control of Ramblas. This argument failed, as Mr Quinlan had entered into another agreement with a separate company, Olivo, in which he is obliged to transfer any shares he might receive to the Olivo. As such it would be Olivo who take Mr Maud's shareholding in the event Mr Quinlan acquires the shares from Mr Maud's Trustee in Bankruptcy.

The Court considered at length whether the Petitioners had an ulterior object, and as such whether the evidential burden should shift to them to show that bankruptcy is in the interests of the class of creditors as a whole. The Court followed Hicks v Gulliver, in which an abuse of process will be found to exist if the sole purpose of a petitioner is collateral, but a mixed motive will not amount to an abuse. The Court held that the general body of creditors will benefit from an order, as an independent Trustee in Bankruptcy will investigate Mr Maud's affairs and dealings. Registrar Briggs found that the Petitioners were not seeking to gain a preference over the general body of creditors, and that they sought a Bankruptcy Order in relation to a long outstanding judgment debt for which no payment had been offered.

The ulterior object argument further failed in respect of the argument that the bankruptcy proceedings were intended to undermine the Consortium bid in the Spanish insolvency proceedings. The Petitioners could not have known about the Consortium bid at the time they served the Statutory Demand.

Registrar Briggs stated that "In my judgment the ability of Mr Maud to pay his creditors within a reasonable time is uncertain, dependent on too many events requiring a successful outcome, on circumstances that are beyond his own control, and reliant on a foreign process that has to date proved unpredictable in terms of timing."

As such, Registrar Briggs was not prepared to exercise his discretion to grant another adjournment, and found that the Petition Debt was now due and owing, and a Bankruptcy Order was made against Mr Maud.  

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