- 5 mins read
Where a debt is jointly owned, one creditor is not entitled to seek a bankruptcy order without the engagement of the other unless that creditor is in breach of its duty as trustee of the jointly owned debt.
We have previously written about the bankruptcy proceedings against Glenn Maud which resulted in a bankruptcy order being made by Registrar Briggs in 2016. Permission to appeal was granted on the basis that the Registrar had not fully considered the class interest when deciding to make the order.
The bankruptcy petition is one aspect of proceedings in both Spain and England in relation to the "Marme Group" which owns a substantial office complex in Madrid ("the Santander Asset"), worth several billion euros.
Ramblas, the Marme Group parent company, is registered in the joint names of Mr Maud and Mr Quinlan. The Marme Group is heavily indebted as a result of the finance required to purchase the Santander Asset and as a result entered insolvency proceedings in Spain. Under the liquidation plan, the Santander Asset is to be sold to the highest bidder.
In 2010, RBS made demand on Mr Maud and Mr Quinlan for a personal loan of €75 million used towards the purchase of the Santander Asset, which resulted in partial payment of €25 million. Two investments companies, Aabar Block S.a.r.l. and Edgeworth Capital (Luxembourg) S.a.r.l purchased RBS' rights against Mr Maud and Mr Quinlan as well as the parent company of the Marme Group.
In 2011, Aabar and Edgeworth obtained judgment against Mr Maud and Mr Quinlan in the sum of €52.6 million. Aabar and Edgeworth tried to settle with Mr Maud and Mr Quinlan but only reached an agreement with Mr Quinlan under which he agreed to sell his shares in Ramblas for €1 to Aabar and Edgeworth.
As Aabar and Edgeworth did not reach settlement with Mr Maud, they petitioned for his bankruptcy in 2015, relying on the joint debt purchased from RBS.
After presenting the bankruptcy petition in 2015, the Petitioning Creditors' relationship had broken down and they were involved in litigation with each other. Following this, Edgeworth an immediate bankruptcy order however Aabar were prepared to agree to an adjournment of the petition to enable Mr Maud to continue to be involved as a shareholder in the Spanish process.
Mr Justice Snowden considered if Edgeworth could continue with the Petition without Aabar's involvement as joint owners of the debt. He was not aware of any direct authority on this point in the context of a bankruptcy or winding up petition. He noted that the normal rule is that trustees were required to exercise their powers unanimously, and unless the court could determine that one party was acting in bad faith choosing the appropriate method of pursuing their joint debt, the court could not simply accept or act on the submissions advanced by one party to the joint debt.
As such, Edgeworth were unable to ask the court to make the immediate bankruptcy order without Aabar seeking the same.
Two other creditors had appeared to oppose the making of the immediate bankruptcy order being Navarro Ventures S.a.r.l. which is beneficially owned by Mr. Maud's estranged wife and a private equity firm called Global Asset Capital Europe LLC ("GAC").
Mr. Maud had retained his position as a shareholder of Ramblas, and had co-operated with GAC and another investment firm, AGC, in putting together a bid for the assets of the Marme Group to rival that of the Petitioning Creditors. In connection with that bid, GAC bought a debt of over €19 million which Mr. Maud owed to AGC, which had helped to finance the purchase of the Santander asset. AGC had also entered a separate bid to purchase the assets of the Marme Group.
Given that bankruptcy is a class remedy and the Court had heard rival arguments for and against making a bankruptcy order, Mr Justice Snowden needed to consider whether there was a class interest in the making of a bankruptcy order.
The creditors opposing the making of an immediate bankruptcy order sought an adjournment and argued that if Mr. Maud were not made bankrupt he would retain his influence as a shareholder of Ramblas in the Spanish insolvency process and stood to receive a payment for assisting AGC if its bid succeeded. They contended that seeking a bankruptcy order that would deprive Mr. Maud of this opportunity would prejudice Mr. Maud's creditors, and would be an abuse of process. It was said that Mr Maud's involvement would maintain competitive tension in the Spanish process and could bring some ultimate benefit to Mr Maud's creditors.
Mr Justice Snowden considered the class interest in so far as he was able but was not satisfied that the interests of creditors would be served by making Mr Maud bankrupt immediately. There was no certainty but there is some prospect that the Spanish insolvency proceedings could benefit Mr Maud and his creditors if he continued to engage in them. There was no likely obvious or immediate benefit to creditors if the bankruptcy order was to be made immediately. There was also no reason given as to why formal investigation of Mr Maud's past dealings needed to be undertaken immediately.
Mr Justice Snowden decided not to dismiss the petition or make the bankruptcy order. As the time which had passed between the hearing and the handing down of the judgment was longer than the adjournment sought, Mr Justice Snowden invited the parties to address him as to appropriate directions for the future conduct of the petition.