Bankruptcy – petition – proper approach to application for a second adjournment – collateral purpose or ulterior object in pursuing petition – reasonable amount of time for such an adjournment
This was the second hearing of a bankruptcy petition presented against Mr Maud. His sole significant asset was a group of companies that owned a substantial property in Madrid. Those companies had entered an insolvency procedure in Spain. The petition had been adjourned pending the outcome of that process.
The petitioners contended an immediate bankruptcy order was in the interests of all creditors, and that there was a pressing need to appoint a trustee in bankruptcy to investigate Mr Maud’s affairs, as he may have taken steps to put assets beyond the creditors’ reach.
Mr Maud sought a further adjournment on the footing, again, that the petition should await the outcome of the Spanish insolvency. He anticipated that following the Spanish insolvency, he might be able to repay his creditors. He suggested that, if he were made bankrupt, his creditors generally would be worse off and his unsecured creditors highly unlikely to receive anything. He also suggested that the petitioning creditors were pursuing the petition not to make his creditors better off, but to allow them achieve control of the group of companies that owned the property in Madrid.
Registrar Briggs granted a second adjournment until April 2016.
Although, at a previous hearing, it had been found that the petition had not been pursued improperly for a “collateral purpose“, there was a distinction between a collateral purpose – which implied an abuse of process, whereby a petition was brought to obtain a collateral advantage rather than for the benefit of the creditors as a whole – and an ulterior object – whereby proceedings may have been properly brought, albeit that, as well as being designed to benefit creditors as a whole, they were also anticipated to have some particular benefit for a particular creditor or class of creditor
On the facts, the petitioners had an ulterior object in bringing the petition. As such, the burden of proof shifted to them to show that on the balance of probabilities an immediate bankruptcy order was required in the interests of the general class of creditors, or was otherwise necessary. The petitioners had not discharged that burden. Thus an adjournment was granted on the basis that all creditors had a reasonable prospect of being paid in full upon completion of the Spanish insolvency. Further, there was no requirement for an urgent and independent investigation of the debtor’s affairs.
The case confirms that, when exercising the discretion whether to make a bankruptcy order, the court will have principal regard to the interests of the creditors, and in so doing can take account of any ulterior object that a petitioner might have in seeking a debtor’s bankruptcy. The decision shows the court is prepared to be pragmatic where a debtor is doing all he can to realise an asset that has a reasonable prospect of allowing creditors to be paid.
