Bankruptcy – statutory demand – set aside application – r.6.5(4)(d) – “other grounds” for setting aside – international sanctions – illegal payments
Mr Maud applied to set aside a statutory demand served on him by the Libyan Investment Authority (LIA). The LIA claimed Mr Maud owed approximately £17.5m pursuant to a guarantee given by him in 2008. Mr Maud did not dispute the existence of the debt, or that he was unable to pay it. However, he contended that payment of any amount due would amount to a breach of the international sanctions regime currently in place prohibiting, in certain circumstances, dealings with Libyan individuals and entities including the LIA. This, he said, amounted to “other grounds” under r.6.5(4)(d) on which the court ought to set the demand aside.
Granting his application, Rose J held, following the general approach to r.6.5(4)(d) set out in In re a Debtor (1 of 1987) [1989] 1 WLR 271 and John Remblance v Octagon Assets [2009] EWCA Civ 581, that it would be unjust to allow a statutory demand to found the ability of a creditor to present a bankruptcy petition when the payment of the debt referred to in the demand would contravene a sanctions regime and expose the debtor to criminal penalties. It did not matter whether the debtor was otherwise able to pay the debt or not.
In this case there was an international sanctions regime established by two UN Security Council resolutions, several EU Council Regulations and, in England, the Libya (Asset-Freezing) Regulations 2011 (SI 2011/605) and the Libya (Asset-Freezing)(Amendment) Regulations 2013 (SI 2013/2071). Although the sanctions regime had been relaxed since the fall of the Gaddafi government, it was still clear that they prohibited a payment to the LIA by Mr Maud. The wording of the Council Regulations or the English statutory instruments did not support the LIA’s argument to the contrary.
Further, the LIA wrongly suggested Mr Maud ought to have obtained a licence from HM Treasury permitting payment notwithstanding the sanctions. The regime did not place a burden on Mr Maud to apply for a licence and, in any event, it was not clear that HM Treasury would grant a licence as approval for a licence depended upon authorisation from the UN Security Council, which Rose J could not say would be forthcoming.
Although the result turned upon the interpretation of the specific Libyan sanctions regime, the underlying principle is likely to be applicable more widely in cases where the debtor contends that payment of the debt would expose him to a criminal penalty.
