An overview of the recent decision of Mr Justice Snowden in Re Maud  EWHC 974 (Ch)
May 7, 2020
In February 2019, Mr Justice Snowden heard, together, two bankruptcy petitions presented against Mr Maud; the first by the Libyan Investment Authority (“the LIA Petition”); and the second by Edgeworth Capital (Luxembourg) S.A.R.L. (“the Edgeworth Petition”). Judgment was handed down on 5 May 2020 (click here to read the judgment in full).
The LIA Petition
In 2008, the LIA granted a loan to a company of which Mr Maud was a director, and in relation to which he had given a personal guarantee. When the company went into administration, the LIA made a demand of Mr Maud under the personal guarantee; and subsequently presented a petition in respect of the debt on 31 July 2014, for the sum of €22.2 million.
The Edgeworth Petition
The Edgeworth Petition was connected to lengthy litigation and insolvency proceedings in Spain in relation to a substantial office and real estate complex in Boadilla del Monte (“the Santander Asset”). Until recently, the Santander Asset was owned by Marme Inversiones 2007 S.L.; which was, in turn, owned by Delma Projectontwikkeling BV, which, in turn, was owned by Ramblas Investments BV (“Ramblas”) (collectively “the Marme Group Companies”). The shareholding in Ramblas was split equally between Mr Maud and a Mr Quinlan.
RBS had granted a loan to Ramblas, in respect of which both Mr Maud and Mr Quinlan had executed a personal guarantee (“the Personal Guarantee”). A personal loan had also been granted to Mr Maud and Mr Quinlan, jointly and severally, by RBS (“the Personal Loan”). In 2010, RBS sold those loans, and their related security rights, to Edgeworth; and in June 2011, judgment was successfully obtained against Mr Maud and Mr Quinlan in respect of the Personal Loan. Following the judgment, Mr Quinlan agreed to sell his shareholding in Ramblas to Edgeworth. Mr Maud, however, was served with a statutory demand in respect of the judgment debt in June 2014.
In February 2014, the Marme Group Companies entered insolvency; and the Santander Asset was to be sold by the Administrators at open auction. Sorlinda Investments SLU (“Sorlinda”), was supported by Edgeworth in submitting the highest bid for the Santander Asset; but at the time of the February 2019 hearing, the sale had still not completed.
The February 2019 Hearing
The LIA Petition
On hearing the LIA Petition first, the two fundamental questions for the consideration of Mr Justice Snowden were:
- What is the appropriate order to make having regard to the views of the general body of creditors?
- Should the Court decline to make a bankruptcy order on the basis that it would serve no useful purpose?
As regards the views of Mr Maud’s creditors, both the value of their debts, and the reasons advanced for their support or opposition of a bankruptcy order, were relevant considerations. However, in determining this issue, Mr Justice Snowden made clear that “Mr Maud, as the debtor, has no voice”.
There were three appearing creditors: (1) the LIA, with a debt of €22.2 million, which did not oppose Mr Maud’s request for a short adjournment on the basis that Mr Maud may be able to benefit financially from the ongoing Spanish insolvency proceedings and therefore provide a greater return for creditors; (2) Edgeworth, with a debt of €82.6 million, which sought an immediate bankruptcy order; and Navarro Ventures S.A.R.L., with a debt of €65 million, which opposed the making of a bankruptcy order for the same reason that the LIA took a neutral stance.
At the time of the handing down of the Judgment in this matter in May 2020, the Spanish Court had issued a definitive ruling awarding the Santander Asset to Sorlinda; and it was clear that Mr Maud did not stand to benefit from the Spanish proceedings. In his Judgment, Mr Justice Snowden therefore concluded that there was no “positive justification for a further adjournment”; and having regard to the views of the body of creditors, it was appropriate that a bankruptcy order be made against Mr Maud.
As regards the question whether or not a bankruptcy order would serve a useful purpose; although a “potentially relevant” consideration, Mr Justice Snowden was not prepared to accept Mr Maud’s “uncorroborated statement” to that effect, as to do so would be an “invitation to abuse”. Furthermore, he was not satisfied that Mr Maud had given a “full and complete account of his assets and affairs so as to discharge the heavy burden of showing that he has no assets and that the investigation of his affairs by a trustee in bankruptcy would be pointless.”
Accordingly, it was decided that the making of a bankruptcy order against Mr Maud would not be a useless exercise for his creditors.
The conclusion was that a bankruptcy order should be made on the LIA Petition. Nevertheless, Mr Justice Snowden went on to consider the merits of the Edgeworth Petition, due to its relevance for the purposes of costs.
The Edgeworth Petition
The focus of the Edgeworth Petition hearing was on the concerns raised by Mr Maud that:
- The purpose of the Edgeworth Petition was for Edgeworth to obtain his shareholding in Ramblas by triggering the pre-emption provision in Ramblas’ Articles of Association, which provided that if a shareholder loses the right to dispose of his property, his shares must be offered to the other shareholders. Commencing bankruptcy proceedings for this purpose was, in Mr Maud’s view, an abuse of process.
- Secondly, Mr Maud contended that depriving him of his shareholding would be contrary to the interests of the general body of creditors, as those shares gave him the ability to deploy his position as shareholder in the Spanish insolvency process in that he could assist a third party (AGC) to successfully outbid Edgeworth in respect of the Santander Asset. His bankruptcy would remove him from that position, leading to the loss of that opportunity to the detriment of his creditors.
Mr Justice Snowden set out two instances in which the presentation of a bankruptcy petition may amount to an abuse of process:
- Where the petitioner does not really want to obtain the bankruptcy of the debtor at all, but the proceedings are intended to put pressure on the debtor to take some action which he would otherwise be unwilling to take.
- Where the petitioner does want to obtain the bankruptcy of the debtor, but is not acting in the interests of the class of creditors; or, where the success of the petition will operate to the disadvantage of the body of creditors.
Having found that “[i]t has never been in doubt that Edgeworth wishes to make Mr Maud bankrupt”, Mr Justice Snowden turned his consideration to (2); upon which he commented as follows:
a) “…it will be an abuse of process if, even though the petitioner wants a bankruptcy order to be made, recovering its debt through the bankruptcy process is no part of its purpose”; and
b) “…a petition will not be an abuse of process if, in addition to wishing to receive a dividend on his debt in the bankruptcy together with other creditors, the petitioner has a collateral purpose which is not shared with the other creditors, but which will not cause them any detriment if achieved”.
As regards (a), despite Edgeworth’s primary focus of the bankruptcy proceedings being to acquire control of the Santander Asset, Mr Justice Snowden was not satisfied that Edgeworth had no intention to recover the monies owed to it by Mr Maud through the bankruptcy process.
As regards (b), Mr Justice Snowden found “no credible evidence” that there was “any realistic prospect” of Mr Maud assisting AGC in a successful bid for the Santander Asset, nor “any real indication of what benefits that could have brought to his creditors”. Furthermore, at the time of the handing down of the Judgment, Sorlinda had been awarded control of the Santander Asset.
Ultimately, it was found that Edgeworth’s collateral purpose of using the bankruptcy proceedings to trigger the pre-emption provision of Ramblas’ Articles of Association was not likely to have caused any material detriment to the general body of creditors.
In conclusion, Mr Justice Snowden found that the Edgeworth Petition did not amount to an abuse of process and confirmed that had the LIA Petition been unsuccessful, he would have made a bankruptcy order on the Edgeworth Petition in any event.
Jodie Wildridge is a second six commercial pupil at Exchange Chambers who practices in the areas of commercial dispute resolution, insolvency and property and who appears regularly in the District Registries of the High Court and in the County Court on a wide range of matters.
 The LIA petition was stayed for around a year in June 2015, following Mr Maud’s successful out of time application to Rose J to set aside LIA’s statutory demand on the basis that it would have been unlawful for him to pay the debt due to the LIA by reason of EU sanctions (Maud v The Libyan Investment Authority (2015) EWHC 1625 (Ch)). This decision was reversed by the Court of Appeal in July 2016 (Libyan Investment Authority v Maud  EWCA Civ 788).
 The loans and rights were sold to Edgeworth and another party, Aabar Block S.A.R.L. The two parties subsequently had a falling out.
 Re Maud  EWHC 974 (Ch) at 78
 Re Maud  EWHC 974 (Ch) at 72
 Navarro Ventures S.A.R.L. is an entity which is beneficially owned by Mr Maud’s estranged wife, and the sole director of Navarro Ventures S.A.R.L. is one of the trustees of the Maud family trust. Navarro Ventures S.A.R.L. is also a voluntary creditor of Mr Maud (Re Maud  EWHC 974 (Ch) at 27).
 Re Maud  EWHC 974 (Ch) at 106
 Re Maud  EWHC 974 (Ch) at 112
 Re Maud  EWHC 974 (Ch) at 117
 Re Maud  EWHC 974 (Ch) at 120
 There was also an issue as to whether or not Edgeworth had standing, which was swiftly rejected by Mr Justice Snowden (Re Maud  EWHC 974 (Ch) at 133-136). Furthermore, there was also a preliminary issue as to whether or not Mr Maud was able to raise the allegation of abuse of process in this instance, as the same had been unsuccessfully raised by Mr Maud on two occasions previously (Maud v Aabar Block S.A.R.L. & Anor  EWHC 1626 (Ch)); Aabar Block S.A.R.L. & Anor v Maud  EWHC 1414 (Ch)). Mr Justice Snowden ruled that the circumstances did satisfy the threshold test for the reopening of a previously decided issue; fundamentally because there were inconsistencies in Edgeworth’s evidence (Re Maud  EWHC 974 (Ch) at 160).
 This was possible pursuant to section 176 of Spanish insolvency law.
 Re Maud  EWHC 974 (Ch) at 138
 Re Maud  EWHC 974 (Ch) at 139
 Re Maud  EWHC 974 (Ch) at 141
 Re Maud  EWHC 974 (Ch) at 171
 Re Maud  EWHC 974 (Ch) at 195
 Re Maud  EWHC 974 (Ch) at 198