Edgeworth Capital (Luxembourg) S.A.R.L. v Glenn Maud
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 08 June 2020 |
| Neutral Citation | [2020] EWHC 1469 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BR-2014-002375 and BR-2015-001180 |
[2020] EWHC 1469 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building
Fetter Lane, London,
EC4A 1NL
Mr Justice Snowden
Case No: BR-2014-002375 and BR-2015-001180
In the Matter of Glenn Maud
And in the Matter of the Insolvency Act 1986
Jonathan Nash QC (instructed by Farrer & Co LLP) for Edgeworth Capital (Luxembourg) S.A.R.L.
Stephen Robins (instructed by Hogan Lovells International LLP) for The Libyan Investment Authority
Joseph Wigley (instructed by Bryan Cave Leighton Paisner LLP) for Mr. Maud
Andrew Rose (instructed by Joseph Hage Aaronson LLP) for Navarro Ventures S.A.R.L.
Hearing date: 20 May 2020
Approved Judgment
On 24 April 2020 I handed down a judgment on two bankruptcy petitions against Mr. Glenn Maud (“Mr. Maud”): [2020] EWHC 974 (Ch) (the “Judgment”). The petitions were brought separately by the Libyan Investment Authority (the “LIA”) and by Edgeworth Capital (Luxembourg) SARL (“Edgeworth”). The background to the two petitions is lengthy and complex. It was set out in the Judgment and I do not intend to repeat it here in any detail. I shall, however, give a brief summary and shall use the same abbreviations herein as in the Judgment.
The Judgment
In my Judgment I noted that the LIA's petition was first in time, was presented as long ago as 2014, was in relation to an undisputed debt, and there was no suggestion that it has ever been pursued for an improper purpose. As such, I found that as against Mr. Maud, the LIA was entitled to a bankruptcy order ex debito justitiae.
As a bankruptcy order is a class remedy, I then considered the views of the creditors who appeared to support and oppose the making of an order. I determined that the views of the LIA and Edgeworth who wished to see a bankruptcy order made were rational, and that the views of Navarro, which had wished to give Mr. Maud more time to “monetise his position of influence” as a shareholder of Ramblas no longer carried any weight following sale of the Santander Asset to Sorlinda and distribution of the proceeds by the Insolvency Administrator.
I therefore decided to exercise my discretion to make a bankruptcy order on the LIA Petition in accordance with the wishes of the majority in number and value of the creditors who had appeared. I also rejected Mr. Maud's argument that it would be pointless to make him bankrupt because he claimed to have no material assets apart from his shares in Ramblas.
Although I did not intend to make an order on Edgeworth's Petition, which was later in time than that brought by the LIA, I had heard evidence and full argument on it. I therefore also dealt with Mr. Maud's and Navarro's main argument on that petition, which was that at all times Edgeworth had been seeking a bankruptcy order for an improper collateral purpose and that the petition should be struck out as an abuse of process.
Mr. Maud contended that at all times Edgeworth has not been interested in being repaid the debt that he owes it through the bankruptcy process, but has been seeking a bankruptcy order to trigger pre-emption provisions in Ramblas' articles. The relevant article in that respect is article 12.1(b) which provides that if Mr. Maud loses the right to dispose of his property (which it is common ground would be the effect of the vesting of his property in a trustee in bankruptcy) his shares must be offered to the other shareholder(s).
The procedure that will then be followed to determine the price is set out in article 11.6 which provides,
“The price of the offered shares shall – unless all parties agree otherwise in joint consultation – be determined by one or more independent experts to be appointed by the offeror and the co-shareholders in joint consultation. If the offeror and the co-shareholders are unable to agree on this within fifteen days … the willing party shall request the local sub-district court at which the company has its corporate seat to appoint three independent experts to determine the price…”
Article 12.6 then provides that in a case under article 12.1(b) the offer cannot be withdrawn and the offeror may retain only the shares with respect to which the offer is not taken up. Article 11.9 also provides that the offeror may freely transfer the offered shares within three months of being notified that the offer has not been taken up, or has not been taken up in full, provided that the shares are not transferred for a lower price than the price determined in accordance with the articles.
Mr. Maud's argument was that the operation of the articles requiring his shares to be offered to the other shareholder of Ramblas (Mr. Quinlan) would be to the detriment of his creditors, either because it would enable his shares to be acquired by Edgeworth for less than their true value and/or because it would prevent him from “monetising” his position as a shareholder. The former contention depended in part upon an assertion that Edgeworth has various rights against Mr. Quinlan under the Deed of Sale and Adherence which would enable Edgeworth to require Mr. Quinlan to exercise the right of pre-emption and then acquire the Ramblas shares. The second contention was based upon assertions by Mr. Maud to the effect that he had the opportunity to earn money from his position as a shareholder. That contention has been made on various bases from time to time, first on the basis that he might participate in a rival bid for the Santander Asset in the Spanish insolvency, and more recently, after Sorlinda was declared the winner of the auction to acquire the Santander Asset, on the basis that he might participate in an attempt to forestall completion of that sale by taking the Marme Group out of insolvency by paying or reaching an agreement with all of its creditors pursuant to Section 176 of the Spanish insolvency law.
In my Judgment I rejected these arguments, finding (i) as a fact that at all times Edgeworth's purposes included recovering the debts which Mr. Maud owes it through the bankruptcy process (the “payment purpose”) and (ii) that although Edgeworth admitted that one of its purposes in seeking a bankruptcy order had been to trigger the provisions in the articles of Ramblas so as to force Mr. Maud to offer his shares for sale, there was no credible evidence that this would cause any prejudice to Mr. Maud's creditors as a class, and hence it did not constitute an abuse of the bankruptcy process.
On these points, I noted that when Mr. Maud applied to set aside the statutory demand against him at the outset on the basis of abuse of process, Rose J rejected that challenge, observing, at [2015] EWHC 1625 (Ch) at [30],
“…it has not been suggested that the bankruptcy would damage the prospects of Mr Maud's other creditors. There is no reason to suppose Mr. Maud's Ramblas shares will be sold under the preemption provisions of the Ramblas articles of association at less than their proper price. Those monies will then be available for the general body of Mr. Maud's creditors.”
Permission to appeal that judgment was subsequently refused by Gloster LJ.
I also observed that none of Mr. Maud's various plans to “monetise his position” had been supported at the relevant times by any substantial evidence of any rights to benefit from arrangements with a bidder for the Santander Asset or a potential participant in a Section 176 offer, and none of the various plans had in fact come to anything. Most recently, no bid involving Mr. Maud materialised under Section 176. Instead, the sale of the Santander Asset to Sorlinda pursuant to the court-approved auction was completed last year, and the proportion of the proceeds of sale allocated to Ramblas for payment of its creditors (in part) was distributed by the Insolvency Administrator in January this year.
In my Judgment I therefore refused to strike out or dismiss the Edgeworth Petition as an abuse of process, and indicated that if I had not been minded to make a bankruptcy order on the LIA petition, I would have done so on Edgeworth's Petition.
The Interest Claim
When I handed down my Judgment indicating my intention to make a bankruptcy order on the LIA Petition, I expressly did so subject to any arguments as to a stay pending appeal, and I adjourned all consequential issues to a further hearing which was fixed for 20 May 2020 (the “Consequentials Hearing”).
Prior to that hearing, Mr. Maud prepared and circulated draft grounds of appeal and filed further evidence, including evidence relating to the Interest Claim. Edgeworth responded to that evidence.
The Interest Claim issue had first been raised by Mr. Maud in mid-2019, after I had reserved judgment on the petitions. The Interest Claim has been brought by Mr. Maud and Mr. Quinlan in Spain and is based upon two decisions of the Spanish Supreme Court in unrelated litigation as to the level of interest that can be claimed by secured creditors in a liquidation. Those decisions are said to have the result that there might be lower claims for interest in the Marme liquidation than had been admitted by the Insolvency Administrator in respect of various creditors. Since the bid from Sorlinda had been based on the premise that it would pay all of the admitted debts of Marme and Delma, Mr. Maud and Mr. Quinlan allege that this saving of interest will result in surplus monies from the purchase price which could be retained...
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