Bankruptcy - Ulterior Motives

Author: Chris Millar

A debtor resisted a Petition against him upon the basis that the petitioner had an ulterior motive in seeking to make the debtor bankrupt, namely to obtain the debtor’s shares in a Spanish company.

He contended that the petitioner’s ulterior objective was to secure an advantage over the debtor’s other creditors. Nevertheless, a Bankruptcy Order was made. Subsequently the debtor appealed, and Snowden J found that there did appear to be irreparable prejudice to the debtor and his creditors as a whole, if a stay was not granted and that there was no prejudice or risk of injustice to the petitioning creditors from a few weeks delay.

On hearing the appeal, Snowden J held that where some creditors supported and others opposed the making of a Bankruptcy Order, this required the Court to evaluate the wishes of all the creditors and to attribute weight to the views of the individual creditors in deciding whether to make the Bankruptcy Order.

In that regard any ulterior motives or objectives of the petitioning creditors might be relevant. As it appeared to the Judge that the petitioning creditor did have a reasonable prospect of paying his creditors, albeit with some further delay, and as that would result in payment to the creditors as a whole, he allowed the appeal.

Chris Millar

Chris Millar

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