The court adjourned a bankruptcy hearing on the basis that a Spanish court sanctioned liquidation plan for a group of companies in which the debtor had an interest might release value for creditors.
The Debtor applied to have the petition for his bankruptcy adjourned. He argued that a Spanish court had sanctioned a liquidation plan for a group of companies he held an interest in which was likely to have the effect of releasing enough value to satisfy all of his creditors’ claims. The issues before the court were i) whether the Petitioners harbored an ulterior motive in petitioning for the Debtor’s bankruptcy; and ii) whether granting an immediate bankruptcy order would benefit the Debtor’s unsecured creditors.
The facts led the court to conclude that the Petitioners had an ulterior motive in presenting the petition. The burden of proof was therefore on the Petitioners to demonstrate on the balance of probabilities that an immediate order for bankruptcy would benefit creditors. The Petitioners stood to benefit overwhelmingly from the bankruptcy order at the expense of the potential recovery for the unsecured creditors generally. If the hearing of the bankruptcy petition was adjourned and the Spanish proceeding allowed to come to fruition the realisations would benefit all creditors. The court decided in favour of adjournment.
The principal of bankruptcy being a class remedy will ultimately guide the court in its decision as to whether to proceed with a petition hearing.