Bankruptcy petition defects rectified by court

Published on
2 min read

The Debtor had guaranteed the debts of a company which the Petitioner had obtained a substantial arbitration award against. The parties signed a settlement agreement that limited the claim against the Debtor and obliged the Petitioner to continue pursuing the company for the debt, although it qualified that the full amount could be claimed from the Debtor if he failed to make any of the monthly instalments provided for.

The Debtor failed to make the payments. As such, the Petitioner served a statutory demand followed by a bankruptcy petition, it then withdrew that petition and was ordered to pay the Debtor’s costs, and finally it served a second bankruptcy petition in which it set-off the amount of the costs award against the judgment debt. 

Despite the Debtor’s objections on the grounds, the Court made a bankruptcy order and held that:  

  1. The Petitioner had complied with its obligations under the settlement agreement.
  2. It would “manifestly unjust” to require the Petitioner to pay the costs award when the Debtor continue to be in breach of the order to pay the underlying debt.
  3. The petition, which attempted to recover interest from the date of the statutory demand, could be cured of this defect as it caused no detriment to the Debtor.
  4. The Debtor had not satisfied any of the criteria to evidence that he had a reasonable prospect of paying the petition debt in full. 

Moorgate Industries UK Ltd v Pramod Mittal (2020)

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