Costs where two competing petitions

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Two bankruptcy petitions had been presented against Mr Maud by two creditors (“L” and “E”). Each creditor had supported the other’s petition. It was highly unusual for there to be two bankruptcy petitions pursued simultaneously. A bankruptcy petition is a class remedy, and the legislation, rules and practice assume that there should only be one petition against a debtor at any one time. E had continued to pursue its second petition at times when L's entitlement and ability to pursue its earlier petition was in doubt.

As it transpired, the court made a bankruptcy order on L's petition, which had been presented first. No order was made on E's petition, although the court would have made an order on E’s petition had it been necessary to do so. The costs of E’s petition, and the ranking of those costs in the bankruptcy, fell to be decided.

It was not disputed that L and E were entitled to their costs relating to L’s petition to be paid as an expense of the bankruptcy, thereby ranking ahead of other unsecured debts, pursuant to IR 10.149(i). However, Snowden J held that IR 10.149(i) allowed only for the costs which related to the petition on which the bankruptcy order was made to be given priority. There was no reason to read the rules more widely to enable the court to give priority to costs in relation to a second petition, on which no order had been made.

The costs associated with E’s petition did not therefore qualify for priority payment over the claims of the ordinary class of unsecured creditors in M's bankruptcy, and should rank as unsecured claims only.

In The Matter Of Glenn Maud Sub Nom (1) Edgeworth Capital (Luxembourg) Sarl (2) Libyan Investment Authority V Glenn Maud (2020) [2020] Ewhc 1469 (Ch)

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