Get your drafting right

The court supports the making of a bankruptcy order based on a debt arising out of a settlement agreement, notwithstanding the drafting not making it clear that the debt was a liquidated amount.

The ICC made a bankruptcy order and refused to dismiss a bankruptcy petition based on a debt arising out of a settlement agreement. The debtor appealed that decision. The High Court dismissed that appeal.

The debt arose from a settlement agreement that linked payment of the debt to transfer of shares and other obligations. The debtor therefore argued that, as the obligation to pay was dependent on performance of other obligations, the debt was not a liquidated debt on which a bankruptcy order could be made.

The Judge disagreed on his interpretation of the settlement agreement, but this decision highlights the need to make it clear that a debt is independent of any other obligation, and therefore liquidated, if the creditor wants to obtain a bankruptcy order in respect of it.

Mulville v Sandelson [2019] EWHC 3287 (Ch)

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