Mammen P Jacob v Heino Vockrodt (2007)


A claimant had not presented a bankruptcy petition maliciously where he had reasonable and probable cause due to a defendant's failure to repay a debt when he had made various promises to do so and despite the service of a statutory demand.


The defendant (V) in a debt claim, made the subject of bankruptcy petition proceedings by the claimant (J), counter-claimed on the basis that the petition had been brought maliciously. J had lent US$100,000 to V pursuant to a written loan agreement on the basis that V would invest the money on J's behalf and that they would share any profits. The agreement provided for interest payments to be made in addition to full repayment of the loan amount on demand. After a short period of time, J requested that the money be repaid to him but V failed to respond. J sent further requests stating that he would use all legal means necessary to retrieve the funds. V accepted that the debt was outstanding and twice agreed to make payment through his solicitors but failed to do so on the agreed dates. A statutory demand was served on V which he also failed to respond to. As part of J's attempts to obtain the money, and on legal advice from his solicitors, he presented a bankruptcy petition against V, which was subsequently terminated in V's favour. V submitted that J had presented the bankruptcy petition without reasonable or probable cause and that he did so at a time when he knew or reasonably ought to have known that the debt was the subject of a substantial dispute.


The correct approach in a situation where a bankruptcy petition failed and it was subsequently suggested that the presentation was malicious was that in Partizan Ltd v OJ Kilkenny & Co Ltd (1998) BCC 912, Partizan followed. A petition was an abuse of process only where the petitioner knew or believed that the debt was the subject of a substantial dispute. In the instant case it was clear that J could not have reasonably believed that there was a dispute in relation to the debt since V had agreed that the money was owed and had made promises to make repayment. In circumstances where V had ignored the statutory demand and failed to keep his promises, it was impossible to conclude that J knew the debt was substantially disputed. J had acted in accordance with the Insolvency Act 1986 and the Insolvency Rules 1986 and had acted reasonably in taking steps to present the petition. Further, although criticism could be made of J's legal representatives for their haste in advising that a petition be presented, they simply advised a common course of action. J was advised to pursue a debt that remained unpaid despite the service of a statutory demand, with the element of hope that if V was in a position to pay the debt, it could be paid before the bankruptcy hearing. There had been no malice in J's intentions since he had acted at the behest of his legal advisors and had been entitled to do so. On the evidence there was no absence of reasonable and probable cause in the presentation of the bankruptcy petition as the key element in V's counter-claim was missing.

Judgment for claimant