Bankruptcy – payments made by company purportedly on bankrupt’s behalf – validation order under s. 42 sought by bankrupt – third party payees not party to application and bankrupt had no financial interest in outcome – application refused
Between the presentation of a bankruptcy petition against B on 27 May 2009 and the making of a bankruptcy order on 31 August 2009, certain payments were made by C, a company of which B was a director, directly to third parties. B claimed that in February 2009, she had loaned $5 million to C for it to pay certain expenses on her behalf as her agent to third parties, which reduced pro tanto its indebtedness to her by set-off. B sought to validate the payments under s. 42 of the Bankruptcy Ordinance (Cap. 6), arguing that there was no relevant disposition in favour of C to which s. 42 applied. The application was opposed by B’s trustees in bankruptcy, Ts.
Held, dismissing the application, that:
- The application was not properly constituted. Neither C nor the third party payees were made party to the application. This was no mere technical objection. The payees might contend, as Ts did, that they had been paid by a separate person (ie C, who was not acting as B’s agent, the payments they received were not caught by s. 42 of the Ordinance and that they were not at risk of having to repay any sum to Ts).
- Conversely, B had no financial interest in the outcome of the application and thus no standing to seek ratification of the payments made. B appeared to be seeking some sort of reputational redress and this was not a proper basis for the application.