Case Studies

BACKGROUND
The Company entered into creditors voluntary liquidation and liquidators were appointed in August 2022. Following their appointment, the Liquidators identified a number of unexplained payments made by the Company to the director totalling approximately £38,000.

CLAIMS
The payments to the director gave rise to claims against the director on the basis that they created an overdrawn loan account, were transactions at an undervalue or were made in breach of the director's duties/in breach of trust. All claims were assigned to Manolete Partners in October 2023. Using AI bank statement analysis software, further payments of approximately £193,000 made to a connected entity were identified.

CHALLENGES

• Detailed analysis was required as certain invoices in the Company's books and records appeared to explain the inter-company payments.
• The director was under the misapprehension that he only needed to deal with a fairly modest overdrawn director's loan account.

OUTCOME
With the benefit of the detailed bank statement analysis, it was possible to advance claims against the director and the connected entity on multiple bases. Within five months of purchasing the claims, settlement terms were agreed with all parties for £150,000 payable in full within two months. This produced a far larger recovery than the liquidation estate previously expected.

BACKGROUND
Debtor declared bankrupt on his own petition in April 2017. He had utilised tax avoidance schemes. Total creditors' claims at the date of bankruptcy in excess of £9,000,000.

CLAIMS
The Trustee in Bankruptcy identified claims of approximately £1,000,000 arising from the movement of assets undertaken as part of the tax avoidance schemes. Manolete agreed to fund the Trustee in Bankruptcy in pursuing those claims under the terms of a funding agreement entered into in November 2021. After robust pre-action correspondence did not prompt a resolution, an insolvency act application was issued in March 2023.

CHALLENGES

• The limitation for issuing an application was rapidly approaching.
• Debtor filed application to strike out the claim on the basis of limitation and that the claim was vexatious.
• Although the debtor engaged in ADR, it proved difficult to agree on the choice of mediator and when the mediation did take place in January 2024, the debtor's solicitors were not focused on facilitating a resolution.

OUTCOME
Despite the difficult conditions at the mediation, the parties ultimately agreed a settlement. Under the terms of the settlement, the Respondent agreed to pay £600,000 over three months which resulted in a return to the insolvent estate of more than £271,000.

BACKGROUND
In mid-2023, Manolete was asked by a liquidator to consider potential claims relating to a Company which had entered liquidation with very significant tax liabilities. The director had deleted all of the Company’s books and records prior to liquidation. Due to the paucity of information, it was initially unclear what claims, if any, existed.

Our in-house investigations, including a detailed review of the transactions in the Company’s bank statements, company invoices, VAT returns, and information on the company’s website, revealed there had been a significant fraud which had enabled the Defendants to unlawfully extract circa £12m from the Company.

CLAIMS
The claims were against the Company’s former de jure director, a de facto director and certain third parties, all of whom had received significant monies from the Company.

Due to the nature of the fraud, without notice freezing and proprietary injunctions were sought and obtained against two of the Defendants, resulting in the freezing of their assets. The injunctions were maintained at the return date. One of the Defendants subsequently applied to have the injunction set aside. We successfully resisted this and were awarded our costs.

Following the injunctions, we issued hybrid claims (i.e. both Companies Act 2006/Part 7 claims and Insolvency Act 1986 claims) against the Defendants for a total value of circa £12m. The claims included: fraudulent trading, breach of duty, dishonest assistance, knowing receipt, transactions defrauding creditors and transactions at an undervalue.

CHALLENGES

• Due to the deletion of the Company’s books and records, we had to undertake a detailed investigation based on the Company’s bank statements and other available information (such as historic versions of the Company’s website) in order to piece together the activities of the Company and the extent of the fraud.

• As a result of the fraudulent nature of the claims, we had to urgently apply for and issue freezing injunctions against the protagonists to prevent the dissipation of their assets and ensure recoveries for creditors.

• In fraud matters, where the defendants have been at pains to hide the fraud and destroy any evidence, leaving the factual position unclear, injunctions always require a ‘leap of faith’ despite the inevitable unknowns. The confidence in our investigation work enabled us to take that leap.

• The existence of potential competing creditors meant the claim had to be progressed very quickly in order to maximise recoveries for the estate.

OUTCOME
The claims were settled against three of the Defendants for a combined total of £3.1m within circa six months of purchasing the claims – and these amounts have been paid in full. The case continues against the remaining defendant and a judgment is expected to be obtained against him for circa £6m.