A Vexing Case, a Litigant in Person and his E-book

At Manolete Partners we are very familiar with dealing with opposing parties who have not instructed legal representatives i.e. litigants in person (“LiP”). While these cases come with their own issues, one such case proved to be particularly vexing and even featured Manolete Partners as the subject matter of an e-book written by the LiP!

Background
The defendant LiP was the sole director and shareholder of a company which, prior to its liquidation, had provided a ‘no-win no-fee’ service to members of the public helping them to obtain tax refunds. The liquidators had identified payments made to the defendant, purportedly as dividends in circumstances where the company did not have the funds to do so. The claims arising in relation to those payments were sold to Manolete Partners.

The claims
The features of the case itself were fairly unremarkable. A typical claim for unlawful dividends and corresponding breach of duty claim which required the usual considerations regarding the company’s ability to pay the dividends and its solvency to determine whether they could be ratified.

The last filed annual accounts at Companies House revealed the company was balance sheet insolvent with net liabilities of £8,500 so we were off to a good start. Although subsequent management accounts suggested the company had positive current net assets, the assets were overstated. They included intercompany balances owed by two linked companies, one of which was dissolved, the other was insolvent. Excluding those (now irrecoverable) debts, the company was balance sheet insolvent with net liabilities of c.£20,000. The accounts for the next period also recorded the irrecoverable intercompany balances as an asset as well as a substantial WIP pipeline which was not realistic nor a true reflection of the company’s debtor profile. Disregarding those assets, the company’s net liabilities were c.£300k. It was clear the company was insolvent at the relevant time on both cash flow and balance sheet bases.

Having carried out our usual asset intelligence, we identified the defendant personally held a portfolio of rental properties. However, it was unclear where the defendant resided personally. He proved to be very evasive and appeared to be moving between addresses resulting in correspondence repeatedly being returned marked ‘gone away’. We also identified he had a string of dissolved entities behind him. It later became apparent that he seemed to think he knew a thing or two about the legal system!

Challenges
The case was riddled with challenges right from the outset. We initially had no engagement with the defendant. Our letters before action were either returned marked ‘addressee gone away’ or went ignored. There was therefore no opportunity to settle matters pre-action and left us with no choice but to commence legal proceedings.

When proceedings were issued, we were immediately faced with an application by the defendant who sought to challenge the Courts’ jurisdiction on the grounds that we had not served him at his usual or last known address. This was despite the fact that we had served him at every address we were aware of! After receipt of a rather confusing defence in which the defendant made some admissions, we were thankfully able to dispose of the challenge to jurisdiction and move forward.

Our offer of ADR was initially refused and when a ‘without prejudice’ meeting did finally take place, it proved ineffective. The defendant declined our Part 36 offer of £90,000 and countered with one that was not acceptable to us.

In the meantime, we were faced with a Data Subject Request made by the defendant for all personal data held by Manolete Partners and our solicitors. Unhappy with the response he received, he persisted with his demands to know what personal information we held and when and how he had consented to it being given to us. He eventually gave up.

It then came to our attention the defendant had published an e-book on Amazon, in which he sought to tell his journey (in three instalments). Unfortunately, there was nothing of any utility revealed in part one, or part two for that matter and part three never materialised.

Our usual monitoring of the defendant’s property revealed that throughout the process he was taking steps to dispose of properties from his portfolio. We considered applying for injunctive relief to prevent him from disposing of any more properties but that was ultimately not an option. We upped our monitoring, however, assets continued to be depleted as the matter rolled onwards to trial.

After exchanging evidence, we obtained expert evidence that resulted in us increasing our claim in respect of additional payments identified and seeking disclosure of the director’s tax returns. Despite making the applications in January in anticipation of a June trial, they were not heard until the end of May. Thankfully, the applications were successful, prompting the defendant to make an improved offer, but not without a gripe. So close to trial and feeling confident, his offer was rejected.

Outcome
At trial, the defendant cross-examined the liquidator and expert witness and the defendant was cross-examined by our lawyer. The judge sought to narrow the issues for consideration, urging us to drop the breach of duty claim but we stood firm. The judge agreed the accounts were overstated and gave judgment in our favour on the unlawful dividend and breach of duty claim, ordering him to pay £153,490 plus interest and costs.

The defendant was the controlling mind who personally benefitted from payments, so no relief was granted under section 1157 of the Companies Act 2006. As the judgment exceeded our Part 36 offer the interest rate applied was enhanced and an additional 10% added for beating the offer which in total came to c. £95,000. Notwithstanding the difficulties, we remained confident in our claims and steadfast in pursuing them, resulting in a positive outcome for us and the insolvent estate.

Thankfully, we don’t encounter such challenges in every case but when we do, we roll with the punches and tackle each and every obstacle head on to secure the best possible outcome.

Alison Kirby
Associate Director for the East

Q&A

Jerusha Samy
Financial Analyst

What is your legal background?
I graduated in Law with Business at the University of Brighton in 2018. Before joining Manolete, I worked as a legal assistant at BTMK Solicitors in their conveyancing department. I am currently studying for the Solicitors Qualifying Examination (SQE) with the support of Manolete.

How long have you been at Manolete?
I joined Manolete in October 2019 as a Financial Analyst in London. I work in the net worth team providing net worth reports for the Associate Directors. My role also involves administrative work and submitting applications to Land Registry. Being the youngest member in the company, I occasionally get asked to help sort out any IT problems!

What have been your main impressions?
Manolete has created a strong, supportive team and everyone is a team player. Being the newest recruit at the time, it was daunting joining a new firm with limited knowledge of the industry, but everyone made me feel welcome and I bonded with everyone very quickly after joining. I am also impressed with the calibre and the continued growth of the company.

What are the other highlights?
I had the chance to sit in on a trial which was a great learning experience and offered me a fresh perspective of legal work beyond my usual working role. Manolete also holds quarterly legal meetings which are a great opportunity to catch up with the team and socialise in the evening. Since Covid, I haven’t had to travel into the London office as often, so it is good fun to see everyone at these events when the opportunity arises. Some of these events have included a tour of the House of Lords and Polo in the Park to name a few.

What do you do outside of work?
I love to travel and visit new places, experiencing and immersing myself in different cultures and cuisines. I could spend hours taking in all the architecture and learning about the history of a city. I also love eating out and dining in new restaurants.

Stephen Baister writes
What do you call the judge?

Judicial titles in England and Wales have long given rise to absurdities. When Dame Elizabeth Butler-Sloss was appointed to the Court of Appeal in 1988 she was known officially as Lord Justice Butler-Sloss: no woman had been appointed to the Court of Appeal before, so there was only the male title. A Practice Direction provided for her to be known as Lady Justice Butler-Sloss, but that only became official when what is now the Senior Courts Act 1981 was amended.

One might have thought that would have put an end to women judges bearing male titles, but not a bit of it. When Biddy Macfarlane was appointed as master of the Court of Protection in 1982 and Barbara Fontaine was appointed as a master of, what was then, the Queen’s Bench Division in 2003 (and later as chief QB master) they continued to be called “Master”. In the meantime other women masters have been appointed to positions in both the King’s Bench Division, as it now is, and the Chancery Division.

Deputy circuit judges continue to be called recorders, although they do not record anything. The Recorder of London continues to sit in the Old Bailey, as does the Common Serjeant of London. There used to be serjeants-at-law who were a kind of senior barrister and were distinguished by wearing a coif, but that office ceased to exist in the nineteenth century.

Justices of the Supreme Court become lords or ladies. But Court of Appeal and High Court judges are called “my lord” in court even though they are not lords.
There has been some modernisation: it is now some time since County Court registrars were transformed into district judges; more recently the London insolvency judges, who used to be called bankruptcy registrars, have become insolvency and companies court judges. And a master is now called “judge” in court, in spite of the fact that the underlying title survives in all its absurdity.

If you want to know more the Courts & Tribunals website publishes guidance on how judges of various types should be addressed (Google “What do I call a judge? The different ways to address members of the judiciary” if you don’t believe me).

It is not a priority, but it really is time this was sorted out once and for all. I would go for simplicity. (There is enough about the legal system already that is complicated enough.) Why not abolish the present outmoded and misleading titles and forms of address and call all judges simply “judge”? The court in which they sit could be added where it is necessary to note where a particular judge is in the hierarchy of courts or a distinction needs to be made for some reason. That would better suit a modern profession working in the modern world.

Case study
The Manolete Model in Action

Events
R3 Annual Conference 1-3 May:
Forging global pathways: UK insolvency and restructuring in a post-Brexit world

R3’s 2024 Annual Conference will take place at the Fairmont Hotel located in St Andrews. This year’s conference theme ‘Forging global pathways: UK insolvency and restructuring in a post-Brexit world’ will explore global economic trends and the role and shape of the eco-system for insolvency and restructuring in an inter-connected world.

The programme will also explore the potential pathways these create for firms and professionals at every stage of their career. The keynote speaker will be The Rt. Hon. Lord David Triesman.

Manolete is delighted to be Key Sponsor Partner for this important event. Rachel Grant, Manolete Associate Director for Scotland will speak at the conference on "A world without insolvency litigation funding – where would we be?"

Date and time
1 May 2024
0900-1800

Location
The Fairmont Hotel
St. Andrews
KY16 8PN

Find out more