Respondents’ Application for a Stay Based on Challenge to IPs’ Appointment Dismissed, Manolete Partners Plc v Jones & Anor (Re Traxx (Aggregates) Limited) [2023] EWHC 236 (Ch)

In a judgment handed down on 14 February 2023, ICC Judge Barber refused an application for a stay of Manolete’s claim against the director of Traxx (Aggregates) Limited (“the Company”) (“the First Respondent”) and his wife (together, “the Respondents”) in respect of certain payments made by the Company to the Respondents. The stay had been sought pending the outcome of a separate application brought by the First Respondent and the Company against the Company’s administrators (“the Administrators”) challenging the validity of their appointment ("Validity Application").

Manolete as assignee of the claims of the Company and the Administrators issued an insolvency application and a Part 7 claim against the Respondents on 1 September 2022 and 2 September 2022, respectively. By a consent order dated 30 September 2022, those proceedings were consolidated (“the Proceedings”) and the Respondents agreed to file and serve their points of defence by 18 November 2022.

On 10 October 2022 (being the day before the sixth anniversary of the Company’s administration), the Validity Application was issued and – without informing Manolete of the same – the Respondents entered into a second consent order, dated 1 November 2022, in which Manolete agreed to extend the deadline for the Respondents’ points of defence until 16 December 2022. On 15 December 2022, the Respondents applied for a stay of the Proceedings pending determination of the Validity Application.

In denying the stay, the Judge noted that - despite first taking issue with the Administrators’ appointment in 2016 - the First Respondent did nothing to bring that issue to court until October 2022, after the Proceedings had been issued. Indeed, Counsel for the Respondents admitted Manolete’s commencement of the Proceedings was the “main reason” why the Validity Application had been issued, the Respondents having allowed the administration to be extended five times without issuing any formal challenge.

Aside from the Court appearing to take a dim view of the Respondents’ seemingly strategic attempt to delay the progress of the Proceedings, the Judge explained why the Respondents’ costs of preparing their points of defence would not be wasted in the event that the Validity Application succeeds (as submitted on behalf of the Respondents):

• Even if the Validity Application succeeded, it would be open to the Court to grant a retrospective administration order.
• If the Validity Application succeeded and no retrospective administration order were granted, it would be wrong to proceed on the assumption that all claims pursued by Manolete against the Respondents would simply disappear because: if the Company is insolvent when the Validity Application is determined, the Company may be wound up or a fresh prospective administration order may be granted; and even if the Company is not placed into another formal insolvency process and ‘office holder’ claims fall away, the ‘company’ claims would still survive and remain with the Company. In such a situation, it would be open to the Company to pursue such claims.
• It follows that, even in the Respondents’ ‘best case scenario’ (i.e. the Validity Application succeeds and no retrospective administration order is granted), it cannot be said the work done setting out their defence to the Proceedings will inevitably have been “entirely wasted”, as their Counsel put it. Producing their defence and so setting out their position would also enhance the prospects of the Proceedings being successfully resolved via ADR.

The Judge also noted that Manolete is a “well-resourced concern, plainly capable of meeting any costs order in favour of the Respondents, should the need arise”.

This judgment makes it patently clear that defendants/respondents facing claims by Manolete would be better advised to engage properly with the claims against them rather than contriving to delay matters.

Henry Glen
Associate Director
London

Q&A

Charlotte May
Associate Director for the South West and Wales

What is your legal background?
Growing up in the days of Ally McBeal, I aspired to an idealistic legal career from a young age. The outfits and social life were never quite as glamourous, but the work more than made up for it. I trained as a banking lawyer but, as the credit crash hit, I qualified as a banking litigator with a special interest in security enforcement and title issues. This, in turn, evolved into property litigation at Burges Salmon where I advised on all aspects of asset recovery and enforcement for landlords, lenders, LPA Receivers and office holders.

How long have you been at Manolete?
It was a stormy September evening in 2018 whilst standing soaked-through on a site visit in Aberystwyth when I decided I wanted to move from private practice! I joined Manolete a few months later in December 2018 as the Associate Director for the South West and Wales. This was an exciting time as I joined the week Manolete listed on AIM and getting to open the London Stock Exchange was quite an experience. We have only continued to grow from there. In 2021, I was appointed R3 Chair for the South West and Wales.

What have been your main impressions?
Working at Manolete has the rare balance of technical skill mixed with commercial aptitude. We can quickly see where a case is headed, which ones are likely to be difficult and finding ways to make them move forward. It makes a real difference to see a case complete in a matter of months rather than years. There are difficult cases that can be finely balanced and unusual cases; it is never predictable but it is very satisfying. The collective experience of my colleagues is immense and we share a lot of legal knowhow and ideas. Now that the lockdowns have ended, there is no substitute for getting out to meet people face-to-face. My role has brought me into contact with some amazing IPs and solicitors from large firms to sole practitioners.

What are the other highlights?
Whilst we resolve most cases without the need for trial, the rapidly growing number of claims means more trials and judgments, many of which involve attempts by respondents to avoid answering claims. It is particularly gratifying to see many of our cases reported which are helpful not only for Manolete but also for office holders in general.

What do you do outside of work?
I love weekend trips, particularly if it involves rugby, history or Eurovision!

Stephen Baister writes
Good and Bad Witnesses (2)

In the Christmas newsletter I identified some of the factors a judge took into account in deciding which evidence to accept from the witnesses in a trial where the oral evidence was important because of the lack of documentary evidence. Let me take up the subject again but looking at it from a different angle.

Memory is imperfect. The courts recognise that obvious fact. A short passage from a case called Gestmin SGPS S.A. v Credit Suisse (UK) Limited, Credit Suisse Securities (Europe) Limited is often cited to note the fallibility of and bias in memory of litigants and witnesses:

“[T]he best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

Nietzsche examined the problem in terms of a conflict between memory and pride in this pithy apothegm: “‘I did this,’ says my memory, ‘I cannot have done this,’ says my pride, and remains inexorable. In the end memory yields.”

It is that yielding of the memory to pride (and other factors) that makes witness evidence so imperfect. The job of the judge is objectively to assess the documentary, written and oral evidence and to construct out of it, as best he or she can, to the relevant standard of proof, a working version of the truth that will best serve that elusive thing – justice. It is a job that the judge most often will perform well, but it is inevitable that on occasions things do not go so well: it is a task that, by its nature, invites imperfection; and it rarely susceptible of objective testing.

Yielding witness memory is just one of the many risks attendant on any litigation and one of the many reasons why, as Megarry J once said, “[T]he path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.” (John v Rees [1970] Ch 345).

It’s what we call litigation risk.

New Joiner
Welcome to our New Colleague

Manolete Partners Plc announced on 6 February, Lord Theodore Agnew had joined the Company as an expert counter fraud adviser. He is supporting Manolete in further developing its practice in assisting UK financial institutions to recover monies for the taxpayer that were unlawfully misappropriated under the UK Government’s Bounce Back Loan Scheme.

Steven Cooklin, CEO of Manolete commented: “We are delighted to have one of the country’s leading counter-fraud experts join our team as we progress our efforts to support the Government in the important area of Bounce Back Loan recoveries, specifically where Directors of UK companies have misappropriated those monies from their companies."

SOCIAL MEDIA VIDEO
A rapid assessment

Manolete has developed a series of social media videos, with our PR partners Instinctif. The videos highlight the strength of our lawyers network, the unique Manolete model and the benefits to creditors in insolvent estates if IPs choose Manolete litigation finance.

Watch the video here.

Events
Main Sponsor to R3's Southern Forum

The R3 Southern Forum 2023, brings together insolvency, restructuring and turnaround professionals from the South & Thames Valley, South West & Wales and London & South East regions. Manolete is delighted to be a main sponsor for the event.

The theme of the forum is ‘Looking to the Future’ and will focus on the challenges that currently face the profession.

The keynote speaker is Jeremy Mindell. The gala dinner will be hosted on Thursday 23 March.

Date and time
23-4 March 2023

Location
De Vere Wokefield Estate,
Goodboy's Lane,
Reading
RG7 3AE

Find out more