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Sunday Times reports on Cobham case

 

Manolete cobham header

Two executives of the FTSE 250 air-to-air refuelling specialist Cobham are being sued for £2.3m over the closure of one of its subsidiaries, writes Oliver Shah.

Christopher Jewel, who has since moved to another company, TT electronics, and Stephen Beeching, who is still at Cobham, are being pursued by a litigation fund that bought the right to sue them from the liquidator of the subsidiary after it collapsed.

News of the High Court battle comes after a period of intense turbulence for Cobham, which is not a party to the action. The aerospace and defence group moved to oust its finance director, chief executive and chairman this year and made a trio of profit warnings. Cobham did not comment on the legal action.

MMI research was a subsidiary of Cobham that produced devices used by police and security services to detect mobile phone numbers and monitor the movements of suspected wrongdoers. Manolete Partners, which is bringing the claim, alleges that Jewell and Beeching breached their duties as directors to MMI and its creditors by moving MMI’s assets and £2.3m of cash, to another part of Cobham in March 2012, before MMI went into administration.

According to Manolete, the “unlawful” movement of the cash left MMI “as an empty shell and so unable to pay its debts”. These included money owed to a rival surveillance tech company, CellXion, over a patent dispute and more than £1m owed to HM Revenue & Customs, Manolete claims. Jewell, 52 and Beeching, 47, could not be reached for comment. However they are understood to have hired lawyers to defend themselves against the allegations.

*Photograph depicts an RAF Voyager tanker refuels Tornados with equipment made by Cobham

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Financial Times reports on Cobham case

 

Cobham directors accused of unlawfully transferring cash

Claim by insolvency litigator alleges move left defence group’s subsidiary unable to pay creditors

cobham ft pic
Cobham is known for its mid-air refuelling and radar technologies © Alamy

 

by: Peggy Hollinger, Industry Editor
Millions of pounds in cash was unlawfully transferred from one subsidiary of Cobham to another, leaving the defence equipment company’s mobile technology unit unable to pay creditors, it is alleged.

Two former directors of MMI Research, a subsidiary of Cobham, have been accused of breaching their fiduciary duties by paying £2.3m in dividends to another Cobham company, leaving it little more than an empty shell.

The claim, brought by insolvency litigator Manolete Partners, alleges that this was done despite the fact that MMI faced a court order to pay costs after losing a legal battle over patent infringement, and unrelated claims from HMRC for more than £1m.

Manolete, which says it is one of the UK’s largest insolvency litigators, acquired the claim from a liquidator at Begbies Traynor in March after a two-year pursuit by creditors to reclaim assets and costs of £1.7m.

The Manolete claim, filed with the High Court last month, alleges that the directors “did not reserve any funds for the liabilities owed to creditors … although they knew or ought to have known that MMI was liable to those creditors for litigation costs and outstanding tax”.

The events are alleged to have taken place between 2012 and 2013, when Cobham, like many defence companies, was under pressure from falling military spending in the US. The group has warned on profits three times in the past year and has changed its chief executive. Last week its chairman, John Devaney, stepped down.

MMI’s alleged liabilities stemmed from a long legal battle with another mobile monitoring company, Cellxion, which began two years before it was acquired by Cobham and when it was owned by property entrepreneur Mark Slatter.

MMI twice won its case for infringement of a patent on technology that identifies and intercepts mobile phones, but finally lost to Cellxion’s appeal in 2012.

According to the filing by Manolete, emails were then sent by MMI’s lawyer to directors Stephen Beeching and Christopher Jewell, as well as Cobham’s then vice-president for legal and compliance issues, Mark Thomas, stating that the costs remained to be decided.

Cobham executives were also allegedly advised that they should defer a long-planned transfer of MMI’s assets to a sister company, pending the decision. Nevertheless, in March 2012 assets were transferred and a dividend of £2.3m was paid by MMI to Lockman, another Cobham subsidiary, before the court had fully quantified costs, it is alleged.

MMI, now devoid of assets, was then sold to its previous owner Mr Slatter. Manolete claims that MMI’s parent had made a proposal to pay all liabilities before transferring the company to Mr Slatter. Cobham was also in dispute with the entrepreneur over issues related to its original acquisition of MMI and recovery of costs associated with the Cellxion litigation, the claim alleges. When the final £434,432 costs ordered by the court were not forthcoming, Cellxion petitioned to wind up MMI and a liquidator was appointed.

Manolete is now seeking the restoration of £2.3m plus interest from the directors.

Cobham declined to comment. Neither Mr Beeching nor Mr Jewell, who has since left the company, could be reached for comment. Nor could Mr Slatter be reached for comment. No defence has yet been filed.

November 2016 – 5 new cases in 5 weeks

On 30th September 2016, we announced that we had signed our 150th insolvency litigation case. Five weeks later – we are already at 155 cases, with five new cases signed in the last five weeks.

109 of those cases have been completed in a record average time of just over 8 months per case (compared to IMF Bentham’s published average case length of 2.4 years) – recovering tens of millions of pounds for UK insolvent and bankrupt estates.

New cases continue to come from repeat customers (Insolvency Practitioner firms that have used Manolete on prior cases) but 40% of recent new cases have come from first time IP and law firm customers.

Manolete CEO, Steven Cooklin, commented: “While it is always very pleasing to get repeat business, it is particularly good to see record numbers of cases coming from IP firms that have not previously engaged with Manolete. Following the implementation of the Jackson Reforms, there are clear signs in the market that IPs are now turning to Manolete’s litigation financing solutions as the preferred option for the benefit of creditors. Our track record proves that returns to estates are invariably better and quicker than under the old CFA/ATE regime -this was borne out by Professor Peter Walton’s most recent report on the Insolvency Litigation Funding Market and key comments from the TRI Award judges that recognised Manolete’s high level of recoveries when naming Manolete as the Insolvency Litigation Funder of the Year”.

Manolete’s litigation financing solutions are specifically tailored for the insolvency market:

  • The estate and the IP is given a full indemnity against any adverse cost award – so even though the estate stands to recover the majority of the proceeds from a case, the IP and the creditors bear no risk whatsoever
  • All ATE cover is provided for free (as ATE takes a large and expensive “top slice” of any recovery, our products maximise estate returns in all instances, particularly on smaller cases)
  • We have never used brokers, so there are no “hidden brokerage fees” in our pricing nor packaged into ATE rates
    Manolete always pays an immediate cash amount into the estate plus a majority share of the net proceeds. We can also offer a one-off cash payment if the IP wishes to close the estate
  • Most funders strictly limit the amount of funding that they are prepared to offer an IP – we offer unlimited financial support
    The IP chooses his/her preferred legal firm and counsel – there is no preferred panel of solicitors or counsel and we have no conflicts of interest by having a sister law firm
  • All lawyers and counsel are paid on normal hourly rates – we have never used a conditional or contingent fee agreement (as these only serve to greatly increase the costs of a case)
  • The IP is paid for any additional important investigation work that we require to support the case
  • There are no “hidden fees” and no “preferred return to the funder” – Manolete only ever makes a return when the estate makes a return – we are therefore uniquely aligned to maximise the creditor outcome

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