March 2016 – Lehman High Court Judgment: Manolete’s Funding Doubles Creditor Returns and Protects Estate from All Risk. Also highlights Manolete’s £1m Adverse Cost Fund (“M-ATE”)

London: A recent judgment in the High Court concerning Longmeade (a company in Lehman Brothers Group) highlighted many of the key strengths of Manolete’s insolvency litigation funding model. The case covered an unusual situation where the Liquidator had strong legal advice on the merits of a US$26m claim, however, the large majority of creditors were opposed to the claim being pursued.

Mr Justice Snowden said, the Liquidators: “have arranged for a litigation funder [Manolete Partners] to finance the pursuit of the Claim on terms that mean there will be no cost and no financial risk to the insolvent estate”. [Emphasis added]

Mr Justice Snowden drew attention to Manolete’s funding package including, “100 per cent funding for the Claim”. Unlike other methods of funding insolvency claims, Manolete’s funding covers every single cost of the case, including solicitors, counsel, experts and (on larger cases such as Longmeade) additional IP work. The Judge continued: “to deal with a further concern raised by one of the creditors, Manolete’s offer also includes an indemnity in relation to the additional management costs of keeping the Longmeade liquidation open to pursue the Claim”.

While Manolete’s standard funding agreement provides for complete adverse cost cover, Mr Justice Snowden also remarked that in this case Manolete was also providing: “a deposit of £1 million to provide cover against adverse costs”. This demonstrates Manolete’s unique alternative to expensive ATE policies. Manolete’s “M-ATE” product provides a cash sum held directly by the Office Holder’s solicitors and held solely to the Office Holder’s order in case of any Security for Cost or Adverse Cost order.

He continued: “if successful, even allowing for the share of recoveries payable to the funder, the Claim would double the likely return to creditors in the liquidation”. [Emphasis added]. Consequently by partnering with Manolete, there was no possible reduction in the creditor dividend (even if the case failed): if it succeeded, the creditors would enjoy a doubling of their dividend.

Mr Justice Snowden summarised: “the Liquidators have also sought to make it as attractive as possible for Longmeade to bring the Claim…. In short, the position has been reached that the litigation could be pursued at no financial cost or risk to Longmeade”. [Emphasis added].

The judgement comes just a few weeks before the lifting of the exemption to LASPO to insolvency proceedings, which promises to have a significant impact on the insolvency market.

The full judgment can be found by following this link:

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