|Cobham directors accused of unlawfully transferring cash
Claim by insolvency litigator alleges move left defence group’s subsidiary unable to pay creditors
|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.