Case Study – The Manolete Effect

Case study – Exceeding expectations?

Case study details

In October 2023, the liquidators of a company operating a transport business referred their case to Manolete after they had been trying for approximately one year to recover an overdrawn director’s loan account debt of £37k. The director disputed liability, would not make any offers of settlement and, by October 2023, had stopped responding to the liquidator’s correspondence altogether.

During the pre-assignment review process, we noticed from the Company’s bank statements that the Company had made several sporadic payments in round figures to a connected company during the final two years before it entered liquidation. We queried this with the liquidators and they had not been aware of any explanation for these payments from their review of the Company’s books and records.

We took an assignment of all claims, including potential claims against the connected entity. Our assignment terms involved an up-front payment to the estate, a division of future net proceeds of any claims and a complete indemnity for adverse costs for the benefit of the Company and the liquidators.

Our in-house expertise

Immediately after purchasing the claims, we funded a full bank statement analysis to allow us to further investigate the payments to the connected company and identify other unexplained payments from the Company to third parties.

Using our in-house expertise, we used the bank statement analysis to consider the timing and nature of the payments to the connected entity in the context of the Company’s business and, of equal importance, rule out payments that were obviously justified in the context of the Company’s business. Having done so, we considered there was a viable claim against the connected entity and a corresponding breach of duty claim against the director for £192,000. This was in addition to the (disputed) DLA claim for £37,000.

Following those investigations, we instructed solicitors to send letters before action to the director and connected entity demanding repayment on several alternative grounds, including breach of duty, TUV, preference and knowing receipt.

The Manolete effect

As an indication of the strength of the claims identified from our investigations, the defendants settled with us for £150,000 within two months of those letters, paid in full over a period of six weeks.

Having achieved settlement so early, external legal costs were minimal and we were able to pay net proceeds of over £70,000 to the insolvent estate six months after the claim was assigned to us.

We were delighted to use our in-house expertise to very quickly recover a much higher sum than the liquidators expected to recover, achieving a result described by the liquidators as “truly spectacular”.