September 9th 2015

Autumn Newsletter 2015

Welcome to the Autumn newsletter

It has been a busy six months and with the new SBEE legislation now enabling IPs to sell outright their own Insolvency Act claims, the future looks set to be more active than ever. More on this important development below.

£5m recovered for creditor estates in last 6 months

A number of our larger claims were settled during the last six months – in fact October 2015 saw us complete four mediations in a hectic three week period. All resulted in very significant wins for IPs, their legal teams and creditors – total recoveries across these four cases alone were £2m. The highlights were as follows:

(i) Project Crystal – £2.4m recovered in 14 months

In June 2015, we completed a £2.4m settlement on a long running, complex misfeasance and wrongful trading claim for Mercer & Hole. We funded the case using our “LCIP” Model (Large Case Integrated Product) where we committed to a fixed solicitor cost of £360k spread out evenly over a 24-month period – no matter what the eventual outcome. As usual, the case through Manolete was completed quickly – in just 14 months. So the legal team benefitted not only from regular monthly substantial fixed fees, they also enjoyed a very significant bonus as the final 10 months fee was paid as one lump sum once the case completed. The LCIP also covered the cost of vital, additional forensic investigation work which was undertaken by the excellent Mercer & Hole investigations team. These investigation costs were paid by Manolete as the case progressed, just like the costs we cover for solicitors and barristers. So by the time the mediation took place, in May 2015, Manolete had invested very substantial sums in the case – meaning that the IP, solicitors, barrister and the creditor estate were completely insulated from all “own-side” costs, no matter what the outcome. We had also arranged £1 million of adverse cost insurance to protect against any possible adverse cost consequences. Due to the speed of completion, the ATE premium was limited to just 20% of the cover – a vital component in ensuring that we could return maximum proceeds to the Creditor Estate. The premium would have risen sharply higher had the case continued further.

The £2.4m settlement resulted in creditor returns from the liquidation rising 10-fold – from 4p in the pound pre-litigation, to over 40p once the litigation was completed. It was another tremendous testament to the Manolete Model.

(ii) Deloitte case – £540k recovered in 2 years 9 months

This case was initially funded by Manolete in January 2012 and was eventually settled at a mediation in October 2015. This case certainly tested and proved our resilience. We had initially backed the Office Holders from Deloitte to pursue a TUV claim against a connected newco, which had apparently underpaid for the main assets of the insolvent company. However, the defendant company was then itself put into insolvency by the same directors! Undeterred, we re-cast the claim as a misfeasance action against the individual directors themselves. The support work from the Deloitte team was first-class and we were very impressed with the performance of barrister Jamie Riley (Littleton Chambers) at the mediation.

(iii) Wilkins Kennedy – £200k recovered in 15 months

Here we recovered every penny of the claim (£169k) from a major UK financial institution plus all of our costs. This was mainly due to the outstanding investigation work undertaken by the Wilkins Kennedy team who traced a complex series of wrongful payments through a number of related companies. Kidd Rapinet and Dawn McCambley (Radcliffe Chambers) provided such excellent legal support throughout, the defendant company felt compelled to replace their own legal team prior to the final mediation.

(iv) Moore Stephens – £750k recovered in 12 months

This was a complex ‘asset stripping’ case made relatively straightforward by the IP’s comprehensive investigation and analysis work. Collyer Bristow advised throughout. A great result was achieved at mediation which covered all IP and legal costs as well as a material creditor dividend.

(v) David Stringer & Co – £480k recovered in 13 months

Here was a case which covered a substantial illegal dividend, a TUV, preference payments and misfeasance. David’s tremendous forensic work alongside excellent legal advice from Coffin Mew and Linden Ife (Enterprise Chambers) helped us secure the settlement, which resulted in a very substantial payment to creditors.

(vi) BRI – £175k recovered in 12 months

This case had been running for a long time prior to our involvement, however, the Office Holder had identified an excellent claim. The former director had used every excuse not to engage with the Office Holder. We simply issued the claim and this finally brought this high profile media figure to the table. We are grateful for excellent legal support from the team at EMW.

(vii) Numerous smaller cases

Unlike all other major litigation funders, Manolete funds or acquires claims with values of just £20k upwards. During our six year history, the majority of cases we have undertaken have been for less than £100k. Our track record in this area of the market shows that strong returns for all stakeholders can be achieved even on small cases. On the rare occasions we fail to make a recovery (because the defence is robust and convincing or the defendant declares bankrupt) then the insolvent company retains the initial amount we have paid up front for the case and the lawyers get paid in full for their time on the case. The loss is for our account alone. We can’t win them all!

Over recent months we have continued to make impressive ‘small case’ recoveries:

(a) Lawson Fox case (property sector): £80k recovery
(b) Absolute Recovery (retail sector): £68k recovery
(c) Mark Jones (manufacturing sector): £85k recovery
(d) BRI (manufacturing sector): £15k rcovery
(e) Adcroft Hilton (services sector): £50k recovery
(f) Absolute Recovery (restaurant): £75k recovery
(g) RMT (IT services sector): £50k recovery

From 1 October 2015: Manolete can now purchase all insolvency act claims

Following the introduction of the Small Business, Enterprise and Employment Act 2015 (“SBEE”) we are now able to purchase (rather than just fund) all Insolvency Act 1986 claims (TUVs, preferences, wrongful trading etc). Prior to this new legislation, we could only fund these claims. By buying the claims, the case moves forward solely in our name (Manolete Partners Plc .v. XYZ). The Office Holder is thereby completely insulated from any adverse cost order. Manolete self-insures all of our purchased cases – so there is no ATE cost for the case to bear before proceeds are allocated back to the insolvent estate when we settle or win the case. Should we lose the case – you keep the consideration we have already paid you.

Following the introduction of SBEE, we will now be giving Office Holders two Purchase Options:

  1. Sell the 100% interest in the case outright to Manolete for a one-off lump sum cash payment. Your file can then be closed. Final costs invoiced and distributions made.
  2. Our traditional purchase offer: an initial smaller payment but the insolvent company retains an ongoing economic interest in the financial outcome of the case. This starts at least at 50% in the Company’s favour and the Company’s interest rises to 75% or more depending on the level of recovery achieved i.e. a ratchet up working in your favour.

Where we purchase cases and we need additional work done by the Office Holder e.g. investigation work, information provision, witness statements etc then we engage with you as we do with our legal teams: you give us a budget for that work, the work gets done, we pay for that work. If we make no eventual recovery, then that is solely our loss. If we make a recovery and you have retained an interest in the proceeds, then the insolvent estate stands to benefit (usually very significantly) on that as well.

Lord Justice Jackson supports Litigation funding for insolvency cases

We were naturally very pleased that LJ Jackson came out so strongly in favour of litigation funding at his recent Mustill Lecture in October. We believe that our track record continues to match our claim that Manolete’s model is the most effective tool for supporting IPs and their chosen legal teams in pursuing, and maximising creditor recoveries, on litigation claims (large and small). LJ Jackson’s complete opinion is here:

M-ATE: Manolete’s alternative to expensive ATE

Predominantly to stand alongside our larger funded cases, where IPs want the additional security of a cash fund held with their own lawyers in case of an Adverse Costs Order, we have launched “M-ATE”. In exceptional circumstances, we will offer M-ATE on a stand-alone basis (where we are not funding the case).

For further information please contact:

Steven Cooklin ACA ACSI CF Tel: 01494 618520
Chief Executive Mob: 07900 985559
Manolete Partners PLC