Case Study from Scotland

Breathing life into a stale case

Introduction

The liquidator of a Scottish company operating as a transport business referred a case to Manolete in March 2024, having been appointed back in November 2020.

The liquidator had identified several claims against the directors resulting from payments made to them by the Company totalling around £400,000. The liquidator and their solicitors believed those payments to be an assortment of unlawful dividends, loan advances and payments made in breach of the directors’ duties owing to the absence of any documentary evidence to justify them.
The liquidator’s solicitors had been exchanging correspondence with the directors for some years seeking payment of £400,000, but they denied any liability and were not prepared to make any concessions or proposals to resolve the claim.

Our in-house expertise

During our review process, we thoroughly considered all the pre-action correspondence and concluded the directors had reasonable grounds to contest some elements of the claim. However, they were not engaging meaningfully in any settlement discussions because they did not believe the liquidator would, in the end, issue proceedings against them.

We took an assignment of all claims on conventional terms including an up-front payment to the insolvent 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 liquidator.

The Manolete effect

In April 2024, we instructed solicitors to send letters before action on our behalf, setting out in detail why we did not consider the majority of the defence offered by the directors would succeed. However, we ensured we gave credit for some elements of the claim for which the directors had offered a valid explanation, leaving a viable claim for £240,000.

We wanted to leave the directors in no doubt we had considered their defence in considerable detail and that, even having given credit for the reasonable elements of it, they still faced a substantial claim which we were prepared to pursue through court action, if necessary.

Our pragmatic approach encouraged the directors and their advisors to engage with us, particularly as we could show we had given proper consideration to their partial defence. From there, we entered into sensible negotiations taking account of the directors’ ability to raise funds and reached a settlement at £165,000, paid in full by December 2024.

While we engaged and paid solicitors to deal with the correspondence, we handled all investigatory work internally, minimising legal spend and maximising returns to the estate. As a result, we were able to return over £75k to the insolvent estate within eight months of purchasing the claims.

We were delighted to showcase how our internal expertise can breathe life into aged cases, producing significant returns to insolvent estates within a very short time frame.