Hybrid Claims: the Manolete Approach by Stuart Lindley

It has been four years since the June 2021 decision in Manolete v Hayward and Barrett [2021] EWHC 1481 (Ch).

The judgment in that case provided clarity by confirming that a party wishing to bring a company claim (whether that be the office holder or an assignee) had to issue a Part 7 claim even where there are related office holder claims in the same insolvency, in which case two sets of proceedings are required (“Hybrid Claim”).

Consequently, whenever we issue a Hybrid Claim, which will involve a mix of Insolvency Act claims (e.g. transactions at undervalue, preferences) and company law claims (breach of duty, unlawful dividends, overdrawn director loan account), we immediately apply for the Part 7 claim to be transferred to the Insolvency and Companies Court and consolidated with the application notice and for the Part 7 claim to be treated as if commenced by way of application notice.

Manolete always seeks to agree directions through to trial in Hybrid Claims to avoid both parties incurring unnecessary costs. We advocate as streamlined and efficient a procedural path as possible by, for example, avoiding costs budgeting and expensive Part 7-style disclosure exercises. We have the know-how, funding and litigation strategy to untangle these complications effectively.

Our whole approach at Manolete is informed by the objective of maximising returns to the insolvent estate of the company whose claims (and those of its office holder(s)) we have purchased or are funding.

Recent Developments
As Hybrid Claims of the type we issue as an assignee are well established, it is pleasing to see they are now specifically addressed in the Chancery Guide 2022 (December 2024 update) at paragraphs 3.25 onwards, which contains provisions detailing how the parties can seek to ensure the proceedings are dealt with by the appropriate court.

The more recent Practice Note - Listing and Criteria for Transfer of Work (2024), which came into effect on 6 January 2025, states that judges will consider whether a case should be heard in the High Court or County Court at Central London. In doing so, judges are required to consider the overriding objective (CPR 1.1) and several other factors, including the complexity and length of proceedings and the sums in issue. While the default position is that, absent the aforesaid factors, certain categories of petitions, applications and claims are required to be transferred to the County Court, Hybrid Claims are not amongst them and this can be viewed as tacit recognition of the often-complex nature and value of such claims.

A recent decision of the High Court is a cautionary tale of the potential perils of issuing Hybrid Claims.

In Re Park Regis Birmingham LLP (in liquidation) [2025] EWHC 139 (Ch), the company’s joint liquidators issued two applications against the former administrators of the company. The first application was for a declaration that the former administrators were invalidly appointed, together with payment of equitable compensation or damages for breach of fiduciary and other duties, and for trespass, by the former administrators. The second application was to seek permission of the court to bring proceedings against the former administrators, who by then had been discharged.

Upon issuing the applications, the joint liquidators’ solicitors paid a court fee of £10,000 (substantially more than would have been required for an insolvency application), explaining in a letter to the court dated 18 May 2023 that, "…the [First] Application contains non-Insolvency Act claims in respect of which we asked the court to deduct an issue fee of £10,000 from our PBA account."

The former administrators applied to strike out the applications on the basis that the first application was procedurally defective on account of it being incorrectly issued and that the second application had been served out of time.

The judge, using the power afforded to her to remedy procedural errors under CPR 3.10, declined to strike out the applications, permitting the first application to proceed as if it had been issued as a Part 7 claim.

While the judge considered it reasonably clear that the joint liquidators knew, or at least knew there was a strong possibility, that not all of their claims could properly be brought by way of insolvency application, they had not fully realised the absolute nature of the requirement to issue both a Part 7 claim and an insolvency application, even in a case where both depend on the same facts. Further, that it was clear they were not seeking to avoid the issue fee, since that was paid at the time of filing the insolvency application. The failure to recognise the procedural requirements while not laudable, was not severe enough to be penalised by way of strike-out.

While on the facts this was a pragmatic and fair decision, it would be unwise for office holders to regard this as a precedent.

Stuart Lindley
Associate Director – London