Welcome to our first newsletter of 2020
Into the future
The Manolete team enjoyed a very busy time in 2019 closing it with record levels of case enquiries in November and December. It’s a good moment to reflect on the previous year overall and consider what has changed and what has stayed the same.
On the face of it, there is no real change to daily office life. The principles and model which Manolete follows are the basis of all the successes that have been achieved as a company. So maximising returns to Creditor Estates will remain the primary goal – only when Creditors win does Manolete start to make a return. The cases are the same: issues of misfeasance, Director’s loan recovery, TUVs, Preferences and wrongful trading etc. Case discussions with your choice of lawyers are unchanged as is the alignment in interests between the Creditors, Manolete, the IPs and their lawyers.
Of course Manolete has a bigger team now with a fully established regional network - we all meet every other Monday to assess the full set of cases and their progression towards completion.
Our cases size still starts at £20k but certainly the number and quality of cases has shown a marked increase – there has been a 48% increase in the number of case enquiries and an uplift of 50% in case acceptance rates in the last 12 months. Manolete is also able to give substantially increased up-front payments to cover legacy WIP and vital investigation work. In the last six months, Manolete invested in more cases from IPs than in the previous 12 months. In December, there were 46 new case enquiries which was the highest ever monthly total, despite the Christmas break.
The Manolete model encourages much earlier case completion compared to others and historically the duration has been under 12 months. More recently, there has been an acceleration and we are often seeing cases complete in five, four or even three months. But when we need to, we go all the way to trial – we never shirk that.
Working shoulder-to-shoulder with IPs and their chosen lawyers, it is also a tribute to the in-house Manolete legal team who support and expedite these cases with such precision and care and can also skilfully mediate very fair commercial settlements with great efficiency.
So in the last 12 months there has been a record numbers of enquiries, a record number of completions, tremendous returns to Insolvent Estates, and the IPs' legal teams paid as the work is done, with a more rapid rate of case completions. It is reassuring to know that Manolete’s core business principles that we started the business with 11 years ago, have stood the test of time and remain a constant today.
Steven Cooklin, ACA ACSI CF
Chief Executive, Manolete Partners PLC
In this issue:
Seeing is believing – A Manolete claim from start to finish by Alison Kirby
Great Ormond Street Hospital donation
Manolete’s latest recruit – Henry Glen
Conferences sponsorship update – Charlotte May, Head of Key Strategic Partnerships
Insolvency: the need for class consciousness by Stephen Baister
Seeing is believing:
A Manolete case from start to finish
By Alison Kirby
I have been speaking with lots of IPs and their lawyers and they often ask me for good case studies which properly illustrate how the Manolete model works. I wanted to share the experience I had gained from a case recently when the Manolete name really was the ‘game-changer’.
The case was a simple overdrawn Director’s loan account of possibly up to a maximum of £260k. The Office Holder had written to the Director setting out the debt owed, annexing the evidence, and seeking proposals for repayment. This had elicited a response along the lines of “well, I cannot pay”. There it rested for a while until Manolete was approached.
I was contacted by the Office Holder’s Manager, who forwarded the relevant letter and documents. I did not need to clarify many points as the case was quite straightforward. I asked our in-house forensic team to investigate the Director and provide me with a forensic report on his assets. They duly did, and my view was that he had the ability to pay about half of the money owing on visible assets, and possibly more given ‘hidden’ assets such as pension. Within a couple of days of being approached Manolete offered (and the Office Holder accepted) purchase terms of an upfront payment of £15,000 and a waterfall on net realisations of 50% to the insolvent estate. The upfront payment is an amount that the Office Holder keeps even if the claim is not successful.
I instructed the Office Holder’s legal team to act for us and sent a letter before claim which informed them the claim had been purchased by Manolete. Standard wording is used and it shows we mean business – Manolete would not have purchased the claim if the company were not prepared to bring Court proceedings for the claims purchased. However, the letter before claim also makes clear Manolete will enter ADR if there is a genuine wish to resolve the claims purchased.
Immediately, the reluctant Director sought legal advice, and a well-respected solicitor, who is acting for Manolete in other cases, was instructed. I confirmed there did not perceive to be any conflict and indeed a well-advised Director can save significant costs to both parties involved. Within five weeks of the revised letter before claim, Manolete received a detailed response focussed on what the Director could afford to pay, with a comparison of the recovery if he were made bankrupt. Given the detail provided, the offer was immediately accepted as the best likely outcome.
Manolete concluded a settlement agreement for £140,000 with £25,000 paid immediately and the remaining balance secured and payable within six months. The legal costs were proportionate given the speedy commercial settlement, so the return to creditors was very healthy and the Office Holder was delighted with the result.
The average case duration across the board is 11 months but this case was resolved particularly rapidly: from letter before claim to conclusion of the settlement was just three months.
Great Ormond Street Hospital donation
The Christmas newsletter included a pledge for Manolete to donate £5,000 to Great Ormond Street Christmas Stocking Appeal to help Professor Walton get more returns to his survey on insolvency litigation funding. It was an amazing response and the donation was made the same day. Pictured below Steven Cooklin and Jeremy Sare of Manolete present a cheque to Lizzie Helps and Kiren Chemi of Great Ormand St Hospital.
Manolete's latest recruit
The expansion of Manolete’s Legal Team continues apace. Manolete now has every region of Britain covered but there is still plenty of casework in London too. Earlier this month, Henry Glen joined us from Meyer Brown as Associate Director.
Henry qualified as a solicitor in March 2010 at Eversheds and has acted primarily for Insolvency Practitioners throughout his career on a wide variety of insolvency claims and corporate recovery matters. His practice has focused on proceedings in the Business and Property Courts, including representing claimant Office Holders in a multi-million pound misfeasance action. Henry has written a number of articles on insolvency law and contributed to several different restructuring publications.
Conferences sponsorship update
Manolete has been proud to continue its support as a main sponsor of R3 (Association of Business Recovery Professionals) in 2019. In September, Manolete presented at the R3 Northern Conference and through the autumn also sponsored the IPA and ICAEW roadshows, supporting the profession in its compliance updates.
In November, Manolete was out in force at the SPG Forum in the lovely setting of Heythorp Park in Oxfordshire. Our Head of Legal, Mena Halton, spoke on the first day on our approach to maximise litigation recoveries. On day two, Manolete Associate Director, Nick O’Reilly, presented on Dealing with Vulnerable People in Insolvencies. SPG was an excellent opportunity to catch up with many of our great contacts.
The conference season was busy as November proved popular for R3, TMA and the TRI Conference and Awards. All were incredibly well attended which is a sign of the growth and scale of work in this sector. The year was completed by our CEO, Steven Cooklin, presenting a webinar for ICAEW on generating funds from insolvent estates.
Manolete’s regional network of lawyers was very active, getting to many events to explain the effectiveness of the business model. This year, Manolete’s lawyers are looking at how we can work more closely with the sector. Many of our regional Associate Directors are members of committees for R3, TMA etc and also organise seminars with local lawyers and IPs. In Newcastle, Andrew Cawkwell is hosting a seminar on 13 February with Muckles LLP and Enterprise Chambers and in the South West I have organised the next R3 meeting on 28 January with Ashfords discussing Re Implement Consulting as well as a TMA seminar on negotiating skills on 5 March.
If you missed us at one of the conferences last year, or are interested in hosting an informative event with Manolete, please get in touch with me.
Head of Key Strategic Partnerships
Insolvency: the need for class consciousness
It may be the 202nd anniversary of the birth of Karl Marx and 101 years since the murder of Rosa Luxembourg and Karl Liebknecht, but do not worry: the kind of class consciousness I have in mind is the kind that underpins insolvency proceedings rather than communist thinking. Class consciousness has always been important because insolvency proceedings have always been a class remedy, as Mr Justice Harman made clear in Re a company (No 001573 of 1983):
“The true position is that a creditor petitioning the Companies Court is invoking a class right…and his petition may be governed by whether he is truly invoking that right on behalf of himself and all others of his class rateably, or whether he has some private purpose in view.”
His statement applies as much to bankruptcy as it does to winding up. But recent developments in insolvency appear to pose a threat to the class nature of insolvency.
First, there is the adjudication process which replaced debtors’ petitions in April 2016. A debtor who wishes to make himself bankrupt no longer petitions the court but applies for bankruptcy online. The process is in effect secret: it is dealt with as a private matter between the debtor and the adjudicator. Creditors are not notified and play no part unless there is an appeal. Fair enough: very few debtors’ petitions invited creditor attention, and in the overwhelming majority of cases the court had no choice but to make the order sought. But there was a suggestion in 2012 that the process should be extended to creditors’ bankruptcy and winding up petitions where creditors have a very real role to play. Happily, the proposal was abandoned. It should not be revived. It would have represented a serious incursion on creditors’ class rights.
Secondly, the new decision making processes introduced in 2017 similarly represents a roll back of class rights. The presumption that creditors will no longer gather in one place but instead use remote procedures to make their views known may be seen as detracting from their traditional “rights…to consult together with a view to their common interest” (Sovereign Life Assurance Co v Dodd).
Thirdly, certain special insolvency procedures (there are said to be over 30 of them) relating to financial institutions, for example, derogate from normal class principles by giving institutions such as the Bank of England more control than creditors enjoy, though understandably so and arguably for good policy reasons.
Finally, the ability of the secretary of state or the official receiver to apply for a compensation order in disqualification cases and the proposed extension of HMRC’s rights to pursue former directors of insolvent companies could put them in direct competition with the insolvency practitioner attempting recovery on behalf of the general body of creditors, although it remains to be seen how these regimes will operate in practice.
There is, of course, no legislative conspiracy to do down creditors and erode the class principle. The points I make are, in all probability unintended consequences of good intentions. All of us concerned with the integrity of our insolvency regimes, however, need to take care (or greater care) in future to ensure that the class characteristic of insolvency is maintained, that creditor participation in insolvency processes is supported and that creditors’ rights to benefit from the assets available in any insolvency are not unduly diminished.
Dr. Stephen Baister
Non-Executive Director, Manolete Partners PLC