Not only insolvency cases

Introduction

Liquidators of a company had identified a potential professional negligence claim against the company’s auditors.  Because of several other claims that the liquidators had been pursuing, the professional negligence claim had taken a back seat and there was a lot of work to do in order to assess the claim.  When the claim was referred to Manolete there was also less than a month until limitation was to expire, but Manolete were nevertheless prepared to take an assignment of the claim and invest time and spend in the investigatory work.  We took an assignment of the claim on conventional terms including sharing the net proceeds of the claim and providing a complete indemnity for adverse costs to the liquidators off our balance sheet as a listed company.  We paid solicitors and counsel for their work, not requiring them to work on a contingency basis, and also paid for expert reports which are essential in cases of this nature.

The negligence claim was two-fold: it arose from the company’s auditors (1) permitting the company to file accounts with overstated asset values, and (2) failing to expose misappropriations by the directors of the company.  Quantum was uncertain at the time of assignment, but was thought to be in the region of £2m.

Our in-house expertise

Manolete’s expertise lies not only in insolvency claims, but in its efficient management of complex non-insolvency cases through to resolution.

The immediate steps to be taken in this case were to (1) preserve limitation, (2) establish the breach of duty, and (3) calculate quantum.

Manolete was able to collaborate with top professionals to achieve these initial steps swiftly:

• Solicitors were immediately instructed and a standstill agreement was entered into.
• Manolete and the liquidators worked closely together to review the audit work.
• Experts in audit negligence were engaged to review the documentation and provide an opinion.
• Specialist counsel was briefed who formulated the claim.

Within just five months a fully particularised protocol compliant letter before action – built from the ground up with no pre-assignment correspondence – was sent.

The Manolete effect

As with all of our cases, Manolete wanted to ensure that our opponents (in this case, the auditors and their insurers) were in no doubt that we had fully considered the claim in considerable detail and that they faced a substantial liability in damages  which we were prepared to pursue through court action if necessary.

The auditors’ insurers took over which can often mean matters proceed at a slower pace, however Manolete ensured that work on our side continued and developed the quantum of the claim further to in excess of £4m.

After just one further letter setting out further arguments on quantum, the auditors agreed to mediate – before any claim had to be issued.

Deploying our skills in case management and progression meant that sensible negotiations took place and a significant seven figure settlement  payable within 14 days was reached.

This case is a great example of the ‘Manolete-effect’ – taking a hands on approach and working closely with liquidators, whilst also engaging and managing appropriately skilled professionals to progress matters in a manner which maximises returns to the estate.

Alexandra Withers - Associate Director (North East)

Alexandra@manolete-partners.com | 07413 242320