Unlocking Higher Value Claim Recoveries
In the case of higher-value claims the combination of finance and expertise is key to asset realisation.
High-value claims present substantial recovery opportunities, but they also present an increased risk profile and tend to be of longer duration, thereby incurring significant legal and other costs. Claims across the insolvency spectrum, including antecedent transactions and director breach of duty, will have a range of quantum, but there are particular claims where the value is likely to be high, and the numbers involved need to be significant, to justify the investment in pursuit of these complex claims. At Manolete, we deal with claims with a range of values, but in terms of assignment of higher-value claims, a pattern has emerged.
Quincecare claims
The Quincecare duty, as clarified by the Supreme Court in Phillipp v Barclays Bank UK plc [2023] UKSC 25, forms part of a bank's obligation to exercise reasonable skill and casre when executing its customers' payment instructions. It requires a bank to refrain from carrying out a payment instruction given by an agent if the bank has reasonable grounds to suspect the agent lacks authority (including where the agent may be acting fraudulently).
In insolvency, the tyupical scenario is that the director, as agent of the company, instructs the bank to carry out transactions for his or her benefit, or the benefit of connected parties, and in doing so is defrauding the company.
The bank will be liable to reconstitute the account if there were red flags or warning signs that it should have recognised and used as a basis to refuse to execute the instructions. A detailed analysis is required to identify the red flags, the point at which the bank should have stopped executing the director's instructions, and the sum required to reconstitute the account. Banks are very well-resourced opponents and are robust in their defence of these claims. In our experience, it is invariably necesdsary to issue proceedings, but settlements have then been achieved.
Auditor professional negligence
The statutory functions of an auditor are set out in Part 16 (Chapter 3) of the Companies Act 2006 and are summarised by Lord Oliver in the seminal auditor negligence case of Caparo Industries v Dickman [1990] UKHL 2. Negligence conduct includes permitting the company to file accounts containing overstated assets or failing to identify or report misappropriations carried out by the directors.
Expert evidence and forensic attention to detail are key to successful managment of claims in this specialist area. Insurers can be expected to resist alternative dispute resolution until after proceedings have been issued, but we have reached settlement after pre-action correspondence with a well-presented claim, supported by an expert report.
Tax-related director misconduct
Breach of duty claims in relation to tax avoidance have been common, but there has been a trend towards VAT and payroll fraud. VAT fraud can involve a company charging VAT to its customers but not accounting to HMRC for the same, or deliberately over-declaring the VAT on goods purchased and then claiming repayment of the VAT it is not entitled to. Payroll fraud involves maniuplation of either VAT or PAYE - or both. Frequently, the fraudulent company is an "umbrella" company employing temporary workers then supplied onwards.
Claims against directors and third parties in these instances include breach of duty, fraudulent trading, dishonest assistance and knowing receipt. Understanding these frauds is vital and swift action is essential to preserve assets by way of freezing orders.
What higher-value claims need
Manolete can provide the finance to pursue higher-value claims. It can also provide the expertise by working collaboratively with insolvency practitioners and insolvency lawyers to develop and advance claims.
This article was written by Mena Halton, CEO (Manolete Partners) for R3 Recovery Magazine - Autumn Edition 2026
Manolete Partners Plc is an investment business focused on dispute finance. It is not a law firm and does not provide legal advice. The information provided in this article is correct at the time of publication.