Expert Legal Defence Against Manolete: Transactions at an Undervalue Claims

Facing a legal claim for a transaction at an undervalue, particularly from prominent litigation funders like Manolete Partners PLC, can be a significant challenge for individuals and companies involved in insolvency proceedings. Understanding the intricacies of these claims and the relevant law is crucial for building a robust defence. We specialise in providing expert legal representation to clients facing such actions. This article explains what a transaction at an undervalue is, outlines the key legal principles, and details how our experienced team can help you defend against claims, especially those brought by Manolete Partners.

What is a Transaction at an Undervalue Under UK Law?

A transaction at an undervalue occurs when a company or an individual enters into a transaction where the value of what they provide is significantly more than what they receive in return, or where they receive no consideration at all. This is particularly relevant in the context of insolvency, as liquidators, administrators, or trustees in bankruptcy may seek to recover assets that were transferred away to the detriment of creditors before the insolvency proceedings began.

Under UK law, as outlined in the Insolvency Act 1986, a transaction at an undervalue typically falls into one of two categories:

• Gifts or Transactions with No Consideration: This includes situations where a company or individual gives away assets or enters into an agreement without receiving any payment or benefit in return.
• Transactions with Significantly Less Value Received: This covers instances where the value of the consideration received by the company or individual is significantly less than the value of what they provided. The assessment of “significant” undervalue is a matter for the court to determine based on the specific circumstances.

The Legal Framework: Section 238 of the Insolvency Act 1986 and Beyond

The primary legal basis for challenging transactions at an undervalue in corporate insolvency is Section 238 of the Insolvency Act 1986. This section empowers an administrator or liquidator (referred to as the “office-holder”) to apply to the court to seek an order in respect of such transactions entered into by a company that subsequently goes into administration or liquidation.

If the court finds that a transaction at an undervalue has occurred within a specified “relevant time” and other conditions are met, it has the power to make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into the transaction. This could include requiring the transfer of property back to the insolvent estate or ordering the recipient to pay a sum of money to the office-holder.

Similar provisions exist for individuals facing bankruptcy under Section 339 of the Insolvency Act 1986. A trustee in bankruptcy can apply to the court to challenge transactions at an undervalue entered into by the bankrupt within a longer “relevant time” frame.

Key Elements of a Transaction at an Undervalue Claim

To successfully pursue a claim for a transaction at an undervalue, several key elements must be established:

• The “Relevant Time”: For companies, a transaction at an undervalue can typically be challenged if it occurred within two years ending with the “onset of insolvency”. This period is presumed if the transaction was with a person “connected” with the company (other than solely as an employee). For individuals facing bankruptcy, the “relevant time” can extend up to five years before the presentation of the bankruptcy petition. Again, there are presumptions of insolvency for transactions with “associates”.
• Insolvency: In corporate cases, for a transaction within the two-year period to be considered a transaction at an undervalue (unless with a connected person), the company must have been unable to pay its debts at the time of the transaction or become so as a result of it. This is presumed in transactions with connected persons. Similar insolvency requirements exist for bankruptcy cases, particularly for transactions more than two years before bankruptcy.
• Significant Undervalue: As mentioned earlier, there must be a demonstrable significant disparity between the value provided and the value received by the company or individual. The courts will assess the value at the time of the transaction, although subsequent events may be taken into account in certain circumstances. The case of Phillips v Brewin Dolphin Bell Lawrie Ltd provides important guidance on how the court assesses the value of consideration in such transactions.

Defending Claims for Transactions at an Undervalue: How We Can Help Against Manolete Partners

Manolete Partners PLC is a leading insolvency litigation funding company that specialises in pursuing insolvency-related claims, including transactions at an undervalue. Their business model often involves purchasing these claims from liquidators or administrators and aggressively pursuing litigation against directors or other parties to maximise returns.

If you are facing a claim for a transaction at an undervalue backed by Manolete Partners, expert legal representation is essential. We have extensive experience in defending clients against such claims and possess a deep understanding of the tactics employed by litigation funders like Manolete. Our expert team can provide strategic legal support to counter aggressive tactics and ensure the most optimal outcome in your case.

Here’s how we can assist you in defending against a transaction at an undervalue claim from Manolete Partners:

• Challenging the Claim’s Validity: We will thoroughly examine the basis of Manolete’s claim, scrutinising the evidence and identifying any potential weaknesses or defences specific to the type of claim being pursued. This includes assessing whether the transaction meets the legal definition of an undervalue transaction and whether the “relevant time” and insolvency criteria are satisfied.
• Scrutinising Financial Evidence: We will meticulously review financial records and challenge any assumptions made about the company’s or individual’s insolvency or financial state at the time of the alleged wrongdoing. This is particularly crucial as Manolete often relies on retrospective analysis of financial positions.
• Utilising Limitation Arguments: We are acutely aware of the applicable limitation periods for bringing such claims and will raise these arguments where appropriate. Manolete has faced challenges on this front in the past, and the Limitation Act 1980 provides potential avenues for defence.
• Demonstrating Good Faith (Corporate Claims): For claims against directors of companies, we will explore whether the Section 238(5) defence applies, arguing that the company entered into the transaction in good faith and for the purpose of carrying on its business, with reasonable grounds to believe it would benefit the company at the time.
• Challenging the Assignment: While recent court decisions have made this more difficult, we will, where appropriate, examine the validity of the claim assignment from the liquidator or administrator to Manolete.
• Focusing on the Merits of the Case: Our primary focus will be on building a robust defence against the substance of the transaction at an undervalue claim itself, rather than being diverted by challenges to Manolete’s involvement.
• Considering Security for Costs: While Manolete often asserts that security for costs orders are rarely obtained against them, we will explore this option in suitable cases.

We a track record of successfully challenging complex insolvency claims and has extensive experience in dealing with litigation funders. Our team of expert solicitors and barristers possesses in-depth knowledge of insolvency law, commercial contracts, fraud, and directors’ duties, making us well-equipped to handle even the most sophisticated claims brought by Manolete Partners. We adopt a strategic, partner-led approach, providing robust representation tailored to your specific circumstances.

Facing a Transaction at an Undervalue Claim from Manolete? Contact Our Expert Legal Team Today

If you or your company is facing a legal claim for a transaction at an undervalue from Manolete Partners PLC or any other litigation funder, it is imperative to seek expert legal advice without delay. Our dedicated team is here to provide you with the strategic guidance and robust defence you need to protect your interests and achieve the best possible outcome.

We invite you to contact us for an initial consultation with our experienced solicitors and barristers. We will carefully analyse the details of your case, assess the merits of the claim, and develop a tailored defence strategy designed to counter the allegations and protect your position. Don’t face Manolete’s aggressive litigation tactics alone. Let our expertise in defending transactions at an undervalue claims work for you. Contact us today to discuss your case.