Manolete Case Study: Director Ordered to Repay £1.43m for Unauthorised Expenditure (Director’s Duties & Insolvency Act Breaches)

This Judgment (Manolete Partners Plc v Matta & Ors [2020] EWHC 2965 (Ch)) exemplifies the rigour with which courts uphold directors’ duties under the Companies Act 2006, particularly as companies approach insolvency. Litigated by leading insolvency funder Manolete Partners, the case highlights how misuse of director loan accounts (DLAs) and unauthorised payments to connected parties can trigger personal liability, especially in the context of claims assigned following a company’s administration.

For practitioners and directors, this decision is a pivotal reminder that claims under the Insolvency Act 1986, such as transactions at undervalue and preferences, may proceed even after a company’s dissolution and assignment. For a detailed guide to defending Manolete-funded litigation, see defending Manolete claims and our expert analysis on the evolving law of winding-up petitions and directors’ duties.

Case Background

The background to Manolete Partners Plc v Matta & Ors [2020] EWHC 2965 (Ch) traces the fortunes of Saint George Investment Holdings Ltd, a holding company for a North West England care home group. Dr Amir Matta was its sole director and majority shareholder. Financial difficulties began to surface in 2015 amid regulatory embargos and rising costs, culminating in losses from June 2016 onward. By October 2016, the company entered administration and subsequently dissolved in 2019.

During this period, it emerged that Dr Matta had run up an overdrawn director’s loan account totalling £1,365,422.64, using company assets to fund significant personal expenditure, including luxury items and a divorce settlement, without authorisation or subsequent regularisation. Additionally, payroll payments were issued to his ex-wife, daughter, and a third-party company, MMJ Global Limited, raising issues about their basis and commercial justification.

Manolete Partners, a leading UK insolvency litigation funder, acquired and pursued the company’s claims. The action sought to recover the overdrawn DLA, challenge payments to connected parties as transactions at undervalue or preferences under ss.238–239 Insolvency Act 1986, and enforce directors’ statutory duties under ss.171–176 Companies Act 2006.

View the PDF Judgment Below:

Key Findings in Manolete Partners Plc v Matta & Ors

Breach of Director Duties

The judgment delivered by Deputy Judge Treacy is unequivocal in its criticism of Dr Matta’s conduct. At paragraph 34, the court declared:

“I accept the submissions of Mr Channer that a director’s powers to authorise payments from a company’s funds are not granted to enable directors to pay for or fund very significant personal items of expenditure on a long term basis. I also accept that authorising such payments on a continuing and long term basis, and taking no steps to regularise the position is a breach of the duty to act in a way most likely to promote the success of the Company.”

The court dismissed Dr Matta’s argument that the company was “rich and successful” at the time the money was withdrawn, holding at Paragraph 35:

“That is not an answer to the issue that arises under CA 2006… by failing to regularise the situation over a period of many years, including once a tax charge had been levied on the Company as a result of the position and as the Company’s financial position became less favourable, Dr Matta was in breach of his obligation to exercise reasonable skill, care, and diligence in carrying out his duties.”

Scrutiny of Connected Payments

The court considered whether payments to Dr Matta’s ex-wife, daughter, and MMJ Global Limited amounted to transactions at undervalue or preferential payments under the Insolvency Act. However, Deputy Judge Treacy concluded at Paragraph 52:

“Some key elements of the Applicant’s case are not sufficiently established to reach a conclusion on whether the payments to Ms Matta and Mrs Matta were transactions at an undervalue or preferences… the nature of the duties carried out … whether they provided value to the Company (and if so, how much); … the basis on which Ms Matta was paid under the settlement agreement in June 2015; and the nature and basis of any duties subsequently carried out by Ms Matta for which she was paid…”

Thus, the application for summary judgment on these grounds was refused, but directions for a full trial were recommended.

Orders Made

Ultimately, Dr Matta was found liable to repay:

• The entire outstanding DLA balance (£1,365,422.64)
• Unjustified payments processed via MMJ Global Limited (£70,000)

Applications concerning the other respondents under the Insolvency Act were either settled or stood over for further trial due to insufficient evidence at this stage.

Summary of Key Liabilities in Manolete Partners Plc v Matta & Ors

Respondent	Nature of Liability	Amount Ordered to Repay	Jurisdictional Basis
Dr Amir Matta	Director’s loan account	£1,365,422.64	ss.171–176 Companies Act 2006
MMJ Global Ltd	Unjustified payments	£70,000	ss.171–176 Companies Act 2006
Ex-wife/Daughter	Connected party payments	Stood over for trial/settled	ss.238–239 Insolvency Act 1986

Implications of Manolete Partners Plc v Matta & Ors

Manolete Partners v Matta demonstrates the judiciary’s willingness to enforce director accountability, particularly where misuse of director loan accounts is concerned. The judgment clouds any hope that the director’s subjective perception or solvency at time of transaction will excuse misapplication of company funds. This case affirms that a DLA treated as a “personal current account” is a persistent statutory breach, regardless of the company’s financial standing when routine authorisations go unrectified.

The court reaffirmed that technical defences, such as the alleged capacity to pay debts at the relevant time, carry little weight if there is clear deprivation of company assets and the director’s actions were not regularised or properly documented. Further, the judgment illustrates that even where a company has been dissolved following insolvency, claims can be assigned and pursued by litigation funders such as Manolete, expanding both judicial scrutiny and the scope for creditor recovery. For directors and advisers, this decision signals heightened risk, personal assets and historical actions may be open to scrutiny, and resolving DLA imbalances promptly is critical. It also underlines the evidential threshold required: complex undervalue or preference claims are unlikely to be determined summarily, so preparing for a full trial is key if factual issues remain unresolved. Our practical litigation guide for defending Manolete claims addresses these strategies in more detail.

Defending Manolete Director Claims

Defending against funder-backed claims requires early, careful planning. Strong evidential foundations, such as forensic accounting to scrutinise the basis and commerciality of alleged transactions at undervalue, are essential. Where the legitimacy of payroll or third-party payments is challenged, producing detailed employment contracts and contemporaneous records will help establish a credible defence. As seen in Manolete Partners Plc v Matta & Ors and other cases in the LEXLAW multi blog network, robust documentation of the company’s solvency position at the time of contested payments may counter the statutory presumptions under the Insolvency Act. Early advice from specialist insolvency solicitors ensures informed negotiation of assignment or settlement terms.

Our litigation team recommend meticulous review of transaction histories, negotiation of settlement where evidence is weak, and, where justified, opposing applications for summary judgment on the basis that factual disputes must be aired at trial. As demonstrated by our successful defence of wrongful trading claims, timely legal advice is critical: instructing LEXLAW’s expert team may help secure a more favourable resolution when facing Manolete-funded actions.