This judgment (Manolete Partners Plc v Nag & Anor [2022] EWHC 153 (Ch)) demonstrates the uncompromising approach the courts adopt when directors divert company assets away from creditors once insolvency becomes unavoidable. The case, brought by litigation funder Manolete Partners, highlights how directors and even connected family members can face personal liability for misfeasance, dishonest assistance, and knowing receipt. It underlines the importance of early legal advice from specialist solicitors when financial distress arises and transactions are under scrutiny.

Background to the Director Misfeasance Case

Quore Ltd, a telecommunications company founded in the mid-2000s, faced growing financial pressures by 2012. Its director, Ronojoy Nag, had pursued an aggressive “buy and build” strategy, acquiring businesses whose customers held contracts with O2 and moving them to Vodafone in order to generate commissions. However, Quore was already struggling to meet liabilities, including a significant loan from Vodafone itself.

By late 2012, Quore was insolvent on both a cash-flow and balance-sheet test. The company owed over £200,000 to Vodafone, a further £300,000 to the Leahy family (sellers of Bridgwater Communications), and substantial sums to HMRC (eventually proving for more than £450,000 in liquidation). Despite this, Mr Nag engaged in a complex restructuring designed not to protect creditors, but to extract value for himself and his wife, Amanda Nag.

The key transaction occurred in March 2013. Quore’s business was transferred to Quore Technologies Ltd (“QTL”), an effectively dormant company controlled by the Nags, and then on-sold to Evolve Telecom Ltd. The transaction was structured so that:

• £650,000 was paid by way of a loan to QTL (purportedly to repay a debt to Quore); and
• £817,430 was paid to Mr and Mrs Nag personally for their shares in QTL.

Of the £1.26 million consideration, only a fraction ever reached Quore’s creditors. Substantial sums were instead paid directly into Mr Nag’s personal account, transferred to connected companies such as Q London Ltd, and even used to repay family members.

Quore was wound up compulsorily in 2015, and the liquidator assigned all claims to Manolete Partners Plc. The litigation funder then brought proceedings against Mr Nag for misfeasance and against Mrs Nag for dishonest assistance and knowing receipt.

View the PDF Judgment below:

Key Findings in the Manolete Partners Plc Director’s Misfeasance Case

Was there a Breach of Fiduciary Duties?

Deputy High Court Judge David Halpern QC was unequivocal in his findings against Mr Nag. At paragraph [64] he held:

“Mr Nag signed accounts which admitted that Quore was insolvent on the balance-sheet test and he admitted in cross-examination that he knew this to be the case.”

The court found that Nag was aware Quore was insolvent on both cash-flow and balance-sheet tests by late 2012. Despite this, he structured a sale which diverted over £1.26m away from creditors and into his and his wife’s pockets.

At [70], the judge concluded:                                                                             

“Mr Nag knew, when he signed the agreements on 28 March 2013, that the entire consideration for the sale of Quore’s business should have been paid to Quore, that Quore was insolvent, and that it was contrary to the interests of its creditors that any part of the payment should not be paid to Quore. He committed a breach of fiduciary duty in signing documents which diverted a significant part of the purchase price to himself and his wife.”

Preference of Vodafone

One striking element was Nag’s decision to repay Vodafone’s £203,253 loan ahead of all other creditors, motivated by his personal guarantee. The court held this was an unlawful preference, stating at [72]:

“Mr Nag’s duty as director of an insolvent company was to consider the interests of creditors as a class. He committed a breach of that duty by making this payment which was not in the interests of the creditors as a class, whether or not it amounted to a preference under section 239.”

Misleading the Court and Misuse of Bank Details

The court also found Nag had deliberately supplied solicitors with the bank account details of a different company (Q London), leading to £446,746 being misapplied. Judge Halpern QC described Nag as “a thoroughly unsatisfactory and unreliable witness” [47] and concluded his claim of error was “plainly a lie” [50].

Was the Director found Liable for Dishonest Assistance?

Although Amanda Nag was not actively running the business, she signed documents and authorised the transfer of her share of sale proceeds into her husband’s account. The judge accepted she was not inherently dishonest but found her conduct met the test for dishonest assistance. At [89]:

“Her approach was to refrain from considering whether it was right or wrong but simply to do whatever her husband asked. This amounts to wilful blindness, which is not the way that an ordinary decent person would have behaved in the circumstances of this case.”

Accordingly, she was held liable for dishonest assistance and knowing receipt, making her accountable for £1.26m.

What are the Implications for Directors of Insolvent Companies?

The decision has wide-ranging implications for directors and connected parties.

First, it reaffirms that directors’ duties shift decisively towards creditors once insolvency is probable. Even if transactions are formally documented, courts will scrutinise substance over form. Attempts to extract value for shareholders or family members will be unwound.

Second, it highlights that connected parties such as spouses are not immune. Where they sign documents or benefit from misapplied funds, liability may follow under doctrines of dishonest assistance or knowing receipt. This expands the risk profile for family members of directors in distressed companies.

Third, it shows the effectiveness of litigation funders such as Manolete Partners, who take assignments of claims from liquidators. Creditors benefit because funders can pursue complex and costly litigation that an insolvent estate cannot otherwise afford. For directors, this means aggressive and well-resourced claimants are often on the other side.

Finally, the judgment reinforces broader insolvency law trends. Courts consistently disregard technical defences and focus on whether transactions prejudiced creditors. As seen in similar directors’ duties litigation, judges will pierce through contrived structures and prioritise equitable outcomes. At this juncture, it is absolutely essential to engage specialist solicitors who are well-versed in director’s duties.

Defending Manolete Director Claims

Directors facing claims backed by Manolete or other funders must act decisively. As our legal guide to defending claims from Manolete Partners explains, early engagement with specialist solicitors is crucial.

In practice, defences may involve forensic accounting to demonstrate that transactions were commercially justifiable, not undervalue transfers. For example, directors may argue that payments constituted repayment of legitimate loans or genuine remuneration. Proper contemporaneous records are vital to sustaining such arguments.

Another expert defence is to challenge the liquidator’s or funder’s characterisation of insolvency. Timing matters: if insolvency can be shown to have arisen later, the duty to prioritise creditors may not yet have crystallised. Expert financial evidence is often decisive.

For spouses or family members accused of dishonest assistance, the key is to demonstrate lack of knowledge and absence of benefit. Evidence of independent legal advice, arm’s length dealings, or absence of involvement in company decision-making can help rebut liability.

At LEXLAW, our company insolvency litigation solicitors have successfully defended directors accused of misfeasance, wrongful trading, and preference claims. We understand the aggressive tactics often used by Manolete and can deploy procedural tools, such as applications to strike out weak claims or to compel better particulars. Proactive defence also opens up opportunities for negotiated settlements. Funders are commercially driven; demonstrating a robust defence can often lead to significantly reduced settlements or discontinuance. As we have seen in defending directors against wrongful trading allegations, timing, tactics and expertise often determine the outcome. Contact now for tailored legal advice!