Michael Green QC has successfully defended his client, Mr Robin Ellis, from a claim brought by AIM-listed insolvency litigation funders, Manolete Partners PLC. Manolete bought the claims of the liquidators of Bright Future Software Limited, which went into liquidation in February 2016. The company was the brainchild of Mr Ellis’ partner, Ms Eudie Thompson, and it was a socially worthwhile venture aimed at providing employment and training in software development to young people in deprived areas of the North West. It was supported by a grant and loan from the Regional Growth Fund. Mr Ellis himself put in some £2 million to fund the venture which he lost. Ms Thompson was the chief executive and the majority shareholder. Mr Ellis was appointed as a non-executive director and he had no involvement in the running of the business.

The main claim pursued against Mr Ellis was for wrongful trading under s.214 of the Insolvency Act 1986. Manolete was claiming that Mr Ellis should have stopped the company trading from 31 January 2015 at the latest and his failure to do so meant an increase in the company’s deficiency by over £6.5 million. Mr Richard Spearman QC, sitting as a deputy High Court Judge in the Chancery Division, dismissed that claim in its entirety holding that: “It would, in my judgment, be very harsh on Mr Ellis if he was held liable for wrongful trading on the facts of this case. He was not irresponsible, and nor did he close his eyes to the reality of BFS’ position, or allow BFS to carry on trading after it was or should have been obvious to him that BFS was insolvent and had no reasonable prospect of trading out of difficulty.

The Judge also dismissed a claim for £325,000 brought under s.238 of the Insolvency Act 1986 (transaction at an undervalue) and for breach of duty. He allowed one small claim for a preference under s.239 of the Insolvency Act 1986 in the sum of £188,769.

The full judgment is available here