Manolete Partners Plc v David Smith

Manolete Partners Plc v David Smith

The payments by A & D Joinery Limited to David Smith were transactions at an undervalue because the company received no realisable or equivalent value in return; the consideration (Ventures' obligation to repay) was speculative and ultimately worthless. The company was insolvent at the time or as a result of the payments. David Smith breached his fiduciary duties by authorising the payments for his own benefit without proper regard to the company's or creditors' interests. The s.238(5) defence failed as there were no reasonable grounds to believe the transaction would benefit the company, and it was not in good faith for the purpose of carrying on the business.

Parties
Applicant: Manolete Partners PLC; Respondent: David Smith
Jurisdiction
England and Wales
Judgment Date
07 May 2026
Procedural Posture
Insolvency Application (transaction at Undervalue) / Judgment After Trial
Outcome
Claim allowed for transaction at an undervalue and breach of duty (in part)
Legal Topics
Transaction at Undervalue, Breach of Fiduciary Duty, Section 238 Insolvency Act 1986, Section 171 175 Companies Act 2006, Balance Sheet and Cashflow Insolvency, Directors' Duties, Pari Passu Principle
Insolvency Company Law Transaction at Undervalue Breach of Fiduciary Duty Section 238 Insolvency Act 1986 Section 171 175 Companies Act 2006 Balance Sheet and Cashflow Insolvency Directors' Duties +1 more

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Parties

Manolete Partners PLC

Applicant

David Smith

Respondent

Procedural Posture

Insolvency Application (transaction at Undervalue) / Judgment After Trial

Legal Issues

  1. 1 Whether payments by A & D Joinery Limited to David Smith were transactions at an undervalue under s.238 Insolvency Act 1986
  2. 2 Whether David Smith breached his fiduciary duties as director in authorising the payments
  3. 3 Whether the s.238(5) defence applies to bar relief

Ratio Decidendi

The payments by A & D Joinery Limited to David Smith were transactions at an undervalue because the company received no realisable or equivalent value in return; the consideration (Ventures' obligation to repay) was speculative and ultimately worthless. The company was insolvent at the time or as a result of the payments. David Smith breached his fiduciary duties by authorising the payments for his own benefit without proper regard to the company's or creditors' interests. The s.238(5) defence failed as there were no reasonable grounds to believe the transaction would benefit the company, and it was not in good faith for the purpose of carrying on the business.

Court Disposition

Claim allowed for transaction at an undervalue and breach of duty (in part)