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This case centred around a group of companies that manufacture and sell pharmaceutical products. The group was making a claim worth around £4m against an asset based lender.
Our client engaged a company as a distributor and agent to sell its products. The distributor manufactured and distributed pharmaceutical products to retailers and pharmacies such as Boots and Tesco. Monies collected by the distributor from its customers were supposed to be held on trust for our client.
However, the distributor went into administration in February 2020, owing the client around £4m.
This is where the asset based lender comes in. The asset based lender was factoring invoices for the distributor. This involves selling on unpaid invoices to a third-party company for a lower price than they are worth, in exchange for immediate cash.
However, the asset based lender claimed that the monies collected from the customers belonged to them as the factorer (the company providing factoring services).
The legal arguments were very complex and involved novel points on trust and agency law. Court proceedings are ongoing, which is delaying the administration of the distributor and meaning that its creditors, who are owed around £10m, have yet to be paid a dividend. However, the strategy we deployed means that our client will get paid before the other unsecured creditors.
We successfully settled part of the case on confidential terms in 2021, but a dispute regarding the dividend is still ongoing.