SPECIAL FEATURE by OUR BUSINESS STAFF
The promise of a £6.6 million windfall from the sale of 'air to jet fuel' patents to the state of Israel failed to persuade a judge not to make Avocet Group chairman Martin Frost and his wife Janet bankrupt in a judgment handed down today.
Mr Frost, a self-styled controversial businessman with at least three companies either in liquidation or administration made a last ditch effort to convince the Business and Property Court in Leeds that the release of $20 million from a Texas bank would enable him to settle a £4 million debt being chased by financiers United Kingdom Agricultural Lending Ltd. (UKALL).
But Judge Joanna Geddes dismissed Mr Frost's assertion that the cash would be on its way from the United States if she granted an adjournment of ten or fourteen days. There was also an allegation that Mr Frost was relying on Twenty-first Century alchemy to get him out of trouble.
This was the latest attempt by the Frosts to convince the court that Avocet's intellectual property [IP] would yield sums ranging from $40 million to $100 million. Mr Frost has made similar claims in numerous letters to hundreds of Avocet shareholders.
In a witness statement in April this year as part of evidence aimed at defeating the bankruptcy petition he said the valuable patents were being sold to a major US oil company with the transaction due to be concluded "in a matter of days".
Today's proceedings, conducted via remote links, heard submissions from Mr Frost who was not represented by counsel, and from Jonathan Rodger, on behalf of petitioners UKALL.
Mr Rodger was scathing in his dismissal of Mr Frost's latest assertion. He referred to a letter Mr Frost sent to court on October 11th - the date set by the judge as a deadline for evidence of the Frosts' ability to pay. Mr Frost claimed the money from the sales was being held by America's Frost Bank.
UKALL's counsel told the court there were three over-arching points. "The first one is that there is no evidence of any offer to pay the petitioner's debt, whether that offer be made by Mr Frost, Mrs Frost or a third party. I have taken instruction from my solicitor in the last few minutes and she has confirmed that there has been no offer to pay.
"The second of my three points is that the evidence as contained in Mr Frost’s letter of the 11th October is that he is presently without means. It is clear from that letter that there is a tension between Mr Frost and his advisors arising over fees. You can see that from the first, sub paragraph A. But there is also a plain statement that Mr Frost’s cash position is difficult and that he has no availability on his personal banking or credit cards and he cannot borrow against his unspecified, uncharged UK properties. The starting point is that Mr Frost hasn’t got any means now."
Mr Frost was not saying that he had means, he was making an assertion of the following facts: that there is a company called Avocet Natural Capital Plc [ANC], that company owned the intellectual property in a technology that allowed air to be turned into aviation fuel; that company had sold the technology to the state of Israel and that company could properly, and would, pay a substantial part of the proceeds of sale to Mr Frost.
Mr Rodger continued: "Now, ANC is a corporation registered and domiciled in the UK, in England and Wales, the record shows that and the record shows that Mr Frost is a director of ANC but also that he is one of 697 shareholders. In my submission the factual assertion put up by Mr Frost, which I have just summarised, inherently is implausible.
"There is no bank statement from any bank holding all of this money belonging to ANC. The availability of such a bank statement ought not to be a matter of difficulty. Bank statements are more readily available these days than at any other time in history. Second, Mr Frost is a director of ANC Plc, third on his own account he has some good connection with the eponymous bank holding all of this money. There are no documents at all from Frost Bank.
"There are no transaction documents, by which I mean documents effecting the sale of $40M of intellectual property to the state of Israel. The idea that such a transaction would not have generated a forest of documents is absurd. There is no evidence that any money transfer from the Frost Bank to Mr Frost is in progress. There are no minutes of the board of ANC or of a shareholders meeting of ANC approving the disposition of such an enormous amount of ANC’s money to Mr Frost. Obviously for a company to just give $6.1M of its money to a director is an eyebrow raising thing which ought properly to be done with attending formality.
"And finally, there’s no copy of the written confirmation of this favourable decision from the Texan taxation authority – all of this could have been produced to you. I’m afraid that it’s my submission that Mr Frost’s letter of 11th October and his assertion that essentially 21st century alchemy is going to put $6.1M in his pocket is fanciful and utterly without substance. My submission is there is no good reason, no basis for not making a bankruptcy order here and now."
In response, Mr Frost claimed there had been an embargo in place that there should be no mention of the state of Israel. Counsel for UKALL had broken that embargo in a public forum.
Mr Frost added that Israeli security services had been involved in the transaction. ANC had a number of prominent Islamic shareholders, and "one did not want a big announcement that this technology was being sold to the Israelis".
Judge Geddes said Mr Frost had contended he would have the benefit of £6.6 million from the sale of IP and that he could then pay the petitioner's debt. But despite the significant sums of money and significant transactions Mr Frost had not provided evidence to back up his claims.
The judge continued: "This is not the first time this has happened. Mere assertions are not enough. I am not satisfied he can pay or will be able to pay the debt in reasonable time, and therefore I make Mr and Mrs Frost bankrupt".
Mr Frost immediately indicated that he would be appealing the decision in a higher court.
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