Avocet chairman was hit with £2 million demand from liquidators

 EXCLUSIVE by OUR BUSINESS STAFF

Martin Frost, the one-time head of the Avocet Group of businesses, faced claims from his parent company's liquidators for the repayment of more than £2 million following an investigation of the firm's affairs, according to court documents seen by Not Just Sheep & Rugby.

Items listed in a so-called Letter of Claim, sent to Mr Frost on behalf of insolvency practitioners Joanne Hammond and Ashleigh Fletcher, liquidators of Omega Infinite PLC, in September 2021 included an overdrawn Director's Loan Account [DLA] with a deficiency of £1.176 million.

The 12-page letter also details a number of other financial transactions said to have involved Mr Frost - now bankrupt - which were of no material benefit to shareholders in the company. Omega was supposed to be developing a revolutionary green fuel before it folded, and had attracted millions of pounds of investment by some 650 shareholders.

The document formed part of the evidence placed before Judge Christopher Royle in the Leeds courts in a bid by the liquidators to repossess two luxury flats in Scarborough, said to have been purchased by Mr Frost for £425,000 using company funds.

But in a witness statement, Mr Frost claimed the £2 million demand - to be paid within 28 days - had been "based on a fabricated Omega Frost loan account".

Omega was wound up by a court order following a petition presented by law firm Fieldfisher - a creditor with unpaid solicitors' bills - in November 2019. The joint liquidators were appointed with effect from April 2020, and they embarked on a year long inquiry into Omega's activities before the Letter of Claim was sent to Mr Frost.

It states: "Our clients have investigated the Company's affairs in accordance with their statutory and professional duties. In light of those investigations, it appears there are claims which should be pursued against you and your fellow directors."

After setting out the duties and responsibilities of company directors, the letter declares: "At such times as you knew or should have known that the Company was insolvent, or likely to become insolvent, your duties extended to acting in the best interests of the Company's creditors as a whole. We consider that you knew or should have known the Company was insolvent from 10 January 2017, if not before".

The reasons why Mr Frost should have realised Omega was 'bust' are then set out in some detail. These include:

"On 10 January 2017, the Company entered into an agreement with Mr Glyn D. Short (an inventor and developer) that the Company would pay Mr Short a consultancy fee of $5,000 per month commencing that month. The Company made two such payments in January and February 2017 but did not make any payments to Mr Short from March 2017 onwards. The amount outstanding to Mr Short upon the Company's winding up was $110,000.

"On 14 March 2017, the Company entered into an agreement with AFS Ventures Plc (in liquidation) pursuant to which it agreed to pay the sum of £493,000 by way of further consideration for the purchase of certain intellectual property rights within 12 months (so by 13 March 2018). The Company has not
made any such payment either by the date it was due or since."

As such, say the liquidators, the company was unable to pay its debts as they fell due from 10 January 2017 and they consider Mr Frost knew or should have known this was so.

"The above matters are based upon the proofs of debt received to date. A number of creditors have not yet submitted proofs of debt and, as such, it is anticipated that there will be numerous further examples of the Company's inability to pay its debts. [The liquidators] further reserve their position as to when the Company became insolvent on a balance sheet basis (indeed if it was ever so) as there appears to be significant doubt about the value of the Company's assets."

It is explained that Mr Frost was also a trustee of such of the Company's property as was in his possession or control, including the Company's money, and he owed fiduciary duties to the Company in that capacity.

The liquidators then outline the basis upon which they consider that the Avocet chairman had breached his duties to the company and the consequences of such breaches.

In a judgment delivered last week, District Judge Royle ruled that Mr Frost had indeed breached fiduciary duties by using money from the business to pay for the two Scarborough apartments.

According to the judge: "There is nothing before me which persuades me that the payments were made other than in breach of Mr Frost's duties as a director. There is, as Mr (Steven) Fennell [counsel for the liquidators] has pointed out, no proper evidence of shareholder approval, board approval, or that Mr Frost did anything other than use monies invested in Omega".

In a witness statement dated May 16th, 2023, Mr Frost hit out at the application to have the flats repossessed.

He wrote: "I admit that in recent weeks I have worked with retired UK judicial members, retired counsel and solicitors, the UN in Geneva, US authorities in Wilmington and members of the Israeli intelligence services to proffer fact finds on (a named solicitor) and the liquidators of Omega Infinite PLC.

"Such fact finds do reveal that (a named solicitor) and the liquidators fabricate evidence to mislead Leeds High Court - details of which are due to be privately given to the UK PM next week along with Leeds High Court".