Medhotels founders John Kent and Ian Brooks are being sued for £8 million by senior Argo Holidays executives over the sale of the accommodation-only firm to Lastminute.com in December 2003.

Argo executives sold a minority stake believed to be between 30% and 40% in Medhotels to investment firm Barclays Ventures for £2 million three weeks before Medhotels was sold to Lastminute.com in a deal worth up to £22.6 million.

Argo executives, led by majority shareholder George Loss and chief executive Akis Christoforou, are claiming that Kent and Brooks knew of the Lastminute interest for the entire company when they told them about the Barclays Ventures bid, but did not inform them.

A source told Travel Weekly Argo representatives invested around £300,000 in Medhotels.

Barclays Ventures is believed to have made around £5 million from the Lastminute.com deal after owning the stake in Medhotels for just three weeks.

Kent, who now runs new accommodation-only provider Youtravel.com, which received funding from Barclays Ventures, described the case as “weak”, claiming there was no bid from Lastminute.com at the time of the Barclays Ventures offer.

“It will be dropped,” Kent said. “They have seen all the documents from Lastminute, Barclays Ventures and us but have found nothing.”

However, an Argo Holidays insider believes the case, which is due to be heard in May, is strong.

Travel Weekly understands Argo’s lawyers have taken the case on a ‘no win no fee’ basis, suggesting they are confident of successful outcome.

Argo Holidays and Brooks declined to comment on the case.