KPMG drops £50m Lexi claim against Pannone

ADMINISTRATORS handling the collapsed property finance company Lexi Holdings abandoned their £50m claim against law firm Pannone days before the dispute was due to go to the High Court.

Lexi, led by managing director Shaid Luqman, failed in October 2006 with debts of more than £100m.

Administrators at KPMG were pursuing four separate negligence claims against the firm’s advisors including one against Pannone which worked for Lexi from July 2001 to April 2004. Allegations of breach of contract and professional negligence were to be heard at trial scheduled to start today.

KPMG claimed that Pannone, which advised Lexi on bridging loans and credit facilities from Barclays Bank, allowed Luqman to misappropriate around £50m of assets and unlawful loans.

KPMG and Pannone reached an agreement last week. Pannone said it had not paid damages and each side will cover their own costs.

Simon Pedley, partner in Pannone’s dispute resolution group, said: “The claim, which wrongly called into question our competence and integrity in a quite unjustified attempt to extract significant damages, should never have been brought in the first place.

“We are delighted that the administrators have dropped this baseless claim. Pannone has not paid a single penny in damages and we are pleased that common sense has prevailed.”

Brian Green, joint administrator of Lexi Holdings and partner at KPMG, said: “We can confirm that the administrators of Lexi Holdings have agreed a settlement with Pannone. This was a commercial decision, which will allow us to focus on the ongoing administration.

“The administration of Lexi Holdings was incredibly complex, comprising several areas of litigation including professional negligence claims. Significant sums of money have been received in respect of these other claims, and we continue to realise the remaining assets for the benefit of the creditors.”

A creditors’ report filed in November showed KPMG had recovered £3.85m from other negligence claims. Administrators have so far recovered around £42m, but the cost of achieving this has topped £25.1m, a figure which includes legal fees of more than £10m and KPMG’s own bill of £7.1m.

Lexi collapsed weeks after Shaid Luqman – once an award-winning entrepreneur and a frequent member of national newspaper Rich Lists – was banned from acting as a company director for a maximum of 15 years for his conduct in running another business, Modern Living UK.

In 2009 Luqman was released from prison after serving a second sentence related to the demise of the company. He was jailed for 12 months in March 2009 for failing to comply with various court orders relating to Lexi’s collapse.

Mr Luqman, his father and three siblings are facing court judgements for debts worth a total of £260m. Judgements have also been obtained against 15 related parties and associates as the administrators seek to claw back assets. Administrators are also chasing assets in Pakistan.