Administrator warns ex-Halliwells partners of future claims

FORMER partners of collapsed law firm Halliwells have been warned by administrators that they face the prospect of court action to recoup unpaid capital contributions and overpaid drawings, as well as potential breaches of duty.

Joint administrators Dermot Power and Shay Bannon of BDO have written to former partners to inform them that it is investigating a number of issues, including the firm’s drawings policy and the timing and level of payments made to them.

It is believed to have taken action much earlier in the administration process than usual as a result of ongoing mediation between ex-Halliwells partners and the landlord of the firm’s former St James’s Court headquarters on Brown Street in Manchester, to whom former partners reportedly owe around £3m.

Himor Group began legal action against ex-partners shortly after the firm was placed into administration and ex-partners are understood to have signed personal guarantees for the lease following the practice’s conversion from its partnership model to a limited liability partnership.

Mr Power told TheBusinessDesk.com that he had written to former partners to “inform them of the areas I am looking at”.

Many of the ex-partners have taken legal advice in respect of their liabilities and  resigned from the board of the Halliwells limited liability partnership after it was placed into administration.

An initial round of mediation in the former partners’ dispute with Himor has already completed and a second round is due to take place shortly.

However, the administrators’ letter will serve as a reminder of their liabilities to the firm which, if not met, could lead to potential bankruptcies.

Mr Power said that although the warning of potential action was being taken quite early in the process, after three and a half months the administrators “already have a good feel for where the liabilities are”.

“We don’t want to damage people’s ability to earn a living, particularly as we rely on that for future repayments”.

However, he added that his job as the officer in charge of the bankrupt firm’s affairs was to “realise maximum value to all of the creditors” as opposed to one individual creditor.

Joint administrators began working with Halliwells in May and managed to put together an 11th-hour deal prior to placing the business into administration which saw the practice effectively being subsumed into three other firms.

Hill Dickinson took on the firm’s Liverpool and Sheffield offices, Barlow Lyde & Gilbert acquired its insurance business and HBJ Gateley Wareing picked up the remainder of its Manchester operations, including its corporate, real estate and insolvency arms, enabling it to launch a new Manchester office.

The deals raised a combined £7m to pay down part of the debt which was owed to its bank, Royal Bank of Scotland.

An administrators’ report filed at Companies House in September showed that the firm owed the bank £17.7m. It also owed £14.1m to trade creditors.