Nine former partners of collapsed firm Halliwells have defeated a court bid by the firm’s liquidator to claim back hundreds of thousands of pounds from them in allegedly overpaid drawings.
Halliwells, formerly one of the UK’s biggest regional law firms with 100 partners and 600 staff, collapsed early in 2010 following a steep decline in profitability resulting from the recession. It was broken up and several other firms acquired parts of the business.
The case involved former partner Steven Fennell, who was used as a test case for eight other fixed-share members of the limited liability partnership. All left Halliwells for Kennedys, having entered into a retirement deed with the former.
BDO claimed that Fennell owed over £101,000 resulting from drawings having been made on account of profits that were never made. It claimed that because Halliwells made ‘substantial losses’ from May 2009 to April 30 2010 and thereafter until entering administration on 20 July 2010, Fennell was not entitled to take drawings as a fixed-share member.
In a written High Court judgment however, His Honour Judge Hodge ruled that ‘the wording of the retirement deed, and its effect, are clear’.
He added: ‘The LLP thereby waived and released any claim to pursue Mr Fennell (and the other departing fixed-share members) for any overpaid drawings and any overpaid tax.’
The judgment also updates other unresolved matters relating to Halliwells’ collapse. Secured creditor Royal Bank of Scotland is owed £17.7m and unsecured creditors £203m.
Claims (or possible claims) against former LLP members include: claims for overdrawn current accounts and tax reserve accounts against 150 (the category into which this case falls); claims against 32 former members (not including Fennell) for recovery of a £20m ‘reverse premium’ which the partners shared when the firm moved into new premises in Manchester; and possible liquidators’ claims against 150 members under the Insolvency Act 1986.
Dermot Power, joint liquidator of Halliwells LLP, said: ‘The judgment is only relevant to a small number of fixed-share partners – nine out of a total of 150 – and relates narrowly to the provisions of their retirement deeds. The judgment ruled that the joint liquidators could not pursue claims against these partners to recover overdrawings.
‘The decision has not been accepted by the liquidators’ legal counsel.
‘In the meantime, the joint liquidators continue to pursue multiple other avenues to maximise recoveries for creditors, including action against partners who have sought immunity from liquidation claims.’