Costs of administering the closure of a Liverpool firm have increased by £100,000 in six months and creditors have been told they may be left further out of pocket, the Gazette has learned. 

A progress report written by administrator Quantuma into First Stop Legal Services Limited (trading as GT Law) was published last week, warning that costs are mounting from the shutting down of the firm.

A similar report, covering the six-month period up to the end of September 2016, stated that expenses incurred up to that point were £137,604. The firm went into administration in October 2015 blaming a failed group litigation and costly civil litigation reforms.

Expenses have now escalated to almost £240,000, partly due to previously unforecasted costs associated with monitoring the assigned files, including on-site visits and audits of the acquiring firms.

Significantly higher costs have been incurred in dealing with creditors’ claims, predominantly due to the high-volume nature of the business and thousands of disbursements which were unpaid or ended up costing more than expected.

It is also understood that administrators' legal costs are more than 50% higher than first estimated after ‘significant’ additional regulatory reporting required by a number of claims for professional negligence being made against the company.

While expenses increase, so to have claims from unsecured creditors – and in turn their prospects of recovering anything like what they are owed is diminishing. This group was told in September that the dividend would be around 12p in the pound; that figure is now revised to 6.47p in the pound.

Administrators originally estimated unsecured claims of £519,502: these now exceed £1.3m.

The administrators have recovered work in progress from the assigned client files and the company’s settles cases, with around £726,000 received to date. It is expected the caseload will realise £950,000 overall.

Three firms, IC Law Solicitors, Pilkington Shaw Solicitors and Neumans LLP, acquired various parts of the business when it went into administration. The two group actions involving GT Law, Sonae and Mau Mau, were assigned to IC Law Solicitors and the company will receive a pre-defined percentage of any recoveries resulting from success in these cases, although they are likely to run for some time.

Meanwhile, unsecured creditors have made 47 claims to recover £1.5m total debts from personal injury firm Prolegal, which was rescued through a pre-pack administration last October.

Administrator Quantuma, which is also handling the firm’s affairs, said in its latest progress report creditors will receive a dividend of just 1.9p in the pound.

The sale to Garrnasillagh included the figure of £189,000, a sum which has now been received. The sale included an assignment of the work in progress, with 30% of WIP recovered by the buyer being paid to the administrators.