The group incorporating claims firm Pure Legal collapsed owing almost £25m to lenders and trade creditors from across the legal sector, administrators have revealed.

An update posted to Companies House last week by Kroll Advisory Ltd confirmed the Pure Business Group, which included Pure Legal and seven other subsidiaries, was running 28,000 cases when it folded earlier this month.

The administrators said that due to SRA regulations governing the company’s operations, the practical obstacles of continuing to run the business and the lack of funding available, it was not possible for the business to continue. The company ceased trading on 2 November, with around 290 staff made redundant.

Work in progress, which has a book value of £46m and is estimated to realise more than £30m, has been farmed out to three firms through specialist outfit Recovery First.

That money should be sufficient to pay the lenders which forced the company into administration after waiting since April for repayment. The likely realisation for unsecured creditors – which include barristers chambers, legal expenses insurers and medical experts – is less clear, with administrators yet to offer guidance.

The administrators’ report is the first insight into what caused the downfall of one of the most prominent claims firms in England, whose founder Phil Hodgkinson is also the chairman of Huddersfield Town Football Club.

The report states that legal costs lender Novitas was owed around £1.85m by mid-October after three loan facilities all expired earlier this year without repayment.

Pure Business Group also owed £6.1m to Perspective Investment Fund Vehicle Limited, which had secured all monies due under a master facility agreement from 2017.

These lenders each issued formal demands to Pure Legal in October for the repayment of their outstanding liabilities. Following a failure to satisfy these demands, an application was made to the High Court seeking an order for administration.

Both Novitas and Perspective should be repaid in full, as should third lender Close Invoice Finance Limited. The latter cross-guaranteed a Coronavirus Business Interruption Loan Scheme loan to Pure Business Group in October 2020.

Debts to preferential creditors, consisting of employee claims for arrears of pay and holiday pay, come to almost £700,000, while more than 80 unsecured creditors are owed a total of £10.8m. This final group, according to the report, includes insurance provider Box Legal (owed £1.15m), PII specialist Elite Insurance (£168,000) and Sheffield law practice PM Law (£145,000). Other law firms and barristers chambers on this list are also owed thousands.

Pure Legal was incorporated in March 2015 and employed 122 people at two sites, in Liverpool and Prescot. Claims were split between cavity wall insulation, mortgage mis-selling and miscalculation, GDPR breaches, holiday sickness and housing disrepair.

Kroll (then known as Duff & Phelps Ltd) was first instructed by Close Brothers in January 2020 to assess the financial situation at Pure Business Group and then to undertake various reviews. In June this year, Kroll was again instructed to complete a review of the operational nature of each legal entity within the group.

Pre-administration costs are estimated at almost £200,000, including legal fees of £115,000 due to DLA Piper and a £25,160 charge to Fieldfisher for fees and disbursements. The joint administrators estimate the expenses of the administration at £790,000.


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