A personal injury firm spiralled into insolvency when creditors changed their approach and started calling in debts, according to an administrators’ report suggesting that suppliers to the sector are becoming less willing to grant credit. 

Inquesta Corporate Recovery was appointed in December to handle the affairs of Wigan firm Woodwards Law Ltd after it could no longer withstand changes to the PI market. A notice of administrator’s proposals published this week revealed that the attitude of creditors had recently changed, placing the business under strain.

‘Creditors like doctors and barristers started to pursue Woodwards for any unrecovered fees even though for many years they had just written off the fees on unsuccessful cases,’ said the report. ‘An out of court settlement with doctors in the sum of £325,000… increased the financial burden of the company and more claims were expected from the same creditor on other types of claims.’

The note suggests that personal injury firms are not only facing dwindling income streams but also that cash-strapped medical reporting companies and chambers are being more pro-active about recouping outstanding debts.

Woodwards, which was incorporated in 2012, had largely worked on RTA claims but had tried to branch out to other types of claims such as holiday sickness, starting to invest in this line from around 2015. Administrators reported that most of the invested money was lost due to a ‘significant change’ in the burden of proof of such cases.

As recently as the year to June 2021, the firm was reporting a profit of £169,000 based on almost £2m turnover, with 40 staff employed. But despite income remaining steady in the last six months of 2023, administrative expenses increased and the firm posted a loss of almost £50,000 for the period.

By the end of last year, Woodwards was not able to meet payment obligations and was mindful of possible legal action from creditors, so it sought advice from Inquesta.

In an effort to improve cash flow, the company had applied for a coronavirus business loan from Natwest Bank. Funding was secured to ensure the firm could trade for a few months, but it became clear that there was not scope to repay any further loans or to finance facilities.

Administrators said the firm sought to contact major creditors, but no agreement was made and the management pursued insolvency proceedings. The directors agreed the best option was to enter administration and transfer all cases to different specialists. Richmond Legal took over PI work, ABH Law was transferred conveyancing cases and KJD Law is handling all other live claims.

Unsecured creditors are owed around £352,000 and are unlikely to receive any repayment. A similar amount is owed to HM Revenue & Customs.

 

This article is now closed for comment.