A law firm is taking legal action against renowned criminal solicitor Karen Todner over the disastrous fallout from the deal to buy her practice.
One Legal Services, which acquired London firm Kaim Todner Solicitors in 2016, has issued proceedings in the High Court against Todner and four other parties, over what was disclosed during the sale process. The claim seeks damages for breach of warranty and/or an indemnity contained within a share sale agreement; declaratory relief; an injunction; and damages for breaches of covenants. The claim is understood to be worth around £6m.
Todner, who left One Legal in 2017, has filed a full defence and counterclaim. She also has an employment claim against the firm which is due to be heard later this year.
The dispute dates back to March 2016, when One Legal – co-founded by former Stobart Barristers director Trevor Howarth – snapped up the criminal defence practice.
In its claim form, seen by the Gazette, One Legal outlines how Kaim Todner had already entered a company voluntary agreement with creditors in June 2012. It is alleged that Todner and her advisers said during meetings leading up to the acquisition that total liabilities amounted to £1.2m, with work in progress of at least £850,000.
One Legal says it was ‘entirely reliant’ on information provided by the selling party as there was no time to undertake due diligence.
It is alleged that Todner artificially caused the value of the company to be overstated, and failed to disclose the existence or amounts involved of a ‘significant’ number of separate business expenses.
The claim form alleges: 'The company at the instigation of [Todner] had adopted the repeated practice of causing cheques to be drawn on the company's principal account held at the bank but not delivering the same to the payee or the payee's agent. Rather, [Todner] caused such cheques to be stored in a drawer.' The claim states the total value of undelivered cheques was £275,000.
It is further alleged that Todner failed to disclose liabilities to the Legal Aid Agency and that certain files – including that of the Gary McKinnon case, which propelled Todner into the national media – were loss-making. The claim alleges ‘numerous’ sums owed to the company were in fact irrecoverable, and that management accounts wrongly stated the goodwill of the company was £662,000, when in fact it was zero.
The claim also cites the SRA’s decision in February 2017 to rebuke Todner and fine her £2,000 for failing report to the Solicitors Regulation Authority indicators of serious difficulty arising during 2012. Todner is a former solicitor vice-president of the Solicitors Disciplinary Tribunal.
Todner told the Gazette she has filed a full defence and counterclaim and is making an application for security for costs, as One Legal has itself entered into a company voluntary arrangement.
She added: ‘Mr Howarth and I have different recollections of the negotiations for the sale of a company, which took place over the course of one week in March 2016, and of which I had already announced I was going to close.’ She said her employment claim includes a claim for making protected disclosures as a whistle-blower. Howarth says there is no basis for this claim.