A costs firm folded owing almost £1.6m just over a year after being resurrected through a pre-pack administration deal.
A notice of administrator’s proposals for Just Costs Solicitors Limited, filed with Companies House by insolvency firm Leonard Curtis, reveals the company struggled to shake off cashflow issues and was soon in trouble with its landlord and the taxman.
Administrators confirmed the company has insufficient property to enable any payment to unsecured creditors, with no requirement therefore to seek their approval.
The company, which has strong links to the personal injury sector, turned over £2.15m for the 11 months ended 30 September 2018, according to financial results included in the report. But over the same period the company lost £380,000 as administrative expenses outstripped profits.
Just Costs Solicitors Limited was incorporated in 2006 but remained dormant until the purchase of the business and assets of Just Costs Limited and Just Costs Management Limited in October 2017. Solicitors Jodi Booth and Adam Quinn joined Paul Shenton as directors, although both resigned from their posts in December 2018. The company traded from offices in Manchester and London, and was primarily funded through a finance agreement with lenders Close Brothers, which holds security over all Just Costs’ assets.
Just Costs Solicitors experienced ‘significant cashflow pressures’ after it commenced trading due to reduced turnover as a result of legislative changes in the sector. The administrators reported that slow payment of debts due to the company contributed to cashflow issues.
When administrators were appointed, Just Costs Solicitors still owed around £740,000 to the previous entities bought out in 2017. It had also fallen behind in its obligations to HM Revenue & Customs, with debts of £262,000 as at November 2018, and owed money to its landlords, with the quarter rent due in September remaining unpaid.
By the end of the year cashflow forecasts could not cover future wage payments and the company had received notice from its landlord to forfeit its lease.
A total of 11 unconnected parties contacted Leonard Curtis expressing interest in certain company assets. An offer from Recovery First proposed to split the caseload between six panel firms.
It is anticipated Close Brothers will be repaid in full under their fixed charge, with staff expected to receive their full claim of £45,660 in wages, accrued holiday pay and pension contributions.
Leonard Curtis is expected to receive £26,000 in pre-administration costs, representing 66.5 hours at an average rate of £396.