National firm TLT has been instructed to defend 26 former partners of Halliwells against millions of pounds in claims brought by the defunct Manchester firm’s liquidator.
The dispute has been ongoing since Halliwells became the biggest legal casualty of the economic crisis of 2008/09 when it collapsed in summer 2010. Former fixed-share partners are being pursued for repayment of drawings and tax payments, and a contribution to the firm’s losses made in the run-up to Halliwells’ demise.
TLT said the claims are based on fixed-share members’ purported knowledge of the firm’s insolvency before it entered a formal administration process. Those members, who dispute they had any such knowledge, were previously represented by Irwin Mitchell.
Following Halliwells collapse attention immediately focused on the legacy of a multi-million-pound reverse premium paid to the firm some years before when it agreed to move into headquarters (pictured) in Spinningfields, dubbed Manchester’s ‘Canary Wharf’.
About 75% of that premium, understood to exceed £20m, was distributed to equity partners, most of who are understood to have left the firm before it fell into administration.
The firm was subsequently run on borrowed money, with RBS taking a security over its assets. RBS was left with outstanding loans of £18m when the firm went into administration.
John Lord, commercial litigation partner at TLT and lead partner on the case, joined TLT from Irwin Mitchell in 2013. He said: ‘Having reviewed all the documents, there can be no doubt that full and frank disclosure of the firm’s financial position and the reverse premium was not given to fixed-share members. This is the corner stone of the fixed-share members’ defence.
‘It will also present some difficulties for those who failed to comply with their duties to other members.’
TLT said the case will also seek to get clarity on the specific claims against each fixed-share member.
It alleged that much of the delay to date has centred on the liquidator not responding to multiple pre-action disclosure requests for this information, with some requests having been outstanding for four years. 'Instead, the liquidator has taken an approach that fails to recognise that different partners retired from the LLP at different times,' TLT said.
John Lord added: 'This case rests on who knew what and when. The liquidator therefore has to accept that properly articulating his claims against each member based on the dates when that member retired from the LLP is absolutely essential.'
A BDO spokesperson said the firm does not comment on ongoing litigation.
TLT is also instructed to represent Stephen Fennel and seven other former Halliwells partners at the Court of Appeal at the end of this month. This follows the liquidator's decision to appeal last October's High Court ruling that the group could not be pursued for drawings and tax.
The group of partners resigned from Halliwells to move to Kennedy's Sheffield office, six months before Halliwells filed a notice of its intention to appoint an administrator.
That dispute concerned whether the retirement deed they negotiated on departure protected them against any subsequent claims to recover monies paid to them by Halliwells. The eight partners involved, who were also represented by Irwin Mitchell previously, are Stephen Fennel, Judith Bloor, Cameron Clarke, Niall Edwards, Suzanne Liversidge, Helen Snowball, Heidi Swales and Gregor Woods. TLT partner Julien Luke is advising.
Note: This article was amended on Monday 13 April. Contrary to TLT's statement, David Fearon is not and has never been a party to the litigation due to progress at the Court of Appeal. He has asked the Gazette to make this clear.