The administrators of Pure Legal have now received claims from unsecured creditors worth nearly £38m – and almost none of it will be repaid.
It marks a huge increase on the £23m in unsecured creditors in the directors’ statement of affairs.
Regulated law firm Pure Legal was the principal trading entity of the Pure claims group, eight of whose constituent businesses went into administration in November 2021, putting more than 200 people out of work.
In its initial report the same month, the administrators at Kroll said they anticipated there would be a distribution to unsecured creditors but could not say how much.
However, after six months they said they now expected there would be “insufficient realisations” from Pure’s work in progress to pay anything to unsecured creditors other than by virtue of the prescribed part – and this position has not changed in the latest report.
The prescribed part is the portion of funds available to unsecured creditors realised from assets subject to floating charges; it is a maximum of £800,000.
In the first year, Kroll has realised £6.2m, although the total of potentially realisable assets is £40m, mainly made up of £30m in work in progress – Pure had 20,000 cases on its books at the time of the administration – and £8m in disbursements.
But the cost of those realisations was £4.8m, including £1.1m in Kroll’s fees – which are capped at £2.3m in total, plus pre-administration costs of £412,000 – £647,000 in fees for the solicitor manager of the practice and £587,000 in legal fees.
The administrators said their view was that recoveries “may be significantly lower” than £40m – although it remained a “very fluid” situation that was “highly dependent” on the pursuit and outcome of cases and ongoing negotiations with after-the-event insurers, litigation funders and the law firms on the Recovery First panel that took on the cases.
Of Pure’s secured creditors, Novitas is owed more than £1.8m loaned under three debentures and the report said one for £1.2m – which ranks first for repayment – should be repaid in full.
At the same time, any funds payable under it will go to Novitas and the Coronavirus business interruption loan scheme – under which Pure borrowed £4.6m – on a pari passu basis.
A funder called Perspective ranks next and the £6.1m it is owed is likely to be repaid in full. Any remaining recoveries will again be shared between Novitas and the coronavirus scheme pari passu.
As preferential creditors, the Redundancy Payments Service (owed £54,000) and HM Revenue & Customs (owed £524,000) are likely to be repaid in full.
In 2021, Pure sold specialist injury firm Pryers to Switalskis and Pure was due to receive £1m of deferred consideration on 1 April 2022, subject to the firm’s financial performance in the first year. But Switalskis said these targets were not met and so nothing was payable.
The joint administrators said they were still in correspondence with the firm “in order to determine the monies owed”.
Kroll said it was continuing to investigate the company’s affairs and was “forensically analysing” Pure’s electronic records and bank statement. But it would not say any more.
The administration is due to end on 1 November 2023.