The joint administrators of Ince & Co have been granted permission to apply to stay or dismiss claims brought against them in France by the former French partners of the City law firm.
Insolvency and Companies Court Judge Barber approved their application given to challenge the French court’s jurisdiction, in a ruling that detailed the allegations of the French partners about the actions that led them to leave the firm, which was sold to listed law firm Gordon Dadds (GD) at the turn of 2019.
Ince & Co went into administration on 31 December 2018 – the group was made up of three firms, the two relevant ones here being Ince & Co LLP, which operated the UK practice and Chinese branches, and Ince & Co International, which oversaw the remaining international offices.
The six respondents to the administrators’ application were members of the international LLP and are all partners of Stream, the firm with offices in Paris, Le Havre and Marseille formerly known as Ince & Co France.
Judge Barber recounted how a merger with GD (now known simply as Ince) was planned for 31 December but did not go ahead for reasons that are “the subject of dispute between the parties”.
The deal ultimately proceeded by way of pre-pack administrations, but neither Stream nor the respondents agreed to join GD.
The respondents have issued a ‘notice of summons’ against the joint administrators at Quantuma and the Royal Bank of Scotland (RBS) in the Judicial Court of Nanterre, with the aim of joining them to an action brought by another former Stream partner against the respondents.
Judge Barber said: “Whilst the basis of [the] claim against the respondents is not entirely clear, it appears to include an allegation that the insolvencies of London LLP, International LLP and certain related entities were ‘orchestrated’ by GD, Quantuma and the Royal Bank of Scotland with the complicity of the management of London LLP and International LLP, with a view to facilitating pre-pack sales on terms highly favourable to RBS and certain partners of the LLPs.”
She said the respondents denied any wrongdoing “and in broad terms maintain that they were kept in the dark as well”.
They argue instead that a key term of the proposed merger was that GD would repay to RBS the professional practice loans take out by the partners and guaranteed by London LLP, and it was only on 2 January 2019 that they learned the merger had not taken place and that instead on 31 December 2018 the LLPs had been placed into pre-pack administrations.
The respondents allege that, prior to the administrations, GD organised the transfer of the partners and staff of London LLP to itself for its own benefit, by means of the powers given to it by each of the partners for the sole purpose of finalising the envisaged merger; and that GD struck a deal with RBS to pay off only the loans of those LLP partners joining GD.
They claim that this enabled GD “to empty Ince & Co of its substance and to then acquire the residual assets [via the pre-pack administrations] at a knockdown price”, and exposing those partners not joining GD to recovery action by RBS in respect of their loans.
They further maintain that this all left creditors (including themselves) facing significantly diminished prospects of any dividend from the LLPs.
The relief sought against Quantuma and the joint administrators in the notice of summons includes an indemnity in respect of any judgment entered against the respondents on the principal claim and damages for the loss suffered “owing to the fraud”.
Judge Barber recounted that the administrators and Quantuma dispute the allegations and “vehemently deny any wrongdoing”.
She said: “They maintain that the pre-pack transactions were negotiated at arm’s length and were market standard. They have adduced evidence confirming that the pre-pack pool did ‘not [find] anything to suggest that the grounds for the proposed pre-packaged sale outlined in the application [were] unreasonable’.”
They submitted that the French proceedings were “contrived” and sought simply to ensure that the loans were paid off.
In any case, they said the French court has no jurisdiction to entertain the claims, arguing that the proceedings concerned matters which should properly be dealt with by the English courts.
Judge Barber agreed. She said the respondents’ complaints were essentially attacks on the pre-packs and that the proposed application was “necessary or expedient for the management of the affairs, business and property of the LLPs”, as permitted by the Insolvency Act 1986.
There was “clearly a jurisdictional issue to be raised and resolved with the French court”, and it was right that the administrators of the London LLP should raise it.
Judge Barber ruled they were at liberty to apply to the Judicial Court of Nanterre for a stay or dismissal of the respondents’ claims against them on jurisdictional grounds, and should be indemnified out of the estate of London LLP in respect of all costs and expenses incurred in that application up to £100,000.