Administrators and lawyers handling the affairs of a collapsed legal funder have incurred extra costs because of the refusal of its managing director to engage.

Affiniti Finance Limited, once one of the biggest lenders to the legal sector, went into administration in November 2021 owing £43m to its main backer.

According to the latest administrators’ progress report from insolvency firm Quantuma, the situation regarding payment of debts is still not resolved and has been ‘significantly hampered by the lack of cooperation’ from the company’s managing director, who has yet to answer any of the administrators’ questions.

The report states: ‘The managing director has yet to provide any material information to the administrator, nor has he agreed to attend any formal interview.

‘As a result, the administrators have incurred significant time costs, as have their solicitors, in attempts to compel the managing director to cooperate.’

Quantuma said its appointed administrators also did not anticipate how much work would be required to contact individuals who had their legal matter funded by the company. In total, Affiniti funded around 15,000 client matters and the administrators had expected that clients would contact their designated law firm for updates on their cases. However, given the initial contact in many cases was between the client and Affiniti, there has been much time taken up with direct correspondence.

The report says that the original administration fees estimate of £851,000 for the period since November 2021 has had to be revised up to £1.25m.

Expenses have increased from an estimate of £829,000 to £1.1m, including legal costs due to Macfarlanes LLP increasing by more than 10% to £671,000 and Pinsent Masons drafted in at a cost of £66,000. It had not originally been anticipated that Pinsent Masons would need to be instructed, but this became necessary to handle negotiations with law firms funded by Affiniti.

During the last 18 months, administrators have secured around £3.5m from settlements with law firms who had funding arrangements with Affiniti. Another law firm that had received a loan through what was called a ‘direct law firm lends’ (LFL) has paid back £655,000 in full.

The single secured creditor, Fortress Investment Group, which is owed around £42.9m, has been paid £1.2m so far. It is not possible at this stage to estimate any further returns. Meanwhile, unsecured creditor claims have leapt from an anticipated £1.8m to a total of £7.6m claimed so far. Any dividend to those creditors is dependent on the final costs of the administration.

Affiniti advanced funds to law firms to finance clients’ disbursements, after-the-event insurance premiums and specialist reports. It also lent directly to the firm.

The first administrators’ report showed that Affiniti’s loan book was worth £30.2m by the end of October 2021, and the company reported increased profits of £3.3m. But after a review of the workforce and the structure of the business, a ‘significant’ number of staff were made redundant.

In September 2020, Affiniti announced a £250m capital raise for litigation and dispute funding, backed by a multi-billion dollar US-based fund. Its investments at the time included more than 5,000 litigation matters, but it was envisaged this would increase to 50,000 within a year.