The cost of handling the affairs of collapsed claims firm Pure Legal has surged past £7m, documents have revealed. Administrators from insolvency firm Kroll state in a newly published progress report that fees since their appointment in 2021 have reached almost £2.5m. This includes almost £400,000 drawn during the past six months. Expenses have now exceeded £5m.
Meanwhile, legal fees for work on the administration have far outstripped initial estimates. DLA Piper has incurred expenses of more than £900,000 – some £769,000 more than originally estimated. Eversheds and Fieldfisher were not included in the original estimates but have billed £144,000 and £21,000 respectively.
Solicitor manager fees incurred by Leonard Curtis were initially estimated at £391,500 but now total almost £900,000.
The administrators have, meanwhile, made a successful application to the court to extend the administration in order to monitor possible receipts from work in progress and to continue their investigation.
Pure went into administration in November 2021 and its live case files were reallocated via its agent Recovery First. The vast majority of cases have since been closed and/or discontinued, with claims being submitted to ATE insurers where appropriate.
Directors had estimated Pure’s work in progress as being worth £30m, but administrators believe that recoveries will be ‘materially lower’ than this.
One of the Recovery First panel firms was SSB Group, to which all of Pure’s 5,800 cavity wall insulation claims were transferred. SSB was placed into administration in January this year. Since 2021, Pure administrators have recovered just £451,000 in total from settled cases.
The lack of realised assets is such that even secured creditors face a minimal return. Litigation lender Novitas was owed around £1.85m, but administrators now say it is ‘highly uncertain’ whether it will be paid. The same uncertainty applies to the Perspective Investment Fund, which is owed £6.1m, and repayment of a £4.6m coronavirus business loan made available to Pure in 2020.
HM Revenue & Customs, owed £524,000 as a preferential creditor, is further back in the queue, while unsecured creditors – who have claims totalling more than £40m – are likely to receive nothing.
Meanwhile, the SRA has confirmed it is investigating Pure Legal in conjunction with its ongoing work around SSB. The investigation into Pure includes, among other issues, similar concerns about clients being unexpectedly pursued for defendant's adverse costs after claims either failed or were discontinued. The regulator said: 'We are progressing our investigation into SSB, Pure Legal and the solicitors involved. We will take action to protect the public where we find evidence that solicitors have fallen short of the high professional and ethical standards we all expect.
'Such action can include seeking to restrict or stop a solicitor from practising. We are aiming to complete our investigation this autumn.'
The SRA said the compensation fund is unlikely to help clients of Pure or SSB because the main key allegations likely to be pursued will not involve dishonesty. Under the rules of the fund those affected would need to pursue a claim against the firm or its insurers first.
One insurer has paused claims against individuals while it seeks to claim money from SSB's insurers. Other insurers have reached an agreement to not pursue the debt from the individual impacted. The SRA has written to the insurers in these cases to explain the benefits of taking a 'similar, pragmatic approach'.
The SRA itself is being investigated by the Legal Services Board for its handling of SSB. The findings are set to be published later this year.
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