The amount owed to unsecured creditors of collapsed Pure Legal has exceeded £40m for the first time – but virtually none of it will ever be paid.

The latest joint administrators’ report to creditors, published by Companies House this week, confirms that claims worth £40.1m have been made from those owed money by the business. That was £3m more than the last administrators’ update in December. The directors had initially estimated in their statement of affairs that unsecured creditor claims added up to £23.3m.

Administrators from insolvency firm Kroll reported that there are unlikely to be sufficient funds to pay anything to unsecured creditors other from than the six-figure prescribed sum.

Unsecured creditors come at the back of a long line of lenders and employees also owed money when the business collapsed in November 2021. None is guaranteed to be paid in full.

Legal services lender Novitas, which provided revolving credit facilities to Pure Legal, is owed around £1.85m from three outstanding loans taken out in the six years before the administration. Pure also owed £4.6m from a coronavirus business interruption loan and £6.1m to another lender, Perspective.

The administrators’ reports states that there is no certainty that any of these sums will be paid back in full.

The situation is no clearer for preferential creditors who were told previously they were likely to be able to recoup money owed to them. HM Revenue & Customs has a claim worth £524,000 while employees are collectively owed £54,000 in arrears of pay and holiday pay. Based on current information, the administrators advise, it is uncertain there will be sufficient funds to pay these in full.

The major issue appears to be what – if anything – can be recovered from the thousands of cases Pure Legal was running when it went into administration.

In their statement of the company’s affairs, the directors estimated that Pure’s work in progress was worth around £30m. Joint administrators say recoveries will be ‘significantly lower’ than that estimate and so far just £338,780 has been recovered through successful claims or an ATE insurance payout on failed claims.

Even the £85,000 owed from trade debtors is likely to result in ‘minimal recoveries’, after one trade debtor itself went into administration and other disputed its debts.

There were some 4,800 cases where claimants had entered a CFA with Pure Legal but no legal file had been opened at the administration date. Three firms were found to take these cases on, but as yet no realisations have been received from this source.

Pure had agreed to sell its investment in Pryers Solicitors in April for a deferred consideration of £1m, but no payment is likely as requisite financial targets were not met.

Meanwhile, the administration itself has already cost almost £6m. Kroll said fees drawn in the past 18 months came to £2.1m, with £3.85m paid in expenses. The administration is set to end on 1 November but it is likely that the joint administrators will apply to the court before then for the company to be placed into compulsory liquidation.

Investigations into the company’s affairs remain ongoing to determine if there are any actions that could be taken against third parties to increase recoveries.

 

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