Recovery First Helps Quantuma Salvage Value Locked in WIP of Failing PI Law Firm
Recovery First was brought in by insolvency specialist, Quantuma, less than two weeks prior to the cessation of a personal injury (PI) law firm (referred to here as B).
Quantuma wanted to maximise the value of B’s work in progress (WIP) as well as avoid the imminent intervention of the Solicitors Regulatory Authority (SRA), both of which were successfully achieved with help from Recovery First.
Ian Cadlock, partner at Quantuma explains: “In this case, everything happened last minute so we were up against the clock. The managing partner at B had previously approached another insolvency firm, which had drafted and circulated proposals to creditors for an IVA. The largest creditors contacted us and asked for our opinion. There was no reference to the value of the WIP or details as to how SRA intervention was to be avoided and we recommended the creditor’s solicitors reject the proposal. We were contacted by other creditors who had similar misgivings and we advised that radical changes would have be made to the proposal”.
“A bankruptcy petition was also pending and had this occurred, any ability to recoup funds would have been lost due to SRA intervention and the immediate cessation of practice. We were confident that significant value could be recovered for creditors and so requested the managing partner speak to us and discuss how the WIP could be realised in advance of bankruptcy, before intervention and bankruptcy eroded the key asset.
“While we considered other providers to help us realise the value of the WIP, Recovery First stood out as the most suitable because of its ability to act quickly, establish a good rapport with our distressed client and offer significantly better debtor terms.”
Acting quickly in a highly distressed situation
It was a highly distressed situation and the Recovery First team, led by managing director David Johnstone, knew it must act quickly to ensure a smooth and compliant process. Within eight working days, the team had drawn up contracts, analysed the 120 PI case files, ranging from road traffic accidents to clinical negligence, and distributed them to three panel members, which have gone on to realise significant value from them for Quantuma.
David Johnstone said: “When B formally instructed us, we informed the SRA of our involvement and found it was keen for a sale to be completed so it didn’t have to intervene. We then undertook a high level review of the cases at B’s offices, which had to be dealt with carefully and sensitively, as the managing partner and his staff were still getting their heads around the situation.
“Understandably, the client was very emotional due to the speed of the process. It is difficult for lawyers to see the business they’ve been building for years quickly dismantled for another firm to deal with.
“The client had told his staff about the situation and they were always a key consideration. Our model breaks up the assets so TUPE is avoided and while we aren’t able to offer staff employment, we will advise and there are situations where the purchasing panel will offer jobs.”
As part of working with Recovery First, B was required to formally instruct JMW Solicitors, who dealt with all legal aspects of the transfer including drawing up a suite of agreements, drafting a letter for B to advise its clients about what was happening and gathering identification documents.
At one point, the documents got delayed and Recovery First feared the SRA might have to intervene, but they arrived just in time for the process to resume. The panel received and reviewed the files and agreed to submit a monthly spreadsheet detailing the status of all the cases, which continue to progress smoothly and bring in funds for the trustees.
Commenting on his positive experience of Recovery First, Quantuma’s Mr Cadlock continues: “With respect to administering the entire process quickly, efficiently and compliantly, the Recovery First model worked exceptionally well. It’s the only vehicle providing complementary professional support to the insolvency industry, being a commercial solution that avoids the requirement for intervention.
“Working with the Recovery First team was fantastic and I was impressed with its ability to affect the smooth retrieval of files, place them with suitable panel firms and oversee a rapid response from these firms to the viability of each extent matter.
“Furthermore, the part of the model operated by Recovery First, ensuring disbursements are remitted directly to the correct charging parties, is extremely efficient. Our experience of Recovery First is very positive and we would have no hesitation in recommending both its model and its team.”