BDO loses in Halliwells case but judge leaves door open for fraud claim

It was “inconceivable” that Halliwells’ staff and fixed-share partners did not know something about the equity partners’ reverse premium windfall, a judge ruled today.

Mr Justice Warren, sitting in the Chancery Division of the High Court, made the comments giving judgment in a claim made by Halliwells’ liquidators against a former partner at the firm.

Former Halliwells junior equity partner Michael Burns – now a partner at DLA Piper – was arguing that the terms of his retirement deed from Halliwells, which stipulated a clean break, meant that he could not be pursued by the firm’s liquidators for cash owed by the firm (18 April 2012).

However, Halliwells’ liquidators – BDO partners Dermot Power and Shay Bannon  – argued that Burns’ actions of pocketing around £377,000 as part of the reverse premium deal with the firm’s then-landlord Allied London, constituted a breach of fiduciary duty, a breach of duty of care and negligence, meaning it fell within the carve-out clause of the retirement deed.

Warren J gave a summary judgment in favour of Burns, finding that the retirement deed meant that Halliwells had waived all rights to make claims against him. He also found that there was no evidence to suggest that it was unconscionable for Burns to rely on the retirement deed.

Warren J said that it was not unconscionable because it was inconceivable that no one outside the 32 equity partners who profited from the reverse premium deal knew anything about the arrangement. Though staff and fixed-share partners might not have known the full details, it was held that some must have known something and that was enough.

Warren J did not make an order for the judgment, however, and has left the door open for the liquidators to amend their claims to allege fraud against Burns. The liquidators’ counsel would not comment on whether they intend to make such amendments.

James Potts of Erskine Chambers, instructed by Irwin Mitchell partner John Lord, represented Burns. A spokesperson for Irwin Mitchell said: “These were always unmeritorious claims against our client. We welcome today’s judgment and will continue to defend all of our clients against any further claims advanced by the liquidators.”

Lexa Hilliard QC of 11 Stone Buildings, instructed by Addleshaw Goddard, represented Bannon and Power at BDO.