Challinors calls in corporate recovery firm as it faces High Court battle over £250k loan from ex-client

Midlands firm Challinors is being sued over its alleged failure to repay a £250,000 loan and is in talks with corporate recovery specialists about the future of the firm.

High Court proceedings have been issued against Challinors’ 14 partners by games designer Cosmic Concepts, demanding repayment of the loan. Cosmic Concepts director Bally Shanker says he made the loan to 14 partners of Challinors in January.

Corproate recovery firm KSA was appointed by Challinors on 29 May to assist it with its current financial position while Flint Bishop head of litigation, Qamer Ghafoor has been instructed to represent Cosmic Concepts in the case. Challinors is currently handling the dispute in-house.

Cosmic Concepts’ claims that in December 2012 it was approached by a partner at Challinors about lending the firm £250,000, allegedly because the firm needed the funds to pay a VAT bill. In a press statement Shanker, speaking on behalf of Cosmic Concepts, says he was promised that the full amount would be repaid within 12 months.

“I thought lending the money to the partners of what I thought was a leading law firm, I would be safe and would be repaid,” Shanker said. “I agreed and my company loaned £250,000 to 14 partners at Challinors Solicitors on 15 January 2013 where those partners were jointly liable to repay the loan within 12 months.

”Some five months after the loan, to my surprise I received [a] letter from an insolvency company, KSA. It now appears that Challinors Solicitors are in financial difficulty and it is unlikely I would be repaid the loan in full. I am now informed that I would likely get 10p or possibly 20p in the [pound].”

As well as issuing a High Court claim against all 14 partners, Shanker has served statutory demands on 13 of the firm’s partners and is understood to be continuing to try and serve the remaining fourteenth partner. 

“I feel very aggrieved and disappointed that I have had to take such steps,” added Shanker. “If I had known that I would not be able to recover the money in full, I would not have loaned them any money”.

The Lawyer contacted Challinors senior partner Paul Griffiths today (18 July), who responded: “Some very serious allegations have been made against Challinors, specifically that this is not a reputable or responsible business. These allegations are denied. We are aware of the claim being made by Cosmic Concepts. Challinors is a responsible business and has already opened up discussions with Cosmic to resolve the matter. We are not prepared to comment on the details of the contractual arrangements between the parties.”

Challinors has also been reported to the Solicitors Regulation Authority (SRA), confirming it as one of the UK’s top 200 legal services providers that are facing financial difficulties.

Last month the SRA said that as many as 160 UK firms were facing financial difficulties, with eight judged as being at an “immediate risk” of collapse (14 June 2013).

An SRA spokesman confirmed the firm was among its so-called “impact firms” and that it was in a regular dialogue with Challinors.

“What goes on in those conversations is confidential information,” the spokesman added.