Hammonds Direct partners set for court showdown

Battle commences as one partner rejects £2.3m cash call following collapse of volume business

Stephen York

Stephen York

The partners in failed volume business Hammonds Direct have become embroiled in bitter court proceedings to recover money owed.

All but one of the partners have contributed towards a £2.29m cash call, which has been made to cover estimated liabilities for the next six years.
It is understood that five partners initially resisted payment, but four subsequently capitulated.

The sole dissenting partner – Stephen York – who is now at Reed Smith, is ­disputing liability. He filed a counter-claim against the Hammonds Direct partnership on 16 April at Cambridge County Court.

Another source close to Hammonds Direct said: “Any partner who failed to meet the call, they commenced bankruptcy proceedings against them.”

Another source close to Hammonds Direct said: “An amount of money has been sought from partners to recover and make provision for any liabilities.”

The business owned by Hammonds Direct’s 41 partners – which traded under the name Hammonds Support Services – went into administration earlier this year (The Lawyer, 19 January). All of the shareholders had unlimited liability. As a bulk conveyancing company it had to be owned by ­solicitors to enable it to be regulated by the Law ­Society.

Hammonds Direct was set up in 2002 after being spun out of Hammonds when the latter merged with Edge ­Ellison. A number of then-Hammonds partners were invited to participate in the venture. The value of their shareholdings was ­calculated in line with the Hammonds lockstep, which ran from five to 13 points.

The 13-point partners involved in the venture, of whom there are now 13, each have to pay £76,700, while five-point partners have contributed £29,500. York is understood to have been a 12-point partner.

The total liability of £2.29m has been calculated to extend over the next six years. The sum does not include liability for the ­Hammonds Direct lease, which reverts to Hammonds the law firm.

“This is being collected in anticipation of what is ­needed,” said a Hammonds Direct source.

The volume business owned by the Hammonds Direct partners had a turnover of £14m and 250 Bradford-based staff. It was hit by the collapse of the ­conveyancing market, when margins fell from 80 per cent to 20 per cent.

York did not return calls for comment.