Hammonds Direct committee denies lease liability in face of pre-action letter
HAMMONDS is gearing up for another bout of possible legal action after serving the partners of failed volume business Hammonds Direct with a pre-action letter.
The firm has contacted the five-member Hammonds Direct partnership committee in an attempt to make the failed conveyancing business’s 41 shareholders, more than 20 of whom are Hammonds partners, pay for the lease on Bradford property Pennine House, from where the business operated.
Hammonds leased the property and sublet parts of it to Hammonds Direct. However, in the letter the firm concedes that it never actually formalised a sub-lease with the volume business.
The letter says: “No doubt because the Hammonds Direct partners were also going to be partners in Hammonds Suddards Edge [now Hammonds], and because this was seen as a mere formality, it was decided that the fact that the lease had not been finalised would not impede the merger [of Hammonds Suddards and Edge Ellison] or the demerger of the Hammonds Direct business.”
The letter continues: “That matter was never completed as you know.”
Hammonds Direct has been disputing liability for the lease since Hammonds Support Services, the business’s trading arm, went into administration in January (The Lawyer, 19 January). All of the Hammonds Direct shareholders had unlimited liability in the business.
Hammonds has suggested that, if the two sides cannot reach agreement on who is liable for the lease, they should go into mediation.
However, in forwarding the letter to the Hammonds Direct partners, committee member David Armitage, who is still a partner at Hammonds, urged them all not to agree or admit any liability for the lease, adding that the committee will meet this week (2 June) to discuss how to proceed.
Armitage told partners: “Hammonds Direct has so far received several opinions of leading counsel robustly supporting the Hammonds Direct position that we have no legal obligation to proceed with a lease of any part of Pennine House.”
A spokesperson for Hammonds declined to comment, adding: “We can confirm that we are in discussions with the Hammonds Direct partnership committee – discussions which have been ongoing for a number of years.”
Gosh, another reputationally damaging mess, courtesy of the (exceptional) former “management”. I presume that the eventual expected returns from Hammonds Direct were part of the “silver lining” many Hammonds partners saw in agreeing the lock-in. Now that this silver lining has turned out to be just another liability and yet another dispute, Hammonds partners must be wondering when the Augean Stables might finally be clean. More water, Peter?
All HD partners expected the business to have been sold years ago. It seems Heller and Hutton hung in too long waiting for the best price. They missed their chance and now everyone involved is paying the price.
I am no real estate lawyer but I clearly remember something about the need for a contract for an interest in land to be evidenced in writing to be binding. Seems to be no contract here and therefore no liability. Clearly a try-on by the boys in Leeds. Tell them to go and hire some property lawyers.
It’s very bad judgement to consider a lease purely a formality and not entirely necessary. How can a group of lawyers get this so badly wrong?
The prospect of Hammonds’ main business suing some of its existing partners who were/are also partners in Hammonds Direct is hardly good for morale and internal goodwill between partners ! Indeed it is exactly this sort of conduct which tells you everything thing you need to know about Hammonds main business and the sorry state it is in – what a pity. One wonders whether Crossley and his management team over told Hammonds Direct partners that they were on the hook for this before the proverbial s**t hit the fan. Also, one might imagine that Heller , Hutton and their management team at Hammonds Direct might find that some rather pointed questions will now be asked about their conduct in potentially exposing partners in that business to this sort of potential liability.
Hammonds LLP finds itself in an untenable position. In the region of 20 current equity partners have, wearing their Hammonds Direct hat, consciously taken decisions that are not in the best interests of Hammonds LLP (with some understatement).
They need to resign and give the next generation (untainted by previous misadventures) a chance to take the firm forward.
They need to resign and give the next generation a chance to take the firm forward ? What is going to be left? I will be interested to see what their PEP figure is going to turn out as this year, after last years reduced figure. Hammonds always seem to be fighting an uphill battle. Who would want to stay at the firm and be promoted into that partnership ? Glad I got out of there when I did !
A classic case of “The cobblers childrens’ shoes”. I come across this time and time again among smaller firms: the ability to take good care of clients’ affairs while failing dismally with one’s own. I’d always assumed the larger firms were better run but maybe not.
As a client, would you now take your business to them?