KWM report reveals administrators spent £25k on Hong Kong flights as costs overrun estimates
Legal costs incurred during administration rise to almost three times the original estimate
February 28, 2018 at 09:35 AM
3 minute read
The original version of this story was published on Law.com
A new progress report from the administrators of King & Wood Mallesons' (KWM) former European arm has revealed further details of the costs racked up during the process, with legal spend and air fares both far exceeding original estimates.
The report reveals that the administrator, Quantuma, has spent more than £25,000 on two flights to Hong Kong to meet with KWM partners, after originally estimating that it would spend a total of just £853 on air fares.
The report states that the flights were required "in order to meet with KWM 2.0 about handover of archiving responsibilities and to interview key partners regarding the affairs of the firm".
The total costs of the administration, including legal fees, IT and facilities management expenses, now stand at £2.38m, more than double the original estimate of £914,646.
The legal costs incurred so far during the administration have also gone far beyond the original estimate of £450,000. Firms including CMS and Pinsent Masons have, to date, been paid out more than £1.3m in fees, while solicitor manager fees paid to Ashfords have amounted to £326,538, compared to the original estimate of £120,000.
The latest report into the administration process covers the period from 17 July 2017 to 16 January 2018.
During that time, CMS received £196,527 for its advice on matters including the operation of KWM's Germany branches, while Pinsents has been paid £18,449 for advice on matters including business sale agreements.
City firm iLaw Legal Services was instructed to provide support in respect to debtor collections and was paid £18,449 for its advice during the six-month period.
The firm's main creditor, Barclays, was paid £825,734 during the period. The bank has received £5,299,501 in total payments so far, although this remains some way off the total value of its security over the firm's assets, which stands at more than £16.5m.
The administrators have received claims from 147 ordinary unsecured creditors, totalling just over £15m, as well as claims from 10 unsecured creditors of the holding company for the firm's employees, totalling about £3.5m, but the report states that these claims have yet to be adjudicated upon or verified.
The progress report reveals that the administrator has received just over £1.4m so far for its services.
KWM's European arm collapsed into administration in January 2017, bringing an end to the UK firm formerly known as SJ Berwin. Last month, Quantuma secured a 12-month extension to its term overseeing the administration, amid lingering questions about the failed firm's accounting practices.
Quantuma partners Andrew Hosking and Sean Bucknall are understood to have questions about some of the accounting at the firm during the 12 months leading up to its collapse, including concerns around areas including how work in progress was carried over.
Sources close to the matter told Legal Week that former senior managers at KWM are likely to face further questioning about decisions made in the run-up to the collapse.
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