HILL Dickinson will pay up to £3.8m for its part of the defunct Halliwells law firm, a creditors report revealed.

The Liverpool-based firm was one of four which agreed to buy Halliwells’ assets before it crashed into administration on July 20. A report, dated July 26 and seen by LDP Legal, revealed it had to pay just £500,000 up front for the firm’s Liverpool operation.

But, as part of the deal, it has agreed to pay up to another £3.35m, which will come from work in progress being undertaken when Halliwells went under.

Just £1.38m of that will go into the Halliwells partnership to re-pay the firm’s creditors.

The remaining £1.97m will be funnelled into a “members’ reserve” which administrators from BDO are setting up.

The money will be used to protect former Halliwells partners from going bankrupt because of their exposure under outstanding Professional Practice Loans (PPL).

On the bankruptcy fears, the report, written by BDO administrator Dermot Power and sent to the firm’s creditors, said: “The purchasers made it clear in the course of negotiations they were not prepared to take on the relevant [Halliwells] LLP partners in circumstances where the transferring members were at serious risk of bankruptcy as a result of their exposure under outstanding Professional Practice Loans, which the LLP has been unable to discharge as a result of its insolvent position.

“As the negotiations developed, this issue became central to each of the four sales.

“The purchasers intend that, in accordance with each part of the agreement, part of the consideration payable by the purchaser will be used to discharge the relevant members’ PPL and so protect the relevant partners from bankruptcy.”

If a solicitor goes bankrupt, it can mean the Solicitors Regulation Authority stops them from working.

Hill Dickinson took on 34 Halliwells partners, including the firm’s former managing partner Jonathan Brown.

It is unclear how many, if any, of them are at “serious risk” of going bankrupt since the firm went into administration.

The report also detailed how Halliwells’ profit nosedived over the last few years.

At the end of the 2007 financial year, net income was £8.5m, but the following year it was £4m and at the end of the 2009 financial year the firm made a net loss of £1.8m.

No one from Hill Dickinson was available to comment.