FORMER Halliwells partners could go to “war” over a £3m rent guarantee signed for one of the defunct firm’s old Manchester officers.
Last week, some of the 130 or so partners affected met at a formal mediation over the debt. It failed to reach an agreement over the liability and an arbitrator has been appointed who could be asked to rule over who owes what.
But a source familiar with the issue told LDP Legal that partners hope an “old English compromise” can be hammered out.
Halliwells collapsed into administration in July after struggling to pay its landlords amid the economic downturn.
Its Liverpool and Sheffield offices were acquired by Hill Dickinson, whose head office is in Liverpool.
As part of the deal, Hill Dickinson took on 34 Halliwells partners, including former managing partner Jonathan Brown.
All the partners could be made to pay out for the guarantee, but it affects the firm’s 40 equity partners the most, six of whom are now at Hill Dickinson.
Four of Halliwells’ Manchester-based partners signed a guarantee for the firm’s old offices in St James’s Court, on the city’s Brown Street, in 2005.
The firm had been based there since 1997, before moving its Manchester operation to new offices in Spinningfields, in 2007.
But when it was signed there were still eight years to run on the lease and £10m in rent to pay over that time.
The issue only came to light after Halliwells had gone into administration and the St James’s Court landlord sent a demand for rent to one of the four guarantors.
They then asked the rest of the partnership to stump up cash to meet the next instalment of rent.
Top equity partners could be liable for up to £150,000, while lower ranking fixed share partners face a much lower demand of around £750, LDP Legal understands. The source said: “There needs to be an old English compromise where the landlord gets the building back early rather than holding us to 2013, he then receives some income from other providers. The other partners would pay some and make a contribution, but these guarantors still have to take some responsibility because they didn’t tell anyone about it.
“The former Halliwells partners are facing arbitration in order to determine the respective liability. Halliwells partners at war.”
Another session of mediation is due to take place next month.
