Tods Murray revealed to have debts of £5m
TODS Murray, the 158-year-old law firm which fell into administration in October, left more than £5 million in debts in its wake following its high-profile collapse.
Dozens of unsecured creditors, including small businesses such as taxi firms, couriers and caterers, are unlikely to receive any of the money owed by the firm which had seen its turnover halve since before the financial crisis.
Advertisement
Hide AdAdvertisement
Hide AdOther creditors include Edinburgh City Council, which was owed £381,000, and HM Revenue and Customs.
Rival Scottish practice Shepherd and Wedderburn acquired the business from the administrators in an arrangement which saved the jobs of most of the 140 staff.
A report on the demise of the practice by joint administrators Tom MacLennan and Iain Fraser of FRP Advisory shows Shepherd and Wedderburn paid £595,000 for the work in progress at Tods Murray. The report also highlights how the firm got into difficulties as it struggled to pay high overheads, mainly for its flagship offices at Edinburgh Quay in Fountainbridge, Edinburgh.
Tods Murray, which had 32 partners across its Edinburgh and Glasgow offices, had moved to the site in 2004, which the administrators said “substantially increased” the costs of the practice.
Turnover had peaked at £23.4m in 2006 but the latest management figures showed that in the year to 31 March it was down to £12.4m. The administrators said the high level of fixed overheads at the firm – mainly people and property – meant that such a fall in turnover had a direct impact on profits and cash flow.
“The cash position of the firm was further worsened by the requirement to pay capital to retiring partners whilst being unable to generate new capital from incoming partners due to lack of finance,” the report points out.
Although efforts had been made to reduce overheads, the firm remained burdened by the lease costs of its Edinburgh Quay offices.
The administrators’ report said it had not been possible to rescue the firm as a going concern as no purchaser could be found for the business and as it is not permitted for a legal practice to trade in administration.
Advertisement
Hide AdAdvertisement
Hide AdWhen the administrators were appointed, £2m was owed to Bank of Scotland which had a floating charge over the firm’s assets.
An estimated £5.14m was owed to other creditors, including a figure of £3.47m covering two years’ worth of its agreement for the Edinburgh Quay premises.
At the time of the sale of the firm, Shepherd and Wedderburn said it would move out of the former Tods Murray offices at Edinburgh Quay and its Bothwell Street base in Glasgow within three months. All staff retained are moving to Shepherd and Wedderburn’s existing offices at Exchange Crescent, Edinburgh and West George Street, Glasgow.
At the time of the sale, Stephen Gibb, chief executive of Shepherd and Wedderburn, hailed the acquisition as “a further significant step forward in realising our clearly defined strategy for growth”.
Lorna Jack, chief executive of the Law Society of Scotland, had said that although the legal profession overall has been robust in weathering the downturn, the demise of Tods Murray showed “that we cannot take things for granted, even as the economy shows signs of recovery”.
“Law firms were hit hard by the recession which, combined with the ongoing, significant changes within the legal services sector, is continuing to have an impact.”
SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING