A family run poultry business was pushed into administration because the impact of Covid-19 meant it could no longer afford the legal fees for defending a £1.6m claim and running a counterclaim.
W Potter & Sons in Warwickshire – which both rears pullets (young hens) and supplies poultry and agricultural equipment – was sold in a pre-pack to a separate company, Potters Poultry, owned by its directors, who are the grandchildren of William Potter. This saved 38 jobs.
According to the report from administrators Begbies Traynor, the company received a claim in August 2018 from a customer who claims the equipment it supplied was defective.
DWF is acting for W Potter and to date has been paid £250,000 in defending the claim, with the firm advising that costs up to the hearing at the end of this year or early next were likely to be a further £350,000.
The company has a potential counterclaim against the supplier of the equipment, however, and has brought the supplier into the proceedings. DWF advised that, as a result, the future costs would exceed £350,000.
The administrators reported: “The company had managed to maintain payments to suppliers, the bank and HMRC during this time, however due to the Covid-19 situation in the country, they received a significant number of cancellations for orders of equipment and minimal new orders coming through, resulting in cash flow difficulties.”
They said that, in isolation, W Potter could have managed the legal claim and Covid-19, but continuing to trade was “unrealistic” when they were combined.
The purchasers paid £830,000 for the business, whose secured creditor, Barclays, is set to see a “shortfall” on the £1m it is owed.
Unsecured creditors, who are owed £1.8m will have to share out just £215,000 between them. They include DWF, which is owed £49,000.
Some £43,000 of the £205,000 pre-administration costs went to Pinsent Masons as solicitors to the administrators.