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Registered number: 12093338
CHEVAL LEGAL LIMITED
UNAUDITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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CHEVAL LEGAL LIMITED
REGISTERED NUMBER: 12093338
BALANCE SHEET
AS AT 31 MAY 2024
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Debtors due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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CHEVAL LEGAL LIMITED
REGISTERED NUMBER: 12093338
BALANCE SHEET (CONTINUED)
AS AT 31 MAY 2024
The directors consider that the Company is entitled to exemption from audit under section 477 of the Companies Act 2006 and members have not required the Company to obtain an audit for the year in question in accordance with section 476 of the Companies Act 2006.
The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements.
The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 3 to 14 form part of these financial statements.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
Cheval Legal Limited is a private company, limited by shares, incorporated in England and Wales. The company registration number is 12093338 and the registered office is 103/4 Suite 103, 4 Montpelier Street, London, United Kingdom, SW7 1EE.
The principal activity of the entity during the year was the provision of legal services.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and the Republic of Ireland' and the requirements of the Companies Act 2006. The disclosure requirements of Section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
The financial statements are presented in pounds, the functional currency, rounded to the nearest £1.
The following principal accounting policies have been applied:
Cheval Legal Limited ('Cheval' or 'the Company') has incurred a profit of £157,300 (2023: loss £2,893,152) and has total net liabilities of £6,010,609 (2023: £6,167,909) at the balance sheet date.
Reference to the Company's policy of calculating work in progress shown in note 2.11 should made in conjunction with consideration of the Company's financial position at 31 May 2024.
The Company meets its day-to-day working capital requirements through (i) investment from Waterfall Asset Management (‘WAM’) via its investment vehicle Spectralegal Finance DAC3 (‘SLF3’); (ii) a loan note subscription agreement with Catalur Capital Management LP (‘Catalur’) via its investment vehicle Ferncroft Capital IV LP (‘Ferncroft’); and (iii) a services agreement with F52 Limited(‘F52’). The agreements with WAM and Catalur were made/agreed on a non-recourse basis. The services agreement with F52 is not investment or loan based.
The Company’s investment from WAM works on a non-recourse basis so that Cheval is incentivised on the upside but the cost of running its cases is covered. Under that agreement, running costs are protected and retained by Cheval prior to any payment being made to WAM/SLF3. WAM, and any loan amounts outstanding when all the cases in the portfolio are settled is written off. WAM has no recourse to Cheval to make up any investment loss.
The Company’s loan note subscription agreement with Catalur works on a similar non-recourse basis, such that the cost of running Catalur-funded cases are covered on an ongoing/monthly basis by drawing on loan notes.
Neither WAM nor Catalur has any recourse to the Company in the event that there is shortfall in their investment/loan.
The Company does not operate and has never operated with an overdraft facility.
In the period WAM acquired an existing debenture from Juice Ventures Limited.
The directors have a reasonable expectation (based on their experience since they signed a revised
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
2.Accounting policies (continued)
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Going concern (continued)
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investment agreement with WAM/SLF3 in 2023 and the loan note subscription agreement with Catalur/Ferncroft in 2023), that the Company has adequate resources and support from its funders/investors to continue in operational existence.
The Company has recently incepted an 18-month extension to its PI cover with its existing insurer.
The Company therefore continues to adopt the going concern basis in preparing its financial statements.
The position with other creditors has significantly improved since the last published accounts.
The Company has adopted a strategy of pursuing consolidated claims which it confidently expects will result in achieving increased claim success and efficiencies. Consequently, the company reasonably believes the overheads will reduce over the next 12 months and beyond.
The Company remains instructed to act in a significant number of Plevin claims which are likely to reach resolution over the next two and a half years.
The Company is currently reviewing its book of claims and ascertaining which claims remain capable of being pursued through litigation and/or settlement routes, and in the alternative which claims are capable of forming the basis of ATE (after the event) insurance claims to relevant insurer(s). This has required an assessment of more than 50,000 claims which remain in the Plevin book. The Company has settled over 20,000 claims to date.
The directors therefore consider that the going concern basis remains appropriate.
Fee income represents revenue earned under a wide variety of contracts to provide legal services. Revenue is recognised as earned when, and to the extent that, the firm obtains the right to consideration in exchange for its performances under these contracts. It is measured at the fair value of the right to consideration, which represents the amounts chargeable to clients, excluding expenses, disbursements and value added tax.
Revenue that is contingent on events outside the control of the firm is recognised when the contingent event occurs.
When relating to contingent fee arrangements, revenue is recognised at the point when open matters reach the 'costs agreed' stage, being the earliest point at which both the contingency has been settled and the value of consideration receivable can be reliably measured.
See note 2.11 for the revenue and corresponding amounts recoverable on contracts.
Interest income is recognised in profit or loss using the effective interest method.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
2.Accounting policies (continued)
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
All borrowing costs are recognised in profit or loss in the year in which they are incurred.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Exceptional items are transactions that fall within the ordinary activities of the Company but are presented separately due to their size or incidence.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
2.Accounting policies (continued)
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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Work in progress/Amounts recoverable on contracts
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In assessing whether unbilled time is recognised as work in progress at cost or as accrued income in accordance with FRS 102, management are required to make judgements in determining the point at which the contingency is resolved and when the fair value of consideration can be measured reliably.
Work in progress is recognised on the basis that although the work is contingent in nature, the costs incurred are covered under an ATE insurance policy subject to exclusions for ineligible, unaccepted and abandoned cases. Work in progress is therefore recognised as the costs incurred on ongoing cases net of a provision for ineligible, unaccepted and abandoned cases post year end estimated at 10% of the cost of such work in progress.
The firm has generated and paid for many thousands of cases. All of the costs of generation and running the cases are expensed as incurred. However, apart from the fixed element of work in progress that is carried forward as an asset (and disbursements which are recoverable from the client, win or lose), due to the income recognition policy, the income that the many thousands of cases are expected to generate is not recognised or carried as an asset. The balance sheet, therefore, only reflects the costs incurred but not the unrecognised income in the caseload (except for the partial work in progress element and disbursements).
Management assesses the contingent and unrecognised income in the live case load on a regular basis. Their assessment of the Amounts Recoverable on Contracts (AROC) which are not recognised due to the contingent nature of the Damaged Based Agreements, is based on average fees and numbers of cases, less known costs that will be incurred when the income is recognised.
This recognition policy that management has determined is on the basis that it is probable that recovery will be achieved, where work performed under a contingent fee arrangement is incomplete at the Balance Sheet date.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
2.Accounting policies (continued)
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
The Company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
The Company has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.
Financial instruments are recognised in the Company's Balance sheet when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
2.Accounting policies (continued)
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Financial instruments (continued)
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traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Company after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans and other loans are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Other financial instruments
Derivatives, including forward exchange contracts, futures contracts and interest rate swaps, are not classified as basic financial instruments. These are initially recognised at fair value on the date the derivative contract is entered into, with costs being charged to the profit or loss. They are subsequently measured at fair value with changes in the profit or loss.
Debt instruments that do not meet the conditions as set out in FRS 102 paragraph 11.9 are subsequently measured at fair value through the profit or loss. This recognition and measurement would also apply to financial instruments where the performance is evaluated on a fair value basis as with a documented risk management or investment strategy.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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The average monthly number of employees, including directors, during the year was 19 (2023 - 11).
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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Due after more than one year
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Amounts due from related parties
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Prepayments and accrued income
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Debtors do not include Amounts recoverable on contracts, WIP is shown in note 5.
Creditors relating to the above amounts due from related parties of £838,092 have not been set off and are shown seperately in note 8.
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Cash and cash equivalents
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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Creditors: Amounts falling due within one year
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Amounts owed to related undertakings
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Other taxation and social security
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Accruals and deferred income
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Other creditors are non recourse, unsecured, and repayable on claim redress or After The Event insurance recovery.
Other loans are secured by a fixed and floating charge over all of the property or undertaking of the company.
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Creditors: Amounts falling due after more than one year
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Other creditors are non recourse, unsecured, and repayable on claim redress or After The Event insurance recovery.
Other loans are secured by a fixed and floating charge over all of the property or undertaking of the company, with a commercial rate of interest (see further note 14).
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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Analysis of the maturity of loans is given below:
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Amounts falling due within one year
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Amounts falling due 1-2 years
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The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund.
The pension cost charge represents contributions payable by the Company to the fund and amounted to £56,751 (2023: £49,481). Contributions totalling £9,386 (2023: £4,807) were payable to the fund at the balance sheet date and are included in creditors.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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Related party transactions
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Included in other creditors falling due after more than one year is £223,731 (2023: £236,231) owed by the Company to Mr Ryan. This loan is unsecured, interest free and repayable on demand. Mr Ryan has agreed to waive any entitlement to interest in consideration of support provided by the Company in relation to professional fees associated with the legal claim (albeit that an indemnity was in place).
Included in other creditors falling due after more than one year is £162,997 (2023: £177,997) owed by the Company to Mr McGarry. This loan is unsecured, interest free and repayable on demand. Mr McGarry has agreed to waive any entitlement to interest in consideration of support provided by the Company in relation to professional fees associated with the legal claim (albeit that an indemnity was in place).
In addition, the directors have assigned their rights in the costs award related to defending the Claim back to the Company (arising from the November 2024 court order) also in consideration of support provided by the Company in relation to professional fees associated with the legal claim (albeit that an indemnity was in place).
Included in other creditors falling due after more than one year is £89,747 (2023: £89,747) owed by the company to Mr S Davenport, a shareholder in the Company. This loan is unsecured, interest free and repayable on demand.
During the year the company received services totalling £Nil (2023: £135,193) from My Reclaim Limited, and wrote off an amount of £32,855 owed to the company as irrecoverable. At the year end there was a balance due to My Reclaim Limited of £32,855 (2023: £65,200 creditor) included within amounts due from related companies. The companies are connected by virtue of having mutual shareholders Mr P Ryan and Mr S McGarry.
During the year the company received services totalling £998,092 (2023: £1,277,250) from DGM Administrative Services Limited. At the year end, there was a net balance owed by DGM Administrative Services Limited of £118,240 (2022: £254,618). The companies are connected by virtue of having mutual shareholders Mr P Ryan and Mr S McGarry.
At the year end, included within amounts due from related parties was an amount of £7,000 (2023: £7,000) owed by RPS London Limited. The companies are connected by virtue of having a mutual shareholder Mr P Ryan.
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CHEVAL LEGAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2024
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Post balance sheet events
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As noted above, during the year, legal action was taken against the Company. The directors considered the claim to be without any merit. At the balance sheet date, no amounts relating to this claim were payable, so the original amount included in creditors in the sum of £2,603,954 has therefore been written off.
On 13 May 2024, the claimant in that litigation was placed into liquidation and PwC was appointed as liquidator. Subsequently, the claim brought against the Company was dismissed by order of the High Court in November 2024.
Further, during the relevant year, the Company obtained judgment on its counterclaim against the claimant, but it was not until December 2024 that the Company obtained a determination of the quantum ordered as against the claimant. Given that the claimant is unable to pay the judgment sum, the company is in the process of robustly pursuing the judgment sum (plus interest and costs per the order of the High Court) as against the claimant’s relevant insurer(s) and brokers.
The debenture referenced in note 10 is now under the ultimate control of Waterfall Asset Management.
The ultimate controlling party is Mr P Ryan by virtue of his shareholding in the company.
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