Axiom Ince has filed documents with the High Court to appoint Neil Bennett, Alex Cadwallader and Andrew Poxon of Leonard Curtis as joint administrators. They will be responsible for closing the firm’s business, realising its assets, and reporting to its creditors.
The joint administrators will operate separately from intervening agents Gordons, Shakespeare Martineau and Stephensons, who will continue to deal with the client affairs of Axiom Ince.
The appointment follows the SRA’s intervention into Axiom Ince on 3 October, with the regulator closing the firm’s offices with immediate effect to protect the interests of clients and former clients of the firm.
Axiom Ince rescued Ince & Co after its second pre-pack administration in April and bought Plexus Legal in July. However, the situation quickly deteriorated with the SRA intervening into the practices of managing partner Pragnesh Modhwadia, for suspected dishonesty, and partners Idnan Liaqat and Shyam Mistry in August.
Axiom Ince went on to file a claim for alleged breach of fiduciary duty against Modhwadia. A High Court judge subsequently imposed a freezing order of £64m against Modhwadia, after he admitted client money had been used to buy both Ince and Plexus, alongside several properties. Modhwadia was unable to account for the money. Axiom had bought Ince for just £2.2m, making an initial £1m payment and paying the remaining £1.2m in instalment.
Given the £64m client account deficit and limited financial assets left at Axiom Ince, former clients are expected to apply to the SRA’s discretionary compensation fund to recover their money.
Concern is now mounting about how these costs will be covered. According to the SRA Compensation Fund Annual Report, accumulated funds on 31 October 2021 were only £50.6m. The SRA is considering imposing a one-off levy on the profession to make up the shortfall.
Losses caused by the Axiom Ince fallout are further compounded by the SRA’s closure of the Metamorph Group and Kingly Solicitors earlier this year, leaving the solicitor profession with a potentially large bill to pay.
Yesterday (31 October) The Law Society of England and Wales made a public statement expressing concern over the proposed plans. ‘As the representative body for the solicitor profession, we are of course greatly concerned that our members could be asked to plug a gap of many millions of pounds in the Compensation Fund arising from the collapse of just three law firms, which were set up under atypical business models and with their own clear and inherent risks,’ said its chief executive officer Ian Jeffery.
‘We would expect the solicitor profession to be consulted before any decision is made by the SRA on its approach to these exceptional compensation questions, given that our members would be required to pay for it and it is their collective reputation at stake,’ he added.
While acknowledging the legal remit of the SRA, Jeffery was keen to stress that The Law Society wished to work with the regulator to reach an equitable solution. ‘As a representative body we recognise that regulatory decisions are by law a matter for the SRA, but we have a role to be assured that the SRA complies with its statutory duty and the regulatory principles guiding any regulatory action which must be transparent, accountable, proportionate, consistent and targeted,’ he said.
‘We will work with the SRA and, as appropriate, the Legal Services Board, to ensure that events are fully investigated and that all proper assurance is provided,’ Jeffery concluded.
