Six former Cobbetts lawyers, including former managing partner Nicholas Carr and senior partner Stephen Benson, have been referred to the Solicitors Disciplinary Tribunal (SDT) by the Solicitors Regulation Authority (SRA) following the Manchester firm’s collapse in 2013.
Those referred by the SRA include Cobbetts management team and former board members who moved to DWF in a fire sale in 2013- partners Carr, Benson, Andrew Brown, Mark Gibson – and Richard Webb, now a consultant at TLT.
The decisions by the SRA to refer to the SDT was published today (22 May) for individual. For example, the decision regarding Nicholas Carr states that there is a ‘case to answer in respect of allegations’, which include that he was responsible for ‘providing misleading information and/or for failing to provide material information’ to one or all of the SRA, an insurer and lenders, exhibiting ‘manifest incompetence’.
At the end of all of the allegations against each individual, the SRA states: ‘The allegations are subject to a hearing before the Solicitors Disciplinary Tribunal and are as yet unproven.’
However, a statement issued on behalf of the former Cobbetts lawyers accused said:
‘The SRA allegations, coming some four years after Cobbetts’ sale, are misconceived and are fully, and strenuously, denied. The evidence demonstrates that we acted appropriately and with propriety throughout.’
In January of 2013 KPMG was instructed to start administration proceedings, although Cobbetts’ lender, Lloyds TSB, had engaged KPMG in September to formulate contingency plans as the firm was beginning to falter.
Up to 70 partners joined DWF from Cobbetts but were not part of the equity for around 12 months. A £3.9m pre-pack deal meant that DWF is not liable for the potential liabilities of Cobbetts, thought to be worth around £41m, half of which was owed to landlords.
According to the Statement of Insolvency Practice (SIP) document drawn up by KPMG at the time, DWF also made £1.8m in payments from book debts and work in progress available to the Cobbetts partners to help partners pay off their capital loans that amounted to £8.3m.
KPMG said the losses incurred by Cobbetts in its last period of trading removed any further liability for tax payable on profits previously earned, which amounted to around £6.4m to be recouped in terminal loss relief and allowed partners to carry back any trading losses that occur in the final accounting period to be set off against profits made in any or all of the previous three years.
The SIP document also describes the fall of Cobbetts in detail. It says that the firm entered into expensive new leases in 2006 and 2007 which, combined with the downturn in trade, led to a decline in profitability, some cash pressure and an over reliance on short-term funders. The firm had been trying to address the problem of real estate costs since 2009, by trying to sub-let empty office space in the firm’s Manchester office but this failed.
madeleine.farman@legalease.co.uk
