AxiomInce ‘s 150-year history came to an end last month when the Solicitor Regulation Authority (SRA) stepped in and closed the firm with immediate effect.
Over its 150-year history the firm was the subject of copious amounts of change. The firm began its life in 1870 as Ince & Co, growing to become one of London’s leading maritime firms operating in over 9 countries with an annual revenue for 2022 of over £100 million. However, the firm has not been without its problems, but all seemed to be a distant memory when the firm was rescued by Axiom DWFM in May 2023 to become Axiom Ince.
The future for the firm seemed bright so what caused the SRA to intervene?
Their branding as Axiom Ince was, however, to be short-lived. Come the fall of 2023, the SRA suspended three of the firm’s directors amid allegations of a £64m fraud, launching an investigation by the Metropolitan Police for financial misappropriation. On the 2nd October, Axiom Ince filed a notice of intention to appoint administrators and inform their clients they would soon cease trading. Less than a day later, the SRA officially shut down Axiom Ince to protect the interests of clients and former clients. The intervention is among the largest and potentially most expensive in SRA's history.
So where did the missing funds go?
Shockingly the firm’s former managing partner, Pragnesh Modhwadia, admitted to using the £64m from client accounts to fund the acquisitions of other law firms and towards the purchase six of his own properties plus the renovation of a number of others. Mr Modhwadia's assets have now frozen.
What does this mean for the Legal Industry?
There are three major consequences stemming from the firm’s actions and subsequent closure which the industry as a whole will need to address.
Firstly, the immediate effect of the SRA decision has resulted in mass redundancies for the firm’s staff. Many will have to find new firms on short notice. Whilst trainees have been left without training contracts and instead replaced with uncertainty regarding their route to future qualification.
Secondly, clients have been completely abandoned by the firm. Clients are being told that they need to find other representation to act for them. Presently, the SRA has collected all clients’ files for ongoing transactions which were in the firms’ offices at the time of the intervention. The SRA has appointed other law firms to deal with the closure, but those firms are not taking on the former clients of Axiom Ince. But who exactly will absorb this vast amount of work still remains unclear?
Finally, and perhaps most concerning, is that clients who have lost money as a result of Axiom Ince may be entitled to claim compensation from the Solicitors Compensation Fund, which is managed by the SRA. Solicitors contribute to the fund through a levy added to the practising certificate fee. Unfortunately, the £18m in the compensation fund reserves is unlikely to cover the potential claims from clients. The SRA has since admitted it may require solicitors to make an additional payment as a means of addressing the millions of pounds in potential claims from Axiom Ince clients. It seems that in order to recover the additional funds needed, lawyers may face an additional one-off levy. This proposal is likely to face huge outcry from lawyers who do their duty of acting in good faith and complying with the SRA’s vast regulations. In fact, there have already been a number of criticisms regarding such a proposal. In fact, the Law Society has made a public declaration of concern about solicitors having to pay for Axiom Ince mistakes, instead calling for a consultation before any decision is made by the SRA.