The 157-year old law firm collapsed into administration earlier this year. But the bigger crisis came after it was rescued by a firm that almost no one had heard of.
Here is the story of what happened to Ince and what is likely to happen next.
The Ince Group was created after Gordon Dadds acquired well-known shipping law firm Ince & Co in 2018.
As Gordon Dadds was already listed, the acquisition allowed CEO Adrian Biles to create a large, multinational legal and professional services business that generated £97m over the 2021/22 financial year.
However, the story for the company changed over 2022 following a cyber attack in March of that year, which was later revealed to have cost the company £5m. Ince’s share price tumbled and it struggled to get on top of the crisis. In early 2021, Ince was trading at around 80p per share but that price plummeted in July 2022 to around the 5p mark.
The company tried everything to resolve the crisis.
It tried to raise more capital by share placements and funding loans as its financial issues piled up.
It replaced its CEO, with Donald Brown, the former chief executive of corporate adviser and stockbroker Arden Partners.
It tried to restructure by selling off several of its subsidiaries and offices.
Ince repeatedly delayed publishing its annual accounts, saying its auditors needed more time to deal with the “complexity of historic and legacy accounting issues”.
But, in January this year, the London Stock Exchange finally pulled a plug on the company after it missed its final deadline to publish its accounts. The group was suspended from trading and eventually fell into administration in April.
To the rescue?
However, the Ince name didn’t end there. Two weeks after it entered into administration the firm was acquired in a deal worth £2.2m by a firm called Axiom DWFM – a firm almost no one had heard of.
The unknown firm was founded by Pragnesh Modhwadia in 2008 with a large focus on property law and conveyancying. It had several names over the years including Axiom Stone, Axiom DWFM and more recently Axiom Ince.
The firm came into the limelight due to the notoriety of the Ince brand in the legal sector. Following the acquisition, the firm quickly changed its name to Axiom Ince. It then quickly went on to buy another firm that had gone into administration, defendant insurance firm Plexus Legal.
But it was only a matter of months before things went south.
In August, the Solicitors Regulation Authority (SRA) announced that it had intervened to suspend three Axiom Ince partners over suspected dishonesty and failing to comply with account rules.
Being suspended by the SRA is one of the most serious actions the regulator can take, and it means that a person is prohibited from practising as a solicitor. Once a lawyer gets this type of banning, it can be very difficult to get reinstated on the roll of solicitors.
One of the partners that was suspended was the owner and managing partner, Modhwadia, who the SRA alleged had misappropriated a “very significant sum of money”.
The board of directors at Axiom Ince quickly called on City firm Devonshires Solicitors to ask the courts to freeze the funds Modhwadia had taken as well as file a lawsuit against him for breach of fiduciary duties.
The board of Axiom Ince alleged that Modhwadia had removed as much as £64m from the firm’s client accounts.
It is also alleged that the “overwhelming majority” of the client monies were put into companies he owned and were later used to help purchase and develop properties. He also allegedly used the misappropriated funds to cover the cost of buying both Ince and Plexus Legal.
Sound of the police
The scandal took another dizzying turn after it was revealed that the SRA was liaising with the Metropolitan Police over the regulator’s investigation into the three partners at Axiom Ince. According to a report by The Lawyer, the Met said it had detectives from “its specialist crime team” investigating the matter.
City A.M. contacted Modhwadia’s legal representatives for comment, but he hasn’t issued a public statement to address the allegations since they were first made.
As the scandal continued to unfold, more and more staff headed for the exit to seek positions at other firms.
Axiom Ince simply couldn’t survive this hit.
The firm collapsed at the start of October. According to RollOnFriday, the firm had to cease trading as its professional indemnity insurance ran out, which effectively prohibits a firm from practising. The SRA later intervened to close down the firms 14 offices across England and Wales.
Corporate insolvency specialist Leonard Curtis has since been appointed as the administrator for the firm. The Axiom Ince’s litigation against Modhwadia is currently ongoing but the administrators will now be responsible for it, if they continue with the claim.
City lawyers fume
How did the SRA allow a firm to increase in staff size by over 1,300 percent overnight and not check up on them?Frank Maher, partner at Legal Risk
But as the criminal probe and litigation continue, there is another issue that has enraged City lawyers.
The SRA may ask the solicitors it regulates to make a one-off payment to the authority in order to help out with its Compensation Fund – which provides compensation to people who are owed money by a regulated law firm in the event of a collapse – to cover the rising cost of covering potential payouts linked to the Axiom Ince case, according to a report by the Law Society Gazette.
The SRA is funded primarily from the annual collection of practising fees from solicitors, which is collected at the start of its financial year in November. The compensation fund is made up of annual payments by everyone that the SRA regulates.
The SRA declined to comment to City A.M. when contacted about this report.
In a statement released on 30 October, the Law Society of England and Wales chief executive officer Ian Jeffery said it was “greatly concerned that our members could be asked to plug a gap of many millions of pounds” arising from the collapse of Axiom Ince.
This move has caused disgruntlement amongst the legal sector.
Speaking to City A.M., CM Murray partner Andrew Pavlovic said: “Questions are being asked as we don’t have answers about what the SRA knew about these three individuals, especially the managing partner.”
He added: “The feeling from the profession is that rightly or wrongly there have been failings here and you can see why people are disgruntled as they are being asked to dip into their pockets.”
Frank Maher, partner at Legal Risk said: “How did the SRA allow a firm to increase in staff size by over 1,300 percent overnight and not check up on them?”
“We haven’t had any clear picture on what the SRA are going to do but there is a figure of £400 per person being thrown around,” he added.
This story isn’t over yet – and it is one that will continue to keep the City’s legal sector talking.