The collapse of the Ince Group has left a major financial hole for lawyers to fund following the scandal involving the law firm’s collapse this year and the freezing order for £64 million against former managing partner Pragnesh Modhwadia (pictured).
In 2018, the Ince Group emerged when Gordon Dadds acquired the renowned shipping law firm Ince & Co, leading to the creation of a substantial multinational legal and professional services business that generated £97 million in revenue during the 2021/22 fiscal year.
The company’s fortunes took a turn for the worse in 2022 following a cyberattack in March that cost the company £5 million, resulting in a drastic drop in Ince’s share price.
Despite various attempts to resolve its financial troubles, including raising capital and restructuring, Ince faced a major setback when it failed to publish its annual accounts on time, leading to suspension from trading in January and eventual administration in April.
Shortly after entering administration, Ince was acquired by Axiom DWFM, a relatively unknown firm, for £2.2 million.
Axiom DWFM quickly rebranded as Axiom Ince and also acquired defendant insurance firm Plexus Legal.
Axiom Suspensions
However, the firm faced scandal when the Solicitors Regulation Authority (SRA) suspended three Axiom Ince partners over allegations of dishonesty and non-compliance with account rules, including Pragnesh Modhwadia the owner and managing partner, who was accused of misappropriating a substantial sum of money.
Axiom Ince’s board sought legal action to freeze Modhwadia’s funds and filed a lawsuit against him for breach of fiduciary duties, alleging that he had removed up to £64 million from client accounts and used the funds for property development and acquisitions. The SRA obtained a freezing order against Modhwadia for the money.
The litigation against Modhwadia is ongoing, with administrators potentially overseeing the claim.
The scandal escalated as the SRA collaborated with the Metropolitan Police to further investigate the matter and, as would be expected, Axiom Ince’s reputation took a major hit.
The Black Hole
In October, the firm collapsed due to the expiration of its professional indemnity insurance, preventing it from practicing. The SRA intervened to close Axiom Ince’s 14 offices across England and Wales, and Leonard Curtis was appointed as the administrator.
According to the report in CityAM, lawyers expressed concern about the SRA’s failure to monitor Axiom Ince’s rapid growth and questioned potential financial implications for the legal sector.
The law firm collapse has left a major black hole for the SRA and the lawyers who fund it, requiring a proposed ‘one-off’ payment.
Law Society Chief Executive Officer Ian Jefferey said ‘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.
‘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 told the Law Gazette.
According to the SRA Compensation Fund Annual Report, accumulated funds on 31 October 2021 were only £50.6m, thus requiring a one-off payment to make up the shortfall.
There remain real concerns among City lawyers about a lack of clarity regarding the SRA’s actions and the financial burden on legal professionals in circumstances such as those surrounding Axiom Ince.
