Compensation claims over collapse of Axiom Ince hit £33m

Regulator says it hopes to avoid additional levy on solicitors by prioritising claims
April 13 2019: Image taken of Aldgate Tower at 2 Leman Street, London E1 8FA. Aldgate station was not busy as this was taken on a weekday late afternoon.

Ince’s former headquarters at Aldgate Tower Mrtravelbunny; Shutterstock

The Solicitors Regulation Authority (SRA) has revealed it is not planning to impose an additional levy on solicitors to fund compensation claims generated by Axiom Ince's collapse despite an unprecedented flood of claims, currently totalling £33m.

The SRA says it hopes to keep the solicitors' compensation fund solvent through the careful prioritisation of claims, with conveyancing cases that could render clients homeless at the top of the list.

The regulator had mooted the necessity of additional levies to the fund  — the profession’s insurer of last resort — after it took control of the firm in October in what is the largest intervention into a law firm to date. Around £66m of client money is missing and the Serious Fraud Office has made seven arrests.

In an update released yesterday (29 November), the SRA said it had already paid out “a limited number of emergency claims against strict criteria, such as where there was a risk of homelessness or imminent insolvency, or if a client was under a contractual obligation to complete on a private domestic property purchase”.

It added: “By taking this prioritisation approach and managing the cashflow demands on the fund, the SRA will not be calling on solicitors to make an in-year contribution at this point, but will keep this under review in the light of any further interventions or other unforeseen events.”

However, it warned of a “longer-term question about the compensation fund and consumer protection more generally” in light of “the increasing number and size of interventions in recent years” and said it would be “considering whether it can reduce the risk of similar firm failures in the future”.

The decision not to impose a levy to top up the fund was welcomed by Law Society of England and Wales chief executive Ian Jeffery who said it would “protect consumers and maintain public confidence in the fund”.

He added: “We maintain that the solicitor profession must be consulted before any decision is made by the SRA on its future approach to such exceptional compensation questions, given that our members would be required to pay for it.”

Axiom Ince rose to prominence earlier this year when the regional firm Axiom DWFM bought venerable shipping practice Ince out of administration. Two months later the rebranded Axiom Ince acquired national insurance law firm Plexus in similar circumstances. In August, the SRA closed down sole shareholder and managing partner Pragnesh Modhwadia’s practice for suspected dishonesty.

In yesterday's statement, the SRA said a claim against Axiom Ince’s professional indemnity insurance was underway while funds could be recovered from an existing freezing order on assets obtained by the firm.“If funds are recovered from the insurance claim or from the sale of frozen assets, then these will be used to replenish the compensation fund,” it added.

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