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Halliwells’ ex-managing partner: ‘I gave my life to that practice’

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  • From my experience of the firm the principle of disclosing and accounting for secret profits obtained by partners was applied very differently according to who you were.

    I do recall a number of partners having problems in this area which appeared to be remarkably similar to situations that did not attract censure for certain others. It appeared to me that this was used as a tool to get rid of certain partners if their face had ceased to fit.

    This does however support what is suggested above as by doing this there is evidence of the principle being accepted by the management who will pesumably now need to explain why their situation was different if they are to defend a claim from the administrator.

    Perhaps we areall wrong about this and the relevant individuals will very shortly be stumping up large sums for the benefit of RBS, FSMs and others.

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  • It shouldn't be forgotten that not every partner at Halliwells can be tarred with the same brush and it was a minority who created this situation. The Liverpool office succesfully managed to protect the majority of its staff including the future trainees. All of those parties are extremely grateful to the people from the Halliwells Liverpool office for their help and support as well as all those involved at Hill Dickinson.

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  • When did the marketing firm 24/7 owned by Austin, Craig, Hills et al cease to receive payment for its services?

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  • any more news from Salford? Does Austin still loom large over the finances of the university or has he fallen on his sword?

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  • Unfortunately Austin is still looming large at Salford, and the University are refusing to clarify whether or not they will be considering his position:

    http://www.whatdotheyknow.com/request/halliwells_llpchair_of_audit_com#outgoing-78739

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  • Re 24/7

    An equally interesting question would be how much 24/7 was being paid for its services, and how much profit went to its owners as opposed to the people who worked for it.

    Does anyone know the correct name or company number for it, as there are a lot of 24/7 names at companies house. A look at the last few years' accounts might be interesting.

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  • 24/7 Comms Ltd is a company registered in England and Wales with number 5079956.

    www.247comms.co.uk

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  • Is he administrator reading these exchanges and taking note? If not perhaps it would be sensible to make sure he knows to check the relationship with any provider of goods or services to the LLP.

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  • I'm too cheap to pay to access those accounts - anybody care to communicate the jist of what secrets they spill (if any)?

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  • Funnily enough, and as previously disclosed by ROF, the shareholders of 24/7 were (at the relevant times) all equity partners (or former equity partners) and the former FD of Halliwells LLP.

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  • Well, I can just about run to £3.00 to get the latest filings for 247 Comms Limited (5079956).

    According to the appointments report, the directors are, unsurprisingly, Bob Bion plus our old friends Ian Austin and Alec Craig. According to the report, Craig holds another 71 directorships, which will make interesting reading for someone at BDO.

    "You start to follow the money, and you don't know where it's gonna take you....."
    Its last annual accounts are made up to 30 April 2009, when Stephen Roe (remember him?) was also a director. There were shareholders funds of £127,735 and a P&L account of £91,348. It's a small company, so no annual profit and loss account, and no details of remuneration of directors. There's also no full audit, and no figure given for the turnover, which would be interesting reading.

    The last annual return is dated 12 April 2010. The directors are Bob Bion, Craig and Austin. The shareholders are Austin (82 shares), Craig (140), Stewart Harper (23), Stephen Hills (23), Bob Bion (300), David Morgan (47), Stephen Roe (117), Karen Spencer (23), Paul Thomas (175), J Whatnall (70).

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  • Who sanctioned the fees paid to 24/7? Was it the same people who qualified for a dividend? When were the fees paid, how much did the shareholders receive in dividends, when was the last payment made?
    Very interesting Mr Administrator

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  • Can you get company accounts under FOI?

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  • In reply to Anonymous 12 September 11:39am, the "minority to blame" are ALL of the equity partners of Halliwells. I love your comment "the Liverpool office succesfully [sic] managed to protect the majority of its staff including future trainees"- if this doesn't scream ex Halliwells equity partner trying to cover their back, then I don't know what does. AND IT GETS BETTER, " and all of those parties are extremely grateful to the people from the Halliwells Liverpool office for their help and support". By "people", you clearly mean the former equity partners (of which you are clearly one). Could you be any more obvious?! Like Ian Austin, you should just learn to keep your mouth shut. I can take one guess as to which former equity partner would be stupid enough to have made this comment and self righteous enough to be expecting some sort of praise.* One moment of clarity please, Hill Dickinson clearly wanted to expand its practice in Liverpool and this is the ONLY reason it took on Halliwells staff. You effectively left them all without work. Only a complete simpleton would buy your pathetic story. It's time to get off that high horse and accept that because of your greed the little ship that was Halliwells sunk good and proper.

    *A little brain teaser for everyone...former equity partner whose name rhymes with poo.

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  • The Administrator's report should indicate if substantial sums from the LLP have found their way over to 24/7?

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  • Remember HL Interative?! The place every property lawyer was told to send new residential conveyancing instructions to. I wonder whether that was all above board. Didn't some of the equity and FSM's of Halliwells run that side show.What was that all about? I remember it gave the pretence to clients that solicitors were doing the work, but in actual fact it was a group of untrained paralegals straight out of uni and being exploited with the carrot of a potential training contract.

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  • The administrator's first report is now out. I don't think they've been reading this website, or Legal Week, RollonFriday, or even talking to anyone in the pub in Manchester.

    There is NO MENTION of the reverse premium. The following is the administrators' account of the background to the insolvency:

    "By the end of the financial year to 30 April 2010 the LLP's management accounts demonstrated that the LLP was performing behind its financial budget. A key problem contributing to the LLP's financial position was a drop in turnover and billings due to the departure of a number of its members and staff. The decline in the LLP's profitability and restricted cash flow led the LLP to proceed in exploring options for an accelerated disposal of its business and assets in early 2010. Accordingly from early April 2010 a disposal process was instigated."

    Unless I've missed it, they don't seem to think that borrowing the best part of £20 million and giving it to the equity partners without telling the fixed share members had any bearing on the eventual insolvency, or is worth mentioning to trade creditors and those outside the legal profession who have lost money but might not read the legal press.

    The administrators' proposals say nothing about an investigation into the conduct of the management.

    But it does say that BDO have run up time costs of £524k and legal fees of £606k.

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  • Mr Justice Kitchin 30 July 2010 Re Halliwells LLP

    "Position of the creditors

    Mr Bannon has helpfully summarised the overall position. Halliwells was, prior to this application, loss making and those losses were projected to increase if it went into administration, significantly eroding asset value and having a knock-on effect on the funds available for distribution to all categories of creditors. The Administrators considered that the intended pre-packaged sales of the business represented the best deal available and would result in a higher level of recoveries for the secured, preferential and unsecured creditors than if Halliwells were allowed to proceed into a traded administration.

    Importantly, the Bank, as a secured creditor owed approximately £18 million, stated by letter dated 19 July 2010 that it was content that part of the monies received from three of the four purchasers should be used for the purpose of repaying the PPLs of relevant Transferring Members:

    "I have seen the draft sale agreements which are exhibited to your witness statement and acknowledge that it is intended that part of the monies to be received from three of the four purchasers of the business of Halliwells LLP are to be used for the purpose of repaying the PPLs of relevant transferring partners in the firm and this a key requirement of those three purchasers in entering into the proposed sale. On this basis and to enable the sale to proceed I confirm that the Bank is content for these monies to be treated and used in this way. The Bank acknowledges that the retention of sums and the establishment of the reserve trust to discharge the PPLs as described in the witness statements is driven out of necessity in order to maximise returns in the administration."
    Mr Bannon continues that the preferential creditors will be made up of employees of Halliwells who are not required by the purchasers. The estimated value of the preferential claims is between £68,000 and £100,000. The preferential creditors will be paid in full.

    Further, the unsecured creditors will receive the maximum statutory "prescribed part" payment of £600,000. This sum will be available for distribution to all unsecured creditors and will result in a dividend of £2.63p in the £. On the other hand, if the four sales did not proceed and the business entered administration as a whole, the number of preferential and unsecured creditors would greatly increase, thereby lowering the dividend for unsecured creditors to £1.60p in the £.

    Finally, Mr Bannon points out there will or may be Members (past or present) who are unsecured creditors of Halliwells, and who have not transferred as part of the four sales and who remain liable on their PPLs. However, he maintains, and I agree, that the payment of monies to satisfy the PPL liabilities of the Transferring Members under three of the four sales was a necessary evil to achieving those sales. The requirement was imposed by the purchasers and without it being complied with, the deals would have collapsed"

    Some partners were let off PPLs..............

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  • Ref Arthur Mee above. HLI demerged last year but HLLP kept a 10% stake and things stayed cosy. I wonder if the King Street (former James Chapman and now HLI's office sublet from HLLP) landlord has found out about the stitch up they pulled together there yet.

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  • No wonder the LLP was performing behind budget: Ian Austin's concept of a budget was a top-down target comprised of the sum of the number of fee earners multiplied by their hourly rate multiplied by the number of hours you hope they work in any one year and hope they cover firstly the fees of your nearest and dearest and secondly your drawings.

    The remarkable thing about 24/7 being a creditor to the LLP was that it hadn't been given a preference - probably something to do with 3 out of 4 offices refusal to stump up their sweetheart fees for this year.

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  • If the PPLs were paid off out of the disposals, where is the £700k that he says he lost? Is he saying his capital account was £700k over the PPL or is this an example of a particular form of financial accumen?

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  • Ian didn't transfer under the one of the 4 SPAs and therefore wasn't a protected person for PPL purposes. He had exited the building before then. Don't know if any other special deals were done with him and Alec as both were clearly not part of any of the deals being done on administration.

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  • According to the Claremont website http://www.claremontgi.com/office/case_studies/haliwells-manchester the furniture and a/v equipment at Spinngfields cost £2.6M. I wander how the rest of the £18M borrowed from RBS for fit-out costs was spent?

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  • Not looking too clever, is it?

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  • Looks like this will end up as a liquidation. I am not surprised as I think the Landlord, RBS and HMRC will all be very keen for a liquidator to investigate exactly how Mr Austin managed to manage the firm into an insolvent position over the course of a few short years.

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  • Ref - Anonymous | 17-Sep-2010 9:12 am
    The landlord would be very interested to learn about the 'stitch up' - are there any more details available?

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  • Bearing in mind the RBS, the Landlord and the FSM's do not appear to be in the creditors list this could easily go beyond £30M. Well done Ian, your comments do not sit at all well when considering the list of creditors but what was the name of the company who used to valet your car?

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  • Ref anon above re King Street. Have a look at Allied Dunbar v Homebase and then do some digging as to the precise nature of the transaction there with those circumstances in mind.

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  • This whole deal needs re-opening and re-examining. How could the administrator enable the Halliwells' old-guard (those who'd most benefitted from the reverse premium deal on Spinningfields) to waltz off into the sunset to their new firms with their capital intact (personal practice loans duly protected) whilst those partners who had the sense to resign in the previous 12 months but hadn't got their capital out, lost everything. At what point does this start to look like preferential and impartial treatment?

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  • I think the point here is that it was a preference which the Court sanctioned. The fear was that the partners would be made bankrupt which would involve them having to sell those houses they bought or built with the reverse premium money and we couldn't have that now could we?
    It is strange that the Administrator has not mentioned the reverse premium. Maybe he is saving up for when he becomes the liquidator?

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  • The court may have sanctioned the preference but it did not expressly relieve the partners in Halliwells LLP from their duty to act with utmost good faith to each other. I imagine the retiring partners who had not yet been repaid their capital will be considering whether the failure to invite them to join one of the rescue deals amounted to a breach of that duty....

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  • Lots of people have commented on the partners' duty of good faith to their fellow partners. But Halliwells LLP was of course an LLP. Unless there was a specific provision in the members agreement setting out a duty of good faith to fellow partners, the only duty of faith the partners was owed was to the LLP, not their partners.

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  • Given that Austin states the December 2009 Kennedy's move was “the straw that broke the camel’s back” how can he justify trading/incurring debts after that date? If I was HMRC I would be taking a very long, hard look at the issue of personal liability.

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  • I understand that there was a duty to act with utmost good faith in the Halliwells partnership deed...

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  • The straw that broke the camel's back was the Spinningfields property deal. In other places and for other reasons, the administrators appear happy to admit to that. Not only did it ensure that the firm had an expensive property and substantial debt as the corporate and property markets crashed, but management's greed in ensuring that the monies from Spinningfield were neither retained nor shared equitably amongst all partners holding equity (however small) created a deliberately hidden timebomb which (when made public), destroyed the partnership.
    When a partnership elides its voting structure with its equity, and is run by the "commercial and entrepreneurial" amongst us holding a significant chunk of equity, then there can be little surprise when it decides against protecting its future in favour of topping up senior partners' pension funds.

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  • and still we keep asking ourselves about that Louis Vuitton luggage set and the managing partners' expense account

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  • Now it is being reported that Paul Thomas, litigation partner and one of the few partners who did not resign from the insolvent LLP (unlike Mr Austin), has written to the other (ex-) partners chasing an indemnity for the rent guarantee that he had to give, and stating that "the most natural and obvious explanation of your actions is that the scheme has been deliberately kept secret from me, to enable you and the other members to secure a purported advantage in disputing your liability to me under the indemnity. Such conduct is, on the face of it, misconduct, and requires investigation."
    It will be interesting to see what the Law Society makes of all this, let alone the new employers of said partners.

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  • Dear Scep Tick
    What makes you think that the information about the resignations, reasons for them or, indeed the Paul Thomas problem (and any advice received on how to deal with it), made it round to all but the Manchester Equity Partners of Halliwells?
    And before you feel too sorry for Paul Thomas, he has profited very handsomely from Spinningfields and other wheezes connected with Halliwells and its clients. As a former managing partner he, and others, were responsible for setting the tone.
    For those of us who had the misfortune to have anything to do with this firm, this behaviour does not surprise.
    Halliwells FSM

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  • Oh, don't worry, I'm not sympathetic. Just intrigued as to how far the backstabbing has gone. Professional integrity is surely in issue and something for the SRA to investigate.

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  • Anybody who worked there will recall the "One Halliwells" ideology. Austin would cite it on a regular basis. It dealt with a number of things including conduct and integrity. So many contradictions but the one defining feature was the collective greed of the equity partners. They are no doubt ripping in to each other although Paul's "poor me" email is highly amusing

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  • Many partners have now received a directors disqualification questionnaire asking them to confirm why the firm failed, what financial information was provided to the partners and whether any of the LLP's property or assets were transferred or disposed of. I doubt Mr Austin is going to get an easy ride!
    Any news on the Salford issue?

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  • It's astounding that we are at least a month on, millions have disappeared and the authorities have done nothing, but if commoners like me get into debt for a few hundred pounds the armies of debt collectors are on our backs immediately. It's one law for lawyers and one for non-lawyers. Why on earth is Salford still associating themselves with a business failure - are they stupid?

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  • So much fun filling in the form - how I smiled wryly when I got to the question about whether we were ever provided with management accounts. The real ones? The ones provided for Full Members or the ones provided for FSMs? And the question about services/goods supplied for value - could any fiduciary ever have justified the 3-year deal with 24/7? And the one about whether we ever had a full meeting of the partners - er "no"? And whether we were ever given a copy of all the resolutions passed and the amendments to the LLP deed - er that'll be a "no" too.

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  • For those reading who have to fill in this questionnaire - let them have it!
    As for Salford - no movement at all. The University are refusing to comment and no statements have been issued.
    There hasn't been a meeting of the Board of Trustees there since all of this came out. There is one at the beginning of October, however - I expect there'll be a few questions for Austin.

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  • Projections, projections, projections were the real strength of Ian Austin. Remember all those who put their money in based on projections of 30k per point? Did Ian really believe that the firm would achieve profits which would justify such projecions when he knew how badly exposed the firm was to the downturn, the extent of the creditors and the ongoing leasehold liabilities?
    As for the accounts produced, I would hope that the Administrator looks very carefully at what was produced and to whom.
    As for the Form, those who know what really went on and how the firm was managed are going to have an awful lot to tell the Administrator!

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  • BLG have been reported as spending £1M on the fit-out of the new offices for the ex-Halliwells insurance group of circa 250 people.
    How did Halliwells mange to spend £18M on the fit-out at Spinningfields for circa 900 people?

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  • Anonymous | 29-Sep-2010 12:43 pm
    Shurely any question about "How did Austin et al manage to spend [x]" is rhetorical?

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  • Re Anonymous 27 September @ 10:59, it's not a case of one law for lawyers and one for non-lawyers, it is a case of one law for the workers and one for the capitalists. "The bourgeoisie has stripped of its halo every occupation hitherto honored and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, and the man of science into its paid wage-laborers."

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  • What was the cause of the failure of the business? Only 2 inches of space to provide a response which could run to a 20,000 word dissertation on how not to run a business. Ian Austin ought to work off the debt Halliwells owe to the CoL by presenting seminars on the subject of business failure.
    All budding lawyers could do with some guidance from one of the architects of the largest LLP failure the country has ever seen.

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  • Halliwells Jumble Sale

    I want to thank Ian, Alec and the others as I have bought some rather nice furniture at a very keen price. I suppose the difference is that I will pay for it.

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