Halliwells’ client money fiasco haunts new owners
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SRA warns BLG, Gateley and Hill Dickinson of £500k liability
The Solicitors Regulation Authority (SRA) has sent a warning to the firms that acquired Halliwells, informing them that they could be liable for the client money shortfalls from the failed firm.
The watchdog has written to Barlow Lyde & Gilbert (BLG), Gateley and Hill Dickinson, warning them to fill the £500,000 black hole or face investigation.
The shortfall concerns client money disbursements due to be paid to barristers instructed by Halliwells. The firm’s accounts show a £305,000 shortfall in fees for barristers and £272,000 in interest.
The SRA letter, seen by The Lawyer, states that Halliwells could have been in breach of rules on how to handle client money for its own legal fees and client money for disbursements such as barrister fees. The two pools should be kept in separate accounts.
The letter was sent by the SRA’s law firm Bevan Brittan to CMS Cameron McKenna, which advises Halliwells’ administrators at BDO. The letter states: “The continued existence of such a shortfall does in the SRA’s view raise issues in the public interest as to whether the firm was properly managed and whether the trust the public places in the legal profession has been diminished.”
The regulator said it was unclear who was liable for the shortfall and urged that it was of “paramount importance” that the matter was resolved. It reminded the firms that there were “regulatory and disciplinary steps it can take in the public interest in relation to those whom it regulates”.
In a statement Gateley Manchester chief Rod Waldie said: “We’re extremely respectful of our obligations in respect of solicitors’ accounts rules. This whole matter is part of ongoing contractual discussions between the purchasers and the administrator.”
BLG and Hill Dickinson did not return calls for comment.
The news comes just weeks before Halliwells’ former landlords at St James’s Court in Manchester go to court over unpaid rent owed by partners.
A three-day summary judgment hearing has been set for 20 June, with four partners who were personal guarantors of the office - Ian Craig, Christopher Phillips, Paul Thomas and Matthew Wightman - named as defendants. Rent had been guaranteed on the premises until 2013, despite the firm vacating the offices in 2007.
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Readers' comments (21)
YMCA | 31-May-2011 10:28 am
So THATS why Barlows made up so many partners this year!!
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Anonymous | 31-May-2011 1:09 pm
Will ex-Halliwells partners actually sell their holiday homes and pay some bills at last? the circus goes on...!!!! ha. ha
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Anonymous | 31-May-2011 5:04 pm
I was under the impression (from reading The Lawyer, I might add) that the successor firms had "ring fenced" the old Halliwells elements in seperate entities (or at least BLG and Gateley had). Presumably then these liabilities are limited to the former Halliwells Partners rather than to the successor firms in general? Could The Lawyer shed some light on this?
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Anonymous | 31-May-2011 6:49 pm
looks like Austin will have to sell one of his jags....
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Anonymous | 31-May-2011 6:57 pm
So the SRA seems to finally be doing something about this shambles nearly a year since it occurred...
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Anonymous | 1-Jun-2011 4:07 pm
Re Anon @ 5:04pm
If the SRA actually do something then they'll strike off the partners who ran Halliwells using client money as working capital. That will hurt the successor businesses more than the loss of the c. £500k in issue.
It seems a bit rich that HBJ is trying to claim the 'black hole' from the administrators ("ongoing contractual discussions") when the people at the heart of HBJ Manchester were in charge of Halliwells at the time the hole was created!
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Anonymous | 2-Jun-2011 10:58 am
Halliwells used client money to pay humungeous Partners' cars costs, running into hundreds of thousands of pounds.
Has the return to "Ford Fiestas" humbled any of them....
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foolhardy | 2-Jun-2011 4:56 pm
Didn't they do any due diligence?
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Anonymous | 2-Jun-2011 6:00 pm
ref Foolhardy
Of course not. One of the three deals was done in less than 10 days from 1st phone call to sign off. No due diligence was done.
The two firms are "polar opposites" by way of culture.
Its a farce, a tragic consequence of greed and desperation. Its also text book case study for "change management - how not to do it".
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Teflon | 2-Jun-2011 9:26 pm
The firm was not properly managed. It is obvious that it was not properly managed. Look at what they did. They took £17M out by way of reverse premium on the Spinningfields property and the firm crashed into administration under the weight of debt created by their actions.
Ian Austin and Alec Craig were the managing and senior partners in control of the firm and they should be called to account.
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