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.
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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Disgusted | 2-Jun-2011 9:29 pm
If the SRA had been dealing with a 4 man firm from Bradford then people would have been struck off by now. Double standards at work. The Halliwells partners ought to be the ones paying back the money rather than the successor firms. It was the Halliwells partners who allowed these things to go on whilst they were at Halliwells and before they moved on to the successor firms.
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In Austin we trust | 3-Jun-2011 7:58 am
Is Austin still chair of the Salford university audit committee? Lol
He doesn't appear to be head of litigation at Heatons anymore.
What is the SRA going to do with him. On his own admission he was there until the end, working his socks off. An admission which represents a characteristic own goal on his part.
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Anonymous | 3-Jun-2011 10:22 am
In relation to the comment from "Disgusted", I could not agree more. As a sole practitioner, who used to work in a very large law firm, I have seen the SRA work from both angles. There can be no doubt that the SRA over-regulates small firms and under-regulates big firms. It is a disgrace. Goodness knows how the SRA will cope with the new "Outcomes-focused regulation" coming in in October 2011. If they already run scared of applying their own rule book to large firms, what are they going to do in an even more subjective world?
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Anonymous | 3-Jun-2011 11:41 am
Pay up and we will forget all about it. Great message to the profession.
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Interested Observer | 3-Jun-2011 12:53 pm
I read today on their website that the SDT is prosecuting someone for misleading the police by not telling them that he was an accredited police station representative. If the SDT has the resources to deal with cases such as this, how come it isn't turning over Halliwells?
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Anonymous | 3-Jun-2011 12:59 pm
Where's Wally?
according to Heaton's website, Wally aka Austin...
"His commercial reputation lead to his appointment to the Business Leaders Advisory Committee to Manchester City Council for two years and currently he is a member of Salford University Corporate Governance Council and is Chairman of their Audit Committee"
what an alarming thought for Salford....
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Tool | 3-Jun-2011 3:55 pm
Austin is acting for Salford in suing some guy who runs a website called vagrant in the casual ward of a workhouse.
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Anonymous | 4-Jun-2011 2:51 am
Yep - Austin is "acting" for Salford University in this ridiculous libel case. Austin - himself a property litigator - has instructed a Barrister well known for his expertese in... personal injury and negligence. Does it get better? Well he's still Chair of Audit at the University, which has recently announced it will be making 15% of all staff redundant AND taking out large commercial loans. As Chair of Audit, he also presumably signed off on a hugely expensive lease arrangement for the University's new premises at MediaCityUK (£40,000/week ex. Vat). This whilst the few at the top of the University reward themselves with ever greater riches, chauffeurs, grace-and-favour houses. Does it all sound strangely familiar?
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SLD | 4-Jun-2011 2:46 pm
If BLG didn't ringfence the client money shortfall then does that mean Clydes will now pick up the bill?
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Tony Guise | 6-Jun-2011 10:31 am
Client account shortages remain the responsibility of the principals who were in place at the time so the successor firms are in the clear. SRA should go for the former principals, as they usually do.
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Look at the deal | 7-Jun-2011 7:18 am
The successor firms agreed to pay down the Halliwells partners lost capital. The deal was approved by the court and presumably the SRA.
The deal was based upon the amount of converted wip and the collection of unpaid invoices.
The temptation to apply money received in a manner which would maximise the reduction of lost capital is there for all to see.
If the ex Halliwells partners have redirected monies paid by clients in anticipation of such monies being used to pay counsel etc then it is likely that such conduct will have taken place both before and after the successor firms purchased the Halliwells assets.
We do not of course know whether all of the successor firms are affected by this. We do not know whether they were even aware of what may have been going on.
The SRA seems to be suggesting that there is a level of culpability but until we hear what the successor firms have to say we do not know whether there is any justification for pursuing them.
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