Challinors reported to SRA as second client claims he lent firm £400k

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  • Whilst I understand Mr Khag wants his money or at least confirmation that he will be paid I think he is going about it the wrong way. Asking for SRA intervention will result in the company being unable to trade and over 200 staff (who have had nothing to do with the loan) suddenly becoming unemployed. What about all their loans and mortgages going unpaid? SRA intervention is good for no-one.
    And Mr Khag I have to say if you are a successful businessman with over £400k to lend it is rather naïve of you to say you were not told to take independent legal advice.

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  • I wonder what due diligence was one prior to the loan being given ? why would the firm take the money ? surely they would have had such facilities via conventional lending ? Very dubious indeed - senior management have some serious questions to answer !

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  • Before deciding whether or not Mr Khag was naive, one needs to see the documentation surrounding the loan.

    Mr Khag has no obligation to the staff at all regarding the recovery of his funds. If 200 people lose their job then their anger should be directed at the partners who lost money in the first place.

    It has never occurred to me to borrow money from a client.

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  • In this case a solicitor who borrowed £350k off his client and failed to repay it was struck off - http://www.sra.org.uk/solicitors/code-of-conduct/guidance/case-study/integrity-trustworthiness-independence.page

    So if what Mr Khag says is true why aren't the SRA even interested in this default? Could it be that Challinors are just too big for them to take on?

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  • It looks like the SRA have got themselves into a mess on this.

    In March they intervened without notice on Blakemores a firm of similiar size just around the corner from Challinors. In doing this they up ended a wind down strategy that appeared to be working for no good reason. So lets ask the SRA a few questions:

    1. Why haven't you followed your own precedent that you set at Blakemores, or do you now acknowledge you made the wrong decision there?

    2. You have been monitoring the situation at Challinors during the period of these "client loans" so why did you allow them to go ahead?

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  • According to the Challinors Statement of Affairs document written by KSA (their administrator)... The partners of the firm have taken from their capital accounts over £2.5 Million, including Mr Griffiths £319k and Mrs Debney by £237k!!

    So, before we comment on Mr Khag's "naviety" and the effects of that on SRA intervention on the 200 staff of the firm, doesn't the responsibility lie with the Partners of Challinors first and foremost, to pay that £2.5 million back and secondly run their business ecomomically... rather than passing that debt to others who borrowed the firm money in good faith? Take money from clients of the firm, and then go into Administration!

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  • Remember the current Firm of Challinors is a traditional partnership and not an LLP or incorporated body therefore the Partners have joint and several liability. I don't believe a pre-pack can be used here to wipe out creditors and to protect the Partners unless the creditors agree not ot pursue them and why should they ?

    The 2 client loans, if true, should certainly warrant an SRA investigation and SDT hearing .

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  • As Challinors is an ordinary partnership, the partners will ultimately have pay back the capital taken out and apply all of their other assets to clear the debts of the firm if that is necessary.

    Mr Fox appears not to understand the effect of the firm being placed into administration. During the period of the moratorium the SRA does know that the firm will open the next day. It was when the firm was not protected by the moratorium that the SRA may have been concerned that it would not. Towards the end of the moratorium period the SRA will no doubt start to become concerned if there has been no sale of the business.

    Whether or not Mr Khag was naive in making the loan, he is surely being foolish in trying to bring down the practice and thereby making it less likely that he will be repaid. It is in his interests that the practice survives and is sold for best value and so that the partners are better able to meet liabilities to him personally if the firm ultimately cannot. Not to mention the interests of current clients and staff and the other creditors of the firm.

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  • Why don't u all concentrate on your own affairs instead of revelling in others misfortune lets hope it doesn't ever happen to you.

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  • Maybe creditors should not only look to bankrupt the partners (so they are investigated) but also consider negligence claims against the SRA for allowing a law firm to trade which may have been insolvent. Surely this will concentrate the minds of the SRA and cause them to intervene. How can Challinors continue to trade when they appear to be insolvent? Have the partners put their homes up for sale to save the 200 employees jobs? I suspect not!!!!

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  • So who was responsible for negotiating these loans with Mr Khag?

    Was it Challinors CEO at the time Andrew Hodges who in June 2012 was sentenced to 18 months imprisonment for the theft of £70k of client money.

    Come on SRA wake up..........

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  • Who in their right mind would lend £400K to a supplier???? I think of some Tom & Jerry type of animation for alarm bells ringing if a supplier was to ask a client for £400K.

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  • Mr Khag not advised about the loan independently........I think not!

    The comment "Why don't u all concentrate on your own affairs instead of revelling in others misfortune lets hope it doesn't ever happen to you." Never a truer word spoken.

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