The Solicitors Regulation Authority ignored liquidators’ pleas for the cash reserves of a closed firm because it wanted to cover its own costs, it has emerged.
MLL Limited was one of a number of entities shut down by the SRA in late 2022 and early 2023 to protect the interests of clients or former clients. MLL traded under several names including Terry Jones Solicitors, Linder Myers Solicitors, Donnolley & Elliott Solicitors, SLC Solicitors, Verisona Law, Beaumont Solicitors and RJW Legal.
A liquidators' report produced by Companies House, records that Lloyd's bank was requested to remit the £129,000 remaining in the account. Despite the written requests, Lloyds decided to transfer the full balance to the SRA on the regulators own request.
The report states that the SRA had elected not to transfer these monies to the liquidation, as the monies were required to ‘fund their works’. The report added: ‘The joint liquidators have been advised that it would be uneconomical to undertake legal actions to pursue to the SRA. As such, no funds have been realised in this regard.’
Liquidators said they had secured a deal to sell a collection of around 105,000 wills relating to MLL and a connected company Browns Solicitors. These have been acquired by QS Legal Limited for a sum of £480,000, with £67,200 already paid and further payments due in the coming months.
Liquidators considered legal action against the SRA but decided it was too expensive.
WIP (Work in Progress) for MLL has gained more than £230,000 to help pay off debts.
Liquidators from insolvency firm Macintyre Hudson LLP reported that they have received claims totalling around £7.4m from 34 non-preferential unsecured creditors. No dividend will be payable to any of this class of creditor. It is unknown what, if anything, will be paid to HMRC, which is a secondary preferential creditor owed £1.47m.
An initial investigation into the affairs of MLL Limited had identified ‘a number of matters that require further review’, but no details were provided so as not to prejudice any future legal action.
Liquidators’ total time costs to 6 December 2023 amount to £230,000, based on 492 hours of work at an average charge out rate of £467 per hour. Incurred time costs are set to exceed the fees estimate of £236,000, the extra costs caused by the time dealing with the wills sale and various employee related matters. Legal fees paid to three different firms come to around £94,000.
Unrecoverable losses from the liquidations of various Metamorph businesses are now approaching £30m, following the previous reports into the affairs of BPL Solicitors and Metamorph Group Services Limited. BPL was primarily a conveyancing practice while MLL entities handled crime, personal injury, commercial and litigation.
This case has raised questions over the ethical standards of the SRA. It may, and probably is, legal for the SRA to retain these fees but the question remains as to whether this is ethical? The SRA has a duty to protect the public and uphold the image of the proffesion to which the regulator acts. Anything that the SRA does reflects upon the legal profession as a whole. If there are members of the public who will now not recover funds from this insolvency, to which they would likely have received otherwise it is not a good look.
Additionally, there were legal cases that were either dropped or simply not pursued because of financial implications, this should never be the case in any matter, but more specifically with the SRA. Any actions taken of this magnitude should be reviewed by an ethics committee with the support and evidences of those involved. It should not act on its own whim, independant to the profession it represents.
