Bostalls, one of the providers of the Legal Services Commission’s police station telephone advice service, has been wound up after failing to pay its taxes.
The LSC has responded by transferring the contract for the Criminal Defence Service (Direct) scheme to a company set up by the same people who ran Bostalls and which employs the same people.
A spokeswoman for the official receiver confirmed that Bostalls was wound up in the High Court on 18 May for unpaid taxes after a petition from HM Revenue & Customs.
The company had one other creditor and owed a total of £130,270.
Andy Scripture, former managing director of Bostalls and principal of new company The Shaftesbury Group, insisted Bostalls had been ‘solvent on paper’.
He said Bostalls was owed money by a firm of solicitors and its assets exceeded its liabilities.
Scripture said he did not fight the winding up petition because he was planning to close down Bostalls in order to set up a new company that would allow him to pursue other ventures.
‘We were looking to do other things and distribute golfing aids from Thailand in the UK, but the articles of association for Bostalls limited it to the provision of legal services,’ he said.
Bostalls won a contract to provide the CDS Direct service, which gives telephone advice to people detained in police stations for less serious offences, in 2007.
As a legal support agency not owned by a solicitor, it required a waiver from the Solicitors Regulation Authority to allow it to provide legal services to the public.
At the time, The Law Society criticised the SRA’s decision to grant that waiver, saying it would allow an unregulated commercial body to deliver legal services.
It accused the SRA of allowing the creation of an alternative business structure ‘through the back door’.
Scripture confirmed that although a new company, Shaftesbury, had been established, the same people were providing the service. Shaftesbury has applied for the same waiver.
The Law Society urged the LSC to explain publicly ‘as a matter of urgency’ what has happened to Bostalls’ CDS Direct contract and how much public money has been lost as a result of the liquidation.
It has written to the LSC seeking answers to those questions.
An LSC spokesman confirmed one of the contracts to run CDS Direct had been transferred from Bostalls to Shaftesbury.
On the question of whether a contract should have been given to a company which, in another guise, had just been wound up for non-payment of taxes, he said: ‘The LSC is satisfied public monies are being spent appropriately.
However, the LSC cannot comment in detail on the commercial arrangements of any legal aid provider.’
He added: 'The CDS Direct service has not been disrupted in any way and continues to run to the high standards it did before this transfer.'