SRA recovers just £2m after paying out millions to Axiom Ince clients

The Solicitors Regulation Authority has been able to recover just a fraction of the millions paid out to former clients of Axiom Ince, new documents have revealed.

The regulator has previously forecast that the total amount paid from the compensation fund to clients of the failed firm could come to £41 million once all claims were paid. In the 2023/24 year alone, more than £17m was paid in relation to the Axiom Ince intervention to clients whose needs were most urgent.

The SRA has a statutory charge on the Axiom Ince administration, effectively meaning it is a priority creditor ahead of even the insolvency practitioner’s own costs and expenses.

But according to a new progress report from the joint administrators, in the almost three years since their appointment the total amount transferred from the recoveries of the Axiom Ince business to the SRA is just £2m. In the last six months, £463,753 has been transferred to the regulator under its statutory charge.

The joint administrators have instructed solicitors to advise and assist in ongoing proceedings against the former director Pragnesh Modhwadia and connected companies. But these proceedings are currently stayed, while the joint administrators have continued to monitor the progress of the bankruptcy of Modhwadia and insolvencies of various companies to assess any prospects of dividends. There remains a freezing injunction against Modhwadia and several related companies up to the value of £64m, although there appears to be little prospect of that money being recovered.

The joint administrators currently estimate the combined recovery of the Axiom Ince assets into the administration estate to be between £7m and £10m.

The report states that the shortfall in the client accounts and the misappropriation of client monies appears to have been caused when trust funds ‘became intermingled’ with Axiom Ince’s own money. The joint administrators say there are still a number of actual and potential claims they are pursuing to recover money lost.

In December 2024, creditors of Axiom Ince approved a £3m limit on the joint administrators’ remuneration. As of 25 April this year, time costs and expenses incurred had come to £1.9m (of which £755,000 had been paid) and it is anticipated that the final costs will not exceed the agreed limit. The administration has previously been extended to October 2028 with the approval of the court in order to realise assets and pursue ongoing claims against the directors.

The handling of the collapse of Axiom Ince, which had grown rapidly in the years before its closure through a series of acquisitions, has proved a source of embarrassment and criticism for the SRA. In May last year, the regulator was sanctioned by the Legal Services Board for failings which contributed to the loss of £60m in client money. The Axiom Ince affair, as well as similar issues relating to the firms SSB Law and PM Law, has prompted the SRA to rethink its approach to safeguarding client money and created a shortfall in the accounts which is being plugged by significant rises in fees this year.