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Mackesys demise blamed on ‘seven-figure debts’
The closure of the south London criminal defence firm has been shrouded in confusion, claim and counterclaim. Freelance legal affairs journalist Catherine Baksi investigates what really happened.
The legal aid sector is used to hearing bad news, but the closure in October 2014 of large London criminal defence firm Mackesys, after more than 40 years in business, still sent shock waves through the profession.
The firm’s demise has been attributed to poor financial management, which resulted in huge debts, rather than it being a direct casualty of the legal aid cuts. Mackesys’ precarious financial situation is thought to have been exacerbated by the scale of overpaid fees clawed back by the Legal Aid Agency (LAA), estimated to be as high as £700,000.
Andrew Hosking, partner at insolvency practice Quantuma, who is advising the firm’s sole principal Geoff Wordsworth, says it would be ‘premature’ to put a figure on that debt, but he indicates it is ‘in excess of seven figures’. Creditors include the Inland Revenue.
The firm had one of the largest criminal legal aid practices in the country, with 31 duty solicitors. According to the most recent figures available from the Ministry of Justice, it received just over £1.5m in 2012/13 from criminal legal aid work.
A proposed merger with Walthamstowbased SJ Law earlier this year collapsed following due diligence checks on Mackesys.
Wordsworth has been in poor health for some time. Some months before the firm’s closure, Wordsworth appointed self-styled legal services and recruitment ‘entrepreneur and enabler’ Sean Smith as chief executive.
According to Smith’s own website, as well as running the UK’s ‘largest recruiter of criminal duty solicitors’, he is founder of Happy Lawyer Marketing, which aims to help solicitors ‘develop new client streams’.
During his time at Mackesys, Smith claims he returned the firm to profit and reckons he could have ‘traded out of the mess in three years,’ adding: ‘Mackesys could have been a fantastic business.’
The closure of Mackesys was shrouded in confusion, with a flurry of contradictory statements posted on its website. At one point, the website itself included a ‘for sale’ sign.
20 October Wordsworth decides to close the firm due to his ‘failing health’.
22 October Statement appears on its website announcing Mackesys had closed and all staff had been made redundant; staff wages will be paid in full, and rumours of financial mismanagement are ‘utter nonsense’.
24 October A new statement appears: Mackesys has not closed but is in the process of an ‘orderly restructuring’. It blames the earlier statement on an ‘unauthorised individual’ who had hacked into the site and ‘posted inaccurate information’.
A Mackesys spokesperson is quoted in the legal press saying Mackesys could not continue to trade due to the legal aid cuts.
17 November Insolvency practice Quantuma issues statement saying that Tuckers and Warren’s Law will assume future conduct of all Mackesys’ client files.
20 November Statement, ‘Mackesys – what has ACTUALLY happened’ appears on Tuckers’ website confirming the arrangement between the firms, and that it has been approved by the LAA.
The firm’s closure was first announced by a statement on its website on 22 October, which was then contradicted two days later by another statement saying it was not closing after all (see box).
Hosking clarifies the firm’s current status as in ‘run off’, with the business being transferred by agreement to London and regional giant Tuckers, and London and Sussex firm Warren’s Law. Wordsworth is now retained by Tuckers as a consultant, but could not be contacted for comment.
The arrangement with Tuckers and Warren’s Law avoids a costly intervention by the Solicitors Regulation Authority, that would see much of its creditors’ money eaten away by lawyers’ fees, according to Hosking.
Despite its size, Mackesys was run by Wordsworth as a sole trader, and is not a corporate entity. As such, it does not have the option of being put into administration. According to Hosking, Wordsworth’s options are limited to bankruptcy or an individual voluntary agreement (IVA). Wordsworth, he says, is preparing the latter, which will be put to the firm’s creditors, including its former solicitors and police station representatives (many of whom were employed on a freelance basis).
However, a self-styled ‘Anti Mackesys IVA Action Group’ has emerged online and is urging former staff and freelancers to oppose the IVA and force Wordsworth into bankruptcy. Smith, who backs the anti-IVA campaign, says if enough individual creditors oppose the IVA and Wordsworth is bankrupted, they, rather than the Inland Revenue, would become primary creditors and have first claim on any assets.