Only five out of 22 lawyers and staff who lost their jobs when Hull firm Ingrams collapsed in July 2017 were protected by the TUPE regulations when the firm was effectively taken over by an innovative alternative business structure (ABS), an employment tribunal has ruled.
Employment Judge Jones said all five were members of the conveyancing and dispute resolution teams as he decided that only part of the firm transferred, rather than the whole.
Having been made redundant, four of the five were employed three days later by Gold Law, a brand of Lawyers Inc – an alternative business structure offering a centralised administration to back lawyers, who can still operate under a different name.
The judge said Lawyers Inc wanted to “minimise the appearance of any transfer falling within TUPE”.
Deciding on a preliminary issue about TUPE, the tribunal heard that Ingrams, was founded in 2001 by partners Paul Stott and Catherine Copp.
Mr Stott was struck off in October 2016, after borrowing over £3m from the Axiom Legal Financing Fund to try and keep the firm afloat. He was declared bankrupt the following spring.
Kellie Noble, who was a salaried partner, bought the firm from Mr Stott in December 2016. In March 2017, letters were sent to all employees of Ingrams, apart from the conveyancing team, warning of redundancies.
Max Gold, the head of the criminal department and a well-known local solicitor, died in May 2017.
Although the criminal department continued to operate until the firm closed, it was not possible to secure a novation of the criminal legal aid contract from the Legal Aid Agency.
Judge Jones said this was “significant” because 40% of fee income at Ingrams derived from criminal law.
Meanwhile, Lawyers Inc had been holding talks about taking over the practice.
Under its business model, Lawyers Inc would take over the administration, accounting and banking services for the firm and provide the indemnity insurance.
Ingrams would close and run-off insurance be paid by the former partners, who would become self-employed consultants.
Ms Noble wrote to existing conveyancing and dispute resolution clients of Ingrams in July 2017, saying that these teams would be joining Lawyers Inc.
She held a meeting with all the firm’s staff on 21 July, and told them that the firm would be closing a week later, due to the expiry of its indemnity insurance.
Gold Law opened on 1 August, its name a tribute to the late Mr Gold, based at new offices in central Hull.
Judge Jones said seven out of 22 staff at Ingrams were offered new contracts at Gold Law, including Mrs Stott, the practice manager.
Most of the old firm’s conveyancing clients were retained, along with around half of its dispute resolution clients.
Npower, whose debt collection instructions accounted for half of the dispute resolution team’s work, refused to transfer its contract over.
“I am not satisfied that the delay of three days from the closing of Ingrams to the opening of Gold Law is of any significance, it being so relatively short,” the judge said.
Judge Jones said: “A legal practice is not comparable to a hairdressers or a public house, where the location may be critical or the brand influential.
“A legal service has, at its core, its lawyers, paralegals and assistants and the service the public entrust in them.
“There was the continuation of the activity of a legal service in the areas of conveyancing and dispute resolution.
“Activity alone is not sufficient, but the substantial number of clients from those departments who transferred as well as the number of staff establishes an identity of an organised group of resources of a further part of Ingrams.”
But the remainder – the criminal departments and the broader administrative support – did not transfer.
The fact that there was no criminal law department in the new firm meant the “identity of Gold Law was significantly different to that of Ingrams”, the judge said.
“Together with some of the other dissimilarities… not least the reduced numbers of staff required, there was not a sufficient coincidence of identity before and after to establish a transfer of Ingrams as an economic entity, in its totality.”
Judge Jones held that, under the TUPE regulations, there had been a “transfer of part” of the practice, in the form or its conveyancing and dispute resolution teams.
He directed that there should be a case management discussion “to discuss the further issues which arise for determination in the light of this judgment”.
Martyn Caplan, a director of Lawyers Inc, said the firm was appealing. Gold Law was closed down last May.
He added that another firm has signed up to join Lawyers Inc in the next three months, and they were speaking to more.