News focus: Metamorph - anatomy of a collapse

Anyone stumbling upon the website of Metamorph Group could still be forgiven for thinking this is a thriving business. The banner headlines boast of a team of more than 650 professionals serving 50,000 clients from a network of 15 offices, most collected over the past seven years as Metamorph acquired high street law firms.

The opening salvo in the company’s ‘about us’ profile: ‘Metamorph is revolutionising legal services.’

The reality could not be more different: this is a business that has spectacularly and expensively failed, with staff unpaid for months, managers resigning, auditors quitting and regulators forced to step in to protect client interests.

Metamorph has gone from aspiring game-changer to being one of the legal sector’s biggest losers. The first signs of trouble came last summer when Metamorph and its stable of firms failed to submit annual accounts on time. This turned out to be no oversight: a Companies House update published just before Christmas revealed that the Metamorph auditor Crowe UK LLP had resigned over concerns about disclosure and management.

'We are working to resolve matters with HMRC and we are very confident of a successful outcome'

Tony Stockdale, October 2022

The firm said it was resigning ‘because we have been unable to obtain sufficient appropriate audit evidence to resolve serious concerns’ identified during its audit of the financial statements for the year ended 30 June 2021.

Crowe said: ‘That audit had not been completed and, despite repeated requests, the company has failed to provide information and explanations sufficient to address our concerns. In addition, we have concerns around management’s behaviour in terms of their approach to compliance with law and regulations.’

The Gazette understands staff were initially paid late last July when they were told the problem was due to migrating to a new payroll system. Wages were not paid in full for October and in some cases are still outstanding.

Yet on the surface, Metamorph tried to exude calm, and to play down any concerns about its financial predicament. Executive chair Tony Stockdale said in October that a winding up petition issued by HM Revenue & Customs was a ‘shock to everyone’.

‘We are working to resolve matters with HMRC and we are very confident of a successful outcome,’ Stockdale said. ‘In addition we have a supportive group of shareholders and management team who remain committed to our strategy.’

'We have been unable to obtain sufficient appropriate audit evidence to resolve serious concerns'

Crowe UK LLP, November 2022

But within weeks uncertainty about the company’s leadership and long-term prospects had grown. Stockdale ceased to be a director of the group in November – only to be reinstated later the same month – and a new winding up petition was issued, this time against Beaumont ABS by estate agency Connells. Metamorph resolved to close down offices in Chester, Sale and Shrewsbury and placed MLL Limited, which traded under the names Terry Jones Solicitors, Linder Myers Solicitors, Donnelly & Elliot Solicitors, SLC Solicitors, Verisona Law, Beaumont Legal and RJW Legal, into liquidation.

By now, the pressure was mounting on the Solicitors Regulation Authority to step in, and the regulator duly intervened into four entities – Beaumont ABS, Atray Limited, MLL Limited and BPL Solicitors – on 14 December. This action was deemed necessary by the SRA ‘to protect the interests of clients’ and involved agents going into 12 branches to seize 1,000 boxes of live matters, advising clients to find alternative solicitors, and collect 60,000 boxes of closed matter files.

At the time, the intervention was said not to apply to any of the remaining Metamorph subsidiaries, but that position changed within five days, as the SRA then moved in to shut down Knight Polson and Knowles Benning – the firm which had absorbed many of the staff and client matters from other businesses in the group in the second half of 2021. Three Metamorph entities – Browns, Beeton Edwards and Parrott & Coales – remain outside the intervention and in operation.

Nobody from Metamorph has said anything publicly for months. The company’s IT is down so staff are reliant on individual email addresses and texts, and have been asked to pass these on to as many former colleagues as possible.

A message from Metamorph founder Simon Goldhill, who resigned as a director of the group last month, confirmed that all employees of Knowles Benning became redundant as of 19 December, with their employment terminated with immediate effect. The company was unable to inform everybody at the time as there was no access to email facilities, HR assistance or even an employee database.

Managers were still seeking ways to put Knowles Benning and other firms into liquidation, which would enable all former staff to make claims for unpaid salaries and notice periods from the government. In closing the message, Goldhill said: ‘I deeply regret what has happened over the past few weeks and the effect this has had on you and your families.’

The reasons for the Metamorph collapse will no doubt become clear through liquidators’ reports in the coming months. For now, observers can only speculate that the group perhaps suffered from growing too quickly, spreading itself too thinly and inheriting financial burdens from each of the firms it acquired.

If this was a revolution, then it ended almost as quickly as it had begun.

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