The debate surrounding the collapse of Ince & Co has intensified following the emergence of key details on why the firm was put into administration.

A Statement of Insolvency Practice document written by administrators Quantuma and seen by Legal Week reveals that the firm was deemed insolvent by Gordon Dadds due to a combination of factors such as accounting miscalculations and the knock-on effect of partner departures.

It states there was a belief that a number of partner exits throughout 2018 would lead to a knock on effect and cause a "significant" loss in future turnover at the firm. Departures during the year included a four-partner shipping team exiting for Clyde & Co in Hamburg, three partners joining Watson Farley Williams in Greece, and London insurance head Joe O'Keeffe leaving for Stephenson Harwood.

The document says a number of "material miscalculations" had been made in the Ince & Co accounts regarding transfer pricing between Ince's foreign offices, that would increase operating costs and reduce retained earnings, according to the document.

The Quantuma document adds that Ince's most recent LLP accounts suggested its London branch owned a 20% interest in each of the foreign entities – but that due diligence undertaken by Gordon Dadds subsequently found that to be incorrect. It further argues there were also unreconciled balances of £2.1m between the firm's London and international practices.

Other reasons for the collapse related to the firm's lack of available cash, leaving it unable to pay its partners' tax bills or its December rent payment, the document states.

As a result, Gordon Dadds approached Quantuma with "serious concerns" over Ince's solvency just 18 days before a pre-pack administration was finalised on 31 December 2018, which allowed Gordon Dadds to acquire the business without taking on some liabilities.

It valued the company's core assets at just over £34m, about £28m of which was money owed to the London LLP from other entities in the group and from clients, as well as work in progress. The firm was financed by members' capital of about £12.5m and about £10m of unsecured credit facilities from The Royal Bank of Scotland.

But former partners and insolvency experts have questioned whether the decision to put the firm through a pre-pack administration was justifiable, particularly because Ince & Co was not marketed to other potential buyers.

"Why was there not the scope to take more time?"

Lee Manning, an insolvency expert with London boutique ReSolve, says: "The question to be asked is why it had to be sold so quickly to Gordon Dadds, and why did it have to be pre-packed before testing the market?"

One person close to some of the firm's former partners says: "There was clearly a lot of urgency there, whether real or imagined. Why was there not the scope to take more time?"

Quantuma states within the document that a variety of reasons left no alternative, arguing that unless the sale did not take place before 31 December, there would have been an "immediate unravelling" of the firm and therefore a "significant erosion of value for all creditors".

The document also says it was "considered unlikely" that there would be an alternative willing purchaser in the market.

Former partners have expressed frustration about Gordon Dadds' 60% collection fee for recovering work in progress and receivables totaling just over £13m from Ince.

One ex-partner says he felt "mugged" by Gordon Dadds when he discovered the firm would be taking almost £8m from the potential creditors pot – feelings exacerbated by partners' own possible financial burdens.

Manning says that "in isolation" the collection fee appears high, but only if administrators are unable to explain to creditors the steps they and Ince's management took to market the business and establish a fair value.

He says that negotiating a collection fee is "entirely normal", although the administrator has to make sure "reasonable efforts to sell the assets for fair value" have been made, given the circumstances.

"Ince effectively had nowhere to go"

John Lord, a Knights disputes partner who advised partners affected by the collapse of Manchester firm Halliwells, comments that the statement shows there would have been "very few options" available to the Ince management come January, which would have increased Gordon Dadds' negotiating position.

He says: "The exclusivity granted to Gordon Dadds will have meant that there were limited suitors who could mobilise quickly enough in order to mount rival bids. Add to that the trading position worsening due to partner departures, actual or anticipated, and Ince's inability to meet its liabilities, likely scrutiny from the SRA [Solicitors Regulation Authority] and its bank being less than supportive, Ince effectively had nowhere to go."

A former administrator with experience in law firm insolvencies adds that the statement suggests that "Gordon Dadds have manoeuvred themselves into a position where they're the only buyer and there's been no test as to whether the deal represents the best value for creditors or not".

"What Ince management were doing regarding taking insolvency advice is a really big question."

Lord also questions why it seemed to be Gordon Dadds and Quantuma rather than Ince & Co that realised the firm was insolvent in the first place. He adds: "If right, that's surprising."

The former administrator agrees, saying: "What Ince management were doing regarding taking insolvency advice is a really big question."

Administrators Quantuma are expected to release their proposals for creditors in the next few weeks.