A FIRM of South Hams accountants has gone into administration after a legal battle over one of its branches – but it has been bought out by the owner’s wife.

MG Associates Ltd, owned by Michael Ghersie, went into administration last week and the business was sold to MG Accountants Ltd, a company owned by Mr Ghersie’s wife Marlene Baylis.

A spokesman for administrators Lameys in Newton Abbot said: ‘The director of MG Associates Ltd [Mr Ghersie] appointed Michelle Weir, of Lameys Business Recovery, as administrator on April 6.

‘The south west accountancy business has already been sold as part of a pre-packaged sale which preserves the jobs of the company’s employees and ensures the company’s customers do not suffer any disruption.

‘Over recent years MG Associates Ltd has been involved in extensive litigation. The recent judgment left MG Associates Ltd with a liability which it could not pay. The business was marketed before the administration and the best offer was received from a company connected to the director.

‘The business has therefore been sold to MG Accountants Ltd, which is a company owned and controlled by the director’s wife [Ms Baylis]. As a result, the management and staff will remain unchanged and the business’s customers should experience almost no disruption to the service they receive. Contact numbers and personnel have not changed.

‘The only significant change is that the business has ceased trading from one of its offices.

‘The Dartmouth office workload will now be administered from the Kingsbridge office. The Torquay office will remain unchanged.’

Michelle Weir, a partner at Lameys Business Recovery, said: ‘We are pleased to have been able to secure a sale of the business which will facilitate a return to the company’s unsecured creditors and has saved jobs.

‘The only real alternative was to liquidate the company and that would have been far worse for the creditors, staff and customers.’

Ms Weir added: ‘It is clear the sale to a company which is connected to the director has provided the best possible outcome. The business was extensively marketed before the administration and, while there was significant interest, the best offer was received from MG Accountants Ltd.’

In a judgement handed down at Bristol Mercantile Court by Mr Recorder David Blunt QC, MG Associates and/or Mr Ghersie was ordered to pay David Beeny, former owner of the Dartmouth practice, £424,876.70 by April 6. A counterclaim for more than £950,000 by Mr Ghersie was rejected.

Mr Beeny had earlier been awarded £227,027.79 by the court after bringing a case against MG Associates and Mr Ghersie, a fellow member of the Institute of Chartered Accountants England and Wales, who had failed to pay for the business he bought in December 2010.

The counterclaim was based on a claim that Mr Beeny had misrepresented or overstated the value of the Dartmouth business when he sold it to Mr Ghersie.

Ms Baylis said this week: ‘In the first trial in 2013, the judge found Mr Beeny to be liable for misrepresentation, inducing the agreement to purchase his business.

‘The court listed a second trial to establish the level of damages due to MG Associates Ltd because of Mr Beeny’s misrepresentation.

‘The figures quoted from the judgement for the first trial are what Recorder Blunt found was the true value of the company not what Mr Beeny had misrepresented it to be.

‘In the second trial in 2015, the judge found, as a matter of fact, that if Michael had known the true fee income of Mr Beeny’s practice, he would not have bought it. However, the judge found that no damages were due from Mr Beeny as a result of his misrepresentation of the fees.’ ­

In response, Mr Beeny said: ‘The contract stated that for the first year the turnover from the transferring clients would be about £220,000. The judge found that the turnover during the first year after completion was £216,150.

‘During that first year a number of clients left the practice. If they had remained as clients then there would have been additional turnover of about £18,000, which would have made turnover for the first year to be in the region of £234,000. Consequentially no loss of income.’

The judge said that based on figures provided by MG Associates’ solicitors, by December 2012 the turnover was down to £60,000. He added: ‘I have found that the turnover during the first year after completion was £216,150. The loss of 72 per cent of turnover in the space of just over 18 months is remarkable.’

The judge added: ‘It is clear that the dramatic fall in turnover only occurred in the second year after completion, when only [one named person] of the inherited staff was still in post (and then only until June 12, 2012). Michael Ghersie admitted... that MG?Associates at times provided a poor service, and made mistakes and that accounts were filed late. Clearly, once [one named person] had left, MG?Associates lost clients through a combination of the fact that new staff did not have any established connection with the clients, through errors and poor service, and through poor client management.’

Mr Recorder Blunt QC, in rejecting claims that MG Associates had inherited staff not up to the job, said: ‘Mr Beeny’s management of his practice may not have been the most lean and efficient, and may not have kept up with the times in all respects, but it functioned reasonably satisfactorily prior to completion.

‘Similarily, although his staff may not have been highly qualified or of the highest calibre, they had the ability required for the nature of the work each of them undertook. This is evident from the results of the practice pre-completion, and from the fee income in the first year following completion.

‘Whilst I accept that Mr Ghersie may have wished to have the services of better qualified and more versatile staff, I consider that, objectively, his criticisms of the staff inherited from Mr Beeny are not justified.’

The court had earlier received complaints from a number of dissatisfied clients of MG?Associates.

One client ‘identified multiple errors for leaving’; and another cited ‘poor customer care and reports repeatedly late by many months’.

Another client said Mr Ghersie ‘did not have a clue who we were’.

One client quit using the practice ‘due to errors in tax bills’.

Another client said she had been ‘tearing her hair out at Mr Ghersie and his team’.

More clients claimed MG Associates ‘were not very good at their job and did not accept responsibility for their errors’; and continued changes in staff ‘left us with a bitter taste for Michael Ghersie and I personally still felt the same after we eventually met him and to this day…’

A former member of staff stated: ‘During the seven months I worked for him, he had an uncanny knack of always being in the right and soon threw his toys out of the pram if challenged.’

The 108-page judgement, given in open court on March 16, was also highly critical of Mr Ghersie’s credibility.

The judge made a series of comments. He said: ‘Mr Ghersie’s evidence was demonstrably unreliable in many respects. He was not in fact a details man. His original analysis of the files lacked thoroughness. I do not consider that all his evidence can be relied upon.

‘His evidence was careless at times. He has lost objectivity and became blinkered in his view. It has led him to make sweeping, unsupported, and objectively unsupportable and slanted statements. He is prone to exaggerate. He is over-suspicious and he has a tendency to rush to judgements and jump to conclusions.

‘Additionally, the evidence suggests, and I find, that human relations and the management of clients is not his strongest point.’

Mr Recorder Blunt QC added that at one point Mr Ghersie made an unsubstantiated claim that ‘the burghers of Dartmouth are dishonest’ and, according to the judge, ‘implying that all or many of them are tax evaders’.

Ms Baylis, owner of MG Accountants Ltd, was listed on the MG Associates Ltd website as its practice director. According to the website, she began her career in local government ‘where she gained a sound grounding in administration within the confines of red tape and bureaucracy’.

She later went into the retail business and had four shops. She sold the business and retired in 2005.

Ms Baylis joined MG?Associates in 2007 as practice manager, bringing with her ‘administrative and retail skills’. She became a director of MG?Associates in November 2010, a position she held until she resigned in November 2015.

In February this year, she registered MG Accountants Ltd with Companies House. Ms Baylis said this week: ‘There will be no change in staff or how we operate – Michael and the team will still be here in the MG Associates offices in Torquay and Kingsbridge – using the same telephone numbers, email addresses and systems.’

Mr Ghersie was until recently also a director of Dartmouth and District Chamber of Trade and Businesses Ltd, known as Dartmouth Business Forum. He resigned after forum chairman Dave Cawley posted an inaccurate comment on Facebook, claiming bailiffs were clearing out his offices in Victoria Road.

At the time, Ms Baylis said MG Associates had taken the decision to relocate for economic reasons. She said: ‘Very few of our customers now use the Dartmouth branch. Many email and we have offices in Torquay and Kings­bridge, which are busier market towns.’

A spokesman for the Institute of Chartered Accountants England and Wales said: ‘Our disciplinary byelaws preclude us from commenting on whether any matter may or may not be the subject of consideration by our Professional Conduct Department. Where such consideration results in disciplinary action being taken, then a public announcement will be made.

‘Although we cannot comment on any individual matters, those same byelaws state that a member shall be liable to disciplinary action if he commits any act or default likely to bring discredit on himself, the institute or the profession of accountancy.’