Modern Law Magazine - Issue 4

The Business of Law

January 2013 | Issue 4 | ISSN 2050-5744 Dominic Regan considers litigation in the new, post reform age and predicts where the tensions are most likely to erupt.

Sector Roundtable: MLM hosts a gathering of senior practitioners, experts and industry associations in the Personal Injury sector.

Richard Susskind exclusive: The author gives Modern Law the low-down on his new book.

Modern Law Magazine | January 2013 | Issue 4

“There has to be a mindset – even in new ABSs which have attracted finance – to invest today, to become the winners of tomorrow,” Doug Crawford, myhomemove

Helen Grant MP

“Yes, I would expect people to be shopping around in terms of legal services. This is a good thing; there will be more competition in terms of fees and what firms choose to charge,” Helen Grant MP Charlton Grant

Supported by

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Introduction

Modern Law Conference

ABS – One Year on - The New Legal Frontiers 1st May 2013

03

TIC KET S

£16 5 +VA T

The Royal College of Surgeons, London

PROGRAMME

Welcome

08.30

Registration

09.00

Chairman’s Welcome Michael Napier CBE QC

09.15

Keynote Address – Putting Consumers First Helen Grant MP: Parliamentary Undersecretary of State, Minister of Justice

09.25

Keynote Panel– Putting Consumers First Helen Grant MP, Parliamentary Undersecretary of State, Minister of Justice Jonathan Djanogly MP, Former Minister of Justice Bridget Prentice: Former Minister of Justice

10.00

ABS: How is it for you?

Christina Blacklaws: Co-Op David Beech: Knight’s Solicitors Mark Savill: Lyons Davidson Tim Oliver: Parabis Group Andrew Twambley: Amelans/InjuryLawyers4U Anthony Hughes: Horwich Farrelly Joe Simpson: Irwin Mitchell Neil Kinsella: RJWSlaterGordan

11. 30

Morning Refreshments

12.00

Investment: How is it for you?

Steve Arundale: Natwest John Llewelyn-Lloyd: Espirito Santo Iain Kenedy: Duke Street Trevor Howarth: Stobarts Robert Terry: Quindell Group Jordan Mayo: Smedvig Capital

13.15

Lunch

14.15

Ethics: Independance, Conflict, Compliance, Control – Are the regulators happy?”

Chris Kenny: Legal Services Board Antony Townsend: Solicitors Regulation Authority Adam Sampson: Legal Ombudsman Ewen Macleod: Bar Standards Board Patricia Greer: Law Society

15.30

“Is the market moving fast enough?”

Stephen Mayson – Legal Services Institute

16.00

Closing remarks Michael Napier CBE QC

16.15

Drinks and Canapés

A

happy, prosperous new year to the legal scene!

I know I’m not the only one entering 2013 on a wave of positivity. There are plenty of practitioners, consultants and experts in the field who share the same enthusiasm for new opportunity in spite of change - most of whom share their thoughts on business practice and planning for 2013 in this fullycharged issue.

So if you are suffering from the January blues, take some time to sit back with Modern Law and let me know what you think about the advice, opinions and updates. Has it helped, did they get it right and what’s missing? Get in touch via the website: www.modernlawmagazine.com or email me: emma.waddingham@charltongrant.co.uk I hope to see you all at the industry-leading Modern Law conference on 1 May 2013, chaired by Michael Napier QC CBE, held at the Royal College of Surgeons, London (full details above).

Here’s Modern Law, the flagship for new ideas in the new legal era.

Emma Waddingham, Chief Editor

Modern Law Magazine Project Director Kate McKittrick Chief Editor Emma Waddingham

Editorial Department Antony Smith Stan Neal

Issue 4 – January 2013 | ISSN 2050-5744 Events Manager Julia Todd

Events Co-ordinator Charlotte Parkinson Production Lindsey Thomson-Heley

Contact t: 01765 600909 or e: info@modernlawmagazine.com

Advertising Rachael Pearson Design Richard Berry

Modern Law Magazine is published

by Charlton Grant Ltd ©2012.

Modern Law Events: www.modernlawevents.co.uk

All material is copyrighted both written and illustrated. Reproduction in part or whole is strictly forbidden without the written permission of the publisher. All images and information is collated from extensive research and along with advertisements is published in good faith. Although the author and publisher have made every effort to ensure that the information in this publication was correct at press time, the author and publisher do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.

ML // January 2013

04

Contents

11

CONTENTS 03-09 Intro & THE News 07 Dominic talks news

Dominic Regan considers litigation in the new, post reform age and predicts where the tensions are most likely to erupt.

11-17 The INTERVIEWS 11 Interview with...

Antony Smith speaks to Richard Susskind on his latest book, ‘Tomorrow’s Lawyers’ – about what the next generation of lawyers can expect from their working hours.

Waking up and addressing change in the legal industry is do or die and as Arlene Adams reports, the value of data and technology needs to be realised in the fight to survive.

15 Interview with...

20 Referring to financial advisers

Agnieszka Scott, Solicitors Regulation Authority

20 Looking for evidence

Chris Kenny, Legal Services Board

21 Do you know where you’re going?

Richard Susskind

13 Eat Lunch or be lunch

19-35 The views

Steven Arundale, RBS & Natwest

21 Putting technology first

15

Jo Hodges, Redbrick Solutions

22 A modern education

Noel Inge, ILEX Tutorial College

22 A sustainable price war?

Robert Parness, Paramount Legal Costs

23 Commoditisation v specialisation

Angela Moore, Jarvis Family Law

23 The point of impact: RTA portal costs

Doug Crawford

The CEO of ‘myhomemove’ is steering further growth to the leading conveyancing ABS’s. As he explains to Emma Waddingham, success to date is investment in people and the systems they use to carry out the company’s commitment to customer service.

David Bott, Bott & Co.

24 If it looks like a duck...

Eddie Goldsmith, Goldsmith Williams

20

24 The longevity of specialists

Charles Christian, The Orange Rag

25 Organisational force

Mark Witter, Anglia Research Services

25 Informed decisions

Editorial Columnists

Agnieszka Scott Director of Policy Solicitors Regulation Authority

Alistair Kitching Group & Sales Marketing Director Esteem Systems Ltd

Alan Nesbit Managing Partner Nesbit Law Group

Antony Smith Director Legal Project Management

Andrew Stenning Managing Director Searches UK

Bernard George Director Socrates Training

Angela Moore Partner Jarvis Family Law

Barry Talbot Managing Director Informance Limited

Anthony Glaister Mediator

Catherine Bailey Managing Director Bar Marketing

Allan Carton Managing Director Inpractice

ML // January 2013

Charles Christian Editor in chief The Orange Rag

Barry Talbot, Informance

Chris Kenny Chief Executive Legal Services Board

Guy Hewetson Partner Hewetson Shah

Noel Inge Managing Director ILEX Tutorial College

David Bott Managing Partner Bott & Co

Jaunita Gobby Director Legal Eye

Paul Wilkinson Lawclient Ltd

Professor Dominic Regan Legal commentator, trainer and costs expert

Jo Hodges Managing Director Redbrick Solutions

Eddie Goldsmith Partner Goldsmith Williams

Mark Witter Anglia Research

Eimear McCartan Solicitor Ralli Solicitors Faye Stenning Inside Conveyancing

Rob Hailstone Bold Legal Group Robert Parness Costs Lawyer Paramount Legal Costs

Matthew Williams Head of AmTrust Law AmTrust Financial Services.

Steven Arundale Head of Professionals Sectors, Commercial Banking RBS & Natwest

Neil Hudgell Managing Partner Neil Hudgell Solicitors

Steven England Litigation Support Consultant K2 Legal Support

Contents

27 New year, new requirements

Bernard George, Socrates Training

29 Acting in the client’s best interest

of checking the current and future development landscape near a property to keep house-buying clients happy.

Jaunita Gobby, Legal Eye

27 What’s the worst that could happen?

47 A bird’s eye view

Andrew Stenning, Searches UK

29 Ready for a new dawn

Eimear McCartan, Ralli

31 Configured to compete

Allan Carton, Inpractice UK

31 Barristers take centre stage

Guy Hewetson, Hewetson Shah

and cover

Matthew Williams, AmTrust Financial Services

32 Are associations relevant in the

ABS world?

Antony Smith reports on a key conference aimed to add fuel to legal ‘machines’, with a particular focus on what firms are doing right in terms of structure and marketing ahead of a stressful year ahead.

Faye Stenning, Inside Conveyancing

role of the lawyer

Catherine Bailey, Bar Marketing

35 Back to the Future: Part 51

Steven England, K2 Legal Support

35 Enabling secure data access for ABSs

54 What do new entrant ABSs have to

37-49 The Features

MLM hosts a roundtable of experts and champions across the personal injury divide (including industry organisations MASS, FOIL, ABI and ARC),to pinpoint such issues as reform fear and who have and haven’t been consulted and why. As well as thoughts on the new world of PI litigation; the winners and losers.

41 Interview with...Helen Grant MP

Emma Waddingham speaks exclusively to Helen Grant MP, Parliamentary Under-Secretary of State, Minister for Victims and the Courts, about LASPO, tackling fraud and the burden of business planning for practitioners and their organisations in light of new (and still unclear) regulatory boundaries.

43 LASPO Fiasco

Russell Smart, Elite Insurance Company

45 Reality check

Paul Addison stresses the importance

do differently to win more work?

Jitendra Valera, IRIS Legal

55 Watching, waiting, innovating?

Alistair Kitching, Esteem Systems Ltd

37 Sector Roundtable: Personal Injury

41

53 Practical help for challenging times

Rob Hailstone, Bold Legal Group

33 Communicating the changes: the

As personal injury lawyers are rumoured to be sharpening their teeth to steer towards professional negligence claims from fast-track cases, Tony Walton points out some key reminders to professional peers.

51-62 BUSiNESS MANAGEMENT

33 The ABS Landscape One Year On

Riverview is one of the new breed of legal businesses created to deliver corporate legal work based upon the premise that law is just another business service. Karl Chapman, Riverview’s CEO, talks to Mike Ames about the inner workings of the company.

49 Who’s been saying I’m paranoid?

32 Commercial claims: application

05

Richard Forth asks if unprecedented change offers more opportunities to work with outsourced expert consultants and if they are innovating their offerings for clients, as well as addressing change in the PI sector.

57 RTA Costs Reduction:

43

the business impact

Alan Nesbit, Nesbit Law

57 Trends in legal service delivery

Antony Smith, Legal Project Management

58 A fixed fees conundrum?

Paul Wilkinson, Lawclient Ltd

59 Effective dispute resolution

Anthony Glaister, MCIArb

60 Why protect the specialists?

Neil Hudgell, Neil Hudgell Solicitors

60 Capturing time on the go

Mick Thompson, Eclipse Legal Services

62 Layering up

As innovators prepare for the April reforms, Phil Bellamy outlines his predictions for change in the After-TheEvent (ATE) insurance sector.

47 ML // January 2013

Dom Regan News

07

Dom Regan news

Litigating in the new world

T

he detailed Rules to finesse the Jackson measures and to deal with the critical issue of transitional measures will appear from January 2013. The Government and Judiciary are committed to April implementation - it is going to happen.

My aim here is to consider the landscape after the reforms kick in and where the tensions are most likely to erupt.

An insult to injury?

In injury, the arrival of qualified one –way costs shifting (QOCS) can only increase the number of claimants.

Subject to limited exceptions the claimant is not at risk of paying costs should they fail. Temple, the prominent after the event (ATE) insurer in this arena, is going to provide cover against adverse risks in respect of disbursements incurred by a claimant.

This is good news, for it is not much joy for the client to be immune from costs if they then face a daunting bill for their own, irrecoverable outgoings.

What is less clear is how insurers / defendants will react. Arguably, we have been here before since QOCS is but a hideous acronym for a legal aid model, i.e. a winning claimant gets costs but defendant must bear own costs even if successful. In years gone by Lord Denning MR spoke of the ‘blackmail effect’ and at a recent conference it was said that defendants might feel obliged to pay ‘blood money’ (their phrase, not mine). The economic imperative might well be to make an early, low Part 36 offer to put the claimant under early pressure.

The risk for a claimant is that if they fail to take an offer which they fail to beat, their entire pot of damages (but no more) is at jeopardy since it will be diverted to meet the costs of the successful defendant. This risk strikes me as one which will make claimants more hesitant to press on and, arguably, could provoke the lowering of settlements; something being better than (possibly) nothing.

‘This risk strikes me as one which will make claimants more hesitant to press on and, arguably, could provoke the lowering of settlements; something being better than (possibly) nothing.’

Portal in play Portals! No other word provokes such anxiety and hostility amongst the injury fraternity. From those in road traffic we know for certain that the threshold for claims is to be increased to £25,000. This is almost meaningless for two reasons. The first is that not many cases fall within the increased bracket. The other, from Sir Rupert himself over a tea and digestive, is that the higher the value the more likely it is that insurers are going to be

more circumspect. It is one thing to chuck the towel in on a £2,000 claim but would one behave the same if it were for £22,000? The portal operates upon a quick admission, no questions asked basis which is inimical to more substantial matters.

The fees agreed and implemented as recently as April 2010 are to be slashed. The recent Government consultation (sic) talks of cutting the usual fee from £1200 to £500.

‘Consulting‘ when you have made your

ML // January 2013

08

Dom Regan News

‘Not for the first time would it be a case of government softening up the recipients of bad news by suggesting a very bad outcome, only to foist a bad outcome instead. My mole says £650. But no one knows anything for sure.’ mind up and promised insurers so, is despicable. For what it is worth, I am told that they have a slighter higher figure in mind. Not for the first time would it be a case of government softening up the recipients of bad news by suggesting a very bad outcome, only to foist a bad outcome instead. My mole says £650. But no one knows anything for sure.

Beyond road traffic, the Government is obsessed with a new portal for employers’ liability and public liability claims. I am certain it will be an abysmal failure. Interestingly, the Italian company in charge of the project wrote to the Ministry of Justice in November saying it could not guarantee a viable working model in April 2013. How astute. Even if they were to cobble something together I consider that a vast percentage of cases would exit the regime. As it is, 49% of road traffic cases drop out and they are - with respect - generally straightforward when contrasted with the intricacies of employer liability.

Commercial anagrams In the commercial sector, I can guarantee that Firstassist - again an eminently reputable provider (in my opinion) - will continue to offer ATE cover but also, excitingly, funding too since it was recently acquired by Burford, a major and creative player in the United States.

The red hot topic in this field is the arrival of contingency fees, aka damages based Agreements (DBAs). The allure is obvious; one will be able to act in a litigated matter in return for a naked cut of the winnings not to exceed 50%. I cannot wait to see the January regulations. Sir Rupert recommended that the client would always have to be sent off to seek independent legal advice. This was initially criticised as otiose but more recently practitioners have realised that it could be a life-saver.

Let us take the example of a claim for negligence worth £1,000.000 (give or take) where the solicitor is prepared to act in return for 40% of the winnings, i.e. £400,000. Miraculously, the defendant caves in after a month or two whereupon the client becomes hostile towards his or her own awesome solicitor. ‘You wrote 20 letters for me at a cost of £20,000 a letter’ they whinge. You point out that they were long and effective letters and stamps cost more than they used too. Had the client been sent elsewhere for advice about the suitability of the arrangement then one would be so much more confident about the deal being upheld; this is critical.

The Law Society is to be congratulated for just having established a committee to look at producing a model DBA.

‘The inelegant but accurate phrase ‘race to the bottom’ is apposite. Will those desperate for work at almost any price ultimately agree to accept base costs only from the other side, leaving their client with a full recovery?’

Getting wobbly over CFAs Our next area of uncertainty is the viability of the conditional fee agreement. They will continue but, for those created post –reform, the client will pay the success fee – assuming of course that anyone does. No longer will it be recoverable from

ML // January 2013

defendant. The real challenge will be to persuade a client to forego part of their hard earned winnings to pay you. Watch this very carefully. The inelegant but accurate phrase ‘race to the bottom’ is apposite. Will those desperate for work at almost any price ultimately agree to accept base costs only from the other side, leaving their client with a full recovery?

‘Beyond road traffic, the Government is obsessed with a new portal for employers’ liability and public liability claims. I am certain it will be an abysmal failure...’

Putting it into proportion The final area of uncertainty is the application of a new proportionality test. Contrary to what was said at a recent mediation conference, hosted

by BLM in London, Sir Rupert Jackson did not veto the proposal that a Practice Direction be produced. On the contrary, he is so understandably anxious to avoid futile and expensive satellite litigation of any kind whatsoever.

In my last article [MLM issue 3, November 2012] I wrote about budgeting and I will not re-visit that territory, save to make the tart observation that if you can agree your budget with your opponent then you avoid awkward and unwelcome Judicial intervention.

Professor Dominic Regan www.profdominicregan.blogspot.com

There is a future for lawyers prepared to adapt, build on their strengths and learn from other business sectors.

We can help you gear up and make it happen.

To develop a successful legal business solutions@inpractice.co.uk www.inpractice.co.uk Manchester London York Oxford Birmingham

New Tricks

Interview

11

Interview with...

Richard Susskind Professor Richard Susskind OBE is a British author, speaker, and independent adviser to international professional firms and national governments.

Anthony Smith speaks to Richard Susskind on his latest book, Tomorrow’s Lawyers (published January 2013).

Q

In some ways this may be your least radical book, for instance, there are examples of law firms and new legal service providers already doing some of the things you suggest. Does this mean the legal industry is now past the ‘new ideas’ stage and into the ‘new delivery stage’?

A

Tomorrow’s Lawyers is intended for young and aspiring lawyers, as well as for older lawyers who could not bring themselves to buy or read a book called The End of Lawyers?

(My last book.) It brings my thinking up to date, but lays it out in shorter form than my earlier books. There is a lot of new thinking in there too - I like to think - not least about what the next generation of lawyers should expect to be doing in their working hours.

For readers who are familiar with my past work, the new book may seem less radical but, for the great majority of practising lawyers, most of whom (alas) have not read my stuff, this work will seem not just radical but seditious.

It is true that some law firms have moved from ideas to action but they are still the exception.

Q

Notwithstanding the above, I think some practising lawyers will be affronted by some of your assertions, in particular the following two: • ‘for much of the legal market the (business) model is not simply unsustainable; it is already broken • ‘I do not see much of a future (beyond 2020) for most small firms in liberalised regimes’ What do you say to people who would dispute these views?

A

I say, ‘speak to clients’. Almost all the General Counsel with whom I meet tell me that they are under huge pressure to reduce their legal spend and that law firms will need to transform to help them make these reductions. Equally, look at the research into individual consumers and legal services – a majority suggest that customers would be more comfortable securing legal help from a high street brand than a conventional law firm.

Q

You refer to lawyers struggling to meet the ‘more for less’ challenge. Most lawyers will understand what this means, but how would you summarise this challenge?

A

There are three elements.

In-house legal departments are under pressure from CEOs

‘My advice is to move from pricing differently to working differently; above all to implementing new and much less costly ways of sourcing routine and repetitive work’

and CFOs to reduce their internal headcount, to spend less on law firms, and yet they have more legal and compliance work than ever before. So, these clients need more legal service at less cost and this challenge will define the next 10 years of the legal industry.

Q A

Your advice to lawyers needing to meet the ‘more for less’ challenge?

My main suggestion is to stop thinking about this challenge as a call for alternative fee arrangements. Much of the debate on alternatives to hourly billing is misdirected because when most lawyers move, say, to fixed fees, they are still working out these fees with an hourly billing model in mind. My advice is to move from pricing differently to working differently; above all to implementing new and much less costly ways of sourcing routine and repetitive work.

ML // January 2013

12

Interview

‘Many deals and disputes are complicated, resource intensive, document intensive, high pressure activities that deserve the rigour project management can bring.

Too often, today’s lawyers are haphazard and ad hoc in their matter management’

Q A

Many lawyers say clients want to ‘speak to the lawyer doing the work’ (and this is a selling point for many firms), so is decomposing and the perhaps outsourcing realistic?

The idea here is that we can break down deals and disputes into component parts and source each part as efficiently as possible. For the routine and repetitive work, this might call for off-shoring or outsourcing or computerising (or one of the rest of the 15 alternative ways of sourcing legal work that I have identified). Generally, and here is the key, clients don’t want to see the lawyers who are doing this kind of work. They only tend to want to speak to lawyers who are undertaking the complex, bespoke work. But, on my model, that kind of work stays with traditional lawyers who will interact with their clients in the way they always have done.

Q A

You also advocate collaboration between law firms.

Is it realistic to suggest to firms who compete against each other that they should now collaborate?

If left to their own devices, law firms will not tend to want to collaborate. However, a number of very major clients have recently been asking their panel firms to collaborate. This drive from clients changes the tune. Law firms have to make it ‘realistic’.

Q A

A surprise in the book is that you have very little time for AFA’s, including value pricing. Why is this?

I have already said something about AFAs. They do not, in my view, change the price of fish. Value billing is superficially attractive but misses a crucial point – that even if a law firm delivers great value, clients will not wish to pay more than the going market rate. Tax lawyers who say to a client they want a cut of the action because they have saved the client £x million will only succeed if they are the only firm that could have delivered that value. If others could have recommended a similar scheme, then the market will trump the value as an index of price.

Q A

But if a law firm has become more efficient and reengineered its legal service delivery, surely there is inherent value in that, which they can then seek to reflect in their pricing?

I agree. If a law firm reengineers, it can take advantage of the savings by being able to offer a lower cost service to clients (or by achieving a greater profit margin; or both). Again, it is all about the market and clients.

There is value for the client, in your sense, if the client pays

ML // January 2013

less. But when most people talk of ‘value pricing’ or ‘value billing’ they mean charging according to the overall value delivered to the client as opposed to the numbers of hours spent by the firm. They are saying look at output rather than input. I say the market sorts out pricing (methods and levels).

Q A Q A

You are actually quite optimistic about the employment opportunities for tomorrow’s lawyers, why is this?

Read the book for this one. There I lay out a whole new set of new jobs for lawyers.

You have long been a vocal proponent of legal project management – why do you believe a project based legal service delivery model is so important?

Because many deals and disputes are complicated, resource intensive, document intensive, high pressure activities that deserve the rigour project management can bring. Too often, today’s lawyers are haphazard and ad hoc in their matter management.

Q

You implore young lawyers to ‘work in the law in the interests of society and not of lawyers’.

Some would say this is overly idealistic and that - to quote the famous phrase - there is ‘no such thing as society’. What would you say to that?

A

I want lawyers of tomorrow to be passionate about access to justice and the rule of law. I would like them to make a good living but for that to be a biproduct and not a prime objective of working in law. It may be idealistic but I like to pursue ideals.

Q

A consistent theme in your writing has been the need for greater access to justice and trying to satisfy the ‘unmet legal need’. Would you agree that, compared to all other suggestions made in your other books, progress has been slowest here?

A

Not at all. It is of course hard to measure. But I think the wealth of government websites and sites put up by the third sector have made simple legal guidance far more widely available and easily accessible than in the past. But we are just warming up. Wait for online dispute resolution.

Richard Susskind OBE MLM would like to thank Anthony Smith, Director, Legal Project Management for conducting this interview.

Interview

13

Eat Lunch or be lunch Waking up and addressing change in the legal industry is do or die and as Arlene Adams reports, the value of data and technology needs to be realised when negotiating the future of your legal services provision.

T

he legal market is undergoing seismic change. It’s not a threat of something that may happen; it’s happening now. If you wait to see how the market plays out, you will be too late. On a daily basis I engage with businesses, existing law firms and new entrants alike, who are plotting and taking action to radically change how legal services are delivered.

In five years’ time the landscape of legal services will be very different. There will be more legal providers of a larger scale. They will adopt business models that are highly automated and largely technology driven. We will also see a surge of boutique firms focusing on specialised work. Again, they will use technology but with a focus on using data to provide a highly personalised and relevant service. It is likely that some of the largest and most successful legal providers in 2017 will be names we haven’t even heard of yet.

It’s already happened in other markets and it will happen in legal. Take retail for example. Before the adoption of the Internet no one had heard of Amazon. Now it’s one of ARS_185x125 15/3/06 7:01 pm Page 1 the most successful companies on the planet. Traditional

retailers lost out to a business that used technology to transform how services are delivered in their market.

Many large companies waited too long and in the end became victims of their own denial. Technology has changed the way we all interact and consume services and understanding this is vital to any business strategy.

Recent research commissioned by Peppermint Technology, across 1000 consumers and 150 businesses, found that legal clients are increasingly demanding new, technology driven models of consumption (www. pepperminttechnology.co.uk/legal-service-customerexperience-research). Firms must embrace technology, and the client, at the core of their business if they are to deliver a quality service, every time, anywhere, anytime.

Like Amazon, firms must focus on becoming data driven businesses and turn this data into value. Only with technology at the core of the business will firms be able to deliver high quality services at the right price point.

The future is being defined now. In this wilderness, firms must realise it is a fight for survival; you either eat lunch or become lunch.

Arlene Adams is CEO and Founder of Peppermint Technology.

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Interview

15

Interview with...

Doug Crawford Doug Crawford, Chief Executive Officer of myhomemove has been steering further investment to help grow the ABSs conveyancing market share over the next five years – currently listed as 3%. However, as he explains to Emma Waddingham, success to date isn’t simply being the first ABS off the block or private equity funding, but investment in people and the systems they use to carry out its commitment to customer service.

Q A

Has the vision for myhomemove exceeded the initial expectations and has the business plan changed in the last five years?

The company received private equity funding from Smedvig in 2005, before the recession. Despite initially envisaging an exit plan of 3-5 years, post- recession it reset its expectations and committed to further growth and investment. It paid off. By 2012 the market share of myhomemove had grown to 3% of the national conveyancing market and we are firmly aiming to capture 10% of the market in the next four years – more than exceeding expectations!

Q A

What have you had to do differently (in terms of competitors) to achieve this?

Investment has been a key area; particularly in technology and people – the latter to support the delivery of a personal service. Our processes are as automated and efficient as we can make them but the delivery is still achieved through skilled people to ensure we put the client at the heart of what we do. This is absolutely central to the success of myhomemove – this focus on service demands that conveyancers’ systems are as efficient as possible to help us deliver. But it’s not about production lines; we have personal processes, combined with the most effective and developed technology to assist our professionals.

Q A

How has being an ABS helped the organisation, above any other model?

We were the first ABS to launch in the UK, making use of external investment behind the business to be well placed to enter the market. But our success tomorrow is about investment today. There has to be a mindset – even in new ABSs which have attracted finance – to invest today, to become the winners of tomorrow.

External investment into a law firm enables them to invest in the future but sometimes the structure of an ABS model is what’s needed to make the most of that funding. In terms of myhomemove, we’re well placed to further our success through the ABS model – along with the commitment of our private equity (PE) funding source. While some PE houses may have walked away at the first sight of trouble, Smedvig continued to grow its investment in 2010 – a bad time for the market. It will increase investment suitably if needed to reach our growth targets and has no plans to exit. This puts us in a strong position, to have a proven track record, brand, funding and expertise thanks to the model.

“There has to be a mindset – even in new ABSs which have attracted finance – to invest today, to become the winners of tomorrow” myhomemove – the first Alternative Business Structure myhomemove was established in 2000 and has grown rapidly to take 3% of the overall conveyancing marketing share. It provides a direct conveyancing service through its in-house firm, Premier Property Lawyers (PPL), regulated by the Council for Licenced Conveyancers. The ABS continues to secure investment funding from private equity house Smedvig.

It also provides panel management for estate agency and financial services introducers - with a panel of lawyers, which may include PPL, to provide their conveyancing services. It offers a range of conveyancing, panel management and fraud risk reduction services for lenders.

Having developed its own specialist system in-house, eWay, myhomemove was awarded ‘Innovator of the Year’ award at Mortgage Finance Gazette Awards 2011.

ML // January 2013

16

Interview

Q A Q A

Have we seen any real innovation in terms of ABSs to date?

No, but it’s early days. We will see innovation increase as the number of ABSs grows. It’s not a question of ‘if’ we’ll see innovation but when.

How has myhomemove gained 3% of the overall market share (currently one in 20 transactions). What do you put this down to?

Two factors; firstly, technology. We have internally developed an award-winning system, eWay, for case management, tracking and client-facing processes. These market-leading, specific innovations have been the core of our success and we continue to roll out a version of eWay to introducers and panel management – available also to panel members. This ensures a consistent and in-house approach to all cases. We have a team of internal developers which we are increasing by 30% in 2013 to increase the capability to invest and develop our systems as we sit fit for the market.

Secondly, our people. We deal with people on a daily basis, either with those introducing new business or with those moving house. It’s a stressful time of life and while technology enables the efficiency and communication, it’s people that deliver and empathise with the client to ensure a high calibre of service. When looking to employ staff we look at a number of elements to ensure they will fit in – there are plenty of legally qualified people out there but they have to share our clear values about focusing on the client and customer service. British businesses traditionally underestimate mindset when employing staff. As a company you need to engage with your employees and create a culture within the company – a ‘this is how we do things around here’ approach that everyone subscribes to. It’s essential to invest in how you get people to feel a part of what the brand is doing. We don’t see this investment – time or financial - as a cost. People put too much focus on investment and capital opportunities when discussing and even planning ABS’s. You’ve got to have a strong, committed team of people working with you and that means you’ve got to train everyone – continuously – as the vision and objectives develop. It’s not enough for those funding and directing to know where the company is going or for marketing to know the brand values.

“British businesses traditionally underestimate mindset when employing staff. As a company you need to engage with your employees and create a culture within the company – a ‘this is how we do things around here’ approach that everyone subscribes to. It’s essential to invest in how you get people to feel a part of what the brand is doing” ML // January 2013

Doug Crawford, Chief Executive Officer, myhomemove Doug was appointed as Chief Executive Officer of myhomemove in April 2012 and has a track record of delivering ambitious plans for future growth. He is passionate about leading the transition of companies into exceptional customer service led and values based organisations in order to differentiate them in often crowded and rapidly changing markets.

Together with his senior management team, Doug aims to increase market share, transaction volumes and profit. He has led several financial and insurance industry focused companies, most recently as Chief Executive of Personal Touch, a financial services network.

Q A

What holds your competitors back?

Probably a lack of recognition of the need to invest so significantly into technology and people – as well as the culture. There is a difference of opinion about what is meant by investment but for clarity I mean cost and time. There’s no doubt that our investments have put us ahead of our competitors so significantly.

Interview ????

00 17

“There is a difference of opinion about what is meant by investment but for clarity I mean cost and time.

There’s no doubt that our investments have put us ahead of our competitors so significantly”

Q A

Looking at the conveyancing market itself, what would Sep Rep do to the sector, for lawyers and for clients?

From the client’s perspective it potentially costs more and slows down the process – it’s hard to see the benefit for the client. However, it could mitigate mortgage fraud and I understand that lenders would see this as a positive step. Lawyers, meanwhile, depend upon pricing and panels. The panel situation (especially the fall out after HSBC) has really highlighted the fact that lenders panels will get smaller and fewer law firms will end up on them. Panel issues follow a trend of natural consolidation as the top 100 conveyancing firms hold 26% of the market share. Smaller firms cannot viably service the panels and the larger ones will get larger and possibly even merge further.

Q A

Is the future of the conveyancing market now a fully commoditised one?

I don’t think it’s fully commoditised - there are still opportunities to differentiate, although it requires an enabler, such as a funder. Myhomemove will continue to differentiate the proposition to market and compete on a number of bases. We’re not going towards a commoditised service based on price but have a clear view going forward on our own terms, not perceptions of the market. The client ultimately comes first.

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The views

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19-35

The Views

ML // January 2013

20

The views

Solicitors referring to financial advisers

T

he Solicitors Regulation Authority (SRA) has decided to allow solicitors to refer clients to any type of financial adviser, regardless of how they are classified by the Financial Services Authority (FSA).

The Board agreed that the Solicitors Code of Conduct be amended to allow solicitors to put clients ‘in a position to make informed decisions about referrals in respect of investment advice’. Solicitors often refer clients to these advisers to provide financial services, and provisions in the SRA Code of Conduct lay out the rules for these instances.

The SRA needed to ensure that best outcomes for clients are achieved and there is a risk that only allowing solicitors to refer to those advisers deemed ‘independent’ by the FSA - as the rules currently stand might be contrary to that aim.

A consultation on the issue was launched in July, where the SRA set out the benefits of such a move as: • supporting outcomes-focused regulation as it does not prescribe how the outcome must be achieved; • making the solicitor ensure the client understands the implications of a particular recommendation; • ensuring the client is involved in the decision-making process, and; • removing restrictions of customer choice, if seeking financial advice referral through a solicitor.

The consultation asked respondents to highlight any issues the SRA had not already identified and considered.

We had an excellent response to our consultation and we’d like to thank all those who responded. However, nothing changed us from our belief that the best way forward was to implement our preferred option.

It represented the best fit with outcomesfocused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss clients’ needs, not be restricted by a prescriptive rule. It needs to be noted though that following the feedback we received, we did introduce a minor change to further protect vulnerable clients.

At the time of writing, the proposed handbook change was with the Legal Services Board for approval.

If approved the amendment would be implemented from 1 January 2013.

Agnieszka Scott, SRA Director of Policy.

Looking for evidence: new LSB online resource

S

ince we started operating in 2009 we have repeatedly reiterated the importance of evidence based policy. We want to minimise and indeed move away from anecdotal evidence in policy making. Why? Because we think better evidence will lead to better regulation. Better regulation in this context means consideration of the perspectives of consumers and their legal needs, the promotion of competition, and the protection of the public interest in relation to the law. It also means evaluating long standing rules to assess whether they are still necessary and avoiding unnecessary regulatory burden through developing targeted and proportionate regulation.

That means developing a better evidence base (to which research is a key contributor), to ensure that consumer, public, and professional interests are considered objectively.

The Legal Services Board has led from the front in highlighting the importance of research, prioritising it as an issue and commissioning various reports across a range of areas. For example we commissioned the Regulatory Policy Institute to take a critical look at the economic rationale for legal services regulation. We used shadow shopping to test quality in will writing legal services. We commissioned an academic team to explore some of the underlying reasons behind the issues with diversity that exist in some parts of the legal services market, ensuring these problems remain at the top of the regulatory agenda. The Legal Services Board is a small organisation and we must target the resources we have at priority areas and through working with others (for example frontline regulators, representative arms, etc.). We do this with a view to enhancing the use of evidence in regulatory policy making. Our new online resource is designed to support these aims.

The new research internet pages (http://research. legalservicesboard.org.uk/) on our website present not only the range of research reports we have undertaken but also makes available all of the raw survey data sets to enable others to undertake further analysis. It includes an online library of surveys, research articles and other reports, and our analysis of what this information shows.

Perhaps ambitiously, we would like these web pages to also generate greater transparency of information on the legal services market, with a view to contributing to a greater understanding of how the legal sector works and what we and the approved regulators are doing to reform it, in line with the aims of the Legal Services Act 2007. Hopefully we can all agree that regulation and the understanding of its impacts on the market will benefit from better evidence.

Chris Kenny, Chief Executive, Legal Services Board

ML // January 2013

The views

Q: Do legal firms know where they are going?

A:

One day Alice came to a fork in the road and saw a Cheshire cat in a tree” which road do I take?” she asked “Where do you want to go” was his response.”I don’t know,” Alice answered.

“Then”said the cat,”it doesn’t matter.” (From Alices’ Adventures in Wonderland.)

The winds of change continue to blow through the legal profession driven by liberalisation, technology, economic recession and changing customer demand and expectation. Faced with these headwinds how many leaders of legal firms are seriously considering where they want to take their legal firm, which road they should take and what the destination looks like?

Most people who have undertaken a degree of education in business management, including most Business Bank Mangers, will be familiar with Michael Porters’ ‘five forces’ model and its relevance when looking to establish a robust and relevant business strategy.

In recent months I have read a number of articles suggesting that Porters five forces is potentially the best hypothesis for supporting legal firms establish a strategic plan given that it focuses on many of the known challenges. This belief was further supported when Neil Kinsella of Russell Jones & Walker addressed the LMS Conference earlier this year and told delegates how Porters five forces had helped the firm establish its strategic direction in readiness for ABS and the subsequent sale to Slater & Gordon.

For me the attraction to Porters model is its ability to engage the thoughts, beliefs and vision of almost anybody in the firm. Porters’ five headings can be used to engage people through brainstorming or mind mapping sessions and represents a fantastic opportunity for employees to feel included in setting the strategic direction of the business. This type of feedback is invaluable to management when they are setting the future strategic agenda and inclusion goes a long way to ensuring that your people are on the same journey.

So why do I think that Porters’ Five Forces are so relevant to the legal sector – if you read the headings I would suggest that it’s almost impossible not to appreciate their relevance.

1.

2.

3.

4.

5.

Threat of new competition Threat of substitute services Bargaining power of clients Bargaining power of suppliers Intensity of competitive rivalry

For any leaders of legal firms about to consult the Cheshire cat – possibly a read of Porters’ five forces may help you choose the right road?

Steven Arundale, Head of Professionals Sectors, Commercial Banking RBS & Natwest

21

Q: How important is the role of technology in the new legal services arena?

A:

The saying ‘Your greatest threat is also your greatest opportunity’ has probably never been truer. The Legal Services Act is credited with opening up the profession to give consumers greater choice and transparency, despite being lambasted by many in the profession for it’s timing during our worst ever post war recession.

Investment in technologies that standardise processes enables practitioners to offer services cost effectively to clients and better compete against new entrants. Consumers inevitably demand value for money which is supported by figures showing 37% of consumers said fixed fees are most important in choosing a legal services provider and 81% saying they wanted to know the costs upfront.

A recent YouGov survey revealed that 85% of respondents had invested in technology within the last five years whilst 42% of participants in research carried out by Redbrick Solutions this month said that Partners now have the final say in buying new technology, a clear indication of the importance being placed by the law firm.

When asked which three factors were the biggest influencers in choosing new technology our research showed 76% said ease of use was key, whilst 64% said the ability to customise technology to fit their requirements was also important and 44% were concerned with the ongoing cost.

It is not enough to simply buy in new technology, firms need to ensure their provider is committed to working with them to customise the system to their requirements, to keep it up to date and provide high level support. All too often we meet law firms who have spent eye watering sums of money on practice management systems but have been left with the responsibility of setting it up themselves – which doesn’t happen because the law firms do not have the time, expertise or resource to do this properly. This is why we provide all of our clients with their own dedicated Business Consultant, whom they can call upon at any time for customisation, training or support at no extra cost.

The possibilities for good legal technology are endless; it can deliver a focused approach to active client relationship management, an increase in new instructions and greater client satisfaction, help business owners identify trends and manage the business effectively. It is too early yet to say how successful the likes of Co-Op, Stobarts and the AA will be in the market but you can be certain they will have the very best technology, and will make sure they are getting the maximum benefit from it.

Jo Hodges, Redbrick Solutions www.redbricksolutions.co.uk

ML // January 2013

22

The views

Q: Are degrees and professional qualifications up to speed with the changing face of legal business models and the marketplace?

A:

Q: Will the price war impact the delivery and sustainability of specialist legal advice (from firms to sets and ABSs) – i.e. will it reduce the quality and number of specialists?

CILEx has long believed that the inherent value of its education and training is in learners being able to apply their knowledge and skills directly to their everyday work. And while workplace learning is not unique to CILEx’s qualification, CILEx can proudly point to its long and consistent record of championing learning outside of the traditional classroom through vocationally orientated distance learning.

The reason why CILEx’s approach embraces the zeitgeist has much to do with the fast-changing structure of the legal services industry. As is widely acknowledged, the legal services industry is becoming more specialised.

So in its response to the Legal Education and Training Review (LETR) CILEx argued that its qualification is, in this respect, entirely fit for purpose.

Indeed, with employers requiring specialist knowledge but perhaps not at senior levels (for example, staff who progress standard files or act as the first point of contact for new and existing clients), CILEx believes that its paralegal qualifications match the requirements of legal business models such as ABSs. But not all legal service business models want to terminate training at paralegal level, which is why employees can progress to full specialist lawyer status through the acquisition of further CILEx qualifications.

The LETR research team found that there were some significant skills gaps hampering the development of the legal services industry, which affect traditional and new forms of legal business alike. For example, the LETR identified the teaching of commercial awareness skills as being an unmet need. CILEx in its submission to the LETR has said that it is developing a qualification which will encompass these skills.

Of course, if CILEx (through its regulator, ILEX Professional Standards) is successful in its various rights applications, then it is possible that Chartered Legal Executives will want to start legal businesses themselves. So ensuring those in such businesses are adequately trained to be commercially effective is but one necessary response to changing business models in the legal services industry marketplace.

In short, I believe the answer to this question is a simple ‘yes’.

Opening his speech introducing LASPO, Kenneth Clark commented that access to justice was a cornerstone of a civilized democracy.

However, LASPO and the proposed civil justice reforms represent one of the most regressive steps imaginable in terms of access to justice for people of ordinary means.

The situation is somewhat of a paradox. Everyone agrees that people should have access to proper legal advice, delivered by suitably qualified professionals. The difficulty is that no one wants to pay for such advice and few are able to do so.

The proposed reforms with swingeing fixed recoverable costs (or ‘frankly ridiculous costs’ as one solicitor described them to me), and success fees to be taken from clients’ damages are perhaps the worst possible solution to the problem. Damages Based Agreements may or may not be of use depending on whether the Ministry of Justice can decide whether the indemnity principle will apply to them or not.

The new arrangements will create a race to the bottom as firms compete for business in a world where clients require a Rolls Royce service but recoverable costs are fixed at jalopy levels and the shortfall would wipe out any damages recovered.

Inevitably the reduced fee income from bread and butter personal injury work (some put the reductions at up to 70%) will have a knock on effect. Firms will no longer be able to afford the more experienced specialist lawyers because there is unlikely to be enough specialist work to keep them occupied full time and the income from more routine work is insufficient to cover their overheads.

What this means in practice is that the number and quality of specialists will inevitably reduce and anyone who requires such advice is likely to have to go to a larger firm, quite possibly located some distance away and charging large firm rates. Such firms are likely to be the only ones able to offer quality specialist advice in the post Jackson legal moonscape.

Noel Inge, Managing Director, ILEX Tutorial College.

Rob Parness, Costs Lawyer, Paramount Legal Costs Ltd.

ML // January 2013

A:

The views

Q: Will commoditisation kill off specialism in firms / chambers / ABSs and what impact will this have? Or will clients always need specialist advice?

A:

Working within a niche family law practice I am perhaps more aware than most of the benefits a specialist in the legal market can offer. The word ‘specialist’ suggests someone who is fully qualified and who has worked for many years gaining invaluable experience within the type of work they are asked to carry out.

One of the challenges with commoditisation of any service is that volume of cases is important to achieve the economies of scale and that needs a certain volume of staff. Recruiting experienced staff is not easy which is why larger providers of legal services often have no other option than to fall back on using inexperienced staff. This presents no problem if the advice to be given is of a routine nature but service issues arise when complex matters are being handled by staff without the specialism necessary to progress the case correctly, effectively and in a timely manner.

A major consideration for any client is cost – the primary purpose of commoditisation is to enjoy economies of scale to be able to offer a legal service at a competitive cost – although conveyancing practice has proved that this is not always the case.

This reduction will be welcomed by many consumers and will undoubtedly enable many more people to access legal advice. However for those with complex circumstances, and who value the benefits that personal experience brings, there remains the choice to use a specialist legal practitioner. In many instances, the specialist will earn their own fee by delivering an enhanced, detailed or more effective settlement, outcome or result whether this be financial, creative or in respect of time with a more personal approach.

What is key for the consumer is that they have a full understanding of the service provided by each provider – making a decision of which service to use on the basis of cost alone could prove to be an expensive mistake.

Commoditisation is both needed and is inevitable as it meets a market demand however it is not the answer for all clients.

The impact of commoditisation will impact on the current legal market in a variety of ways dependent upon the type of work being undertaken. There will always be a need for the true specialists, experienced in their respective field of legal advice. There will always be a need for the general level of advice offered in volume at a cost effective rate. What will sadly be at risk going forward in the current market is the middle tier of neither specialist advice nor volume provider.

23

Q: What will be the main impact of the RTA portal cost reduction?

A:

On the 19 November 2012, Helen Grant MP wrote to all interested stakeholders with proposals on fixed recoverable costs. The proposals are contained in Annexes A and B to her letter.

If you have not looked at the Annexes, what on earth have you been doing that is more important?

The bad news is the figures are very low and they would apply to RTA, EL and PL work between £1,000 and £25,000, whether it settles in the Portal or at Court.

The good news is the letter asked for a response and supporting documents by the 4 January 2013 (around the time of this publication). So hopefully you have already told the MoJ what you think.

Clearly the actual figures have not yet come back and it is likely that the new figures will be out by or in February. But for arguments sake, let us assume that the final figures are not a long way away from the current figures, what will be the impact?

My view is that the lower the figures are the more likely that the majority of law firms will be looking to the client to make a contribution to their legal fees.

Will everyone do this? In my view, the vast majority of claimant law firms will have no choice but to charge the client. So for the majority of law firms it will mean an end to no win no fee and an end to the client getting all of his damages.

Also as the fees are so low, the idea that Lord Justice Jackson puts forward that law firms will compete within the 25% band, just does not stack up to me. I can see firms charging the full 25%, or even a fixed fee and maybe the insurer backed firms or the goliaths being able to charge 0% and there being very little in between.

It is easy to see high street practices which do a bit of personal injury work, struggling and the big firms getting even bigger. What about the firms in the middle? Well there has never been a better time to be efficient, never a better time to go out strong on service. As we are going to have to do everything cheaper and better than we currently do, otherwise we really are in trouble.

David Bott, Immediate Past President of APIL and Managing Director of Bott & Co.

Angela Moore, Jarvis Family Law

ML // January 2013

00 24

????views The

If it looks like a duck...

I

f it looks like a duck, sounds like a duck and walks like a duck, then it probably is a duck. That useful formula can now probably be applied to the very new kids on the legal services market Alternative Business Structures.

One year on and was all the hype worth it? Have they changed the legal landscape? Well absolutely not yet but that was not to be expected. Rome wasn’t built in a day, etc. etc.

There are really just a handful of bodies already licensed and a disproportionate number of those by the CLC (Council for Licensed Conveyancers). Most so far are pretty much as expected. There are a smattering of big brands (Co-op etc) and then a mix of litigation based and conveyancing based bodies - plus a couple of wills/ probate bodies. Nothing earth shattering but then we are not yet a year into full licensing and a completely new market is bound to take time to emerge let alone mature.

What is interesting is more the number of applications which are pending at the SRA and CLC and what proportion of those will make it into full blown ABSs over the next year.

The SRA and CLC are still learning themselves - and the more bodies they licence the more experienced they will become so we should expect an acceleration of successful applications - to the point that it is no longer news-worthy and its getting that way now 2012 was never going to be a defining year in changing the number of legal providers following the Act. 2013 will be much busier and by the time we get to 2015, we are going to see a dramatic difference in bodies providing legal services.

Until then watch out for all sorts of new breeds of ducks populating a pond nearby you!

Eddie Goldsmith, Partner at Goldsmith Williams and Chair of the Conveyancing Association.

Q: Will commoditisation kill specialism in law firms/chambers/ ABSs and what impact will this have? Will clients always need specialist advice?

A:

Over the past few years an American management theory called The Drift to the Left, which basically holds that it is the natural evolution of all professional services to move from a one-to-one, individually customised, relatively expensive adviser/client relationship, to an impersonal, high volume/low price commoditised model, has gained growing acceptance in the UK legal community. Thanks to being championed by its main advocate in the UK – Richard Susskind – in some legal circles it has become the new orthodoxy.

So will commoditisation kill specialism? The answer is a resounding ‘no’ – in fact even Richard Susskind doesn’t believe it will. The argument is far more subtle: what it actually suggests is that much of the work lawyers (and other professional advisers) do on behalf of their clients is of such a routine nature that it doesn’t – and shouldn’t – need to be conducted on the traditional one-to-one basis. This work can definitely be commoditised and it follows that any lawyers who continue to offer the ‘traditional’ approach will find themselves in an increasingly uncompetitive position.

To use the analogy of our old friends Tesco, the traditional corner shop cannot hope to compete with a supermarket in terms of pricing and product range.

But this is only part of the story. There remain plenty of areas of legal practice that do not lend themselves to a commoditised approach, both at the top end commercial level and in niche areas of practice, which is why along with everything else in the legal services market, we are seeing the rise of the boutique firm.

A long time ago, a now long departed president of the English Law Society told members at an annual conference that the days of the generalist High Street practice were over and that they should ‘either get a speciality or get out’. His advice wasn’t popular but he was right. There is an alternative to commoditisation and you can see the same principles at work on the High Street – among specialist shops, boutiques and delicatessen. The successful ones know their markets, their niches and their customers – and they also know they can offer something the commoditised supermarkets can’t compete with.

And please note I am not using the word commoditised as being synonymous with computerized / automated. Just because you are practising in a niche area of law doesn’t mean you can’t still benefit for IT and office automation!

Charles Christian is a barrister who has written about legal technology for over 30 years.

ML // January 2013

The views

Organisational culture: a powerful force that can undermine or propel business success?

T

he traditional approaches to strategy often adopted by firms do not recognise the importance and power of business culture as an integrating and unifying ‘driver’ of action. In other words, they do not recognise the potential for culture to be a powerful force that can undermine or propel their business. In many firms there is no written strategy and so by default ‘the way things are done around here’ actually becomes the firm’s operational strategy.

As such, many firms might not truly understand why they succeeded or fail, or understand the unique contribution culture plays in either event. Organisational and national culture is a ‘deep’ phenomenon, complex and difficult to understand. The dynamics of why and how organisations grow, change, sometimes fail, and perhaps most important of all – do things that don’t seem to make sense, continues to elude us.

Organisations will often measure their performance by hard accounting methodologies without understanding the effects that softer, less visible cultural influences can have on their business; but the effort to understand it is worthwhile because much of the mysterious and the irrational in organisations suddenly become clear when we do understand it.

Just because we cannot define or measure business culture easily does not mean it does not exist. We humans are cultural beings and we do not normally live in isolation. Most humans have a sense of intuition that feeds perception. Perception often becomes reality.

Culture therefore is a phenomenon that surrounds us all, but strangely, people often say that they do not use the concept of culture in their work, but when asked; what is it they do not use, they cannot define ‘it’ clearly.

Culture helps us understand how an organisation is created and constructed, it defines leadership; therefore it is vital to understand how culture is embedded, developed, manipulated, managed, and changed.

To truly have a successful firm, first you need to understand the culture of your firm and to recognise that your firm’s culture is a powerful force that can undermine or propel business success.

25

Q: How important is the role of IT in the new legal services arena?

A:

Our company works in many sectors and it is quite telling how different the approach is to IT within the many sectors that we work in. The approach goes from being utterly reliable on IT to seeing IT as a ‘necessary evil’. It is also obvious that those companies that embrace IT have more control when it comes to making sense of how the business is doing financially. The legal sector sometimes takes a long time to make IT decisions. Is this because equity partners are not given the information they need about how much better their firm will operate if it has the right systems in place? Or is it because they don’t like parting with their hard earned cash? Both scenarios need to be dealt with and key questions that need to be asked should be faced head-on. One such key question is ‘what impact will a reduction of 20% in lock-up have on the firm’s cash flow?’

ERP (Enterprise Resource Planning) systems are designed to work in many different sectors. There are solutions that enable the business processes behind the manufacture of what we eat to those that provide the distribution of goods throughout the world. What is common in all these systems is that they have grown from a need to automate processes and to make the management of these processes simpler. In some sectors, e.g. pharmaceuticals, the regulations under which manufacturing must work are vast and time consuming, but absolutely critical to ensuring safe products are delivered to all of us. Pharmaceutical companies rely heavily upon their IT systems and are very profitable businesses. What can the legal sector learn from what other sectors already know?

To put this into context and again, using the lockup scenario, what benefits would law firms get from providing key information to those that can make the right decisions in a near real-time way? If the current business process does not support this way of working, a change needs to be considered and QlikView will be able to make this possible.

Barry Talbot, Managing Director, Informance.

Mark Witter, Chief Operations Officer of Anglia Research Services.

ML // January 2013

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The views

Q: What resources will be key for growth for your clients over the next 12 months?

A

: There is currently so much focus on compliance across the legal sector and I could respond to this by saying IT and technology to keep up with expanding law firms and ABSs. The truth is though that without firms addressing their compliance needs and ensuring they are complying – the risk is so high that investment in other areas is secondary.

Yes growth is important and winning new work and retaining existing clients, but there is so much to do around compliance and it is vital in the self-regulation environment that we are now in that compliance is key. The focus on resource and investment needs to therefore be on compliance.

The first tranche of firms have already received approval by the SRA with the rest to follow. The new Code of Conduct is live and the compliance officers take up their roles from 1 January 2013 – there is so much to be done!

Firms that have already achieved Lexcel - and/or are confident that their practice management standards are efficient and compliant - should be focusing on Risk Management and especially the Risk Register.

Firms that have not yet started with their compliance plan should start with a health check of their firm. This can be done internally or outsourced but it is vital for them to know what is working well and what needs to be done. Otherwise there is no structured plan.

Where to start? I would suggest they ensure their Client Care letters and Terms of Business are compliant. Then move onto reviewing their policies and procedures. Alongside this and no less important are file reviews. File reviews are key in risk management and supervision. Not only to identify out of date information and updates which are required but once all the hard work has been done, firms will not know that the new policies and procedures are being followed if file reviews are not completed.

Once all of that is up to date and managed - other resources I would focus on would be IT and technology.

Jaunita Gobby, Director, Legal Eye Ltd.

27

What’s the worst that could happen?

A

s COLP, managing ‘business continuity risk’ is a key responsibility. In any case, knowing you have prepared for the worst helps you to sleep easily.

Here is how to get on top of this issue in three easy steps:

1. Understand What “Business Continuity” (BC) means.

It is the ability of your firm to continue its operations despite major disruption (for example due to IT failure, fire or burglary).

2. Identify Your Risks Ask yourself how you would cope if: • Your offices burned down, or were flooded, or otherwise out of action.

• You could not use your IT systems, perhaps due to computers being stolen, or a virus.

• Your paper files were lost or inaccessible, perhaps due to fire or malicious action.

• A key person was unavailable, due to accident or serious illness.

3. Draft Your Plan Having identified the worst risks, it should be obvious what you need to do. Action may either reduce the likelihood of risks occurring, or mitigate the effect. For example a sprinkler system would reduce the risk of fire but you might also make arrangements so people can work from home if your offices burn down.

For most firms the key things will be: • Data backed up off-site on a regular basis. (Cloud technology makes it easy and cheap to back up data.)

• IT systems and data available from off-site.

• Important original documents (such as leases and wills) scanned and saved electronically, in case the originals are lost.

• Insurance.

The risks are much greater for firms which rely heavily on paper files. You may decide this is a reason to move towards virtual document management.

Smaller firms are particularly vulnerable to the loss of key people. There is no easy solution beyond training up others.

This article draws on the Socrates precedent business continuity risk assessment questionnaire and precedent plan, which are part of its service for COLPs and COFAs. Bernard George, Director of Socrates Training. bernard@ socrates-training.co.uk 1 To be precise, partners in general and the COLP in particular have responsibility for “identifying and monitoring financial, operational and business continuity risks including complaints, credit risks and exposure, claims under legislation relating to matters such as data protection, IT failures and abuses, and damage to offices”. See the SRA Code of Conduct, IB 7.3.

ML // January 2013

The views

Q: How Can You Be Sure You Are Acting In Your Client’s Best Interests?

A:

With the focus firmly on risk and compliance at the moment, newly appointed COLPs and COFAs will undoubtedly be feeling a little anxious about their upcoming roles as we enter 2013.

Even firms with the most robust systems in place for best practice will wonder whether they have done enough in the eyes of their regulators, should they receive a visit from them.

Whilst there is no doubt that almost everyone within the legal profession has entered because they want to do the very best for their clients at all times, we now know that working to the best of your ability is no longer, in itself, good enough. You need to ensure you have an audit trail, to support the reasons behind all the decisions you take, hence the need for firms to have a full complement of policies and procedures in place.

Given this, how then would you demonstrate that you were ‘acting in your client’s best interests’ when choosing a legal service provider? Would you feel that price alone would be enough to justify who you have elected? What about turnaround times? Have you considered the service provider’s own risk and compliance systems and procedures? Have they been accredited or undergone any assessments and if so, who by and how recently?

Can you see if they hold appropriate insurance? What is their customer feedback like, and it is available for you to view? Are they members of any regulatory or supervisory bodies? All these things really do need to be considered when choosing any legal service provider, including a search provider.

I am confident that Searches UK, which has been assessed as working in line with the Lexcel standard, is a member of CoPSO and subscribe to the Search Code, would easily tick all of the above boxes if you were to assess us as your chosen search provider. My point is, whoever you use to provide you with your conveyancing searches, the obligation rests with you to show that you have considered why you have chosen that provider and you will be required to look at this regularly to ensure that there have been no changes.

You have a responsibility to act in your client’s best interests, so simply staying with the same provider you have used for the last 10 years is not necessarily going to stack up.

If you would like further information or wish to speak to our Risk & Compliance Manager, please do feel free to get in touch.

Andrew Stenning, Managing Director, Searches UK Limited.

29

Q: Are undergraduate and postgraduate courses and professional qualifications up to speed with the changing face of legal business models and the market place?

A:

As a (relatively) recent graduate of the legal education system (having completed a law degree, the Legal Practice Course and qualified into the working world as a solicitor) I would have to say the legal education system in the form of undergraduate courses and professional qualifications leaves room for improvement.

Whether we like it or not, the face of the legal marketplace is changing at a rapid rate - the most obvious change being the implementation of ABSs, introducing new influential players into the legal market, including more corporate bodies such as The Co-operative and Tesco. Coupled with the difficult economic climate, the role of a lawyer in today’s market is increasingly a multi-faceted one with a combination of different demands.

It is certainly not sufficient to be a ‘good lawyer’ with a comprehensive legal knowledge and good client care.

Lawyers from a very early stage in their career, including newly qualified solicitors, must also be business developers, marketers, effective networkers and proficient managers. Young lawyers must not only know the law, but also show creativity, flair and dynamism in bringing new work to the firm, add brand value and drive the firm forward.

Speaking from experience, there is no doubt that the combination of the degree and professional qualification is effective in providing students with a comprehensive grounding of the law and in establishing a thorough academic foundation.

However, I’m not sure it fully prepares students for the commercial reality of being a lawyer in today’s everchanging and highly competitive legal market.

I acknowledge that students are already thrown many challenges in their academic path to qualification, without having to deal with additional commercial or marketing elements. Despite this, those training lawyers need to find some way of more readily helping students deal with the commercial reality of today’s demanding legal market.

Eimear McCartan, Corporate & Partnership Solicitor, Ralli

ML // January 2013

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The views

Q: How important is the role of IT in the new legal services arena?

A:

Think through this common scenario - then apply the same principles in other areas of your practice to evaluate the potential of IT to make you more competitive and improve your performance.

A client calls in to make a will. They appoint two executors who will be their most trusted friends or relations (and perhaps also someone from your practice).

Do you know if anyone at your practice knows these two executors? Would you ask the testator if it would be helpful to send them some information about the responsibilities they are taking on? Do you have that available? If you don’t already know them, should you ask the client if it’s ok to add them to your system, to be able send out that information and invite them to opt into further contact in future? Can you invite them in for a chat to establish contact if they want to drop in (and send a timely reminder), to build up a better relationship with them so you understand their family’s legal needs? What about their children and parents – can we do something for them? Will you stay in touch to offer that client and members of their family other services relevant to them, now we understand what they might need in the future?

To manage this requires simple but effective use of a user-friendly client relationship management (CRM) system to manage data and prompt activity. Yet this is just one area of how you operate that can be improved by effective use of IT. This is not just about technology but also about the mindset and vision of the people who develop and use IT systems. Integrated, user-friendly and powerful solutions are readily available but require investment of intellect and time as well as money to produce more competitive business results. This isn’t just on relationships but to deliver more for less and managing client relationships is critical. If you do not have a structured approach supported by technology you can rest assured that others will. Those executors could well be your clients today but gone tomorrow.

Allan Carton, Director, InPractice UK Limited

31

Barristers come to the fore

F

or a while now there have been many new initiatives bandied around the Bar from ProcureCos to ABSs (Alternative Business Structures) and LDPs (Legal Disciplinary Practices). For many though, ProcureCos have proven to be a complete red herring and very few chambers that have gone down that route can show significant commercial or financial gains. From the numerous discussions we have had with chambers up and down the country it has become clear that, for many, there are two significant areas that will be defining the future spectrum of the Bar: international client instructions and direct access.

These will continue to be key areas of focus for 2013.

International client instructions continue to increase at the Bar, with some commercially funded sets seeing an increase of 20% plus from international clients in the last 18 months. The more progressive sets are actively targeting this work. In turn, criminal sets are courting and being courted by corporate businesses, as they want to buy into the criminal advocacy skill set – again the more commercially minded criminal sets are positioning themselves accordingly to market this rare commodity.

Direct access offers an ideal, potential win-win situation. Businesses and the general public have the opportunity to get the best legal advice they can afford, without having to pay ‘twice’ by first instructing solicitors. Barristers get paid up-front. The Bar Council has also facilitated the scope for direct access, with the introduction of BarCo, which allows chambers to hold onto client money. At the end of last year there was a new web-based initiative launched to drive direct access work to the Bar; the first of its kind with the potential to be a game-changer for the Bar. For too long chambers have had to play second fiddle to law firms and direct access offers the opportunity for the Bar to balance out the playing field.

With cuts to legal aid funding and the disappearance of many high street law firms, the public are likely to find this route to the Bar very favourable, and extremely cost effective. 2013 will prove to be a year where this message will be marketed to the public and businesses like never before.

Guy Hewetson, Partner, Hewetson Shah LLP

ML // January 2013

32

The views

Q: After discussing funding/insurance options on a new commercial claim, the client wishes to apply for after the event legal expenses insurance (ATE).

How should I prepare the application?

What cover should the client seek?

A:

You and your client will need to complete and submit a proposal form (usually obtained via a specialist ATE broker). The precise detail required may vary, but insurers will be looking to obtain key information to enable them to form an initial view quickly. It is the quality rather than the quantity of information provided that is important.

In addition to basic (but important) information on the parties involved, the following will be essential for the review process.

Brief Case Summary with key documents • What type of claim is it?

• What are the applicant’s objectives?

• What are the prospects of success on liability, causation, and quantum?

• How has the opponent responded?

• Key documents will include statements of case and/or significant pre action correspondence, and a copy of Counsel’s/ solicitor’s opinion.

Financials – Does it stack up?

• Estimates and budgets – A budget showing estimated applicant’s costs to trial, and a reasoned estimate of what the opponent’s equivalent costs will be are required and are central to the appropriate level of cover.

• How will the case be funded? – What will be involved?

Standard retainer, full or discounted conditional fee agreements, third party funding, or from April 2013 damages based agreements?

• Quantum – How is any financial claim calculated and what evidence supports this?

• Will the opponent be able to pay? – What is the evidence?

• Can the case be settled? - Financially and otherwise.

What cover or ‘Limit of Indemnity’ should the client seek?

Insurers are conscious of risk alignment. Be realistic and keep the following in mind: • Adverse Costs: Cover for potential exposure for opponent’s costs is the most usual ATE cover. Typically this is based on the estimate for opponent’s costs to trial. Neither over nor under insurance is desirable.

• Own Disbursements (ODs): OD cover is often available to cover exposure where ODs are not reimbursed by sums received. However OD cover represents a different nature of risk and may not always be offered or offered in full.

• Own Costs: Cover for own costs is much less common. If offered it is likely to apply only to a limited percentage and in particular circumstances.

Matthew Williams, Head of AmTrust Law at AmTrust Financial Services.

ML // January 2013

Q: How effective are associations voicing the issues facing the industry? In terms of multidisciplinary ABSs, are they relevant?

A:

Before I answer this question I will use the word consumer when I mean client and industry when I mean profession.

Not because I wish to dumb things down but because that is becoming the norm and for the sake of clarity and consistency.

There are, I think, two ways that this question could be interpreted. It could have been directed at organisations such as APIL, MASS and FOIL, etc. but it can be also be answered in terms of the changing support available to law firms in this new age.

With more and more ABSs being created every month making sure that lawyers are aware of the issues facing the industry is becoming more and more important.

I spend most of my time monitoring the legal news that all lawyers are expected to follow. It is a full time job. Keeping up to date with what is happening in the legal profession is now a very time-consuming exercise.

Can most firms afford to employ one person to ensure that they do not miss something important, either in relation to compliance and regulatory matters or making sure they have access to the best products and services available?

Before 8.00 am every morning I will have checked over ten different websites, starting with the SRA (in November alone there were six new posts on the ‘news and alerts’ section) and the Practice Notes Section of the Law Society website. Every day I receive numerous emails from companies that think they have created the latest and best solution to a problem, ranging from fraud detection and prevention to ways to win new work.

Two other burgeoning sectors is legal brands and cost comparison websites. Trying to establish whether any of these offer any real help or support is nigh on impossible. What we do as a group, is discuss these new businesses and exchange views on how good, or otherwise, they actually are.

To sum up; keeping abreast of issues facing the industry when more and more new competitors enter the arena is more important than ever before. As to how affective the associations are that voice the issues facing the industry? I can only comment on one. This year we have had a 97% renewal rate for Bold Legal Group members and most of the missing 3% will have merged with other firms.

Rob Hailstone, Bold Legal Group

The views

The ABS Landscape One Year On

L

ast October, when the first ABS applications were being submitted and assessed, most of us were unsure of the way in which they would impact, if at all, on the current legal landscape.

Many were sceptical, believing they were not really all that new, given that back in the 90s, banks had been running firms in much the same way, and that it was more hype than anything else. Some saw ABSs as a huge opportunity – one which they definitely wanted to embrace, whilst others chose to sit comfortably on the fence and ‘watch this space’. Well, we’ve ‘watched this space’ for over a year now, so how have ABSs impacted?

Well, on the face of it, it may appear that they didn’t really create that much of a storm, but that’s hardly a surprise, given the timescales of around nine months involved for processing applications. That said, there are over 60 approved ABSs licensed by the SRA and CLC alone, with over 225 applications pending. This represents just over 2.5% of all firms regulated by the SRA and CLC which have submitted an application already.

The numbers alone do not give us the full picture and we also need to consider the type of licenses that have been granted, as some of them have been significant, as well as the areas of law that have been the focus of attention for firms wanting to be approved as an ABS. Most of us expected the likes of Co-operative Legal Services to apply, and it is anticipated that its status as an ABS will see in the region of 3,000 jobs being created. Others, such as Thompsons Solicitors LLP and Paribas Law, will be operating from over 20 offices across the country. Whilst the largest number of approved ABSs initially targeted the personal injury market, many are now entering the conveyancing and wills and probate arena too.

There is no doubt that ABSs have certainly shaken things up, and I personally believe this is for the better.

Times are changing. Whether you wish to go full steam ahead and jump on the ABS bandwagon or not, it is a given that all law firms need to adopt a more businesslike approach to running their affairs if they wish to survive and prosper.

Faye Stenning, Inside Conveyancing.

33

Q: Is it the role of lawyers to communicate the changes affecting the justice system and the value of lawyers and can they effectively market the message of value to consumers?

A:

Undoubtedly yes, it is the role of legal services providers (not necessarily individual lawyers) to communicate changes in the justice system to their clients and the wider public and to communicate their own value.

Any organisation that takes the lead in an evolving market and can communicate clear and concise value statements will have a competitive advantage over its rivals. It is perceived as a ‘thought leader’ and ‘trusted source of information’.

That perception builds reputation which in turn leads to increased instructions. The same applies in the legal market. However, it is not a simple task.

By taking the lead, chambers can communicate changes before anyone else. They can explain the changes in relation to the clients and furthermore they can illustrate their own ‘value’ by doing so. They need to communicate changes in a manner that the clients can fully understand.

• How does the change impact on the client (or lay client)?

• What do they need to be aware of?

• How do they need to act differently to remain compliant with the law?

• What benefit is there to the client in buying the legal service from us?

The value of chambers is not simply in dealing with the aftermath of events, but instead in understanding the client’s needs and pre-empting any potentially damaging situations. If the chambers’ segments the market correctly the process of building relationships and communicating value becomes easier.

For sets dealing with the general public it’s much more difficult.

There is still a need to communicate changes in a manner that the clients can fully understand. However, communicating with the public requires the ability to talk in plain English and it requires a large financial investment. It also requires a multi-channel approach (advertising, TV, radio, direct mail, face-to-face, social etc.). This is where organisations like QS have the edge over individual law firms / chambers.

However, the smaller firm / set can use social media, comparison sites and joint marketing with other companies to create differentiation and communicate their value. They just need to be a little more creative in communicating their value propositions!

Catherine Bailey, Managing Director, Bar Marketing. www.barmarketing.co.uk

ML // January 2013

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The Views

Back to the Future: Part 51 “The future belongs to those who prepare for it today,” Malcolm X.

M

uch has been written about the forthcoming CPR reforms as proposed by Sir Rupert Jackson. Rightly or wrongly the focus seems to have been on the imminent demise of the CFA and how its replacement, the DBA, will operate in practice.

However Jackson’s cost budgeting proposals, whilst less talked about are going to have a major impact on litigators working on multi-track cases. Essentially the requirement will be to accurately predict your costs, including disbursements two weeks before the first CMC. In the event that you exceed your budget and do not have approval to do so, your client(s) may not be able to recover additional costs regardless of the outcome of the case – see Henry v NGN. Short of employing Mystic Meg to manage your cost budgeting what is the solution? It is not to rush out and employ the most expensive consultant you can find, nor is it to bury your head in the sand assuming that mutual incompetence will be some form of cover at the CMC. There are, however, a number of simple steps you can take that will help to create your own crystal ball: • Preparation: If you don’t already do so start recording your time by detailed activity e.g. rather than ‘0.6 units drafting’ record ‘0.6 units drafting witness statement’. Thus when required, you will know long on average a witness statement takes.

• Identification: Get as much information as possible as early as possible from your client; send a questionnaire asking them to outline how and where potentially relevant data might be stored. Obtain an estimate as to the likely costs of recovering the data for review and disclosure.

• Preservation: Advise your client of the need to preserve all potentially relevant data, this can be done cheaply and quickly. By purchasing an additional back up tape (£40-£50) and using it to replace a tape from the back up sequence. The tape can then be stored by your client until such a time as it is required.

Is your firm ready for cost budgeting? If not better to prepare for the future than wonder what it holds.

Steven England, Litigation Support Consultant, K2 Legal Support and Millnet. www.k2legalsupport.co.uk www. millnet.co.uk

35

Flexible IT infrastructures: enabling secure data access for ABSs

I

n Order for ABSs to work effectively across a multi-tiered range of services, clients and sectors, their employees need instant access to data, no matter where they are working from or what device they are using.

External service providers are being contracted to implement flexible and efficient IT infrastructures which can adapt to changing business requirements and provide ABSs with secure access to their critical data. ABS, Irwin Mitchell, has recently awarded a contract to managed services provider Esteem Systems, to provide a £1.7m solution to transform its IT infrastructure.

In light of the ABSs’ substantial organic growth and recent acquisition of PDP Management, the significant investment will support Irwin Mitchell’s domestic and global growth plans; improve services to clients; and improve employee productivity.

Tim Kiel, IT Director at Irwin Mitchell, explains: “This investment will impact our business in three key ways.

It will significantly improve the IT experience of our employees; enable us to deliver an even better service to our clients; and will support our global growth plans.

From an IT operational perspective, working with one strategic partner for our IT infrastructure and support will simplify the supplier management process, and deliver substantial cost savings.”

Alongside Irwin Mitchell’s in-house IT function, the newly designed and implemented modular desktop infrastructure will be scaled as the firm grows. The solution is set to improve the experience of employees with instant access to applications and data, regardless of location – key for a growing ABS with global growth strategies. Like most large scale legal service providers, secure remote access to critical applications and data for senior partners and associates working from client sites was a key business requirement.

Alastair Kitching, Group Sales & Marketing Director for Esteem stresses the need for ABSs and law firms to prioritise investment into secure and remote data access as ‘providing employees with rapid access to the applications and data they need from anywhere, on any device is essential for them all in order to drive productivity and business growth’. The new infrastructure will allow Irwin Mitchell to support future mergers and acquisitions and drive productivity and business growth.

Alistair Kitching - Esteem Systems Ltd

ML // January 2013

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Features

37

SECTOR ROUNDTABLE: PERSONAL INJURY Modern Law hosted a lively roundtable of practitioners, representatives and experts in the PI field to discuss the impact and redress perceptions of significant reform due to radicalise the sector this April.

MLM: How will the referral fee ban (which comes into effect on 1 April 2013) affect all sides of the PI sector?

Twambley: The ban is aimed at a certain type of claims management company (CMC) but it will hit those running a legitimate operation. The main target (the less salubrious end of the market) has been changed and the ban incorporates everyone.

Bott: We would all really appreciate more information from the SRA. It is at pains to say whether firms are doing something wrong or not in light of LASPO and the 10 principles of outcomes focused regulation (OFR). The vast majority of solicitors are abiding by the rules and plan to after April but we need to know the details. For example, are legal marketing collectives in or out?

Starling: We should take it as read that professionals will obey the rules but this reform should be taken as part of a whole package, not just a stand-alone ban.

Hughes: This ban has to be seen as part of the bigger picture, although it wasn’t Jackson who brought this in, it was Jack Straw - yet even he was vague on the principles.

The biggest recipient of referral fees have always been insurers and one of the main impacts the ban will have on the system is cash flow.

Bott: There are four very separate conversations being had at the moment: 1) on ABSs, 2) Jackson reforms, 3) LASPO / Referral fees, 4) Fixed costs and the portal extension. These have all been lumped together somewhat, with ABSs being offered as a possible vehicle to deal with reform. But the deadline is looming and no information has come to light – so how can firms plan for Doomsday and how is the injured person caught up in all of this?

Rousell: There is a political imperative to reduce costs and the Government is working very closely with the regulators behind the scenes. However it’s important all regulators say the same things and the MoJ and SRA should be in discussion to clarify what’s in and what’s out of the ban.

Bott: Part of the problem with the reforms – unlike the Woolf Reforms – is that there has been a significant programme of redundancies in the MoJ so it may be trying its best but it’s under-resourced.

Nesbit: Another issue is funding the Claims Management Regulation department in the MoJ, as if there are no CMCs...

Rousell: We are working out how many firms are left to pay for the regulator but yes, it will drop.

Nesbit: Lawyers looking to overcome are or are considering bringing in non-legal partners – but there is reluctance by the CMCs to get involved in new models.

Hughes: Ultimately those who set up CMCs are entrepreneurs. They’ll simply find something else to do.

Clarke: Also, I don’t agree with the idea that insurers are just jumping on the ABS bandwagon to overcome the ban.

There are a number of reasons why insurers would want

Roundtable Guests

Chair: Alan Nesbit CEO, Nesbit Law Group LLP, Founder of ARC (Association of Regulated CMCs) Andrew Twambley Partner, Amelans & InjuryLawyers4U Anthony Hughes Chief Executive, Horwich Farrelly Dr Bippon Vinayak Chairman & CEO, Doctors Chambers Charles Layfield Partner, Pannone LLP David Bott Managing Partner, Bott & Co, Immediate Past President of APIL (Association of Personal Injury Lawyers) Don Clarke Partner & Director of Strategy, Keoghs, President of FOIL (Federation of Insurance Lawyers) Donna Scully Partner, Carpenters Solicitors, Immediate Past President, MASS (Motor Accident Solicitors Society) Hilary Meredith Senior Partner, Hilary Meredith Solicitors Kevin Rousell Head of Claims Management Regulation, Ministry of Justice Nick Starling Director of General Insurance, ABI (Association of British Insurers) Tim Wallis Mediator & Independent Chairman of RTA Portal Co Ltd and the ABI GTA Technical Committee (Credit Hire).

A founder member of the Civil Justice Council (CJC). to sell legal services – and the Co-op is a true ABS in that sense. I support the referral fee ban as fees are of no value to the individual, but only if it’s done correctly rather than a knee-jerk reaction.

Starling: Although there’s currently no rush by ABI members to become an ABS...

Vinayak: The concerns about the ban however isn’t from CMCs – they will find opportunities where they can – but from the firms that rely on the claims feed.

Bott: If you surveyed the legal market and asked how many would like to get into bed with a CMC, ‘not many’ would be the response...Law firms have far higher risks to the integrity of the brand and lawyers would be mortified at any bad

ML // January 2013

38 00

Features ????

press over merging. CMCs may not be so bothered on the whole.

Scully: Although some lawyers are blackening the solicitor brand already but the SRA is too busy to close rogues and ‘live for today’ practitioners down.

Hughes: Entrepreneurs brush risk off, they put business first.

MLM: Will the PI small claims limit hike happen and what impact will it have?

Scully: David Cameron looked at a way to lower insurance premiums and the cost of small claims – this is a direct result of that agenda. Political imperative is at its highest level on the matter so although the MoJ would like to wait, it will be dealt with in April.

Rousell: The matter of whether the small claims limit should include only whiplash or all of PI has been consulted on and is a genuine consultation.

Scully: Although only the insurance industry met with Cameron to start with.

Starling: Previous discussions revolved around appalling road safety levels of young drivers. Whiplash – which should be identified as a neck injury or impact on movement of the neck, was mentioned Cameron but as Jackson was coming in anyway there wasn’t a huge discussion.

Wallis: This isn’t good business as it creates resistance. A proper roundtable was needed.

Starling: It’s important for to know however that the focus was on how to lower insurance premium, not the small claims limit.

Bott: To raise the Small Claims Limit would be catastrophic. We’ll also see a rise in the number of litigants in person looking to save legal costs. But they’ll take it all the way to court. Litigants in person rarely know what a good outcome is and won’t have anyone to manage their expectations. This will change the court system and clog up the process.

Hughes: The man in the street could cause chaos in the system by going all

the way to the Court of Appeal – litigants in person don’t give up and this isn’t a better alternative for insurers. Professional organisations such as CMCs filter claims. If you remove this level of filtering then what we have next is a rise in have-a-go litigants in person.

Bott: Who are convinced they always have a case...

Meredith: It’s time consuming as a solicitor to explain to clients why you can’t take their case on and to manage expectations.

Scully: It should be no medical, no damages. Clients in the third party assistance scheme are put off when they’re told to go through a medical – fraudsters know the pre-med assessment is an easy way to get compensation.

Hughes: There has been a peak in the pre-med offers but it’s worth noting that some claimant law firms prefer £1,200 for doing very little and taking a pre-med offer Scully: That is a sad situation Hughes: However, very few settlements are made through a pre-med offer. There are different models and ultimately the insurer decides when to offer.

Vinayak: The approach to medical reporting and fraud, as a doctor, is clear. We have to maintain credibility and authority in our assessments but the former understanding - that these reports may be used in court and that the doctor will have to defend their judgement – has changed. Since MROs, the message to doctors is that solicitors are look for opinion and prognosis, not for authority in court. So the medical report has limited impact. How experts are instructed does need to be looked at (in terms of an independent panel which some offer already) to create a better product.

Bott: It’s hard to get a medical report that looks any different from another due to mechanisation. Speed-wise, this is great but in terms of diversity and specifics, this is lost. The report model doesn’t allow for anything off-piste. Also, I’ve never once sat in front of a GP and been told I’m lying – they may challenge but they don’t cross-examine. GPs don’t have the solution.

Vinayak: In PI, reports are commoditised but consultant’s reports include a full set of records. However they are paid more.

Scully: The problem is it this system makes it easier for fraudsters.

Hughes: The difference between valid whiplash claims and fraud needs to be clarified. To be fair, insurers do challenge and win. But we need to concentrate on these cases in terms of fraud, not serious injury.

Layfield: The small claims limit doesn’t get to the heart of the reform focus, which is a government-led agenda.

Doctors ChamberS Doctors Chambers was established in 1994 by a group of doctors working in Oxford. The company is the UK’s largest truly independent medico-legal organisation. It remains in the ownership of doctors, supported by a strong and experienced management team. We can provide instant in-house medical expertise to our staff and customers and ensure the highest level of clinical governance.

Our extensive experience and medical expertise makes us well placed to assist with all types of medical evidence from the straightforward whiplash cases to more complex cases requiring highly specialised medical experts. We are able to arrange all investigations and treatments and through our sister company, Bodycare Clinics, can provide rehabilitation services, both physical and psychological.

As a new service to our clients we can also provide document sign up

ML // January 2013

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01753 448010 laspo@doctorschambers.com www.doctorschambers.com

Features

MLM: Is QOCS (one-way qualified costs shifting) effective with particular recourse to Part 36 and discontinuances?

Nesbit: Negligence claims in Part 36 offers are always a risk. How can you ensure against a lawyer’s own negligence, especially when the judge decides slightly lower than the commonly held solicitor view on damages. And the impact of QOCS on these cases?

Meredith: It sets a precedent in high profile cases and is extremely worrying.

If the judge doesn’t apportion, sit down and go through the heads of damages then it results in lives being seriously affected by these decisions.

Hughes: It begs the question as to why a one-size-fits-all approach has been used here. These cases are run by completely different lawyers to those in mainstream PI and now we’re left with something that’s unacceptable in these types of cases.

Meredith: It’s absolutely horrendous for multi-track cases and how will this benefit anyone?

Bott: We need to look at where QOCS should be applied, as Michael Napier said: ‘QOCS for all or none at all’... This is just another raft of reform set for April 2013 which seems to be a ‘go live’ date rather than the date by which everything will be ready, tested and deliverable.

Nesbit: The discontinuance issue is very important. Evidence is not always disbursed at the start of a case and if the claimant is fraudulent then they have to hunt around to get evidence – if this is the case, those who are rumbled shouldn’t hide behind QOCS, they should be punished.

Bott: The problem is the police have bigger fish to fry...

Clarke: Lawyers should then make sure clients suffer as a consequence of being fraudulent.

Hughes: I don’t think the number of ‘have a go’ cases will rise under QOCS but I do see this being a problem with discontinuances.

MLM: One year on, have ABSs affected the marketplace and how might they be set to in the near future?

Nesbit: It’s probably too early to say, although it’s not the volume of applicants that would affect the marketplace, it’s who has come forward and been approved.

Hughes: Private Equity firms are waiting in the wings and there are clearly some strategic ideas out there but phase two will bring the exciting ideas and models forward. We have New Law and the Brightside Group to come [as at time of print], as well as others with significant backing for investment.

Bott: Once brands of a certain size

39

come forward (such as Tesco), then we’ll see an impact. However, there’s still the issue of reform in PI and even the likes of the Quindell Group and the Co-op have to work with the restrictions and regulation.

Clarke: It’s true though that big business can bring things to the industry. The SRA will turn things around faster as it gets more experienced and with less and less people looking to become a partner in a law firm, Generation X might look at the new landscape in a better light.

Although the number of applications approved has been slow, the SRA is doing its best to get them through.

It doesn’t want to go outside of the box in fear of getting it wrong and the reaction that would cause.

MLM: Finally, what role will mediation play in the Jackson era?

Clarke: Mediation is being used in difficult cases where joint settlement meetings have failed, with a settlement rate of 90%. The question lawyers have to ask is, is settlement better than an all or nothing outcome, especially for issues over accommodation etc. In the multi track a mediator can be attached to a case without slowing things down and FOIL has now set up a roundtable to look at mediation.

Wallis: Roundtables are often used but there are no outcomes. This might be due to personalities etc. This should be a clear message, not to fee earners but to partners; that cases which should have settled haven’t – perhaps they need to delve into why. Roundtables quite often are not set up properly.

If both sides can come to mediation early on – on those 5% cases which are difficult and parked - they can be settled. There needs to be a push from the defendant side to get mediation used in these cases as well as from the judiciary. The Jackson ADR handbook, published in the Spring, is as much for the judiciary as for practitioners. I’m hoping this will have a positive effect.

Eclipse Legal Eclipse Legal Systems is the UK’s leading provider of Case Management software for firms operating in the personal injury sector.

Our Proclaim software solution is in use by over 18,000 individuals in all areas of work. Proclaim users span the entire sector including claimant and defendant law firms, Alternative Business Structures, accident management and hire companies, insurers, medical reporting agencies and costs drafting firms.

Proclaim provides a complete Case Management solution, integrating data storage, document production, workflow, task management, reporting, financial analysis, and links with referrers and suppliers. As standard, Proclaim integrates via ‘A2A’ with the Ministry of Justice’s low-value RTA claims portal.

The new Proclaim ABS PI system provides a complete solution for

Alternative Business Structures wanting to manage the entire process (claims management, vehicle hire, injury litigation and medical reporting) under one roof.

“Proclaim ABS PI system is a unique solution, and any personal injury organisation wanting to survive and thrive must seriously consider adopting it.”

James Maxey (Partner), Express Solicitors • Call Eclipse on 01274 704100 • Email us at darren.gower@eclipselegal.co.uk • Visit www.eclipselegal.co.uk • Follow us at @Eclipse_Legal

ML // January 2013

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06/12/2012 15:00

Features

41

Interview with...

Helen Grant MP Emma Waddingham (Chief Editor of Modern Law) speaks exclusively to Helen Grant MP, Parliamentary Under-Secretary of State, Minister for Victims and the Courts, about LASPO, tackling fraud and the burden of business planning for practitioners and their organisations in light of new (and still unclear) regulatory boundaries.

Q

April 2013 has been classed as a ‘doomsday’ by leaders in the PI claims sector due to the number of Civil Justice reforms coming into force at the same time. One of the main issues is that regulators aren’t providing enough information on boundaries (i.e. what is acceptable) in reforms such as the Referral Fee ban. This has led – some argue – to delays in business plans for the coming year and a state of flux – what should the regulators be doing and what is the MoJ doing to help?

A

It will happen in April, with no delay. The onus has to be on regulated organisations to provide a business model that’s compliant with the LASPO Act, although every organisation is different.

But regulators - including the SRA, MoJ, FSA, etc. - are in dialogue with regulated organisations to help them change their models if suitable to ensure they are complying with the requirements of the regulations.

Q

What role should / will the Government have in communicating the changes to the general public in terms of how QOCS will work? Will the public be increasingly savvy in terms of using legal services?

A

Regarding QOCS (qualified oneway costs shifting), there has been considerable consultation about our principle reforms over the last two years: LASPO and the Jackson reforms and their implementation. Claimant organisations have had time to adapt and communicate the messages and there has been wide engagement with stakeholders and all the important information on reform and costs is on the MoJ website. In reality it should be the legal representative who disperses and explains information on this type of cost protection to the client.

In terms of savvy customers, yes, I would expect people to be shopping

around in terms of legal services. This is a good thing; there will be more competition in terms of fees and what firms choose to charge.

Q

What is next for whiplash claims, considering the consultation on this and the small claims limit?

A

The Government is absolutely determined to tackle fraudulent whiplash claims whilst, at the same time, ensure people who have suffered genuine neck injuries continue to get compensation. In terms of the key issues being consulted on (whether to raise the small claims limit for RTA PI cases and asking for other possible solutions for dealing with fraud), there will be a series of stakeholder events to allow us to canvass and ask opinion from all those who operate in the PI sector for both claimants and defendants.

Q

Is there an issue to be addressed regarding the limitation of claims management companies (via the Referral Fee ban) to assess claims in the first instance. As it stands, lawyers (both sides) are concerned about the rising number of fraudulent claims that may end up being processed if claims are not being screened by CMCs in the first instance (see the Referral Fee Roundtable on pages 37-39).

A

I’m not aware of any evidence that they screen for fraud. There has been a sharp increase over the last six years for fraud and CMCs are not as effective as they could be to tackle this.

The obligation has to be on the solicitor / other legal representative conducting the case to look at this matter. Lawyers must still be very careful indeed to ensure they are not taking on fraudulent cases. The insurance industry set up its own fraud database (funding £9 million over the last three years on a specialist list) and there have been discussions about sharing this information with claimant lawyers - a very helpful initiative if achieved.

Helen Grant MP, Parliamentary Under-Secretary of State for Justice, women and equalities Helen’s responsibilities through this role within the Ministry of Justice include looking at: victims and criminal injuries compensation; the courts, tribunals and administrative justice; civil law and justice; law reform and sponsorship of the Law Commission; legal services and claims management regulation, and (amongst others); better regulation and growth.

Before this appointment Helen served on the Justice Select Committee until 2011 and was appointed to the Conservative social justice policy group in 2006. She joined Iain Duncan Smith’s think tank the Centre for Social Justice for which she has written extensively on family policy.

Helen read law at Hull University and practiced as a family solicitor since qualifying in 1988. She set up Grants Solicitors in 1996 - focusing specifically on the problems of family breakdown. Helen is the MP for Maidstone and the Weald and is married with two sons.

ML // January 2013

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Features

43

LASPO Fiasco A new year is finally upon us and in less than three months the LASPO Act comes into force. Russell Smart the impact of the ‘fiasco’ on legal expenses insurance for litigators and their businesses from 1 April.

D

espite warnings from many leading figures, the Government seems intent on implementing the LASPO act on 1 April which will surely leave a lasting impression on millions. What started as a one-man mission to reduce costs in civil cases has ended with dismantling one of the finest legal systems in the world - which was the envy of many - only to be replaced with a series of disjointed and ill-thought out proposals.

So who are the winners? Well, probably only motor insurers. We are told that personal injury cases cost motor insurers £2billion per annum or about £90 per policyholder. This is a headline-grabbing figure until you consider that drivers spend £8billion a year on parking their vehicles. In addition £90 looks reasonable when you consider that the Government wants everyone (not just drivers) to purchase BTE (before the event) legal expenses insurance. This currently costs, on average, £30 per annum but is likely to rise considerably to European levels once a ban on referral fees comes in to force.

The alternative Without widespread BTE insurance there are few other workable funding alternatives for the majority of litigation disputes. Litigation funding is only suitable for cases where there are large levels of damages but comparatively low legal costs. This works by litigation funders advancing costs to pursue cases in exchange for a percentage of the client’s damages. If the damages are high but costs are low the proposition is attractive to a funder who usually seeks a ratio of damages four or five times greater than the potential legal costs.

ATE (after the event) insurance has worked well historically because the levels of damages have been largely irrelevant to an ATE Insurer, as premiums are calculated according to the risk of paying disbursements and opponent’s costs. Post LASPO however, if premiums are paid out of a client’s damages then only the cases attractive to litigation funders will be insurable by ATE insurers. It is precisely this reason why LJ Jackson recommended QOCS (Qualified One-Way Costs Shifting) as a counterbalance. However the Government appears to be seeking to introduce QOCS for some types of litigation but not all despite banning ATE premium recovery across the board.

Lord Justice Leveson alluded to this problem recently following his Inquiry into the Culture, Practices and Ethics of the Press and on 12 December 2012, a ministerial statement was released stating that the: ‘provisions relating to sections 44 and 46 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012, which would remove the recoverability of success fees and insurance premiums, will not come into force for defamation and privacy claims until costs protection has been introduced for these proceedings’.

The funding problems highlighted by Lord Leveson are not unique to privacy and defamation cases and the same principle applies to any litigation where damages are not at least four or five times greater than the legal costs of pursuing the case.

What is clear is that unless QOCS is introduced for all litigation, ATE insurance premiums will not be affordable for the vast majority of cases.

QOCS for all If QOCS is introduced for all litigation then opponents’ costs effectively become capped which results in more affordable ATE premiums. Early indications suggest that ATE Lite premiums for personal injury cases are likely to cost in the region of 12%-18% of client’s damages.

However with 25% already being deducted it remains to be seen as to whether the market will remain viable.

Let us not forget that the intention of LASPO was to reduce the Legal Aid bill by £350-£400 million. So will the proposed reforms to civil litigation save the Government money?

A quick look at the arithmetic suggests not. The HMRC will lose £200m in VAT contributions on solicitors costs alone if the proposed fixed fees go ahead on RTA portal cases (assuming there is no reduction in the 800,000 cases each year). Local government and businesses will certainly be on the receiving end of more claims if QOCS is introduced and if the small claims limit increases then claims management companies will jump into the gap and run cases themselves like they have with PPI claims.

Whatever the outcome, I still can’t help thinking that the best solution is the one the LEIG proposed three years ago; where clients pay their own premiums but premiums are recovered from an opponent for successful post litigated cases only.

Russell Smart is Chief Operations Officer, Elite Insurance Company Limited.

“Local government and businesses will certainly be on the receiving end of more claims if QOCS is introduced and if the small claims limit increases then claims management companies will jump into the gap and run cases themselves like they have with PPI claims” ML // January 2013

Features

45

Reality check Paul Addison stresses the importance of checking the current and future development landscape near a property to keep house-buying clients happy.

I

magine this scenario. Your client buys a nice detached house in a desirable area.

Eighteen months later, he discovers that a developer has been given permission to put up two houses that will overlook his property, detracting both from its value and his enjoyment of it. To rub salt into his wound, he also hears that the neighbour who sold the land to the developer has benefited by a decent six figure sum.

Then think about this alternative situation. Before your client agrees to buy the property, you suggest that it might be worth running a check to see if there are any current or potential development threats to it. The report you receive reveals four sites that could be of interest to developers, two of which are active. One already has permission granted for two new houses, while a decision is awaited on another. If built, these two homes would overlook your client’s property. And that would still leave two other sites with the potential for further development. As a result, the client decides not to proceed with the purchase.

Who do you think would be the happier client? It’s no contest is it? Yet amazingly, most people still go into the biggest purchase they will ever make without first checking that it’s not going to be affected in the future by developers plonking a couple of blocks of flats or, even worse, a small estate at the bottom of their garden. If people don’t think the threat is real, consider this. Around 85% of urban homes currently fall within a 75 metre radius of a potential development site.

This situation is only likely to get worse. As leading planning barrister, Martin Edwards, says: “Following the government’s autumn Housing for Growth policy announcement and its more recent statements about planning reforms, it is clear that the acute housing shortage will lead to planning authorities looking closely at all sites with development potential. Identifying those sites provides solicitors with the opportunity to add real value to the service they provide their clients.”

Until recently there was no method for house buyers and their solicitors to properly investigate future development risks and allow them the opportunity to take a considered view about whether or not to proceed with the purchase.

Now, for the first time, the option exists for them to not only carry out searches into existing planning applications that may affect a property but also to look for any threats

from nearby sites that could be exploited by developers.

When they do check, they frequently have cause to be grateful – and not just in the negative sense. For developers can present opportunities as well as threats for home buyers...and sometimes both!

Take this recent case as an example. We provided a report to solicitors acting for the buyers of a 1930s threebed semi which revealed that a neighbouring property had been given permission for eight new houses to be built.

The development, if it went ahead, would have a negative impact on the view from the rear of the house.

Copies of the title to the neighbouring land, controlled by the developer, showed a restrictive covenant that could benefit not just the solicitor’s client but three of their neighbours. They could choose to either block the development or negotiate a release with the developer.

They chose the latter, and all four ended up with a five figure financial windfall. The solicitor also gained three additional – and grateful – clients!

“Now, for the first time, the option exists for them to not only carry out searches into existing planning applications that may affect a property but also to look for any threats from nearby sites that could be exploited by developers.”

Even waterfront properties can have potential problems – and not just from flooding. We were able to point out to one home buyer that the view from the apartment he was thinking of purchasing could be somewhat spoilt by a sixstorey floating hotel that had been given permission to be moored permanently on the water opposite.

In that case, the buyer still chose to proceed. But he was able to do so with his eyes wide open. Knowing what the future may hold can at least help home buyers to make properly informed decisions.

Jeremy Jupp, Head of Conveyancing at Morrisons Solicitors, explains: “Many buyers think that the local search will provide information about planning applications that have been submitted in the local area, but it does not.

“A report that provides information not only about existing planning applications but also a professional opinion on the potential for future nearby development is a hugely valuable resource and fits with our ethos of providing a first class service that fully supports our clients’ needs.”

Paul Addison is Managing Director, DevAssist Ltd. www.dev-assist.co.uk

ML // January 2013

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Features

47

A bird’s eye view Riverview is one of the new breed of legal businesses created to deliver corporate legal work based upon the premise that law is just another business service.

Pulling on external funding and maximising the use of technology, it’s a model others in the sector are looking at intently. Karl Chapman, Riverview’s CEO, talks to Mike Ames about the inner workings of the company.

Q A

How would you best describe Riverview Law?

Riverview is a legal advisory outsourcing business that offers a range of legal services to the corporate world. At the bottom end is Legal Process Outsourcing which covers transactional non-advisory tasks that can be done by non-lawyers or even outsourced. At the top end you have magic and silver circle international M&A work. We’re focused on all the legal advice in between.

Q A

Number of employees and offices?

Q A

What sort of clients have you already won?

Q A

So how are you different from traditional law firms?

We work with SME’s upwards but our sweet-spot is large corporates who really like our service and pricing model and value the benefits we offer.

Naturally I can’t name our clients, however, what I can say is that our expectations have been exceeded in two areas: large organisations and litigation.

We have over 100 people, 60% of which are lawyers. But we are recruiting heavily and expect this ratio to change; ultimately we anticipate employing more non-lawyers than lawyers. Our core offices are situated in London and Wirral which is our main centre with 30,000 square feet of space and we intend to fill it all!

Well it’s probably easier to say how we’re the same: we employ lawyers and we deliver legal advice, but in particular: • We use a fixed pricing model.

• We understand the power of technology and management information.

• Our lawyers do the law; our managers manage and our sales people sell. Why ask lawyers to do things they aren’t great at?

Q A

Q A

Do you have trouble finding lawyers?

Q A

Let’s look at sales now. How do you win new clients?

Who owns the firm?

The shareholders, AdviserPlus Business Solutions [Karl’s HR outsourcing business], DLA Piper, private individuals and the staff.

We are very committed to ensuring we have wide employee share ownership. This structure avoids the usual ‘partnership baggage or language’ that prevents quick decision making – our directors and management team function like any other corporation’s does.

Q A

Why did DLA Piper take a stake?

Well, we wanted a shareholder who had the same values as us, who understood the changes taking place in the legal market and could move quickly. DLA Piper was a perfect fit.

Karl Chapman, CEO, Riverview

Partnership can look risky and elusive. We offer our lawyers a good salary, bonuses, share options, no additional duties over practising the law, a career path and no timesheets.

Add this to a great culture and strong values and, well, what do you think?

I head up BD and have 3 BD Heads: Legal Advisory Outsourcing; SME’s and Litigation. Each leader has a team working with them giving us a total of 11 dedicated business developers but we’re still hiring. Lawyers aren’t expected to sell unless they want to. Our job is made easier because we’re constantly being approached by companies who’ve heard about us and want to know more.

Mike Ames, Flair

ML // January 2013

48 00

Features ????

“Performance measurements are very important to us.

For lawyers we use KPI’s on technical accuracy, commerciality of advice, plain English communications, accuracy of data input and client satisfaction.”

Q A

Do you use a CRM system and if so what is it?

We rely on Microsoft Dynamics CRM. Although Riverview only began in February 2012 our systems and processes come from 11 years’ of development in AdviserPlus. IT is crucial to our business model and allows us to run extremely efficiently. We also offer our clients access to enormous amounts of management information through our Cloud portal. We simply couldn’t manage without it. Having said that we know it’s still people that make the difference!

Q A

So who ‘owns’ the clients within the firm?

The company owns the clients not the individual lawyers as in many traditional law firms. The silo mentality that this produces is destructive and we wanted no part of it. Of course our clients have relationships with the Riverview lawyers of their choice and larger clients also have legal and relationship directors to ensure all their needs are covered.

Q A

What would you say to people who think this model isn’t sustainable?

Q A

How do you measure the performance of your lawyers and business developers?

It’s based upon sound business principles, proven technology and processes and strong values that have worked for 11 years resulting in a 100% contract renewal rate for our large corporate clients. Should the actual question be: is the partnership model really sustainable?

Performance measurements are very important to us. For lawyers we use KPI’s on technical accuracy, commerciality of advice, plain English communications, accuracy of data input and client satisfaction. Business developers are measured on client satisfaction, performance and revenue targets. If you can’t measure it you can’t improve it!

Mike Ames is Managing Director of Flair. For the blog, please visit mikeames.wordpress.com

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Features

49

Who’s been saying I’m paranoid?

As personal injury lawyers are rumoured to be sharpening their teeth to steer towards professional negligence claims from fast-track cases, Tony Walton points out some key reminders to professional peers...

A

s personal injury lawyers now realise the scale of reduction in fees waiting for them in April, a minority are said to be planning to turn on their former professional colleagues and set up departments specialising in more profitable negligence claims arising from claims settled below their true value within the RTA portal.

The Thing is a gory science fiction film in which a team of scientists in the Antarctic are infiltrated by an alien capable of replicating almost exactly the humans it seeks to destroy. It is of course rich in McCarthy-era paranoia, harking back to when the original version of the film was made. In one scene, known as ‘Tainted Blood’, the leader of the embattled team attempts to establish how many of his colleagues are infected. With everyone else tied up together, he tests blood samples in a series of Petri dishes until, inevitably, the alien shows itself by transforming one of the team into something very aggressive and slithery which promptly, but vividly swallows up one of the others.

Our regional meetings were never like this.

Not until now, anyway. From the depths of my naivety, I thought there might have been some sincerity behind firms’ website promises about their commitment to compensation claims for accident victims. The vast majority of law firms engaged in those claims will continue to be true to that stated aim and I wish them well. There is, though, something deeply unattractive about those who turn on their own; more so at a time when our branch of the profession needs to improve its image.

At the heart of the matter is the commoditisation of the volume market in legal services, of which portal work comprises a significant and high profile part. The use of paralegals to handle claims is a particularly sore point. Any legal service delivered by a paralegal, so the argument goes, must be inferior. I can’t help feeling there is more than a little snobbery behind all this, with confusion between status and competence. Is there something magical which overnight transforms a trainee on the last day of his or her training contract into a superhuman when they go to work the following morning as a newly qualified solicitor?

Are they no longer in need of supervision and somehow incapable of error?

It is a mistake to equate the use of junior lawyers with a lack of sophistication. In our case, you’ll be confronted with a culture of rigid quality control through close supervision and comprehensive auditing. Handlers will almost always be 2:1 or higher LPC graduates. They are given reasonable case loads and targets which don’t require exhausting long hours to be achieved. Supervisors have no case load of their own and spend all their time just supervising. They have a working knowledge of all of the cases being handled in their team (only four handlers in a team). Supervision is step-by-

step throughout the case, belying the ‘only-if-you-have-to, can’t-you-see-I’m-busy?’ image that many expect. Auditing is via a detailed 100 point form, not the perfunctory tickbox exercise that has been the undoing of so many in the past. So, you and whose army?

To be fair, there may well be claimants out there who have had their claims under-settled and who are entitled to additional recompense. It may also be inevitable that a minority of lawyers will show no shame in quickly dropping the pretence of commitment to one cause in favour of another which just happens to be a lot more profitable.

They must not be allowed to do so without consequence.

It is a matter for the respective organisations and their leaders, but to me it seems incompatible with membership to advertise for potential negligence claims where such claims may be against fellow members: you are either in or you are out.

At the same time, bowing to the inevitability of such claims being made, those who stay loyal to the cause must benchmark themselves against best practice and give as little opportunity to their former colleagues as is humanly possible.

It is trite to say this is simply about better service for claimants. It is sad that evolution will be forced upon us by such negative pressures. Nevertheless, we must go forward in a direction which on the one hand acknowledges that we currently maintain close links with the very people who may soon seek to earn a living from suing us and on the other offers the smallest opportunity for them to succeed in doing so.

Tony Walton is Managing Director of Questus, the legal outsource specialists. www.questus.co.uk

ML // January 2013

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Business Section

53

Practical help for challenging times Antony Smith reports on a key conference aimed to add fuel to legal ‘machines’ across England and Wales, with a particular focus on what firms are doing right in terms of structure and marketing ahead of a stressful year ahead.

T

he Law Society Law Management Section conference, held in November 2012 (chaired by Andrew Otterburn), began with what turned out to be a keynote address by Simon McCrum, managing partner of Darbys solicitors. Simon’s called ‘more fuel and for a good machine’ - the machine in question being a law firm. While he noted the ‘secret ingredients’ of a successful law firm are ‘good people, more good people and yet more good people’, it was striking how much emphasis he placed on the systemisation of most aspects of law firm operations. This became a recurring theme throughout the day. Different speakers emphasised the importance of adopting systems based thinking for almost all areas of law firm management, whether it be strategic development, nuts and bolts of procurement or dealing with people.

Spotlight on success In 2007, immediately before Simon was recruited as managing partner of Darbys, the firm was at the commercial equivalent of ‘death’s door’ (his phrase, not mine). The situation has improved dramatically since. Space does not permit anything like a full review of Simon’s talk, let alone all of the other speakers as well, but a brief summary should help give a flavour of the event and show how rooted in practicalities the conference was.

So what has Darbys done to turn things around?

• Emphasis on changing the culture to one of openness, transparency and sharing of information – no room now for ‘information silos’ or, more bluntly, for people to hide behind generalities.

• The importance of having good people has been noted above but also worthy of note is that Darbys had 80 lawyers in 2007 and out of those only

20 remain with the firm today.

• There is a strong management team in place, made up of the Finance Director, Operations Director and team leaders / group leaders. Some team leaders were at the time junior lawyers with the firm in 2007.

• There is a relentless focus on cost management and cash collection.

• The systemisation theme continues with the automatic enrolment of all new clients into either Darbys’ ‘purple legal’ scheme for private clients or ‘blue law’ scheme for businesses. Darbys has also automated a centralised crossselling system, so if they do a will for someone for example, that person is kept in touch with Darbys via ‘blue law’ updates and they are offered other legal services by Darbys. The emphasis is on systemising and centralising this function, so that cross-selling is no longer left at the mercy of individual client partners.

• Darbys has embraced a client centric culture, summed by providing great client service by ‘every lawyer, every time’. Some may dismiss this as superficial marketing but the phrase, allied to the transparent culture, actually puts responsibility on every lawyer to deliver every time.

After the conference I had a look at the firm’s website, and I was impressed (http://www.darbys.co.uk/). It is quite unlike the vast majority of law firm websites. None of the usual: ‘we are experts in…’ and ‘about our team...’ etc. The front page is light and client focused.

The firm is expanding, having recently opened an office in Manchester within the last year, and plans to open other offices shortly. It recently held an internal competition for its associate solicitors to present a business case

for a new office location and one team was so enthusiastic they had some pens made with ‘Darbys in [the town name of their preferred new location].’

The reward for the winning team will be to see a new office opened in their preferred location.

Teaching old dogs new tricks With so much attention given to new market entrants and their expertise in client services, marketing and staff development, it is refreshing to see what may be called a more traditional legal service provider make huge strides in these areas as well. Perhaps Darbys show that small and medium traditional law firms are not, as many people believe, doomed after all?

Time will tell.

Other speakers took up many of the themes referred to by Simon, such as leadership styles (Michael Shaw, Michael Shaw Associates), helping change personal behaviours at work (Julie Harrison, Julie Harrison Consulting Ltd), practical tax and accounting issues for law firms (Andrew Allen, Frances Clark LLP), implementing strategy in law firms (Nigel Haddon, SAS Daniels) and practical ways for managing procurement (Sarah Charlton, ILFM).

Steve Arundale (Natwest) outlined issues to be considered in connection with potential law firm mergers while Patricia Kinahan (Hazlewoods) summarised results from the latest LMS benchmarking survey.

Overall, a very worthwhile event and I am already looking forward to the Law Society’s Law Management Section Annual conference later this year.

Antony Smith is the Director at Legal Project Management Ltd. www.legalprojectmanagement.co.uk

ML // January 2013

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Business Section

Q: What do new entrant ABSs have to do differently to a traditional law firm to win more work?

A:

Law firms have traditionally generated new work through referrals and existing relationships with little pro-active marketing. It is difficult for new market entrants to break into these traditional arrangements.

To win market share, many new entrants have attacked the perceived weakness in marketing of traditional law firms, developing strong marketing capability using search engine optimisation and digital technologies to gain a competitive edge. However, many are finding the work generated is not of sufficient volume or quality to cover the cost of acquisition or make profit. Their assumption that more consumers will go online and undertake legal tasks has not yet materialised.

Studies show that for less complex work, consumers are increasingly going online as their first port of call, although mainly to research a legal area and evaluate potential law firms. However, when it comes to actually discussing a legal issue, they still consider face-to-face contact with a solicitor important. Interestingly, many then prefer to work with a firm offering technology to track their matter online.

To gain market share, it would appear that new entrants should refine their marketing, moving from pure lead generation to lead nurturing and focus on helping consumers with their research by including lawyer profiles and case studies, then delivering a value proposition that includes face-to-face contact as well as a full online experience for a fixed fee.

For commercial work, legal services for large corporate

clients and government is a relatively mature market with a sophisticated and experienced client base, clear market leaders with a strong brand presence and established procedures in place. In contrast, the SME market offers greater opportunities as many find it difficult to differentiate one legal provider from another. There are significant opportunities for ABS’s to gain market share by introducing disruptive value propositions to this market. These would include: introducing subscriptions and fixed fees where possible; creating online legal services and documents for more straightforward B2B legal tasks; developing their website to enable a business client to track a legal matter; differentiating by gaining an understanding of a client’s industry sector and getting ‘under the skin’ of clients business; offering low-cost, or free, consultancy and advice on creating an internal legal services policy and procedure.

It is clear that new entrants can and will continue to win greater market share from traditional firms. They need to stay focused on their differentiators, refine marketing efforts and deliver compelling value propositions with a better experience and better value for money than their counterparts. In this way, they can go on to build brand reputation and loyalty and build a profitable business.

Jitendra Valera, Chief Marketing Officer, IRIS Legal.

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Business Section

55

Watching, waiting – Innovating?

Unprecedented change in the legal sector has led to many focusing on doing what they do best, along with a need to reduce costs. Richard Forth asks if this offers more opportunities to work with outsourced expert consultants and if they are innovating their offerings for clients, as well as addressing change in the PI sector.

T

he current extensive developments in the legal market are self evident from the press.

However, perhaps it is reasonable to state that the sector contemplating the largest scale changes is the personal injury (PI) sector, particularly those practitioners and firms operating in the higher volume / lower value area.

It seems that in the 15 years in which I have worked closely for PI firms there have actually been very few periods when significant changes have either not been expected or have been bedded in. In my view, if nothing else, it is a credit to the entrepreneurial spirit of the practitioners operating on the Claimant side of the fence that they have managed to quickly adjust their business models and prevail regardless of the same.

Whether for good (from the Claimant perspective) or for bad (from the Defendant perspective) such entrepreneurs have taken a seemingly ever-changing business environment and driven substantial efficiencies into their fee earning processes. This is particularly prevalent at the volume end of operations to generate ongoing profit streams, which they have invested in further process enhancements and case acquisition to grow their businesses - in some cases in an ongoing upwards spiral.

As the handling of PI claims has become increasingly more process driven, a huge ancillary industry has built up in support of the PI sector.

Some of these ancillary services are simply enhanced traditional services such as barristers providing advice on a much more volume orientated basis.

However, a vast number of other services have developed in response to changes to, and the streamlining of, the PI market, such as medical agencies who have driven significant efficiencies into the procurement of medical evidence and specialist costs consultants who externally assist in costs recovery given the increased complexity of the costs regime.

Even my own discipline of forensic accountancy has had to develop and think more laterally with regards to service proposition, in that it’s no longer satisfactory to simply offer expert reports on larger cases. The market now demands abridged expert reports (for expert input on smaller cases), white-labelled / agency work on schedules, advisory / shadow work, etc. on certain aspects of cases.

Whilst changes have been afoot in the PI sector, never has there been a period where so many fundamental changes are due to happen at the same time and,

consequently, the uncertainty with regards to what the future holds has never been more palpable.

Ultimately, the mechanics and the practicalities of such changes will determine what market there still is for certain ancillary providers and, indeed, what if any new opportunities arise.

The devil (as they say) is in the detail and there is currently insufficient detail (with conclusions to various consultations still outstanding) for there to be any definitive answer to the question posed.

In my mind, of paramount importance to the ancillary market as a whole, is how big the PI sector is after the effects of the potential changes have taken hold, which obviously has a direct correlation to the opportunities that still exist.

In this regard, what seems certain is that the level of incidents for which compensation could be claimed is unlikely to materially reduce. The question is how many such incidents will now find themselves into the revised compensation systems compared to current levels.

Regardless, I believe that with the degree of change in the pipeline there will inevitably be opportunities created for certain organisations at the potential expense of others.

“The whole of the market will no doubt be holding their collective breaths as 2013 unfolds” With regards to the new proposed FRC scheme, if there is no fundamental change to the levels of costs proposed for RTA / EL / PL cases after the consultation period, then it would appear clear that the amount of work undertaken on a case-by-case basis will be significantly reduced. True even for those practitioners who wholly embrace DBAs as a way of supplementing the FRC and, consequently, there may be opportunities for suppliers of certain external services.

To what degree this can be practically achieved will be determined by the new processes and protocols put in place.

In my opinion; if the past is anything to go by, the level of proposed change will inevitably lead to opportunities for certain protagonists in the PI sector. However, clarity is not possible as yet with regards to the nature of the same.

The whole of the market will no doubt be holding their collective breaths as 2013 unfolds.

Richard Forth, Forths Forensic Accountants www.forthsonline.co.uk

ML // January 2013

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Business Section

57

RTA Costs Reduction: the business impact

T

here’s no point in worrying about the referral fee ban as with the figures being presented in the recent consultation on portal costs there is nothing in the pot to pay for referral fees in any event.

The Government, in its wisdom, has chosen to simply deduct £700 from the current costs figures for under £10k, which apparently reflects a referral fee that cannot now be paid under LASPO and then giving remarkably low levels of costs for the much more complicated cases between £10k and £25k in value.

It is entirely unclear why solicitors acting in personal injury cases should be the only businesses in the private sector that have a £0 acquisition cost for work. My firm has invested in a magic Claims Tree, which we are planting in the car park so that we can get claims in for free. Whether non-prohibited referral fees are being paid or investment is made in online or media advertising there will remain an acquisition cost for new work - it is simply unrealistic to expect otherwise.

Very few recent consultations have brought about any change to the original proposal so it is therefore highly unlikely that we will receive any real movement on these figures. That being the case it will mean a number of smaller PI law firms with no ready and cheap access to work will simply have to close their books to new work and attempt to recoup their WIP. All those claims management companies that are dealing with low numbers of cases (less than 20) will be unable to sustain themselves, particularly if they bought in work. What this will mean is that those lawyers continuing to do this work will have no choice but to take a deduction from client damages of anything up to 25% of general damages to try and balance up the overhead and acquisition cost element of the work.

Although of course it may be that this is exactly what the Government is trying to achieve.

Alan Nesbit, Managing Partner, Nesbit Law Group LLP.

Trends in legal service delivery After speaking to some innovative law firms and attending some interesting legal industry events recently, Antony Smith believes there are some common trends emerging in the more innovative legal service providers: 1.

They approach legal service delivery as a business, servicing a market in similar ways to many other sectors. This sounds painfully obvious, but most ‘new’ techniques and methods now starting to be applied to the legal market have in fact already been applied successfully in other markets.

2. The client is put at the centre of the organisational ethos and effort. An increasing number of legal service providers really do live and breathe client service and try to understand what constitutes good service from the clients’ point of view.

3. They have strong senior leadership, and a clear strategy which is known and understood throughout the organisation. The strategy is then implemented by good management teams who trust their frontline staff.

4. Senior positions such as operations directors and pricing directors are becoming much more common, often supported by people in roles such as legal workflow and process analysts, legal project managers and legal client managers to name but a few.

5. There is a lot of interest in process mapping and analysis of all key processes which make up the delivery chain.

6. More of the larger law firms now employ client facing legal project managers to assist with service delivery and build closer client relationships. This is now having a trickle-down effect to some of the mid-sized firms.

7. Business development activity is no longer viewed as a necessary evil but something positively welcomed by more legal service providers, they seem to enjoy this at least as much as practising law.

8. Fixed pricing is of course now very common. I also suggest that more firms are now alive to the possibilities of pricing based on value delivered rather than simply offering fixed prices which are in reality no more than conversions of hourly rates into a fixed price point.

9. Management by metrics is becoming more prevalent.

10. I.T now permeates all aspects of legal service delivery and there is little doubt that the influence of I.T on legal service delivery is set to increase even further as the new legal service market develops.

Antony Smith, Director, Legal Project Management Limited. www.legalprojectmanagement.

ML // January 2013

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Business Section

Q: Are the Solicitors Accounts Rules 2011 for COFA’s a Conundrum?

A:

At our recent seminar on COFA Compliance for the Middlesex Law Society (which also featured a presentation from Deborah Edwards, Head of Training & Support Services, Insight Legal Software), a conundrum arose when it was noted that an agreed fee must be paid into office account in accordance with rule 17.5.

The following questions were raised: 1. Can a solicitor charge for a fixed fee before the work is completed?

2. How is the client protected in these circumstances when the work has not yet been completed?

3. Should a prepayment of this fee be retained in the client account before then transferring to the office account once the work is completed?

4. What is the position with regard to the date and tax point of the invoice?

However following the Rule 17.5 is precise in requiring payment into Office Account: A payment for an agreed fee must be paid into an office account. An ‘agreed fee’ is one that is fixed - not a fee that can be varied upwards, nor a fee that is dependent on the transaction being completed. An agreed fee must be evidenced in writing.

This seems to call into question two of the overriding SRA Principles in the SRA Code of Conduct namely that a solicitor must: No. 4: Act in the best interests of each client; No. 10: protect client money and assets.

If payment of Fixed Fees takes place before the work is completed then this could put client money at risk until completion of the work? Hence an apparent conflict with Principles 4 and 10 to protect client money.

HMRC would, I presume, consider that the Tax Point for VAT purposes is for the total amount at the outset, whenever a Fixed Fee was agreed. The whole of the VAT being payable, irrespective of when payment is actually made by the client.

An SRA spokesperson said: “Issues around client money are ones which the SRA will be looking at in more depth over the coming months. For example, we said in September [2012] that reducing the need for solicitors to hold client monies during conveyancing transactions could help reduce the risk of mortgage fraud being committed.

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Business Section

59

Effective Dispute Resolution

I

recently gave a talk to a local law society entitled ‘Is Litigation fit for Purpose in the 21st century’. That was intended to suggest that most contentious lawyers feel a tad queasy outside the ‘litigation’ comfort zone.

Your first job so far as the client is concerned is as dispute resolvers. They want your assistance to solve their problem as quickly and inexpensively as possible. We all know only a couple of percent of cases go all the way to trial, and on average it takes more than a year to get there and at considerable risk and cost. Along the way cases settle pre-action, post pleadings, post evidence.

The deeper into the process the greater the proportion of costs all well demonstrated in the Jackson Report.

In Richard Susskind’s book with the tongue in cheek title ‘The End of Lawyers’ he highlights the asymmetry between lawyers and their clients and says that the modern forward thinking firm is the one that ‘strives to align its commercial interests with those of its clients’ keeping legal difficulties and expense to a minimum’. That’s difficult to do when all you know about is the CPR and little about arbitration, adjudication, conciliation, mediation and all those other different ways to resolve clients’ problems.

Ditch the mantra that arbitration is simply a mirror of litigation, when if you look around you can arbitrate in a week, a month, 100 days paying the arbitrator hardly more than the court fees involved in taking the same case to trial in a year. Why say adjudication in 28 days can only apply to construction, when you can agree to use adjudication for anything. Ask an electrical expert to opine on an electrical problem, and avoid suggesting that mediation should be used at a time when the costs/ benefit ratio has gone awry.

When clients come through the door we need to understand their interests better and manage their expectations, and need perhaps to become effective resolution managers without being overly adversarial and positional, pushing the parties further apart. How very rare it is to see opposing lawyers and their clients sitting around a table, admitting they have a problem and agreeing how best to sort that problem out.

More cooperation in designing the most appropriate resolution process will probably please the client and lead to more work.

Times are hard and margins are squeezed; but doing right by your client must come first. So in 2013 think outside the box and advise appropriately.

Anthony Glaister, mediator, arbitrator, adjudicator and construction claims consultant. www.mediate.co.uk

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Business Section

Q: Will commoditisation kill off specialism in legal entities and what impact will this have?

A:

Commoditisation: a buzz word striking fear into the heart of many personal injury (PI) lawyers for whom the main challenge, right now, is securing enough new work in a seismically changing legal world.

A simple calculation shows that for low value work we will be doing twice as much for half the money and that’s before we factor in the effects of an increase in the small claims limit!

Commoditisation and securing a larger share of the volume market would appear to be the only option.

The alternative is to take up a niche position based on specialist and higher value work won by a reputation for excellence and expertise. I firmly believe there will always be clients in need of this type of practice and specialist advice. Commoditisation implies ‘one size fits all’ and that certainly isn’t true in high-value complex PI and medical negligence cases.

So far, this approach is working for us, but it’s not every practice’s preferred option. I have daily approaches from CMCs looking to place clients as their existing solicitors have stopped referring work in readiness for either switching their priorities or exiting the market.

Further evidence is the response to www.webuyanyfiles. com which we established in 2011 to buy caseloads and practices as part of our growth strategy. Two years ago, we had to go out of our way to stimulate interest. Now we are now fielding 12-15 enquiries a week from practices looking to cash in on the value of their personal injury work, some to concentrate on other areas of specialism.

Those most at risk from commoditisation are the large number of smaller practices (and some bigger ones too!) characterised by a flat line traditional partnership structure, cash flow strangulation and a generalist approach to law. For firms which either can’t or won’t invest significantly in one particular area of practice, consolidation, take-over or even closure seem inevitable.

In short, it’s a choice between quality and quantity and there is a future for specialist niche firms which stand or fall on their results and the care they take of their clients.

Neil Hudgell, Managing Director, Neil Hudgell Solicitors.

Neil is a member of the Law Society Personal Injury Panel, the Association of Personal Injury Lawyers and the Brain Injury Group.

Capturing time on the go E

clipse Legal Systems, the sector’s largest independent software solutions provider, has announced the impending release of a mobile time recording application.

The application currently codenamed MyTime - will provide mobile time recording for users of Eclipse’s Proclaim Case and Practice Management solutions. MyTime is designed to cater for all popular devices including Apple (iOS), Android, Blackberry and Windows Mobile.

A real-time (or on-demand / ‘push’) sync means that recorded time elements can be posted to the relevant Proclaim area for analysis and confirmation (MyTime will also include a client and matter lookup feature). All time

ML // January 2013

and narrative entries will update the relevant matters, WIP and billing details across areas of the user’s own Proclaim solution.

Steve Ough, Chief Software Architect at Eclipse, said: “This is an important development, furthering our ethos of providing device-independent, mobile productivity applications to complement Proclaim. We have opted to design MyTime inhouse, from scratch, to provide the very best fit for our users in terms of tapping in to Proclaim’s rich feature set.

“We are seeing more and more clients come to us requesting applications and features that require an ‘any time, any place’ architecture. Not only do these applications need to be platform-agnostic, but they need to be location-agnostic too. We feel that the type of remote access to core enterprise software feature sets that this application (and the forthcoming TouchPoint) offers is very much the future of legal IT solutions.” www.eclipselegal.co.uk

Are your partners trying to get rid of you?

Contact Adrian Anderson at Ralli Partnership Law uk on 0161 615 0651 or email adrian.anderson@ralli.co.uk

Ralli Ralli Courts, West Riverside, Manchester M3 5FT Tel: 0161 832 6131 www.rallipartnershiplaw.co.uk

Twitter: @PartnershipLaw

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Business Section

Layering up As innovators prepare for the April reforms, Phil Bellamy outlines his predictions for change in the After-The-Event (ATE) insurance sector, mainly group coinsurance or layering underwriters to help the legal sector overcome times of litigation and profit adversity.

2013

is set to become a very challenging year for both solicitors and ATE insurers alike. The lack of clear guidance on the implementation of LASPO and in particular the ban on referral fees and Qualified One Way Cost Shifting (QOCS) has made it extremely difficult to predict the future let alone prepare for it.

Leaving aside whether firms will be financially able to run PI cases in the wake of the ban on referral fees, the potential drop in fixed fees in the RTA portal and the proposed rise in the small claims court limit for RTA PI cases - what is the future of the ATE market?

With average motor injury disbursements, of up to £400 each pre issue, a case failure or abandonment rate in excess of 13% and the fact that Part 36 trumps QOCS protection, DAS firmly believes there will be a demand for some form of ATE insurance.

The potential for Part 36 claims to wipe out all of a successful claimant award - historic Part 36 claims range from £125 right up to £100,000 - means that claimants and their solicitors will demand protection for these risks. An ATE insurance market will survive, albeit a much leaner one.

“Going forward, once another one or two big losses have hit the headlines I predict that insurance will be secured through a group of ATE insurers, each writing up to £1m or so in order to spread their risk and reduce volatility as much as possible.”

DAS is committed to staying in the ATE market and despite the uncertainty has a number of solutions under development. One form of these ‘lite’ solutions may take the shape of a traditional ATE insurance contract between the insurer and claimant but with the lower insurance premiums being paid out of a claimant’s damages in successful cases - following the abolition of recoverability.

So the Government might succeed in bringing the number of claims down but for whose benefit? Certainly not the voting public who, post April, will face the prospect of potentially paying for legal representation, disbursements, ATE insurance and adverse costs out of any damages they receive.

The funding market is also set for a few changes post Jackson. I think there are similarities between the fledgling ATE funding market and the ATE insurance market of some 10-15 years ago. The industry has had one of the biggest losses suffered by a funder and its ATE insurers since the market really began to take off: the Innovator One

ML // January 2013

case. This £10m loss, although painful at the time, will ultimately be good news for ATE insurers in the medium to long term.

Although DAS currently has limited exposure to funded litigation insurance we have been keeping a close eye on market developments over the years; funding company announcements and results in particular.

Up until this loss, there was the appearance that litigation funding was a safe bet. Funding company results and corporate updates would be issued every three to six months, with a similar, positive upbeat message from most parties.

However, any underwriter who has been in the game for a decade or so will know all too well that these results were unlikely to continue.

History has taught us that anybody can make profits in the early years as the easy cases settle, premiums and funding multiples are received and cash flow is good. Even cases that are abandoned or lose at trial will not cost that much in the early years and can be absorbed by previous income.

However, the honeymoon period eventually ended for early ATE insurers, somewhere between the fifth, sixth or seventh year of trading, when significant losses from failed trials far exceeded the premium income from previous winners. The £10m Innovator loss will not be the last, nor will it be the biggest.

I can accept that funded cases are more robustly vetted than standard ATE litigation, with QC’s opinions and an alignment of interest from all parties.

However, where funders see a prospect of success figure of 60%, underwriters see it as a risk of failure of 40% - a significant possibility of loss and usually a total loss.

Going forward, once another one or two big losses have hit the headlines I predict that insurance will be secured through a group of ATE insurers, each writing up to £1m or so in order to spread their risk and reduce volatility as much as possible.

This method of group co-insurance or layering will be assisted by an increase in capacity from the ATE market as more insurers seek to diversify their book with funded litigation insurance. The ATE market has a history of overcoming adversity and DAS is confident that access to justice can prevail.

Phil Bellamy is ATE & Special Risks Manager at DAS Group Underwriting.

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