What’s the alternative?
Date: 08 July 2011
Authors: Dominic Regan
Issue: Vol 161, Issue 7473
Categories: Opinion, Costs, Legal services, Procedure & practice, Profession
Conferences dedicated to them sell out. Irwin Mitchell announces that it is heading to market. Are we on the verge of a massive transformation of the legal market?
I apologise for spoiling the fun but I think it will be a long, slow process. Do not expect fireworks over the next few months, despite the froth.
Jackson reforms
Surely the greatest problem, in the nicest way, is Lord Justice Jackson and his pesky reforms. Litigation is profoundly uncertain. Claimants can lose cases. Costs is a notoriously unpredictable terrain. What success fee is going to be allowed? A sound Pt 36 or Calderbank offer can sink the strongest of claims.
Yet that list of issues is nothing compared to the forthcoming maelstrom. Should recoverability of success fees end, as the government desires, litigators will take an enormous hit and do not forget counsel either. It is obvious that we will see fixed costs in fast-track work soon. No one knows at what level those costs will be pitched. To add a further frisson of excitement we have the zealous Ministry of Justice reformers consulting now on increasing the fast-track ceiling to perhaps £50,000. So, we do not know what the costs will be in fast-track claims and we do not know what will even be fast-track claims. I accept that once figures are established there may be real interest, for fixed costs bring certainty and the ability to engineer the service provided to the fee specified. Faster resolution of claims will mean less locked into work in progress and healthier cashflow will follow.
Referral fee ban
Were referral fees to be banned, which I think most improbable, we would see claims management companies buying into law firms so as to use their connection and marketing talents from within rather than, as now, an external provider to their legal customers.
The prime minister has endorsed the key proposal of Lord Young that we should move decisively towards the online filing of claims through a series of portals. If you have read the Government consultation on this topic you will see that it is looking at high thresholds with limits of £25,000 or arguably more being created and, provocatively, we are asked whether the same costs rules which are not generous in the sole portal alive now, for road traffic, ought to be duplicated in more complex and substantial cases. Anyone fancy kicking off a clinical negligence claim worth £20,000 for £1,200 and a success fee no longer recoverable from the defendant? I thought not.
External funds
Paul Scrutton at Frenkel Topping understands the market and thinks that, eventually, outside money will seep in. There are very large sums out there looking for a home and the legal industry may well benefit from rationalisation and increased efficiency, enabling investors to make a decent profit. The commercial court is regarded as an entity that brings a substantial inflow of money to the UK from those who trust and use it.
The certainty that contingency fees will be allowed under the Jackson Bill must make the serious commercial firms look mouth-watering. Firms like Allen and Overy, Ince and Co and RPC, all spectacular, will not want for suitors. The outsourcing of support work to Northern Ireland by A & O is surely the first, tentative step down the road to cutting costs so as to enhance profit. The legal profession has not embraced the radicalism that other industries have had to endure so as to survive. Will we see solicitors in many areas becoming an endangered species, with a few employed to oversee many para-legals who are much cheaper and do not want partnership?
The Bar’s future
Wise barristers may well want the security that comes from a closer relationship with solicitors. I am troubled about the future of the Bar. Of course, there will always be demand for those reassuringly expensive commercial types. Lord Grabiner QC will never go hungry and nor should he for he is as brilliant as he is charming. Few occupy those rarefied heights and at the coal face I worry that the inevitable downward pressure on costs will lead to barristers being dispensed with so as to keep the money in-house or at best used more sparingly. Not good.
The publicly traded Australian law firm of Slater & Gordon was looking at the possibility of an English acquisition, something I heard from lawyers both there and here. Early attempts at branding firms under a composite generic tag here is another sign of efforts to get overtly commercial.
To take a racing analogy, it is one thing to place a bet on a specific horse at a race meeting. To pour money into the legal business now, with the prevailing uncertainty, would be more akin to putting on a bet where you do not know the identity of the horse, jockey, racecourse or competitors. Not to be touched until we know the details which will not surface until late next year or, in the case of multiple portals, until 2013. Have a little patience.
Professor Dominic Regan provides in-house training on both Pt 36 and Jackson reforms.
E-mail: krug79@gmail.com. Website: www.profdominicregan.blogspot.com
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