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Jul 29 / Charm

Financial Advisor Says Solicitors are “in Denial” About Accountancy Competition

According to a legal financial adviser specialising in the legal sector, many solicitor firms are “in denial” about the scale of competition they face from accountancy practices, and are failing to appreciate the level of threat this poses. Solicitors Independent Financial Advice chairman Ian Muirhead warns that solicitors will soon be facing direct competition from accountants “on every high street in the country.”

Muirhead predicts that some 750 accountancy firms will secure an Alternative Business Structure (ABS) license and begin taking on probate work.

The Institute of Chartered Accountants in England and Wales (ICAEW) successfully became an approved regulator of ABS licenses last year. This followed two years of efforts on the part of the organisation to obtain approved regulator status. It has given ABS accreditation to 113 firms since October, and is currently processing a further 34 applications. Upon its approval, the ICAEW predicted that around 250 firms would apply for ABS licenses, but Muirhead believes the actual figure could be three times this estimate.

Muirhead, who was speaking at a Westminster Legal Policy Forum, said that there were many solicitors “in denial” about the threat that could be posed by accountants moving into probate work. So far, he claimed, the response of many legal practices has been based on mergers, acquisitions and consolidations an approach he described as a response of “safety in numbers, more of the same, not thinking outside the legal silo.” Such tactics, he believe, could ultimately work in favour of the firms’ newfound competition instead of helping to mitigate the threat. It left legal firms “missing the opportunity of which many new ABSs are availing themselves, of providing a more diversified and holistic client service.”

“Success,” he said, “will go to those who can manage businesses and I query whether that’s going to be the solicitors or whether solicitors are going to be the back-room boys.”

He also suggested that law firms were taking the wrong approach in the amount of money they are spending on attracting new clients. They would be better off, he claimed, investing in maintaining and improving their relationships with current clients and keeping contact with them in order to reduce the risk of losing existing probate work to accountants. This approach should, he said, be combined with an effort to work alongside other firms providing different but complementary services in order to offer their clients a greater degree of choice and a more comprehensive package. Such services could include accountancy, estate agency services and surveying.

May 19 / Charm

Court Wi-Fi Plans Brought Forward Ahead of Digital Courts

The schedule for the roll-out of Wi-Fi in courtrooms has been accelerated by the Ministry of Justice. The plans have been brought forward to facilitate the ministry’s intention to bring about fully digital courtrooms by 2016.

The plans will see Wi-Fi rolled out across the country throughout all courts in England and Wales, including both Crown courts and magistrates’ courts. According to the Ministry, announcing its change of plans today, wireless internet access will become available in every court in the country by October of this year.

Originally, the target date for the complete in-court Wi-Fi rollout was March 2016. In order to be in a better position to digitise English and Welsh courts by next year, however, the decision was made to accelerate plans and bring the target date forward by five months.

The plans to provide wireless internet access in the courtrooms of England and Wales were originally announced in April of last year. They formed part of a scheme to bring the British justice system into the “Wi-Fi era,” according to justice minister at the time Damian Green. This represented a fairly large-scale scheme with initiatives worth a total of £75 million.

It had previously been reported that the target date could slip back in some areas. Courts in Devon were at one point told that they could not expect to benefit from the installation of Wi-Fi until at least 2017 and possibly later. The decision to complete the rollout of Wi-Fi in all English and Welsh courtrooms this year, and within five months, has therefore been received with an element of surprise in some quarters.

The plan is that courts will not only have Wi-Fi available but will become fully wireless. The intention is for all devices and users to connect to the Wi-Fi network rather than using the wired systems that are currently in place.

According to the Ministry of Justice, the recent revision of the target date will do a great deal to facilitate the government’s plans for fully digital courtrooms. With the new, faster timetable for Wi-Fi installation, the Ministry says it is “in a good position” to bring about its digitisation plans by July of next year.

Fully-digital courtrooms will allow defendants to appear in court remotely for pre-trial hearings, via video links connecting courtrooms and prisons. Cases could be presented by both the defence and the prosecution using mobile phones, and submissions can be stored centrally and accessed wirelessly by all relevant parties.

Feb 13 / Charm

ABS: no great change to the legal industry?

Amidst reforms to the legal sector (such as LASPO), and measures designed to make the legal sector more cost effective and competitive, 2012 saw the introduction of Alternative Business Structures (ABS). Amidst opening up the legal sector more, and shaking up the traditional legal firms, such companies were also supposed to enable more people to get access to legal services and advise.

Essentially, ABS are legal service providers not run by lawyers. The company is fully regulated and registered by the Law Society to provide legal services and advice, but has some non-legal management structure. That non lawyer involvement or management can take any form- but usually consists of another company not working in the legal sector having a law branch, or setting up a subsidiary legal company. Such firms have to be regulated, and operate under the Law Society’s rules and codes of practice.

When the first ABS licences were granted in 2012, many companies got on board, and either entered the legal sector, or set out plans to. Cooperative’s existing legal division took advantage, and under the ABS rules became Cooperative Legal Services, one of the first of the new businesses. Eddie Stobart (trucks and logistics) formed Stobart Barristers chambers. Professional service provider Parabis expanded, moving from insurance, finance and travel into legal services as well. Several new or existing law firms restructured their businesses, becoming an ABS to bring in non-lawyer management.

Many had misgivings about the scheme, criticising ABS as ‘Tesco law’, and questioning the quality of legal services provided by the new companies- many of which had never operated in the legal sector previously. Indeed, Lord Neuberger (the President of the Supreme Court), said in 2013 that the rise of ABS needed rules in place to stop the risk of the “unyielding tentacles of self-interest,” and that the opening up and liberalisation of the legal services market must not result in a “free-for-all”.

The ABS’s rebutted their critics with equal fervour, and have worked in the background the last few years, getting established in the legal sector. Law students (future lawyers) were uncertain as to the new potential employers, and reception was tepid at best in the law school campuses and careers services. However, critics and supporters both agreed that ABS were a fundamental change to the legal sector- and a change that was here to stay.

2015 marks three years since ABS were introduced- with mixed success and acceptance so far. Further to that, 2015 saw a report released on ABS by Jasminka Kalajdzic, Associate Professor at the University of Windsor in Ontario in Canada. Essentially, the report found that there was no data to indicate that access to justice had fundamentally increased.

Professor Kalajdzic found that Australian and British ABS had seen successes in areas such as branding (or rebranding), utilising new technologies (such as online systems) and in achieving economies of scale. One point of note was that the business models of ABS had resulted in an increasing number of personal injury claims being seen. However, there was no ’empirical evidence’ that the new business structures had resulted in a reduction in the costs of legal services, or much alteration in the rate of self-representation.

Whatever financial benefits of- and economies of scale that were derived from- ABS were mostly seen in areas of legal practice that could become a commodity-such as personal injury. Areas of law that required a more personal touch, or individual attention (such as family and employment law), still seemingly needed the existing support and structure provided by a traditional law firm, and as such were less prominent services for ABS.

Another issue considered was access to justice. Supporters of ABS state that the new structure can increase access to justice, especially for those who cannot afford legal representation. In her study, Professor Kalajdzic found that there was no evidence of such a significant impact on areas relating to civil justice (such as family, employment, debt and consumer legal issues); however, those civil justice concerns are the most significant legal concerns in Ontario.

The report was compiled amidst an interest in the ABS structure following recommendations in 2012 looking into the legal market in Ontario, the most populous province in Canada, and home to both the national capital Ottawa, and legal and financial hub Toronto. The proposal considered was to allow non-law firms to be able to offer legal services, or indeed to wholly or partly own law firms. Other similar but moderated proposals were also put forward.

Whether the Ontario provincial government will adopt such measures remains to be seen. This side of the Atlantic, the report just serves to confirm what critics knew all along; that non law companies offering legal services was never going to be an effective method of practicing law, and neither would it impact on the availability and access to justice. Overall, the Canadian report does nothing to assist the already tarnished reputation of ABS.

Dec 19 / Charm

Old Master or Bad Advice? The Legalities of Expert Opinion

Giving advice always has its pitfalls- even informally amongst friends and family.  There are some, however, who give considered professional and expert advice as standard, as part of their job.

In the art world, many who work in auction houses and galleries are considered experts as regards art- and are regularly asked for their opinions and valuations of artworks old and modern.  Their experience and detailed, expert knowledge enables them to asses the authenticity, age and value of a painting- with their knowledge assisted now by 21st century technology. But what if such art experts give the wrong advice or opinion? 

Such a matter concerning a potential professional negligent misstatement recently came before the High Court inLondon. 

Lancelot William Thwaytes inherited a copy of Caravaggio’s celebrated The Cardsharps from a relative in the 1960’s. The original was painted in 1594, and is currently on display in a museum inTexas. A key work in establishing Caravaggio’s reputation as a master, The Cardsharps was widely copied by followers of Caravaggio in homage to the master. When Mr. Thwaytes sold the painting at auction in 2006, Sotheby’s catalogued the artwork as painted by a follower of the Old Master, and sold the artwork for £46,000 to Mrs. Orietta Adam. It is believed and understood that she herself bought the painting on behalf of a friend, the well known collector Sir Denis Mahon, on whose behalf she is understood to have bought the painting.

Sir Denis had the painting restored. Upon the advice of a friend in the art world, he investigated further- before announcing a year later at his 97th birthday party that the work was indeed an autograph replica painted by the hand of Caravaggio himself in 1595. Some Caravaggio experts (of which Sir Denis was one), such as Mini Gregori, agreed with the assessment. 

Upon Sir Denis’ death in 2011, the painting was loaned to a museum- and insured for £10 million, as it was presumed to be by the hand of an Old Master. Mr. Thwaytes brought proceedings against Sotheby’s for giving him negligent advice as regards the authenticity of the art prior to the sale in 2006. Sotheby’s claimed that their experts had all unanimously agreed that the art was indeed a copy by a follower, and defended their valuation and opinion. The matter eventually ended up before the High Court, where a verdict is expected in January 2015. 

The case over the disputed Caravaggio is but one of many that goes to prove that it is easy to be dissatisfied by such expert advice, or for the expert to make a mistake. This is particularly so in the professional arena, such as doctors, lawyers and accountants, whose advice is taken very seriously.

For lawyers, tort law in the form of Hedley Byrne v Heller (and later Caparo v Dickman) provides some guidance. That well known case set out the criteria for a claim for pure economic loss arising from negligent or careless misstatements. The statement (or professional advice) in question must be either untrue, inaccurate, or misleading, with the one giving the advice or statement having acted negligently in making such a misrepresentation. Further, the recipient must have relied in a reasonable manner upon the negligent misrepresentation; when it comes to professional legal or financial advice, it is very often reasonable to act upon the advice given. Hedley Byrne also stresses again the necessity (as always in tort) for there to be a duty of care between the two parties for any successful claim of negligent misstatement to be made. Further, Hedley Byrne gave rise to the ‘disclaimer’ statement now so commonplace. 

For doctors, the humble (and often criticised) Bolam test as regards professional medical advice has stood the test of time in this regard- and was expanded by Bolitho v City & Hackney HA.   The essence of the Bolitho test is that a medical course of action will normally be reasonable if it is logical to perform the procedure- and there is a body of supporting medical opinion. As regards what constitutes a medical body of opinion- the House of Lords declined to state what that was, considering that (predictably) it was not for the courts to make the law, but rather to apply it. However, according to Bolitho, a judge could choose between two opposing bodies of medical opinion, and reject a course of action that was ‘logically indefensible’. However, the House of Lords stressed that the law would find a medical procedure that was in conformity with a sound and reasoned body of medical opinion to be negligent very rarely. As a result of such convoluted legal reasoning, doctors now derive protection from negligently (or otherwise) informing and advising their patients.

With that in mind, it is wise to be wary of giving advice. Despite that, those who give advice as a profession are (sic) often well protected legally from the consequences of their advice- but only to a certain degree, and not in all cases. Returning to the High Court, it is fitting that the painting in question is a copy of Caravaggio’s famous image of three medieval card sharpers. Often, many feel that they have been badly advised or cheated by such professional experts- especially when they get an opinion they did not want to hear.

The Cardsharpers (Caravaggio, 1594)

The Cardsharpers (Caravaggio, 1594)

 

 

UPDATE: The High Court delivered a verdict as regards the disputed Caravaggio in mid January. The court found that Sotheby’s had indeed taken all reasonable care and due diligence as regards authenticating the painting in 2006. As such, the auction house had not given negligent advice. The seller is now considering appealing the verdict. http://www.scotsman.com/lifestyle/arts/visual-arts/connoisseur-loses-legal-battle-over-caravaggio-1-3664242

 

 

Oct 27 / Charm

Solicitors to get More Work from Parental Leave Reform

From December, a new regime governing parental leave will come into effect. It has been suggested that the introduction of this system will give a boost to the amount of work being received by employment solicitors.

The new shared parental leave (SPL) system will allow maternity leave and maternity pay to be shared by working parents of babies born from 5th April 2015 onwards.  This will mean that working practices become more flexible, and parents will be better able to share the bringing up of children in their youngest days.

Under the current system, mothers are entitled to take maternity leave for up to 52 weeks and to receive statutory maternity pay for 39 weeks.  Fathers, on the other hand, are entitled to two weeks of paternity leave immediately surrounding or following the time of the birth. If the mother has returned to work, they are entitled to a further 26 weeks of leave once the child has reached the age of 20 weeks.

The new system, however, will introduce a “pool” of leave and statutory pay which can be shared between parents and taken in more flexible, combinations depending on the needs and wishes of the couple.

According to Sarah Gilzean, an associate of leading firm HBJ Gateley and a discrimination expert, has said that there is likely to be an increase in the number of employers seeking advice on how requests for maternity/paternity leave should be handled. This will create more work for solicitors specialising in related areas.

Gilzean says: “There may be a slightly higher risk of claims coming from men arguing that a failure to pay enhanced [maternity pay] amounts to indirect sex discrimination.” Gilzean also went on to suggest that “there may be claims from women who lose their enhanced maternity pay to take SPL on the basis that they have been subject to a detriment for taking SPL.”

According to estimates from the government, in 2015-2016 SPL will probably only be taken by a relatively small proportion of men. Something between the 2% and 8% mark is forecast. However, this is likely to increase over the following years as fathers become more widely aware of their increased range of options, judging by trends seen in other countries that have introduced similar systems. For example, Germany saw only 3.3% of fathers make use of their equivalent system in 2006, but by 2010 this had increased to 20%.

Aug 26 / Charm

Legal Industry Sceptical About New Mediation Scheme

The government is introducing a new scheme to provide couples undergoing separation with a free initial mediation session. The government hopes this will encourage more couples to reach agreements without taking their disputes into the courtroom, but legal professionals remain sceptical about the impact it will make.

Family Justice Minister Simon Hughes announced the scheme earlier this week. It forms part of a string of government efforts to promote mediation, stretching back to the controversial cuts to family legal aid in April 2013.

The government aims to promote mediation as a quicker, cheaper alternative to settling disputes in court. According to Hughes, “We know mediation works and we want more people to make use of it.” The government has also issued figures which, it claims, show the efficacy of mediation. 70% of couples who undergo mediation, the Ministry of Justice said, reach an agreement without the need for the courts. Almost two thirds of those whose disputes relate to children manage to settle their differences after a single session, the Ministry claimed.

However, so far the government’s efforts to encourage the use of mediation by separating couples have fallen decidedly flat. This was seen as son as legal aid cuts took effect, at exactly the time the government hoped couples would seek out mediation as an alternative. Contrary to the hopes of the government, the number of couples turning to mediation actually fell. Six months after the cuts hit, less than half as many couples were using mediation as an alternative to settling their disputes in court. Over this six month period, the overall number of couples seeking out mediation services fell by 51%.

This fact may be down to the fact that fewer couples are now turning to lawyers. Unable to access legal aid to fund professional assistance, they instead proceed to court as litigants in person without stopping to consult a legal professional. Previously, lawyers were often the ones who made their clients aware of mediation and recommended the process, so by taking lawyers out of the equation the government may have caused awareness to fall. This has not been helped by the fact that, as critics of the cuts have been quick to observe, the government has made comparatively few efforts to make couples aware of the mediation schemes they have been introducing.

A number of legal professionals have expressed their doubts about the latest scheme. Resolution chair Jo Edwards pointed out that the scheme is limited to cases where at least one partner already qualifies for legal aid, and this is likely to limit its usefulness.

Jun 3 / Charm

SRA Says Diversity Rising Too Slowly

Lawyers are becoming more diverse, but according to the Solicitors Regulation Authority (SRA) the increase is not happening fast enough. The SRA published statistics today which showed that the increase in diversity is indeed a slow one.

This year saw an increase in the proportion of solicitors belonging to black and minority ethnic (BME) groups, but that increase was a mere 0.5%. The SRA’s diversity monitoring statistics also showed a rise in the proportion of solicitors that are female over the last three years, but labelled this only “gradual.”

There are currently 136,081 practicing solicitors in the UK, of which 85% are white and only 15% belong to BME groups. Specifically, 8% are Asian in ethnicity, 2% are black, 1% of Chinese heritage, 1% of mixed ethnicity, and 2% belong to other groups. Black and ethnic minority solicitors are more often found in small firms. 61% of them are sole practitioners or belong to firms with only 2-4 partners, and just 10% can be found in firms with 81 partners or more.

These trends are reflected quite closely among partners. 89% of partners are white and 11% are from black and ethnic minority groups. The latter category breaks down as 7% of Asian heritage, 2% black, 0.5% Chinese in ethnicity, 0.5% of mixed heritage, and 1% other.

One area in which the partner population departed markedly from the trends seen in the population of practicing solicitors at large is in the proportion of women. Women make up 47% of solicitors altogether, but only 27% of partners are female. This suggests that while the number of women entering the profession is improving and approaching the roughly 50/50 split that would reflect the population at large, there is still marked inequality in terms of career progression.

Women in the legal profession are also found predominantly among younger groups. 62% of women practicing as solicitors are under 40, compared to just 39% of male solicitors.

Richard Collins, executive director for strategy at the SRA, spoke of a “relatively slow pace of change” within the legal profession. However, he did not feel that this was the result of firms actively discriminating against women or BME solicitors. He said that “Patterns and ways of doing things have built up over the years. It is not something the SRA can solve by ourselves… Rather firms need to accept the information and put in a lot of senior management time to change it.”

Apr 28 / Charm

Law Students to Help Divorcing Couples?

New proposals from Justice Minister Simon Hughes call for law students and trainee lawyers to be called in to help separating couples with the process of divorce. Hughes suggested that students and trainees could “talk through the issues,” “sort out the clutter in their minds” and generally “hold the hands” of couples as they worked through the divorce process.

It is reported that ministers are forming plans for a potential advice centre network. Staffed by students and trainee lawyers, they would specialise in giving guidance to Litigant in Persons (LiPs) before they appear in court as part of their divorce proceedings.

On paper, the scheme is a timely one. Recent cuts to legal aid have affected a very large number of family court cases, including divorces. A significant portion of cases that appear before family courts now involve no professional legal representation for either party, and many struggle to afford specialist advice. The government has made it mandatory to first consider mediation, which is cheaper, easier and generally more amicable, but many cases still have to resort to the courts to settle disputes.

However, within the legal profession there are many voices speaking up to suggest that unqualified advice such as this will not prove to be an adequate substitute or even a particularly effective system in practice. Many students and trainees feel that they would not be confident in giving such important legal advice to people without it being checked by a qualified and experienced professional, especially when it could have such a profound impact on someone’s personal life.

Many solicitors echo this sentiment when thinking back to their own days as trainees. For example, Hart Brown NQ solicitor Danielle Collett-Bruce said she would have felt “out of [her] depth.” She also added that “experienced practitioners are still trying to understand the changes and I think it is unfair to expect young lawyers, whether in practice or not, to try to give a good level of advice.”

Jo Edwards, chair of Resolution, also felt that such a scheme would not be adequate. While acknowledging that “any help that can be provided is not to be sniffed at,” she also said that “the reality is this is complex stuff that needs specialist’s advice from qualified professionals.” Resolution, a national association of family legal professionals, has itself recently been tackling the issue of couples who struggle to afford professional help when going through divorce. They have teamed up with a major credit provider to offer manageable loans to fund legal advice and representation.

Feb 27 / Charm

Law Commission Calls for Pre-nups to Become Legally Binding

The Law Commission has proposed that pre-nuptial agreements gain legal status within England and Wales. The possibility has been widely welcomed by family lawyers.

The issue has been talked about for some months, and it is now looking like any relevant reforms that result from the discussions may soon come into effect.  The Law Commission’s recent report calling for the move is the result of consultations stretching out over three years.

Currently, pre-nuptial agreements can be treated by courts as a factor in deciding how to assign assets in divorce cases, but they are not legally binding and have no set-in-stone status in law. The commission’s report includes a draft of a bill which would change this, allow agreements that are legally binding to be made by couples who are getting married. In the event of their marriage failing, this would result in much greater security for both partners regarding the way their assets will be disposed.

If a bill in line with the Law Commission’s draft should be passed, courts will have no authority to deviate from the terms of qualifying pre-nups when disposing of a couple’s assets as long as the terms provide adequately for the needs of both partners and for any children.

In order to qualify under the terms of the draft bill contained in the report, a pre-nuptial agreement must meet the following criteria:

  • It must be signed at least 28 days before the wedding takes place.
  • It must not involve fraud, misrepresentation, or undue influence.
  • It must contain a statement that the couple understand that the agreement is binding and cannot normally be altered by courts in the event of divorce.
  • Both partners must have received legal advice, and undertaken full disclosure.

If any of these conditions are not met, the agreement will not be entirely voided. However, it will not be strictly binding and there will be greater discretion for courts to deviate from the terms when disposing of assets.

James Carroll, co-chair of the family law committee of the Law Society, stressed that this does not make all pre-nuptial agreements into documents that will be absolutely binding in every circumstance. He clarified: “Parties can choose to opt out of sharing non-matrimonial property, but they will not be able to contract out of providing for each other’s needs.”

Many lawyers predict that there will now be a surge in demand for pre-nups, although opinions differ as the to likely extent of this.

Jan 30 / Charm

UK Surpasses New York as International Centre for Legal Services

According to a recent report, the UK has surpassed New York to become the world-leading international legal services centre. TheCityUK’s Legal Services 2014 report says that New York remains the home of the world’s largest market for domestic law, but the UK is now the biggest centre of international law.

Approximately 7% of revenues for law firms around the world are taken by UK companies. This makes the UK the largest market in Europe by some distance, and the largest in the world by a smaller margin. The UK is also home to three of the world’s five largest law firms when judged by number of employees. Alternatively, if judged by total revenue, the UK houses four of the world’s ten biggest firms. The UK currently also houses offices of more than 200 foreign legal firms.

In 2012, legal services contributed £20.4 billion to the UK economy, accounting for 1.5% of the country’s total GDP. Gross revenues for UK law firms were £38.5 billion in the 2012-2013 financial year, showing growth of 5% in this period.

Another claim the report contained is that London is the world leader in dispute resolution. This applies collectively to al forms of dispute, such as mediation, arbitration and litigation. Over 19,000 commercial and civil disputes were resolved in London in 2012, with approximately 4,700 of these being international. Furthermore, out of all corporate arbitrations across the globe, 40% of governing law is English law and London is widely viewed as the preferred arbitration centre.

According to Desmond Hudson, chief executive of the Law Society: “This report reinforces that the UK continues to lead the way. To remain the destination of choice for legal services, we need to invest in infrastructure, invest in skills and reduce the regulatory burden.”

Furthermore, large law firms in London are likely to have larger, more extensive global networks than their counterparts in other parts of the world. This is perhaps linked to a claim in the report that the current slow rates of economic growth in established markets is likely to drive law firms towards overseas expansion to generate fees.

Nicholas Lavender QC, chair of the Bar Council, said: “These figures demonstrate how important the UK’s legal services sector is to our economy and to the economic recovery.” Lavender went on to say that “English law remains one of our most significant exports and continues to ensure the UK plays a leading role in global commerce.”