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DESCRIPTIONPersonal injury/North West focus SAM KENWORTHY THE CLOSURE OF TAYLOR WESSING’S personal injury practice in April this year was more than a simple casualty of internal restructuring; it was yet another example of a City firm being priced out of a market that’s heading north. 34 Legal Business June 2004
34 Legal Business June 2004
Personal injury/North West focus
Grown-upoperationOut on a limb? The North West is one of
the key UK regions which has worked out
how to provide efficient bulk personal
injury work; defendant practices at City
firms have been hammered
THE CLOSURE OF TAYLOR WESSINGSpersonal injury practice in April this yearwas more than a simple casualty of internalrestructuring; it was yet another example ofa City firm being priced out of a marketthats heading north.
The firm had established the practice in1990, with two partners and six associates,acting for defendants, primarily NorwichUnion and Commercial Union. In thoseheady days, there was no pressure on fees.London rates were paid without question,says Taylor Wessings head of litigation,Michael Frawley. Then, about five yearsago, whether to make themselves moreattractive to investors or simply tomaximise profits, firms on the panels weretold to re-think their rates. Re-think as inreduce. Profits took a battering as a result.
A retirement allowed the firm todownsize the practice to one partner andtwo associates, generating 1m per annum,but the squeeze had not yet finished. In2003, the firm was told by one client that itwould have to set hourly billing rates at105 for senior associates, and 135 atpartner level just under a third of whatthe firm ordinarily bills for litigation at the top end; the writing was on the wall.
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36 Legal Business June 2004
overheads. I can see expertsmoving out of London to theprovinces as a result.
National firms have anadvantage in holding on totheir talent by relocating it toanother office: Eversheds runsPI work out of its Cardiff office,while DLA does the same fromfive regional offices. However,recruitment consultant MartinVowden, at Michael Page, hasyet to see significant movementto independent firms in theprovinces. The problem is the difference in salary, he
It simply isnt feasible to run a defendantPI practice at a City firm. Claimant firmshave a better chance of survival, but onlybecause the shrinking number of firms willmean more referrals for those still involved,explains Frawley. And even though the liti-gation system as it stands pressures partiesinto settling, the costs of running a litiga-tion at City rates are often horrific.
At nearby Irwin Mitchell, which exclu-sively advises claimants, Colin Ettinger issimilarly wary. Work referees are squeezingthe firms on fees, and there will be casual-ties in the City, where overheads and feesare higher, and where defendant firms aremore vulnerable, he warns.
In the era of no win, no fee, its allabout your business nous, in what is ultimately a series of well-informedgambles. The demise of Claims Direct wasset against a backdrop of what were allegedto be grossly exaggerated success ratios. Inan industry where the margins of successare so critical, companies such as Invarohave sprung up, providing access to justiceby vetting claimants and arranginginsurance, or getting funding from a bankor lending body, to cover fees. Althoughpremiums and interest payments may cost,a second opinion in assessing the validity ofclaims reduces the risk of client andsolicitor being out of pocket at the culmina-tion of a case. Validity is based purely onthe chances of success: while afirm might publicly put a 51%chance of success as thethreshold, in reality the require-ment is significantly higher.
Frawley has no doubt aboutthe prognosis for the market.The future is a high-intensitywarehouse in the provinces, hesays. By that I mean leveragedfirms, around one partner to 20assistants, perhaps not evenqualified lawyers, with a highturnover of work and low
explains. You tend to find that local firmsrecruit from the same pool of like-mindedfirms. London lawyers have to lower theirexpectations if they leave the City.
North West stepsThe North West is one of the key areas ofgrowth in the UK. Here, the high-intensitymodels are already up and running. Informer heavy industry cities, frequentinjuries to workers have always meant com-pensation. Since the 1970s, it has meantincreased litigation. Liverpool may sufferunfair jibes about ambulance chasing, orbeing the tripping-and-slipping capital ofBritain, but its law firms certainly knowhow to stay healthy.
There are two key principles to runninga successful provincial PI firm: efficiencyand specialisation, says Terry Sweeney, chief executive at eight-partner SilverbeckRymer. We only have specialists workingcases that they are familiar with, and as afirm we only take on cases that we know wecan handle. There is a high degree of specialisation because its not effective tohave lawyers dealing with a mixed bag. The firm advises defendants and claimantsalthough, whereas versatility would beviewed as an advantage in other disciplines, concentration on specific areas is the route to profitability, both forthe individuals and the firm as a whole.
Bott & Co could be the model PI firm of the future. Sole partner David Bott overseas six solicitors and eight legal executives, who handle over 3,000 cases at any one time, generating 3.2m in fees annually. Impressive for a three-year-old firm.
The only way to make PI work as a business is witha lot of technology, which keeps costs to a minimum,says Bott, although the firms expenditure of 100,000
a year on upgrades suggests you have to spend moneyto save your clients money.
When Bott stresses the importance of quality ofservice, hes talking about speed and efficiency: non-qualified employees focus on work where, commonsense and good administrative skills are moreimportant than knowing the intricacies of the law.
If you are carrying 300 files, its better to getthrough them quickly, Bott concludes.
THE NEED FOR SPEED: BOTT & CO
The case management system is essential to the success of anyPI-focused firm. Each case must be run according to a planestablished from the outset. You cannot wing it. Terry Sweeney, Silverbeck Rymer
Sweeney: case management system is essential
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38 Legal Business June 2004
It is for this reason thatboutiques are more likely tosucceed in PI than the bigger,full-service firms. Case manage-ment systems at SilverbeckRymer, and elsewhere, aretailored for PI claims, andwould not be transferable toother areas.
The whole firm is a machineof efficiency. The case manage-ment system is essential to thesuccess and profitability of anyPI-focused firm. There must be100% focus on its develop-ment, continues Sweeney. Weconstantly develop and modifyours. Each case must be run according to aplan established from the outset. Youcannot wing it.
Although the firm prefers to advocatethe quality of advice rather than the value(We certainly do not see ourselves as acheap alternative, says Sweeney), low-cost
work is the foundation. Smaller,more straightfor-ward claims arehandled in largenumbers, providingtraining for juniorstaff who aregradually involvedin more complexmatters as theirexperience growsand, perhaps more importantly,maintaining asteady cashflow thatallows the firm to
undertake claims which maynot generate fees for years.Good business sense does notmean grabbing every penny you can, however. Legitimatecriticism has been levelled atfirms for letting claims run
along, and at the end the claimant andlawyer both get a big payout but the clientends up with a poor life outcome, saysSweeney. The theory is that rehabilitationprojects, which cost less in strict monetaryterms than cash settlements, are not goodfor firms. Best client quality care is whatwe dont compromise on, says Sweeney.This may reduce fees in the short term, butwill increase profitability in the long term.
Union tradeAlthough Thompsons is a national firm, a70-year history of advising trade unions andtheir members generally directs its opera-tions to work-related injury claims in indus-trial centres. The firm fits the leveragedmodel of 35 partners to around 800 staff,across 18 locations in England, Wales andNorthern Ireland, and it is the workloadgenerated by the various offices whichpermits the pursuit of lengthy claims. Headof the Liverpool branch, Matthew Tollitt,explains: High- volume, bulk work funds
the longer, more drawn outcases where fees wont be seenfor a while. A sole practitionerrunning 100 or 200 cases simul-taneously is going to find it verydifficult to keep going withoutsettling cases and getting feesthrough the door. The nature ofour firm is that we can aggres-sively litigate matters if theinsurance company or defen-dants are dragging their feet,which they are prone to doing.
Tollitt also reveals a loss-leading principle, with similarethics to Silverbeck Rymers best
Ettinger: warns of casualties in the City
Tollitt: pushing back boundaries
Proposals to float law firms are set out in the widely-debated Clementi review, and have generated mixedresponses caution and optimism. Many lawyers arebeginning to accept that the idea of non-legal financialinterests in law firms is an inevitable development ofthe process of modernising legal services. Personalinjury firms may be the first to feel the force of thesereconsiderations.
Amongst the most likely beneficiaries of externalinvestment are high-volume, process-driven firms,such as personal injury practices.
Colin Ettinger, head of personal injury in IrwinMitchells London office, and recently appointedPresident of the Association of Personal Injury Lawyers,notes: We would welcome investment from outsidebusiness where it can be a genuine partnership. PIf