The battle for the online legal document market hots up

Rocket Lawyer, the Google-backed online legal documents business, formally launches in the UK today.  It will sell consumers and businesses annual packages of legal forms and documents starting at £40 for individual users and £100 for businesses, and is aimed principally at small businesses and start-ups which wish to keep costs of legal compliance to a minimum. 

Legal document businesses tread a fine line in the need to avoid holding themselves out as the providers of legal advice without the necessary licences, and to avoid this problem Rocket Lawyer has signed up 20 law firms in the UK to its ‘On Call’ panel for those customers who need legal advice rather than simply documents.  The panel firms include Butterworth Solicitors, Freeman Harris Solicitors, and Glaisyers.

So will the venture succeed?  It certainly seems to be making waves in the US, where the business was launched.  In an interview with Forbes last year, founder Charley Moore claimed that in the US the company has 70,000 users a day and had doubled revenue for four years in a row to more than $10 million in 2011. That is impressive growth by any standards, and as a consequence the business has attracted investment from Google Ventures and Investor Growth Capital.

Rocket Lawyer is not the only business to have identified the opportunity to provide legal documents at a low cost.  LegalZoom began offering legal documents to the public in the US back in 2001, and in September 2012 it was announced that they had formed a partnership with the United Kingdom-based legal services provider QualitySolicitors (backed by Palamon Capital Partners) as part of which the companies will jointly offer online legal services in the United Kingdom including company formations and divorce documents.  LegalZoom claims to have over a million customers and, like Rocket Lawyer, has the backing of very significant businesses and individuals.  So ferocious has the fight for market share between these two companies become that LegalZoom have recently launched a legal action against Rocket Lawyer for false and misleading advertising.

It seems therefore that the principle of what LegalZoom and Rocket Lawyer are doing has been proven to work in the US.  Is there any reason to think it will be different in the UK?

One area of disappointment for me is that in relation to its UK launch, Rocket Lawyer is making a woefully small number of documents initially available.  Although the range of documents will undoubtedly increase over time I can’t help but think it is a mistake to launch with such a small number, as it will give those who are attracted early to look at the service a very poor impression.  It remains to be seen how many documents LegalZoom will cover at launch.

In fact, this type of service is nothing new in the UK.  Businesses such as Simply Docs (with which I have no connection, other than as a satisfied user) have been offering the online document service for many years, and have over 2,200 documents in their database, which makes the Rocket Lawyer initial offering look even more paltry, although the latter would differentiate its service through the ability to get legal advice if required through its lawyer panel.  The reality is that even though the databank of Simply Docs may be far more extensive than its newer rivals, the cash backing that Rocket Lawyer and LegalZoom enjoy, together with their high profile and well connected Board members, means that they can expect to make an impact on the UK market.

Axiom Legal Financing Fund - Time for a Regulatory Investigation

The situation regarding the Axiom Legal Financing Fund has become increasingly farcical.

As previously reported in this blog, US-based OffshoreAlert has made a series of very serious allegations, claiming publicly that the Fund appears to be a Ponzi scheme and warning investors that they have been victims of a massive fraud.  The Fund directors have denied any wrong-doing and brought KPMG in to investigate, although the publication of their findings has been delayed. In the meantime, redemptions and subscriptions from the Fund have been suspended, Tim Schools, the founder of the Fund and former boss of its investment manager, Tangerine, has been replaced as its head as a consequence of the allegations, and Tangerine itself has been sacked as investment manager of the Fund.  And to ramp up the pressure a notch further, Tim Schools has now commenced legal proceedings in the UK to sue OffshoreAlert for defamation.  The whole sorry scenario is being played out in public, through blog posts, social media and published correspondence between the protagonists.  

Spare a thought in all this for the investors who have invested in good faith in the award-winning Fund and who have no idea who to believe as the pressure increases.  I have been contacted by one such individual, who has asked whether there is any likelihood of him getting his money back.  The truth is that I have no idea.  The specifics of the allegations being made by OffshoreAlert are fairly detailed and on the face of them certainly merit a thorough and independent review, but they are being robustly denied by all involved and it would be dangerous simply to accept them at face value.  If they are true, then the investors and those involved in advising the Fund could potentially lose very significant sums of money.  If they are false, then doubtless huge damage will have been done to a Fund which may struggle ever fully to recover.  

Whilst the whole sorry saga is being played out, there has been a striking lack of comment from the Cayman Islands authorities.  Surely now it is time for them to launch their own investigation?  Given the size of the Fund (over £100 million), the very public and serious nature of the allegations, I do not think it is sufficient comfort for the investors to have the directors organising an investigation (albeit by a third party) into what, if anything, has happened.  Whilst the directors were absolutely right to launch their own investigation, they cannot be seen as entirely impartial as there may be implications for them if the allegations are substantiated. Investors may, therefore, not be entirely satisfied with the outcome of a review where the terms of reference are set by the Fund's directors, and they are the recipients of the report.  

In my view, it is time for CIMA or the Cayman Islands police to be seen to take control of an investigation into whether there is any truth in the allegations, as a matter of urgency. This is not because I believe that a fraud has been committed - as I have said earlier, I simply do not have sufficient facts available to know - but because the current very unsatisfactory situation should not be permitted to persist.  The reputation of the Fund, its advisers, and the Cayman Islands regulator are all at stake.  

Early movers in Legal Services Act reforms reap big rewards

It seems that the early movers in the post-Legal Services Act shake-up of the UK legal system are having much greater success than many would have expected.

At the Legal Futures conference on Monday representatives of Stobart Group and MyHomeMove were amongst the speakers sharing their experiences of the post-LSA landscape.

I have long been a believer that the LSA would have a far greater impact on the legal services market than many lawyers wanted to believe, but I will be the first to admit that I was very sceptical that Stobart Group, a company known for its trucks rather than legal services, would succeed in attracting business to Stobart Barristers brand, launched in May of this year.   It seems I may have to eat humble pie, certainly if the benchmark of success is the number of barristers signed up to the scheme.  According to Trevor Howarth, group legal director of Stobart Group, more than 4,000 barristers have applied to be part of its direct access scheme, which enables potential clients to get some free initial advice direct from a QC.  That amounts to almost a staggering one third of all of the country’s 12,500 self-employed barristers.

MyHomeMove – whose conveyancing arm Premier Property Lawyers was the first ABS to be approved, also appear to be enjoying very healthy growth, with plans to treble the size of the business by 2016 and a recruitment process under way to recruit a further 400 case handlers.   The business, which has grown strongly to capture around a 3% share of the English conveyancing market, aims to have a 10% market share by 2016, whether directly or on a ‘white label’ basis for other firms.

These are early days for such businesses and the proof of the pudding will come when they demonstrate that they are able to deliver the quality and service that clients demand, time and time again.  However, the early signs of success should have many law firms sitting up and taking notice.  Whilst no-one is advocating that firms should be spooked into knee-jerk reactions, ignoring the competition can be a very dangerous mistake.

Axiom Legal Financing Fund sacks Tangerine Investment Management amidst fraud allegations

The directors of Cayman based Axiom Legal Financing Fund, the embattled fund at the centre of a storm of serious fraud allegations, are reported to have sacked the current investment managers, Tangerine Investment Management.

Last month all redemptions in the fund were suspended following a flood of redemption requests in the wake of allegations made by OffshoreAlert about Tangerine’s boss, Tim Schools, and management of the fund.   The seriousness of the allegations made by OffshoreAlert has escalated over the past couple of months, and now includes claims that the fund appears to be a Ponzi scheme and that investors have been defrauded. 

Mr Schools, Tangerine and the Fund have all strenuously denied any wrongdoing, and Mr Schools has indicated that he will be taking defamation proceedings against OffshoreAlert.  Despite this, Mr Schools stepped down as head of Tangerine following publication of the allegations.  He is separately under investigation by the Solicitors Regulation Authority in England in relation to alleged misconduct at ATM Solicitors, an English solicitors firm he sold last year.  His case has been referred to the Solicitors Disciplinary Tribunal, where it will be heard in due course. The allegations are as yet unproven and again Mr Schools strongly denies any wrongdoing.

KPMG Cayman was appointed by Axiom to carry out an independent review of operations and it was said that Tangerine was “actively cooperating with that review”.  The output of that review was expected by today at the latest, but whilst it is understood that the directors have seen a draft of the report, the final version will be delayed as KPMG have now been asked to provide interim advisory services in the light of Tangerine’s removal and need to focus on this as their priority.  KPMG’s role will be to preserve the fund’s assets, to interact with a panel of law firms to determine their short-term funding requirements for the progression of cases and to gather proposals for the ongoing management of the fund.  The delay of the publication of the report will doubtless be a disappointment to the many investors in the £100 million fund, who are desperate to know whether there investment is safe and whether there is any truth in the allegations.

In a letter dated 14 November, the directors said that an Extraordinary General Meeting will be held in December at which the directors, will present proposals regarding the continued management of the fund.

There is no explanation in the letter as to why Tangerine’s appointment has been terminated.  It is therefore not clear whether the action is because KPMG have found prima facie evidence of wrongdoing, or simply that the step was necessary to restore credibility in the fund’s management in light of the allegations.

Tim Schools to sue OffshoreAlert for defamation re Axiom Legal Financing Fund Claims

According to OffshoreAlert's own website, Tim Schools is to issue legal proceedings against them for defamation in connection with the claims made recently that the Axiom Legal Financing Fund is a Ponzi scheme and that its investors are victims of fraud.  

OffshoreAlert has raised a number of red flags regarding the fund over recent months, but in the last week their publications have included increasingly serious allegations.

Those connected with ALFF have strenuously denied any wrong-doing, and have appointed KPMG to investigate the allegations made.  In view of the ramping up of rhetoric on both sides, the investors in the fund will be anxiously awaiting publication of the report, which is expected by the end of the month.  There is clearly a great deal at stake.

LDC to take a minority stake in Keoghs following ABS licence

Back in September I reported that defendant insurance law firm Keoghs was expected to take external investment from private equity house LDC (part of the Lloyds Banking Group) once it had received its alternative business structure (ABS) licence.  This is now about to come to pass, with the SRA having approved the conversion to an ABS and Keoghs having agreed to sell a 22.5% stake in the business to LDC.  

It is interesting that LDC will take only a minority stake in the business – traditionally PE houses have preferred to take a majority position in target businesses, to ensure a greater degree of control. Perhaps this is the reason why Keoghs switched horses from Bowmark to LDC relatively late in the process?

Keoghs is a defendant insurance claims specialist with 1,000 employees across offices in Bolton and Coventry. Established in 1968, the firm represents insurers and councils and reported fee income of £55m in 2011.  It plans to use the investment funds to invest in technology and potentially acquire some complementary businesses.