comparethelawyer.com?

BGL, best known for being the owner of comparethemarket.com but also the owner of motor and bicycle insurance businesses, has acquired Minster Law.

Minster Law was established in 2006 and since its early days has worked closely with BGL, growing to a staff of 800 and revenues exceeding £100 million p.a.  It specialises in personal injury claims (particularly motor traffic accidents) and is therefore a natural match for a motor insurance firm. Since the banning of referral fees between insurance and law firms, a number of other insurance companies have made moves into the legal market - most notably Admiral Insurance and Ageas - and many have voiced doubts about the financial viability of small independent PI specialist firms.

These acquisitions have been made possible by the Legal Services Act, which has enabled non-lawyers to own law firm businesses, with SRA approval.

All of the 800 Minster Law staff, based in York and Wakefield, are expected to be retained post acquisition.

Parabis nudging towards Top 20 slot with latest merger

Plexus Law, part of the Parabis Group backed by PE firm Duke Street, is merging with insurance dispute  firm Greenwoods. The merger will create a £90 million defendant insurance litigation business. 

 Parabis also owns Cogent Law and the three businesses in aggregate will be turning over in the region of £150 million, meaning Parabis will be nudging a coveted top 20 UK law firm slot.

The deal is expected to complete this month and the Greenwoods brand will be retained alongside that of Plexus.

Hogan Lovells spat puts the spotlight on remuneration for law firm management teams

Law firm remuneration is always a controversial topic. 

For the firms which have stuck with pure lock-step arrangements there are often complaints that the system does not reward high performers well enough, or penalise those who rest on their laurels at the top of the lock-step. 

For firms which have introduced performance related pay, there are often fierce arguments regarding what type of contributions should be most highly rewarded (Is personal billing more important than nurturing a good pyramid of associates?  Is winning a new client for another part of the business more important than one’s own fee earning performance?  How do you deal with a star biller who won’t collaborate?).  But always up there amongst the hottest topics tends to be how to remunerate non-fee-earning roles, and particularly the senior management positions.

Most of the wrangling, though, tends to stay behind closed doors; lawyers are notoriously tight-lipped about money and don’t like to air their dirty laundry in public.  That is why it is somewhat surprising to have seen a relatively public spat within Hogan Lovells, whose new bonus system has provoked some quite public criticism from partners that the process is not sufficiently independent, that it over-rewards the international management committee (IMC) members, and that it has led to fee earners “hogging” client relationships and a consequent diminishing of the collegiate atmosphere within the firm. 

A number of partners (and ex-partners) have expressed dissatisfaction about bonuses complaining that only a small number of fee earning partners have been well remunerated.  This is hotly denied by the firm, who say that there is already an independent three-member compensation committee led by the Chairman, that IMC members are not involved in deciding their own bonuses, and that the allegation that it is IMC members who have received the largest bonuses are simply incorrect.   Whoever is right and wrong, this is not good publicity for the firm.

In boom times, of course, such unedifying squabbling is less common.  When there is plenty of largesse to distribute and most partners are seeing their total remuneration rise, then rebellion tends to be somewhat muted.  But Hogan Lovells, like many other firms in tough times, is facing decline in global revenues for 2012 of 1.9% and a 6% drop in average profits per equity partner.  That means of course that as a simple mathematical consequence the majority of partners are likely to see their total remuneration package decline, unless there is a cull in their numbers.   So when the spoils are more meagre, the jostling for position becomes much more noticeable, and in particular the contribution made by “the management” is (rightly) subject to more scrutiny.

Until relatively recently, law firms tended to have a very flat structure, and the managing partners were also expected to be fee earners. It was quite common to see them maintaining a significant client role, even in large firms, as the role of management was not seen as one which was particularly onerous.  Furthermore, those elected to senior roles were often drawn from the ranks of the star billing performers, and so their overall contribution to the success of the firm tended not to be questioned, despite the fact that the management role itself was not necessarily very highly valued.   As law firms have grown, often into multi-national businesses, then the management roles have in most cases become full time tasks, meaning that fee earning roles usually have to be relinquished.  But the esteem with which law firm management is held is still patchy.  Whilst those occupying have a tendency to view their roles as meriting higher remuneration that fee earners, as they are superior in the hierarchy, there are others who still see them as little more than glorified administrators.  Those who are pulling in the big fees in the here and now will often argue that it is they who are the life blood of firms, and they should be the most richly rewarded. 

So who is right and who is wrong?  There is no one simple answer to this, as no firm is exactly the same as another.  But I am always wary of remuneration systems which continue to reward management teams very richly when profits are falling.  A good management team can make a huge difference to the financial performance of a firm, even in a recession, by trimming resources to fit, or by ensuring that leverage is at its optimum, for example; whereas individual fee earners can make less impact.   To my mind, this means that the senior managers should be amongst the most highly rewarded when times are good, but should take the pain if profits are falling.  Fee earners, on the other hand, I would argue, should see less volatility in their total remuneration.

Having structurally high remuneration for senior management roles regardless of the overall profit performance of the firm leads to an unhealthy situation where star fee earners may be driven towards those roles in order to maximise personal reward.  Quite apart from the fact that there is little proven correlation between the ability to earn fees and the ability to undertake a complex management role, this remuneration situation is likely to lead to a draining of a firm’s best talent away from the vital task of fee earning.  Having a high degree of variability in management remuneration, on the other hand, will ensure that only those with a genuine talent for the role are likely to want to put themselves forward.

Axiom Fund failure claims another law firm victim

The Axiom Legal Financing Fund scandal continues to cause a ripple effect in the legal industry.

Not long after Axiom was placed into receivership by the Cayman court following serious allegations of mismanagement and malpractice, Tandem Law put its entire workforce on notice that they were at risk of redundancy.  Now we see Ashton Fox, the Preston based law firm, has been acquired by a rival in a pre-pack deal following its own collapse into administration.

Both law firms were recipients of significant funding from Axiom to finance client group action litigation, and were plunged into crisis following the Fund’s sudden closure.

Parabis off to a flying start as an ABS

Parabis, the parent company of Plexus Law and Cogent Law, has turned in an impressive first year of trading as an ABS entity, seeing its revenues rise 8% to £108m and its profits rise a whopping 41.4% to £18.4 million.

The business was launched in 2000 as an LLP by Tim Oliver (formerly partner of Berrymans Lace Mawer), and provides a range of legal and claims-handling services for the insurance sector.  It has been something of a trail-blazer in the post-Legal Services Act world, being the first PE-backed ABS structure, following a £50m investment by Duke Street.

Since then the firm has been expanding rapidly. In November it launched a Scottish office in Glasgow and has followed up 6 months later with the establishment of an Edinburgh office, to be staffed by a partner-led team poached from Brodies.

There has been much discussion on whether law firms and PE houses make easy bed-fellows, but the early signs for this particular marriage appear good.

Insurance giants shake up the legal services market

Insurance companies are making their anticipated moves into the legal services market following the Jackson reforms which came into effect on 1^st April, banning the payment of personal injury referral fees. Referral fees became notorious in recent years for having spawned an unwelcome compensation culture in the UK, with personal injury claims relating to motor accidents and whiplash injuries being particularly prevalent.

The RAC has agreed a 5 year commercial deal whereby Quindell Portfolio, the AIM-listed ABS firm, will manage all before-the-event (BTE) legal expenses work generated by RAC’s huge motor book, which accounts for some 7 million customers and approximately 10% of the UK market.  In a highly innovative deal, instead of paying a referral fee for claims as it would have done in the past, Quindell issued warrants for more than 250 million shares to RAC valued at 13p each, the equivalent of a £32.5m shareholding. If the warrants are exercised, they would give the RAC a significant financial interest in Quindell. The deal as structured gives Quindell a significant cash-flow benefit and means it will not need to draw down the £80m funding it raised to support its working capital requirements.  

Quindell will provide a comprehensive service for all RAC customer personal injury claims, including medical reporting, rehabilitation and auto accident repair. The agreement follows a successful pilot of the scheme which is claimed to have reduced claims costs by 20 per cent.

Admiral, the insurance giant, has also decided that a strategic move into the legal services market is warranted, and has chosen to effect this through two separate joint ventures with existing law firms.

The first joint venture, to be known as Admiral Law, is with Bristol law firm Lyons Davidson and will cover Admiral’s main book of business. 

The second, to be known as BDE Law, will be with Cardiff based Cordner Lewis, and will cover 3 subsidiary motor claims businesses owned by Admiral – Bell, Diamond and elephant.co.uk.

The SRA has granted alternative ABS licences for the two ventures, effective 1^st May 2013.

It seems that Admiral are not expecting the moves to be a major profit contributor, but believe  they will improve customer service by being able to handle claims in house

Finally, insurance giant Ageas has announced a partnership with personal injury law firm NewLaw Solicitors after completing its ABS conversion, to be called Ageas Law.  The firm will provide legal services for customers making non-fault personal injury claims sustained after a motor accident.

One might speculate which is the bigger driver for these changes – the Legal Services Act or the Jackson reforms – but whatever the answer it is clear that there are huge changes sweeping the personal injury and allied insurance industries.  It seems that smaller independent PI firms are going to have a very tough time in the future, unless they are one of the firms swallowed up by the major insurers.

Are law firms getting cold feet on outsourcing?

There has been something of a trend towards outsourcing in the legal profession in recent years, mostly in relation to back office functions but sometimes also in relation to client work.  It is interesting therefore to see that two firms which have gone down that route, Osborne Clarke (“OC”) and CMS Cameron McKenna (“CMS”) have both decided to scale back part of their outsourcing agreements with Integreon.

OC set up its arrangements with Integreon in 2009, transferring a number of its back office staff to the outsourcer.  65 of those former OC employees will return to OC from Integreon following the changes to the outsourcing arrangements 4 years into the 7 year contract.  OC will bring back in-house client relationship management, IT, and events management.   OC is not cutting all ties with Integreon, which will continue a number of functions including information services and business intelligence.  It is not yet clear how many jobs will be lost in the process, but it is expected to be only a small number.

CMS, who have used Integreon since 2010 after agreeing one of the largest outsourcing contracts the legal market has ever seen (rumoured to be worth £600 million), have announced that they are looking for a different third-party provider to take over one element of the services currently provided by the outsourcer. They did not announce publicly which service this was.

So what should be deduce from all of this?  Is it a sign that law firms are having second thoughts about the outsourcing model?  Or is it that there are problems at Integreon which are unlikely to affect other providers?

OC are bringing a team of people back in house, but are also moving an element of their outsourced services to an alternative provider, Mitie, whereas CMS are simply looking for an alternative outsourcing provider.  This would seem to suggest that both firms still believe that outsourcing can be an effective solution, but that they are not happy with all of the elements currently serviced by Integreon.  It is clear that neither of the firms have lost faith in Integreon entirely – both were keen to stress that they would continue to work with the company, and indeed it appears that CMS are expanding the amount of legal process outsourcing that Integreon carries out on its behalf, so Integreon would seem to be getting something right.

What I suspect that is going on here is that firms are learning that outsourcing a huge range of functions, both back office and in some cases client facing work, to a single provider is a big ask.  There are very different skills sets required to provide an outsourced human resources function, or an IT help-desk, than to have teams of legal researchers.  Just because a business can run a top class out-sourced office management function, does that necessarily mean it is also well equipped to undertake client facing “KYC” requirements or document support?  Whilst it might be tempting to take the easy route of putting all out-sourcing requirements with one single provider, perhaps the experience of CMS and OC is showing us that firms need to be cautious about doing this if the range of services being out-sourced is particularly broad.

Local authorities to use ABS structures in bid to cut costs?

When lawyers think of the potential of ABS structures, it probably isn’t local authorities that spring to mind as amongst those most likely to seize the opportunities that they present. However, according to The Lawyer, South London boroughs Lambeth and Southwark are considering setting up an ABS vehicle in order to cut their legal costs, which currently amount to £8 million and £12 million respectively.

The two London authorities already co-operate together and share legal costs in a number of areas. 

Tandem Law becomes latest casualty of Axiom Fund fiasco

Tandem Law, the Group Litigation Order specialist law firm based in the North of England, appears to be the latest casualty of the Axiom Legal Financing Fund fiasco.

The firm relied on Axiom to finance its cases, a source of funding which has dried up since Axiom was been placed into receivership following allegations of mismanagement and fraud.   As a consequence, Tandem has begun a redundancy consultation and has reportedly given almost the entire workforce “at risk” notices, although the firm’s managing director, Andrew Lindsay, hopes that the actual number of redundancies to be made will be only a small percentage.

Lindsay has been quoted as saying his firm will sue Axiom’s fund manager and its directors for withdrawing funding. 

Axiom Legal Financing Fund Receivership - further info

As reported earlier this week, Cayman Islands’ judge the Honourable Mr. Justice Foster QC, granted an order appointing Grant Thornton as receivers for the Axiom Legal Financing Fund.  In so doing, Justice Foster rejected a proposal by City Equities to take over the running of the Fund in a bid to trade out of its current difficulties – a proposal which was opposed both by the Fund’s directors and by the Cayman Regulator, CIMA, due to perceived conflicts of interest. 

The City Equities proposal had aroused a great deal of suspicion from investors due to the fact that it is under common ownership with Tangerine Investment Management (“Tangerine”), the Fund’s former investment manager, which was sacked when the Fund’s many problems came to light.

The Fund’s directors supported the appointment of Grant Thornton following shareholder preference, despite having initially preferred the appointment of KPMG.

Justice Foster also ordered that Tangerine must pay 60% of the Fund’s costs of the receivership application.

And so it seems that the wheels are set for the winding up of the troubled Fund.  It remains to be seen how much can be salvaged for the investors who backed it, and whether any action will be taken against those responsible for its demise.

Axiom Legal Financing Fund Receivership approved by Cayman Court

The Axiom Legal Financing Fund was yesterday ordered into receivership by a Cayman Islands court, which rejected a "rescue bid" by a company connected with its former investment manager, Tangerine Investment Management.  More to follow.

LegalForce to challenge the traditional model of legal services delivery

This week sees the launch of an innovative new business in the legal services sphere.  LegalForce is launching simultaneously in the US and UK a business aimed at servicing the technology industry through highly unusual retail-style premises (styled LegalForce BookFlip) which could easily be mistaken for a trendy coffee shop or a high street book-store.

The business is focused on tech-start-up businesses which need advice on intellectual property protection and general commercial legal services but which may not have the budget to hire one of the mainstream commercial firms, and delivers its services in a manner which is a long way from the traditional stereotype of a stuffy law firm.  Customers can drop into the retail-feel store, and use on-line do-it-yourself precedents, with guidance and advice where needed from a team of lawyers at a knock-down rate ($45 for 15 minutes in the US) and without the need to make an appointment.

The stores will sell a wide range of books, documents and tablets as well as having lawyers available to offer legal advice, and will run workshops on subjects designed to appeal to entrepreneurs.

The 8,000 square feet US store front has just opened in Silicon Valley, a short stroll from Stanford University, with a look and feel designed to appeal to the uber-cool vibe beloved by tech entrepreneurs.  The store is open unconventional hours for a law firm – including evenings and weekends.   

In the UK, the intention is to open a store front in either Soho or Shoreditch – both centres for a lot of high tech business start ups.  Initially, the UK business will be run by south London law firm Freeman Harris (who are also part of the QualitySolicitors network and a member of Rocket Lawyer’s panel), but if the business model succeeds then it is planned to add a number of other firms into the network to broaden the range of advice that will be provided. 

LegalForce was formerly known as Trademarkia, which launched in 2009 as an online trademark search service and which bills itself as being the world leader in US trade mark applications, with over 23,000 trademarks having been registered.  Over the course of the last year been morphing into a wider commercial e-law brand, and the opening of the physical stores is an attempt to re-engineer the way in which young tech entrepreneurs access legal services.

It is interesting to see a legal services business which started up as an entirely on-line business moving into having physical premises through which it interacts with customers, at a time when many others are moving in the other direction.  However, I can't help but think that this is a shrewd move which is well aimed at a particularly part of the legal-services-buying public, and I have high hopes that it will be a great success.

Axiom Legal Financing Fund - CIMA takes a stance

The various stakeholders caught up in the Axiom Legal Financing Fund fiasco show no signs of agreeing a route forward any time soon, but last week saw the Cayman Islands Monetary Authority (“CIMA”) taking a visible role for the first time.

The Fund’s directors believe that the fund should be put into receivership, and would prefer KPMG to carry out that function.

These plans are opposed by Tangerine Investment Management (“TIM”) - the company which was sacked as the fund’s manager last year, following serious allegations of mismanagement and possible fraud – who do not want the fund to be wound up at all, but to be allowed to trade out of its present difficulties. 

The beleaguered investors (or at least some of them) are believed to have been convinced by the directors that receivership is the most appropriate course, but disagree as to who should conduct the receivership, favouring Grant Thornton over KMPG due to perceived conflicts of interest relating to KPMG.

Taylor Moor, who promoted that fund, have vocally lobbied for it being liquidated rather than being put into receivership, in the belief that a liquidator will have greater flexibility and will be better placed to investigate what has gone wrong with the fund to bring it to such a sorry current state, but agree with the other investors that Grant Thornton are best placed to take the role.

In the meantime, City Equities Limited (“CEL”), an FSA regulated company who has no official standing in the situation at all, is calling on the fund’s investors not to wind up the fund, but instead to allow CEL to take over its investment management function, in the belief that it can make a success of the business.  An optimistic view in the circumstances one might think, but they are reported to be offering to pull off this feat of management brilliance by charging significantly lower fees than the fund was hitherto bearing. But the plot thickens further.  CEL is reported to be owned by BVI company Otterswick Limited, which also owns TIM, and both companies are represented by BVI law firm, Forbes Hare.  Although the beneficial ownership of the companies involved is not a matter of public record, it is hard to avoid the conclusion that they are all owned by the same individual(s) – in all probability Tim Schools, who is himself facing investigation by the Solicitors Regulation Authority in the UK. 

After months of public silence on the matter from CIMA, the Cayman regulator has finally put its head above the parapet and taken a stance in the sorry saga, saying that it will oppose CEL’s bid to take over management of the fund because of the perceived conflict of interest, but that it has no objection to the appointment of Grant Thornton as receiver.  It is difficult to see how CIMA could possibly support CEL’s bid in the circumstances.

The hearing of the application took place on 31 January 2013 and 1 February 2013, but the judge has reserved judgment for the time being and so investors will have to wait a little longer before they learn the outcome of their fund’s future.

Cobbetts calls in the Administrators

I have blogged before on the question of how quickly a professional services business can descend into a death spiral once the confidence of the partners is lost and they start to depart (most notably in the case of Dewey & LeBoeuf  (http://www.blogger.com/blogger.g?blogID=759712752327313714#editor/target=post;postID=4182441567666633396.)

The latest casualty of this phenomenon seems to be troubled northern law firm Cobbetts, which is set to enter administration in an attempt to secure a fire-sale of its business.

Cobbetts has almost 500 staff and 74 partners across 3 offices.  In 2007/8, before the financial crisis, the firm was performing strongly, turning in revenues of almost £60 million.  Corporate work was booming, and the firm expanded rapidly.  However, it was hit hard by the financial downturn and managed only £45.2 million of revenues for the 2011/12 financial year.  Given the significant fixed costs associated with the expansion during the boom years, this appears to have been a disastrous scenario. The management team attempted to address the problem through three separate redundancy rounds – a necessary step but something which saps the morale of a people-led business – but to no avail.  Four partners then defected to Gowlings, and another two to Gateley last year, which must have led to a greater crisis of confidence for those remaining, and so the spiral began.

In an attempt to reverse its decline, the firm considered a number of merger opportunities – most notably with DWF last year, but talks collapsed because of the market uncertainty.  It would, perhaps, not be entirely surprising if DWF emerges as an acquirer of the business through the administration process.

It is perhaps surprising that Cobbetts is the first major failure of a UK law firm since the fall of Halliwells in 2010, although the UK office of Dewey collapsed as part of the larger global group.  I suspect that, sadly, more may follow.

Capita enter the legal process outsourcing market

Capita has for many years been synonymous with business process outsourcing, but not in the legal services sector.  That is all set to change as it looks to enter the LPO market on the back of a successful pilot project with Pinsent Masons (“Pinsent”).  Given Capita’s size and capital resources, the existing incumbents in that market will doubtless be forced to sit up and take note.

Pinsent has recently been using a Capita office in Krakow to review documents in an e-disclosure exercise for a large legal dispute.  Capita assembled a team of 85 individuals, whose work was overseen by Pinsent lawyers shipped out to Poland for the purpose, in an attempt to drive down costs for the client (and presumably drive up margins for Pinsent at the same time).  This is not the first time that Pinsent has used a legal process outsourcer – it was one of the earlier pioneers of the practice - but it is the first time that Capita has entered that arena as a provider.

From the perspective of a law firm, outsourcing labour-intensive tasks such as e-discovery offers not only the ability to carry out work in a lower cost location, but also obviates the need to carry the fixed costs of large teams of people who may not be fully utilised all of the time.  In today’s tough market where many firms are scrabbling to reduce fixed costs, this is a significant consideration.

Although Capita will doubtless be hoping to receive more work from Pinsent, it appears that the pilot was not designed with this particularly in mind – according to an article in The Lawyer, Pinsent intends to decide which LPO provider to use on a case-by-case basis rather than electing to partner with any one provider for future projects.  Nevertheless, Capita are apparently sufficiently pleased with the way that the pilot went that they plan to move aggressively into this new niche, competing with the likes of CPA and Integreon.

More redundancy misery for UK lawyers

It seems there is a chill wind blowing through the legal services sector.  Well over 4 years into the financial crisis, law firms are still making further cutbacks to try to sustain profitability for those who are lucky enough to avoid the cull.

January has seen a raft of firms putting jobs "at risk" and starting redundancy consultations - 166 jobs are at risk in Eversheds (and this comes on the back of 4 previous rounds of redundancies, which have seen a total of 737 jobs being shed), 250 jobs are at risk in DLA Piper, 40 in CMS Cameron McKenna, 12 in Farrers, and 43 in Allen & Overy, which is moving more jobs to Belfast.

Take your tax advice from a lawyer rather than an accountant if you want to keep it confidential from HMRC

In recent years, there has been a blurring of responsibilities between the legal and accountancy professions, particularly when it comes to tax advice.  Lawyers frequently advise on tax matters which would previously have been within the remit of accountants, and accountants often given advice on the legal implications of tax schemes.  The blurring of the lines becomes even more marked with the introduction of multi-disciplinary practices.  However, a recent Supreme Court decision has confirmed that if you want to keep your tax planning discussions with your advisers confidential, then you will need to instruct a practising lawyer, rather than an accountant or a non-lawyer tax adviser.

The UK Supreme Court has ruled that legal professional privilege (LPP) should only apply to communications between lawyers and their clients and not between clients and accountants, even when the accountants are giving legal advice.   So in essence, the identical conversation between a client and his adviser regarding his tax affairs will be covered by LPP if he is talking to a lawyer, but not if he is talking to an accountant.

In the case of Prudential plc v Special Commissioner of Income Tax, HMRC had served Prudential with notices demanding the disclosure of documents related to a tax avoidance scheme promoted by PricewaterhouseCoopers (PwC).   Prudential resisted disclosure on the grounds that the documents contained legal advice on tax matters, from, amongst others, the accountants PwC.  The Supreme Court rejected this, saying that LPP could not be extended without legislation to do so, and that to extend the concept of privilege through court interpretation would lead to unwelcome uncertainty in an area where there is clarity on what the current law means.  Lord Neuberger said:

"The suggestion that it should apply in any case where legal advice is given by a person who is a member of a 'profession [which] ordinarily includes the giving of legal advice' suggests to me that this is an inappropriate formulation for us to adopt, as it would carry with it an unacceptable risk of uncertainty and loss of clarity in a sensitive area of law.”

As far back as 1983, the Revenue Commissioners recommended the extension of LPP to tax advice given by accountants and tax advisers belonging to certain professional bodies, but this did not get governmental backing was never acted on.

Not surprisingly, accountants are very unhappy at this situation. Michael Izza, Chief Executive of the Institute of Chartered Accountants in England and Wales, said:

"The current position on LPP is unprincipled and anti-competitive for individuals and businesses who we believe should be able to seek the best professional advice upon the same terms whether from lawyers, accountants or indeed other appropriately qualified professionals.  The way in which legal services are provided is changing as a result of the Legal Services Act with the creation of Multi-Disciplinary Practices.  As a matter of urgency, Parliament needs to find a way to resolve how issues such as LPP are addressed within these new structures."

In the meantime, tax lawyers will no doubt be making hay whilst the sun shines.

.

Grant Thornton to be appointed Receiver of Axiom Legal Financing Fund

Faced with a storm of criticism from shareholders, the directors of the embattled Axiom Legal Financing Fund have reluctantly agreed to the appointment of Grant Thornton as receiver, rather than KPMG which had been the directors’ choice.

In a letter to shareholders on Tuesday, the directors confirmed that they will support the application to have a receiver appointed for the fund at a February court hearing.

KPMG had been appointed in October to conduct an audit of the fund’s assets following fraud allegations which had been made, principally by OffshoreAlert, and for this reason the directors thought that they would be best placed to act as receivers.  However, it became clear that a significant majority of investors opposed this view because of concerns over independence and fee levels, and so the directors have reluctantly bowed to investor pressure to support the appointment of Grant Thornton instead.

Quindell outperforms expectations following ABS conversion

Quindell Portfolio the AIM-listed company which received its alternative business structure (ABS) licences last month, has reported strong 2012 results, ahead of market expectations. 

In October Quindell Legal Services Limited acquired Pinto Potts Solicitors ("Pinto Potts") for an initial £1.5 million of cash plus 87,500,000 Quindell shares, with another £1.5 million in cash consideration being payable in the second half of 2013.  This was rapidly followed by the acquisition of The Compensation Lawyers ("TCL") in December, for a payment of £30,000 in cash and the issue today of 2,200,000 Quindell shares.

It seems that the acquisition strategy is proving to be a success. Quindell, which also offers outsourcing services in the insurance and telecoms sectors, expects revenue to be approximately £165m, with adjusted EBITDA of approximately £47m (including the figures of the acquired law firms for the period during which they were in partnership with Quindell prior to the issuance of the ABS licence).  Furthermore, Quindell is achieving an EBITDA margin of 28% - a figure that many firms would like to emulate.

Rob Terry, Chairman and Group Chief Executive said: 

“ Quindell Legal Services is now the UK's largest, claimant focused, personal injury law firm (based on forecast run rate volumes) having secured long-term relationships with some of the UK's most respected motor related brands during 2012. These long-term relationships are part of Quindell's wider claims outsourcing arrangements covering vehicle repair, hire, recovery, broader legal services, medical reporting and multi disciplinary rehabilitation services all helping to lower the total cost of claims for the insurance industry whilst protecting the quality of customer journey and the rights of the consumer.”

At the end of the day, the success of listed companies will be determined by their share price.  Qunidell’s shares are currently trading at around 14.75 – a very considerable improvement on the 52 week low of 4.70 which was seen last summer.  This will doubtless make the former Pinto Potts and TCL owners very glad that they took such a significant element of their sale consideration in Quindell stock.

A revolution in social mobility for lawyers?

Given the huge hikes in University fees in the last few years, it is not surprising that many students are becoming sceptical about the value of degrees, and opting for alternative ways of achieving their career ambitions.  As might be expected, many of the less academic degrees at dubious quality universities are being shunned as a consequence, but it seems that the full-time study even of such high-brow subjects as law are not immune to the winds of change and fewer students are willing to fork out £27,000 in fees and probably another £20,000 in living expenses to study a 3 year degree course which qualifies them....well, to do some more studying.

There has for a long time been a route into the legal profession as a paralegal or legal executive without going to university – through ILEx – and last year the Government provided £1m in funding for a new apprenticeship scheme for paralegals, which is expected to launch this year.  A number of more forward-thinking law firms have risen to the challenge themselves and begun to offer apprenticeships for school leavers for legal exec roles. However, until now, there has not in recent years been an alternative direct way into becoming a fully-fledged solicitor, without either doing a law degree, or another degree followed by the CPE.

That is all about to change.  The Minister for skills, Matthew Hancock, has announced government plans to introduce new higher-level apprenticeships, equivalent to bachelors degrees and masters degrees, in subjects including law, accountancy and engineering.  BPP Law School intends to launch an apprenticeship scheme for school leavers wanting to become lawyers, and is currently in talks with regulators on the issue.

Law is often a profession mired in intellectual snobbery, and I am sure there will be many who will decry the fact that these steps will lower standards.  I am not at all sure that this will be the case.  Much of what I studied during my 3 year law degree has been of very little, if any, value in my working life (never once have I been asked to opine on Roman Law or Jurisprudence, both of which were compulsory topics).  The study of law is essentially vocational and I think it is well suited to an apprenticeship style of learning which is routed firmly in the “real world” of day to day legal practice.

I am sure that many academic high-flyers who have the luxury of parents willing and able to fund them through university, or a relaxed attitude to the prospect of spending many years mired in debt, will continue to study law at our top class universities – and good luck to them, I would not want to knock that.  But it must be a good thing that for those of more modest means, or whose personal circumstances mean that a full time degree course is not a practical or desirable option, there will now be a sensible route which could potentially take them to the top of their profession. 

The proof of the pudding will be in the attitude of the big firms to those who have come through the apprenticeship route.  It is easy to see how the apprenticeships could be a great route in to smaller law firms doing relatively routine legal work – and that in itself would be a step in the right direction for social mobility.  But the real added value would be if the magic circle firms could embrace the concept and genuinely regard applicants with an apprenticeship background as on a par with those who have studied at university, provided they demonstrate the right aptitudes and attitudes.  Now that really would make a revolutionary change within the legal profession.  The question is, will any of the magic circle firms have the guts to give it a go?