Do you know what you can expect from your solicitor? Here is some comforting and enlightening information.
Trust me – I’m a solicitor!
In the words of the Master of the Rolls in 1994, the solicitors’ profession is one in which ’every member, of whatever standing, may be trusted to the ends of the earth’. This quote came up in a recent case (perhaps the exception which proves the rule?!) when an ex-colleague of mine was struck off from acting as a solicitor for forgetting to pay stamp duty on various transactions (he was a property lawyer) and then, when he remembered and was finding that penalties (unfortunately rather severe) were due, without telling anyone he used money from his clients’ accounts to pay the stamp duty and penalties, rather than fronting up his mistakes. He didn’t gain anything personally from it (I suppose he was trying to protect his reputation, but ended up almost destroying it –I hope not too badly). Anyway, the point I’m trying to make is that you should expect to be able to put your trust in your solicitors.
Solicitors’ PI insurance cover – safe as a bank!
Another thing about solicitors is that no-one is allowed to call himself a solicitor unless he is properly regulated and insured. Solicitors are bound by a Code of Conduct which requires them to behave extremely properly in all sorts of ways! And they have to get minimum levels of PI insurance cover for which they pay extremely high PI insurance premiums! Admittedly this insurance cover might not cover all potential liabilities. One top 5 City firm currently faces the threat (hopefully theoretical) of a $3.5 billion liability for advice in relation to a rather large merchant bank which went under in the last year or two. I suspect this might not be fully covered by its PI insurance. This could leave all its individual partners across the globe personally liable for the excess, which could theoretically bankrupt them all, even though the vast majority would have known nothing whatsoever about it! (It won’t happen of course.) The minimum insurance cover required for a solicitor’s firm is £2m. It’s £3m for solicitors who operate through limited liability partnerships or limited companies. OnHand Counsel Limited is a limited company, and has cover to £3m. Which should hopefully reassure my clients a little!
Aren’t lawyers expensive?!
A recent report on the legal profession came up with the following information. Average ‘magic circle’ (the largest 5 or so law firms) partner charge-out rates had dropped in the previous year by a third, from £680 an hour to £450 an hour. Average partner rates at other London firms fell by 15% to £375. But these firms had not offered similar reductions for newly-qualified lawyers (that’s people who have just qualified as solicitors after their two year training contract) and associate lawyers (that’s all lawyers below partner level). Newly qualified lawyers (‘NQs’) at magic circle firms remained steady at £250 an hour. Senior in-house lawyers were said to be moaning about the cost of junior lawyers, with one being quoted as saying “It’s ridiculous to be paying NQs a third of what you’re paying a good corporate partner”.
The point? The financial models of full-service law firms (which means almost all firms in the UK which give business law advice) depend heavily on gearing, ie having 3-5 NQs and associate lawyers per partner, and on milking those lawyers by working them as hard as they can and charging them out for as much as they can get away with. The partners might reduce their own rates, but you won’t generally see that much of them unless you’re very important!
And that’s why I set up OnHand Counsel and why I’ve founded the Network of Independent Business Lawyers. We don’t have the same business model and therefore the same pressures that full service firms have. We don’t have junior lawyers. Almost all NIBLers have partner-level backgrounds. Almost all NIBLers charge out their time at less than £250 an hour (please note: less than an NQ at a magic circle firm!). And of course we see as much of our clients as they can possibly want!
Proactive or reactive: how do you like your business lawyer?
OnHand Counsel is trying to lead the drive for good business lawyers to be seen as proactive rather than reactive. Admittedly one of the reasons for this perception is that many business lawyers are reactive rather than proactive. And indeed some clients do actually seem to want their business lawyers to be reactive rather than proactive! I’ve been told off by a number of clients for taking an active interest in their business strategy and ‘bigger picture’ stuff in relation to the deals they have asked me to document for them! OnHand Counsel doesn’t want these clients – we want clients who value the input we can give on bigger picture stuff, not clients who just want us to dot ‘i’s and cross ‘t’s! I can confidently say that this applies to other members of the ‘NIBL’ network (Network of Independent Business Lawyers – over 60 strong now). This means we want to talk to clients when they are thinking about their business development strategy, or thinking of looking to do a deal of some sort, or generally thinking about the bigger picture. We don’t want to talk to them when they’ve signed a heads of agreement on something and want us to ‘legalise it’! We might agree to do the work for the money, but it doesn’t mean we’ll enjoy it. We won’t be adding the same value, and perhaps you won’t want us to make comments about things which may not have been fully thought through in doing the heads of agreement but which might now be rather tricky to re-visit…!