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English solicitors on the edge as profession faces meltdown

Nigel Morris-Co...

There are those who misguidedly think that the world would be better off without lawyers. The UK legal profession's problem is that it has for so long abandoned its long-standing principles that it's become utterly rotten from within. Add in the deliberate destruction of the profession by successive governments and it's no surprise that there is a crisis from which few will emerge unscathed.

There's much to be said for the tweedy country solicitor who, with the bank manager and the vicar, formed the holy trinity of small-town life. Everyone knew were to go for their essential needs.

Comfort and solace were provided by the vicar who knew everyone's business either from church or home visits; a mortgage or maybe a car loan came from the bank manager who knew everyone's basic information as to income and spending; buying a house, starting a business or writing a will started with a visit to the solicitor.

But the move of social workers into the church's patch turned social advice into political conversion and a broad drift to the left; all manner of secondary lenders and the centralisation of decision making took the local bank manager out of the loop; the growth of a raft of non-solicitor advisers, estate agents and accountants cut the ground from under the legal profession.

Worse was the insistence on opening up access to the profession: the result was an influx of people who saw law as a business not as a profession. Even worse, was an influx of people who were not especially bright and thought law was an easy route to high earnings. But the worst of all was the lack of filtering over that most crucial asset of lawyers; the ability to communicate in excellent English. As the UK's standard of teaching English collapsed, so did the quality of entrants to the legal profession.

Worse, the "reforms" headlined "The Woolf Reforms" were a disaster: they turned the courts system into a kindergarten where educated and experienced lawyers were disadvantaged if they used the terms they had learned in school or over a lifetime's dedication.

Legislation has been drafted without regard to whether the terminology has any legal meaning resulting in total uncertainty as to how a case will turn out. And if a lawyer can't reliably advise a client as to the certainty of winning or losing, he can't advise at all.

The regulation of the solicitors' branch has all but collapsed with even simple technology projects such as the registration of retired solicitors running out of control in terms of both budget and time (that one was eventually abandoned). The Solicitors' Regulatory Authority seemingly spends time and money on the design and purchase of branded mugs when its resources should be focussed on fixing its own internal chaos (recently, letters were sent out with the address of its new office but still bearing the old - unused - office telephone number).

Both The Law Society and the Solicitors' Regulatory Authority (and various predecessors) have done a dismal job of protecting and managing the profession for the past two decades or, even, more. They failed to react to the tirade of unjustified abuse of lawyers in the tabloid media in the 1980s where English lawyers were regularly represented as the equivalent of the worst end of the US legal profession. The fact is that, until the mid 1980s, English solicitors were, by and large, well educated and dedicated to their clients' interests. They did not make super-profits although corporate work was well paid. Once scale fees for conveyancing were abolished, the income for general practices fell dramatically. A survey in the early 2000s said that, in firms with four partners or less, the average (note, "average") profits per partner were less than GBP10,000 per annum.

Good law firms balanced their social obligations by those relatively high-paying areas of work. What is now trumpeted by industry as "Corporate Social Responsibility" was always a feature of well run law firms. One firm, created at the beginning of the IT age and a front-runner in technology adoption, had an overhead rate of GBP54/fee earner/hour. But legal aid paid only GBP17/hour for most work and even that was due to a second guessing as fees were assessed retrospectively by the court in a process called taxation. Unlike many other firms in its district, the firm held onto legal aid work for several years until it ran into financial difficulty. Even then, it continued to provide limited emergency services free of charge to some who desperately needed help but could not get it elsewhere. That was in the mid 1980s to mid 1990s.

It is therefore no surprise to see that today the profession is not so much imploding as slowly collapsing in on itself like a cake where the mix was too soggy and the heat was too high.

Almost daily, the English solicitors' newspaper "The Law Society's Gazette" carries stories of one or more firms that have failed. Yesterday, there was the shock news that one of London's oldest and most respected law firms, Manches, has been taken over by relatively young firm Penningtons which started in the late 1970s, basically, as a small family law firm known as Penningtons Ward Bowie. It's not the first long-established firm it took over: Wedlake Saint, itself a combine of several long established City firms, in 2011. There is an irony in the deal: Helen Ward, founding partner of Ward Bowie and partner in Penningtons Ward Bowie left the firm in 1994 - to join Manches although she is no longer with that firm.

But the deal again shows the weakness in the SRA: now, when a firm gets into trouble, the SRA as regulator, does not "intervene" in order to take over the clients papers and protect the clients' interests. Instead, it leaves it to the market: a firm appoints a receiver and the receiver sells the assets. Increasingly, it is large - and expensive - accounting firms that are handling these deals.

The SRA is now trying to reduce its obligations to clients' of failed firms by reducing the period for which it is required to retain documents of those firms in which it does intervene. The reason for this is simple: it anticipates a significant increase in the number of firms that fail and for which no purchaser can be found.

The costs of running a firm have increased due to excessive regulation (a recent requirement is that all firms file "diversity statements" in relation to their staff, a requirement that should be irrelevant, that promotes institutionalised racism at regulatory level and which offends the profession in addition to the cost of compliance) and the cost of professional indemnity insurance. A badly thought out plan to reduce the cost of insurance led to a debacle as insurers tried to enter the market by adopting cut-price premiums, found themselves in trouble and as a result the SRA decided that it would need to, in effect, approve PII providers.

Changes in the rules relating to legal aid have left solicitors in the invidious position that they are, in many cases, restricted to legal aid rates even where the client is not eligible for legal aid and is paying from private resources. Contracts for criminal work are being dished out to favoured firms, some of which are commercial concerns although, once the terms have been fully worked out, some of those firms are either not proceeding to enter the contract or are seeking substantial variation. Adding in new demands for specialist qualifications for appearing in criminal courts, the end result, as the Gazette this week said, is that there is probably room for only some 300 solicitors' practices to continue to provide criminal defence services. That's not even one per town.

The creation of commercial entities operating as providers of legal services has created no real benefits for the public at large: sales booths in high street shops showed signs of lack of interest with reports all over the country that they had been reduced to un-manned counters with leaflets left out.

The profession is in a mess. Its representatives and regulators have been sleepwalking and trying to be trendy while the profession has eroded from within.

Several large firms have collapsed in the past year as well as dozens of smaller outfits. Almost 200 are reckoned to be at risk of failing to be able to continue after the next round of PII premiums are demanded.

This is not in the public interest.