Matthew Williams answers the following question: My corporate client is bringing an action for breach of contract. I have discussed with the directors options on funding and the potential for ATE insurance. They have expressed an interest in applying for cover ‘at some point’. In this post recoverability era, what should we keep in mind?’

1. Q: My corporate client is bringing
an action for breach of contract. I
have discussed with the directors
options on funding and the
potential for ATE insurance. They
have expressed an interest in
applying for cover ‘at some point’.
In this post recoverability era,
what should we keep in mind?’
A:Some basics points are best
considered at the outset:
BTE: If the client has any ‘before
the event’ legal expenses cover,
then you should see if this can be
utilised.
Prospects: The claim will need to
have good prospects to appeal to underwriters.
Realistic quantum: The formal claim will put quantum
at its highest, but underwriters want to understand
what is considered to be the realistically achievable
range of damages. Similarly the directors will want to
be satisfied that potential returns are sufficient to justify
expenditure, not only on an ATE premium but also on
all the other non-recoverable costs. This includes any
success fee and other own cost elements that may
prove irrecoverable (e.g. costs disallowed as in excess of
an approved budget, not awarded on assessment or not
provided for in any settlement).
Own costs: What is your estimate of the costs the client
would incur if it had to take the matter to trial? Generally
an underwriter would be looking to see that those
costs do not exceed the amount likely to be achieved.
It remains to be seen how the courts will ultimately
interpret the new CPR rules on proportionality. Whilst
the approach of the court and the approach of an
underwriter may differ the two are related. If one method
of funding could cause proportionality issues, is there
another way? Could costs be reduced, for example, by
opting for a premium paid ‘upfront’ (at a reduced rate)
and a standard or fixed fee retainer or a discounted
rather than full CFA and /or a lower success fee?
Timing: If the client wants/needs protection against
opponent’s costs, consider making an application at
the outset, look for sensible staging so that premium
payable is limited should the matter resolve early. If
an application is put off until settlement opportunities
have been exhausted, it is likely to be significantly more
difficult to obtain cover and for the cost of that cover to
be considerably higher.
Matthew Williams, Head of AmTrust Law,
AmTrust Financial Services.
Q: The recent Penningtons
Manches merger has led to fears
for mid-sized firms and their
ability to withstand the pressures
from ABSs / larger and niche
practices. Is M&A the only choice
for the mid-sized law firms?
A:Mergers are fashionable. I
am sure the word has never
been uttered so often at partners’
meetings as it has been this year.
They can work but only if they
are done for the right strategic
reasons, never when they are done
just to break an impasse or for
lack of anything else to do.
My business is helping firms to merge and so I should
probably be encouraging firms to merge, merge and
merge again. I know that, while they are difficult to do,
it’s far more difficult to make them work after the event.
Usually the benefits take three years or more hard slog
to become apparent. Some appear to view mergers as
the solution to their problems, as if putting two poorly
run firms together will suddenly create a panacea of
profit, but this is not so. Tie two falling stones together
and you get one stone, falling faster - just ask the
LeBoeuf partners.
The Penningtons / Manches merger was a rescue, as
was the Penningtons / Dawsons deal. Just look at the
make up of the board afterwards. The Penningtons
partners are lucky to have good leadership under
David Raine who has transformed the firm from the
sick man of the profession last decade, into a force
to be reckoned with today. David had vision then,
and the partners backed him. Conversely, while this
was happening, Manches was busy wallowing in
management disputes, losing the best partners and
inheriting the ‘sick man’ mantle.
The recent Peppermint Technology survey of
commercial clients showed that 4 out of 10 felt no real
loyalty to their current law firm. This is an opportunity
for well-run firms who will listen to their own clients and
adjust their offerings to suit.
So, the problem is not one of size, it is one of
management. One person makes all the difference, and
the partners need to chose the one amongst them who
has vision, and then back him or her. We act for lots of
firms in this market segment who are very successful
and they have one thing in common, a leader with vision
who is backed by the partner group.
Andrew Roberts, Managing Director, SSG Legal
ML // December 2013
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