Matthew Williams answers the following question: When looking for ATE on a multi claimant commercial claim, are there additional points to keep in mind?

1. Additional considerations
When looking for ATE on a multi claimant commercial
claim, are there additional points to keep in mind?
‘Yes’ Multiparty claims cover a broad
spectrum, from two or more joint
claimants on a single claim form, to
substantial court managed, litigation
under a group litigation order (GLO).
It is not unusual for them to involve an
element of funding, and after the event
legal expenses insurance (ATE). Such
actions can facilitate claims which may
not have been viable as standalones, but the multiplicity
of interests give rise to additional considerations.
• ATE insurers are likely to want the following points
addressed:
• Identification of each claimant, and each party who
will comprise the ‘Insured’.
• Identification of the issues to be covered and
whether these are common.
• Own and adverse costs estimates tailored to the
circumstances, and which lead to a level of cover
being sought that is sufficient to take the matter
through trial.
• Agreement between claimants on cost sharing and
the allocation of adverse costs.
• Identification of a simple process by which the
lawyers can take instructions.
• Agreement between all interested parties on the
distribution of claim proceeds.
• Confirmation each claimant has, entered into
the required agreements, authorised the issue of
proceedings, and authorised the inception of ATE on
terms offered.
A case management conference in the RBS shareholder
actions, reported earlier this year included consideration
of adverse cost allocation [2014] EWHC 227 (Ch).
The actions are subject to a GLO and at the time,
two claimant groups had issued claims with others
indicating an intention to do so. Arguments on liability
for common adverse costs (paragraphs 24 – 37) are of
general interest. In those actions, and with an objective
of fair alignment of risk and reward, Hildyard J decided
the fairest course was for each claimant to have several
liabilities, in proportion to the amount they paid for
their shares. That departed from the GLO default
position (CPR 46.6(3)) where group litigants pay in
equal proportions, and from the position contended for
by one of the groups which involved splitting adverse
costs between groups, then sub dividing between group
members equally or as stipulated by group agreement.
Submissions included comment on whether that would,
in effect, ‘lay off’ part of the adverse risk from a larger
group, onto the ATE cover obtained by a smaller group.
The judgment makes interesting reading and provides
food for thought.
Matthew Williams, Head of AmTrust Law
Five quarters of economic growth
provides encouraging signs that the
UK economic recovery is steady and
sustainable. Against this backcloth I meet
many legal firms who are now talking
about growth on the back of increased
transactional activity. Indeed the Banks
Benchmarking Report detailed that 94% of respondents
believe that revenue levels will increase in 2014.
An improving demand for legal services has prompted
many firms to consider a growth strategy and once
again this fuels the market for lateral hires. I recently
spoke with a Recruitment Manager who confirmed that
the legal market is now more active than at any time in
the last five years. The ability to achieve growth on the
back of lateral hires is not risk free and a number of firms
have jeopardised their financial stability on the back of
a bad strategy, poor financial planning and ultimately
the employment of non performing partners who fail to
integrate within the new firm.
Given the known risks associated with lateral hires and
the obvious effects on overheads the question that
should be asked “is it too early in the economic cycle for
firms to be considering taking on lateral hires”? Before
considering growth via lateral hire possibly a firm should
consider the following:
• Gearing, within SME firms the gearing ratio is on average
2x. Firms should consider their staffing ratios to establish
if work can not be allocated to paralegals or less
expensive employees thereby freeing up partner time.
• Robert Mowbray suggests that there are some 1600
chargeable hours available in a year and yet many fee
earners fail to record more than 1000 chargeable hours.
The suggestion here is that many firms have unutilised
capacity within their existing fee earners which could
negate the need for lateral hires. The impact of fixed
fees is that many firms have become poor at time
recording and as such they can not measure time
efficiency which has to be a poor management practice.
• Instead of investing in people, why not explore what
technology is available to save fee earner time and
create additional capacity? Investment in technology
is likely to be cheaper than investing in people and
appropriate impact/benefit assessment will provide
for an easier risk appraisal than that associated with a
lateral hire - after all technology can’t tell fibs.
So, in summary - before rushing in to a growth strategy
involving lateral hires, firms should consider their own
efficiency and how this can be improved. As ever, this will
involve firms holding up a mirror to themselves and as we
know, many firms fail to do this often enough.
Steve Arundale is Head of Professional Sectors & Financial
Institutions, Sectors & Specialist Business, NatWest
The economic cycle
ML // June 2014
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