Big business

ABS: the new dawn

The Law Society of Scotland supports the ability of solicitors to form business associations of their own choosing, provided proper rules are in place – and that’s official.

By a majority of 801-132 on a proxy vote, affirming a two thirds majority of those present in person, the Society’s annual general meeting on 22 May took the historic decision to support the policy paper The Public Interest: Delivering Scottish Legal Services. The paper, since presented to the Scottish Government as the Society’s response to the recommendations by the Office of Fair Trading that restrictions on forms of business association be removed, affirms the Society’s support in principle for multi-disciplinary practices and externally-owned shares in legal firms, among other structures.

The vote followed a debate that fully represented the strong views held on both sides – in which the speakers, notably, were united as to the core values they wished to protect, but deeply divided over whether this could only be achieved by maintaining the present restrictions.

“If I thought for a moment that external ownership in itself compromised independence, I wouldn’t have it”, Vice President Ian Smart declared in opening the debate. But consultation with the profession had shown a significant mood for change, and while there would be complex issues with the Master Policy and Guarantee Fund, and he was not saying the Society could make every model work, it would look at how to make any model work.

Independence was on the lips of virtually every speaker in the debate. As they did in the April Journal, Walter Semple (Glasgow) and Dundas & Wilson’s Alan Campbell put the case for and against the view that it is incompatible with external ownership and control. Commercial interests look for profit, and company directors owe duties to shareholders, not to clients, Semple argued. To ask who can be allowed to influence practitioners misses the point, Campbell countered. The question is not who, but how, and no investor would set out to destroy value built up on the basis of high professional standards.

Joyce Cullen of Brodies suggested that the consultation had not shown majority support for non-lawyer ownership, in moving an amendment declining to support that element of the paper. There was a danger, she added, that the government would look at a vote for the principle but ignore the caveats. Eileen Sumpter and Caroline Flanagan of Dunfermline both argued that we were moving too fast in that direction, while Professor Alan Paterson maintained that we couldn’t have external ownership without Tesco law, and that would just lead to cherry picking. “We can’t expect non-lawyers to be as committed to our core values.”

But Magnus Swanson of Maclay Murray & Spens, like Ian Smart, pointed out that solicitors are already subject to many outside influences from the likes of banks, insurance companies, SLAB and others. “Solicitors either stand up to these, or they don’t. We know the current system isn’t perfect. That isn’t a reason to rush after the English, but a bridge has been crossed.”

Former President Duncan Murray claimed that ABS were unstoppable, but had a concern that the Society wasn’t the right body to be regulating them; and in-house lawyer Janet Hood said she was expected to stand up to people who might want to influence her: “There will be problems with regulation of entities, but not of solicitors within the entities.”

Alistair Morris, convener of the Guarantee Fund Committee, maintained that the likely problems with the Fund had been exaggerated because as long as there was one innocent partner, the matter was a Master Policy claim.

After the vote to approve the original motion unamended, the President, Richard Henderson, said the debate had been a strengthening matter rather than a dividing one. He undertook that the Council would not abuse the trust that had been placed in it.

Henderson: “pivotal year”

Opening his President’s address to the meeting, Richard Henderson said that last year had been a “pivotal” one for the Society and the profession. Paying tribute to his predecessors for setting the direction of travel, he said his key objective was to drive that forward so that both the Society and the profession could achieve their full potential.

In a wide ranging review that covered the Society’s place on the international stage (support for lawyers in Malawi; protests over their treatment in Pakistan) as well as the hardy annuals such as professional standards and legal aid, he acknowledged that the year had “created some turbulence”, but maintained it had also produced opportunities to look forward to.

Henderson expressed his concern at the working of the summary justice reforms in practice – they had gone well beyond what had been anticipated in taking cases out of court – and the effect of legal aid fees on access to justice, while asserting his belief that the Society had gained real concessions from the government.

On the new Complaints Commission, the Society had taken the decision to co-operate with the Commission, which had resulted in it having a better understanding of the discharge of its functions, “though that must be a matter for it”. The Commission had given the impetus for a clear statement of professional standards for solicitors and clients, on which the online consultation was now live, and the Society’s work had benefited hugely from a reference group of non-legal interests, providing the comfort of affirming that the proposals were on the right track.

It also led to the need for a robust education and training regime, and the Society had won international acclaim for the exercise it carried out last year to obtain views on the way forward. “Our approach is to recognise that high standards exist, while continually striving for improvements.”

Turning to the Society’s own organisation, he said that like the profession, it had to be modern and businesslike. Its ongoing project on governance, together with the decision just taken by Council to more modern and suitable offices, would further this. “It is essential for the Society to develop into the institution that its members want.”

Concluding, he predicted that the coming year would be no less challenging than the one just past, but that the profession would continue to discharge its duties of service to the highest standards.

Finance: a sounder footing

Expressing his thanks to the Society’s members for accepting a “dose of strong medicine” over the past two years, and to its staff for their efforts in saving costs, the treasurer Jamie Millar said the Society was now able to move forward on a more stable footing financially. With income up by 26% and spending down nearly 6%, reserves had increased by £1.76 million following the deficits of the two previous years.

The 2007-08 budget and cash flow projections had been reviewed in the light of the relocation project, and gone over with great care by the Audit Committee. He believed that the risks involved had been managed to acceptable levels and that the project could be implemented without an impact on subscriptions.

Fund under review

Since the Guarantee Fund was set up 60 years ago, the environment has changed beyond all recognition, and “serious consideration and concern” was being given as to whether liability should be capped and whether the fund should accept claims by large financial institutions. So said vice convener Graham Matthews, presenting the fund’s annual report.

The fund is now reporting all intimations at full value, and potential claims total £3,777,000 against reserves of £1,737,000, and while it is difficult to anticipate the level of actual payments, Matthews accepted it was possible that additional levies would be required. He pointed out that it was not possible to assess the total value of claims at any one time, as it takes time to ascertain these following the appointment of a judicial factor.

Commission won’t revisit old cases

The Scottish Legal Complaints Commission will not revisit old cases, which means no second look at endowment complaints, Director of Regulation Philip Yelland confirmed to the meeting. In fact, he said, with the Commission only accepting service complaints where the solicitor was initially instructed after 1 October 2008, the Society’s role will continue for quite some time yet, though there must come a point where it asks the Commission to take over any outstanding matters.

Yelland also confirmed that the Society is looking at its own two year time limit for accepting complaints, in light of the fact that the Commission will apply a one year limit (unless the complainer was excusably ignorant); and explained to the meeting the Commission’s fee charging structure for its first year, as set out in last month’s Journal (p 33).

“Minister is listening”: Adair

Opening a debate on summary justice and legal aid, convener Oliver Adair said the Society shared the profession’s concerns about the financial aspects of the government’s model, predicated on an overall 6% cut in summary legal aid. However there had been significant concessions, and a commitment to rectify at the earliest opportunity any anomalies that emerged. Referring to the recent industrial action in Glasgow and elsewhere, he asked what there was to be gained from making an enemy of a sympathetic Cabinet Secretary.

Asked whether he sympathised with the right to take industrial action, Adair said he would support it as a weapon of last resort but only where the profession was united, there was a defined campaign, and a genuine threat to the independence of the bar.

CPD: more hours, more methods

The number of hours of CPD required each year could double to 40 – comparable with other professions – but will widen in scope to include matters such as appraisals and coaching, education and training convener Christine McLintock informed the meeting in presenting an update of the education and training review.

We were also assured that routes to qualification will be more flexible and consideration had been given to making it easier to attracting people from outside the cities.

McLintock outlined the current phase of the review (see Journal, January, 28) and confirmed that a policy would be presented to Council before a further consultation, with final proposals being put to next year’s AGM. “Taking time to get it right is very important”, she affirmed.

Equal treatment for solicitor advocates

The Council supports efforts by solicitor advocates to secure parity of treatment with counsel in sheriff court proceedings. However amendments to the rules should reflect those recently secured in the Court of Session, recognising remuneration for teams of solicitors, and a requisition by the solicitor advocates on the narrower basis was withdrawn on the Council undertaking to pursue this.

The meeting did accept the solicitor advocates’ other requisition, seeking revocation of the practice rule requiring clients to be advised on the pros and cons of instructing counsel as well as a solicitor advocate. Although some members suggested the rule served a purpose and there were differences from members of Faculty who are subject to no such rule, the meeting agreed that the matter was essentially a service issue rather than one of professional conduct.

Benevolent Fund looks for more

The Scottish Solicitors’ Benevolent Fund had a “mixed year”, convener Craig Bennet reported. Donations were down but the balance rose due to realisation of investments. The number of grants remained stable at 22. He said there were some signs of a rise in donations in the current year, both from local faculties and individuals, and hoped to present a happier picture at next year’s meeting.