A financial maelstrom that nobody predicted, the collapse of the banks, and the costly introduction of the new legal complaints commission. Richard Keen QC found little to cheer about during 2008, and wonders if models coming on stream in 2009 will find a legal market buoyant enough to make them successful.

If anyone had suggested to me on 1 January 2008 that by the end of the year we would have witnessed a part-nationalisation of our largest public company RBS, the almost complete destruction of shareholder value in the now second bank, HBOS, and the virtual disappearance of lending in the property market, I would have suggested (albeit in my own gentle manner) that they were still suffering the effect of the night before.  Nevertheless, all of this has come to pass and the events cited are merely the manifestations of a more deep-rooted and fundamental change in our economy.

It is not of course just Scotland which has suffered in this way.  Indeed events have shown that we do not function as some kind of stand-alone or independent economy.  Having aspired to join an arc of prosperity across the Nordic economies of Iceland, Norway and Denmark, we have had to watch while these economies melted into a puddle of insolvency.

Closer to home, there can be no doubt that the legal profession in Scotland will face very hard times in 2009.  Except in the areas of litigation and insolvency, the financial crisis has left many firms both large and small becalmed.

The banks don’t lend and parties do not transact. If they do not, then lawyers do not receive instructions.  Is there any silver lining? Well the introduction of class action certification for litigation would certainly be an attractive development. I can think of at least one shareholder in RBS who would readily sign up.

A legal services bill is about to be introduced by the Scottish Government. This will provide solicitors with the opportunity to embrace Alternative Business Structures. I do however wonder who at the present time would have either the means or desire to invest capital in a large firm of solicitors. There will also be the prospect of Multi Discipline Practice but in a period of recession and retrenchment I do wonder whether that will take off.  

Are there any prospects for growth in the present environment? I would predict that over the next 12 months we are almost certainly going to see a substantial increase in the identification of loan fraud related to buy to let projects. I would not be at all surprised if this came to dominate claims on the Master Policy and the Guarantee Fund.  

During 2008 the Scottish Legal Complaints Commission announced that it had “opened” for business.”  The website for the SLCC declares that it is “independent impartial and accessible”. It is all of these things, although the first disgruntled consumer will point out that it includes 4 lawyers. It is also chaired by the able and dedicated Jane Irvine. However, as the SLCC has in its own words “opened for business” some may be prompted to ask if it represents value for money – either for lawyers or consumers.  

The initial budget of the SLCC was estimated at about £1 million. The SLCC has now projected an actual budget of £3.5 million per annum. This is hardly surprising as the Commission requires suitable offices; a Chief Executive; and an estimate of up to 60 staff.  This does however translate into a levy for each solicitor of about £400 per annum. The figure is a little less for an in house solicitor, newly admitted solicitor or an advocate. With the overheads of solicitors ranging north of 60% this suggests that the average solicitors are going to have to work 2-3 days at legal aid rates just to meet their obligations to the SLCC.  It does beg the question of whether we may have created a Rolls Royce where a Mini might have done.  

The rule prohibiting “mixed doubles” was revoked in order that advocates and solicitor advocates may now appear together for the same client. Whether these developments can be made to work for the benefit of clients depends to a large extent on instructing solicitors.  I look forward how matters develop in the coming year.

I shall not wish you all prosperous New Year, because I don’t frankly believe that is in prospect for many within the legal profession.  I do hope the readers of the Firm enjoyed a happy Christmas and I look forward to crossing swords with at least some of you in the New Year.