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23 March 2011


Hamilton-Bruce: if a failing law firm were a school, it would be put into “special measures” and receive an avalanche of support

Posted by Barbara Hamilton-Bruce F.Inst.L.Ex., director of legal operations at Legal Futures Associate Accident Advice Helpline

It is often said that out of crisis comes opportunity and today’s financial climate has increased the number of specialist law firms positioned either to buy-out law firms, niche departments or act in response to a “voluntary” closure or intervention. Supply follows demand and this may be an excellent business opportunity for some law firms.

But, for the personal injury (PI) firm “voluntarily” closing, faced with the threat of personal bankruptcy, the loss of the family home and future inability to produce an income for self and family, the circumstances create a “perfect storm” of conflict – a solicitor’s personal future against the best interests of the client.

There may be law firms out there which, given the circumstances, would approach matters differently, but my experience is a “batten down the hatches” response, ignoring contact to present the client with a fait accompli on the future conduct of their cases. Often the last person to learn that a firm has closed is the client – being told about the closure only after it happens, with no consultation or consent.

Options are not discussed until an approach from a solicitor unknown to the client who states that they are “in possession” of their case file. The original lawyer (having promised to provide representation) is off of the scene with no explanation or apology.

Confidentiality and data protection is breached when a file is transferred in the absence of the client’s consent. Whilst arguably this may be in the client’s best interests, as an industry priding itself on the protection of confidentiality and independence at all cost, just because the means may achieve the end does not make it right.

Often the closure signifies bad news for clients in more than one way. It is only when the case goes to a new firm that they find out that their claim does not possess sufficient prospects of success. In extreme cases limitation periods have passed whilst the transfer is taking place. Clients are left with no lawyer, no case and a recommendation to seek professional advice on the behaviour of their former professional adviser.

In my role I often get an inkling of when firms are in difficulty. Sometimes it’s possible to gain positive input but invariably I find out either at the same time as referred clients or through my own detective work. Approaches to the firms themselves are often stonewalled; an ostrich-like approach or at times an aggressive response.

A decision to close would never be taken lightly but by that stage the desire to push a solution to evade financial meltdown or a brush with the regulator is what is shaping the behavior, not consideration of the client. After all, the regulator only finds out if the client complains – right?

This toxic behavior shapes the client’s perception of the law and lawyers – it can underline the belief that they are the “little man” and nobody cares. Customers are advised of the right to complain but clients don’t want to be making complaints. They want to know that they matter and that somebody is doing their job.

If facing such a situation, a consumer may be inclined to visit the SRA’s website and there is a section which mentions closure, but then only focuses on what happens when a firm is intervened in. The website is silent on what to do if your solicitor has ‘voluntarily’ closed.

So what about the future? Last year’s draft Solicitors Handbook, at chapter 10, includes mandatory outcomes (O3 and O13) and indicative behaviors (IB3-6) relating to activities that stem from financial concerns. The focus is on early SRA notification and achieving the “orderly and transparent wind-down”.

If a failing law firm were a school, it would be put into “special measures” and receive an avalanche of support to ensure that the school did not fail (failure not being an option in an education environment). There is no evidence of a proposed “help” fund or groups of SRA advisors that are can be deployed with the aim of supporting firms and clients in such a situation. The rules are drafted to focus on what level of information is given to the SRA by reference to overriding principles, which will, of course, encompass acting in the client’s best interests.

Relationships come to an end but the customer-focused challenge for law firms is allowing the client to play a positive part, exercising some control in the future conduct of their claim and, for the regulator who will be focusing on outcomes, the creation of a culture that allows firms to notify problems as they arise in the spirit of gaining assistance rather than in fear of a penalty.

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October 21st, 2016