Losing Your Local Law Firm Could Cut Off Access to Justice

How losing their local legal adviser could negatively affect small businesses

Losing Your Local Law Firm Could Cut Off Access to Justice

It’s not only the retail outlets belonging to the likes of Blockbuster, Jessops and HMV that have been lost to our high streets.

The same story sadly applies to many small legal businesses hit by the double whammy of reduced work volumes and lower fees over the long recession.

Away from the media spotlight, hundreds of smaller high street law firms have quietly gone out of business. A good many that haven’t gone bust have been forced into shotgun weddings with other small law firms.

Perhaps you feel this doesn’t matter. Let’s face it, it’s easy to typecast lawyers and law firms as parasitic fat cats.

It’s true that some of the lawyers working ridiculous hours for a few city firms do earn very good livings, but it’s certainly not the case for the high street practices with only a few partners.

These little law businesses offer an important service to their local communities, and are the gateway to justice for most of us.

Many of these small legal practices have built their businesses based on long standing, mutually beneficial relationships with SME clients.

If you’ve happened to recently lose your local law firm you’ll know what an inconvenience this is. Replacing a trusted adviser will cost time finding an alternative. What’s more, you’ll rue the effort you have to spend bringing them up to speed on your business.

Yet these are minor irritations compared with the problems caused by being compelled to change advisers during a long running legal battle. Finding a suitable replacement lawyer during adds pressure and stress that you and your business could well do without, and bringing in someone cold could even reduce the odds of you winning your case.

However, it is not only the recession that has put smaller law firms under pressure. The raft of legal reforms introduced by Lord Jackson from 1 April this year has added considerably to many a law firms’ burden. Indeed for some it has been the final nail in their coffin.

So what’s changed? For a start, there’s a change to the awarding of costs. Before Jackson, SMEs who took someone to court were able to recover 100% of the damages from the losing side.

Now, at best your business will only be able to recover half of the damages. This will prevent many smaller firms from seeking legal redress in the first place, unless they choose a Conditional Fee Agreement, about which more below.

But for lawyers, the risk of losing cases and not being able to recover their costs will deter many of them from acting for SMEs in the first place. Without being alarmist we can foresee a shortage of solicitors able to serve the SME market.

A recent survey of the financial strength of law firms we commissioned from research group Company Watch found that nearly 900 firms, about a third of the sample – were at financial risk based on their most recent published accounts. The Solicitors’ Regulation Authority has now backed these findings in subsequent research, identifying 1,200 law firms in financial difficulties based on their very latest financial position. So a difficult situation is rapidly getting worse.

Other factors hitting small law firms include changes to how insurance costs are allocated after cases are settled.

Another part of the new post-Jackson regime is that legal costs will have to be applied proportionately. Before, a judge was able to allow for the ability of parties to meet them. Again, will this mean smaller companies are denied their day in court?

But rather end on a bleak note, what can your business do to help your local law firm? Well, apart from being prompt settlers of invoices, one thing you may not have considered is that it’s not only ambulance chasing legal cases such as personal injury where lawyers will work on a no win/no fee basis, or in legal jargon, a Conditional Fee Agreement. In fact, quite a few lawyers offer CFAs and willingly accept all the risk.

So, if you have a potential case but you felt it would be too expensive or time consuming to seek legal redress, perhaps it’s worth you sitting down and discussing all the options available with your high street law firm. It may give you the satisfaction of having your day in court, while also helping to keep your local firm in business.

By Matthew Kain, Director of Kain Knight, one of the UK’s largest firms of costs lawyers.

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