New beginnings

Just one month into the SRA's time as a licensor of alternative business structures (ABSs) and we have seen two major announcements that could foretell how the reforms introduced by the Legal Services Act will take shape. Last month Quindell Portfolio plc announced it would be buying Liverpool-based law firm Silverbeck Rymer in a £19.3m deal. That was then trumped by the news last week that Australia's Slater & Gordon (S&G) was purchasing Russell, Jones & Walker (RJW), the London-headquartered volume personal injury and employment practice (and owner of Claims Direct), subject to SRA approval. S&G have long had the distinction of being the first law stock market listed law firm in the world, in their case on the Australian Securities Exchange.

S&G are paying almost £54m to buy RJW, in order to gain an instant foothold in the UK market, financed by increasing their debt. In the words of its chief executive, Neil Kinsella, '[RJW] want to become the largest and most trusted provider of personal legal services in the UK... Our commitment to making justice and legal services accessible and affordable to all remains, but our ability to do this increases as a result; this development will bring real benefits to our clients and affiliated organisations.'

Silverbeck Rymer is also a volume personal injury practice and thus will enter the history books as being the first firm of solicitors to be bought up by an external investor '“ assuming the deal gets the green light from the SRA. Quindell is said to be a 'brand extension company', whatever that means, but a look at their website shows they focus on consultancy, outsourcing and software solutions.

Shortly after the Silverbeck Rymer announcement, Quindell bought up 29.9 per cent of the equity in a claims management company called Ai Claims Solutions plc, giving them the capability to not only source and process the work, but to provide one of the central planks of any personal injury claim: medical evidence.

It's a snapshot of what is probably about to happen not only in the provision of volume legal services, but in the external investment market as well. Law firms have been either salivating with delight or quivering with fear over the prospect of being bought up. It is only likely to be the big law firms with systems in place that will be of interest to external investors and that seems to be borne out by these two deals. What will be really interesting is to see how their systems cope with more complex higher-value work, and, in the case of RJW, how they deal with a volume family law caseload, which has always been a tricky area of law to undertake in bulk both because of the potential for disputes between spouses to become very bitter and because each party, generally, bears its own costs.

Seeing the future

Both the firms involved practice in commoditisable areas of law '“ whiplash injuries and lower-end claims. In other words, they don't rely on fee earners bringing in business through their own abilities and personality. They act for clients who probably never even visit the office and five years after their case has settled probably can't even remember the name of the firm that acted for them, let alone the name of the fee earner. In this model it doesn't matter who is tapping on the computer screen because it's all a process and the case management system will see it all turns out right (fingers crossed and hope the client does as he/she is told and doesn't have a non-standard injury) in the end. For these firms it won't particularly matter if you're based in Liverpool, London, Cape Town or Bangalore.

In time of course, it will be increasingly unlikely for this type of work to be carried out in the UK when pressure on costs will only get more intense. Outsourcing on this scale will probably only be an option for firms with deep pockets, and RJW was quick to say that the deal gives it a five-year head start on any other firm thinking about listing.

Interestingly, Quindell has also recently purchased Mobile Doctors, a medical reporting agency (MRA). There are many MRAs around, which exist to assist claimant personal injury lawyers by sourcing medical notes and then arranging for the injured party to meet with a doctor to obtain the medical report necessary to pursue the claim. It saves the law firm time in not having to search around for the three experts to put to the other side and for the time incurred in arranging an appointment date and writing letters of instruction, and so on. More importantly the agencies supply the reports on deferred payment terms '“ usually 18 months or the end of the case so that neither the client nor, crucially, the law firm has to pay the doctor.

What are the issues though with a parent company owning the claims handlers and the providers of evidence? After all, in the bulk of PI cases there is no dispute on liability and the quantum of damages is the only issue, which boils down to what the medical expert prognosticates. Yes, the other side could get its own report, especially in higher-value cases, but, for claims at the lower end of the scale, that can't happen because that is why the MRA offers a choice of three experts in the first place.

Yes, the doctors are independent from the MRA in the sense that they are not employed by them, but for many doctors '“ especially GPs and consultant orthopaedic surgeons '“ writing a medical report is a nice little earner. Won't there be a temptation to say the right thing in the report so as not to offend the MRA and also the client, being in this case not the person with the whiplash injury or broken ankle but the MRA's stable mate law firm? Justice has to be seen to be done, as well as being done, and I can't help feeling that the SRA ought to have some concerns about this proposed link up.

I am sure we'll see more of these types of deal, and it will represent the final transition of the fast-track claimant personal injury market from being an area of law once practised by every high street solicitor to one dominated by high-tech, hugely capitalised law firms, probably based offshore, leaving only the serious or catastrophic claims for those practitioners who aren't in that mould.

Plugging the leaks

The chairman of Quindell, Robert Terry, said this deal 'represents a significant opportunity for us to address the issues faced by the insurance industry within one of its three key areas of claims leakage: personal injury'.

Claims leakage: it's a new expression to me but you can see what he means. Try and keep the claims all under one roof, make sure you maximise the number of leads coming in and extract profit from every stage of the process. Kinsella was quoted as saying something similar when he said that RJW's ownership of Claims Direct 'positively differentiates' the business and gives them an 'additional and valuable route to the UK market'. Grab the clients early on in the process and then keep them until the claim is sorted. It's the same idea as with Quindell.

What will their next purchase be? RJW has strong union links as well as its Claims Direct offshoot. Neither they nor Quindell are likely to need an after-the-event insurer if the Jackson reforms are implemented, but a BTE (before-the-event) policy could be a very powerful marketing tool for both companies. Why stop at personal injury and employment? How about another volume law firm, perhaps to carry out conveyancing work, followed by a firm of surveyors or estate agents? This is one-stop shopping taking shape as we watch.