Tiger, Plant, Freshfields and the Short Sellers

Charles Plant, outgoing Chair of the SRA who has led the SRA through one of the more interesting phases in its relatively young life, had some interesting thoughts in a recent valedictory speech (at legal futures).  In particular, flat-earther comments aside, he is reported as having offered this:

[‘Solicitor’ is] a brand, he said, which had been the core reason English law firms have conquered overseas markets: “The universal belief that the hallmark of an English solicitor is his or her integrity, honesty and trust… Solicitors understand that they must respect not just the letter of law and the letter of regulation; they understand that they must respect the spirit of regulation.”

Now this is a sentiment with which I have a great deal of sympathy, although I am less certain than Charles that it is a view commonly shared and adhered to in practice. Or rather that there are a number of rather high profile occasions when this has not occurred and we have yet to see the SRA act.*  Rather than rehearse those and tire a busy readership, I thought I’d point out a new example. It comes from today’s FT and is on the vexed topic of Quindell, but in fact is about the short sellers, not Quindell itself. Read it here if you have access.

The story says that a hedge fund has been using anonymous shell companies (Cayman Islands naturellement) to short sell Quindell shares.  The story quotes a Freshfield partner, Michael Raffan saying:

“The purpose of the short selling disclose rules was to increase transparency and consistency across Europe…   The use of artificial structures to avoid disclosure is against the spirit of the rules.”

The FT is slightly uncertain on whether any rules have been broken but implies not stating: ” It is not against the European rules to use a subsidiary but most other hedge funds use their own names.”  They also quote the FCA saying, “The EU position is that there’s no requirement for the beneficial ownership to be disclosed to regulators.”  It may be the FCA are taking a narrow legalistic view.  Or it may be Mr Raffan is saying that its bad law here rather than suggesting the Hedge fund (or their lawyers) have acted unethically but on the face of it what has happened here, assuming lawyers were involved** (and may have advised against it, yet assisted anyway) it looks like a breach of Mr Plant’s statement on integrity.


*They may be acting on some – we ordinarily do not know until a decision to prosecute is taken.

** The FT imply that a named London HQed firm did the legal work on this, but we do not know.

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Guest Post: Future Bar Training? A Soft and Uncertain Launch

The Bar Standards Board has today “launched” what it calls an “ambitious new programme to reshape legal education and training” and has asked the Bar for its help.[1] However, it’s not entirely clear what has been launched, nor is any real indication given of what’s coming next. Called ‘Future Bar Training’, we are told to expect, “a number of workshops and open consultations on different work streams” over the next three years, but the press release is somewhat thin on detail. Barristers are told to watch out for what is on the horizon, but not much else. There’s no BSB consultation open,[2] despite the press release stating that ‘Future Bar Training’ will be “underpinned by a fully consultative approach”.  As we tell our students in Contract Law, it is a well-settled principle of law that an agreement to agree is void and unenforceable because it is so uncertain.

What we do know is that ‘Future Bar Training’ is underpinned by four high level aims:

  • “focusing training regulation on what is demonstrably required for professional practice;
  • ensuring that the regulatory structure does not stand in the way of candidates for the Bar from the fullest range of backgrounds;
  • aligning the regulation of education and training with our wider targeted and proportionate approach; and
  • maintaining standards for authorisation to practise as a barrister in a changing market.”

The use of ‘demonstrably required’ in 1. is interesting and, arguably, sets up the BSB for a fall if the evidence base used for its regulatory interventions on education and training are not suitably robust. Certainly, the Legal Education and Training Review[3] (LETR) did not really provide all that much in the way of new empricial data, and other regulators, like the SRA, have commissioned and are using further work to inform their post-LETR policy responses. Is 1. an indication of the same from the BSB? The second aim is laudable – the Bar, like the solicitor’s profession, does not reflect the society it serves and needs to be far more diverse, particularly at the senior levels. Exactly how progression/retention can be better served through regulatory interventions on education and diversity has, however, also been hard for me to fully understand. The third aim seems to suggest a greater move towards outcomes focused regulation. Here, the BSB sets out a work stream that involves, “making our rules covering education and training less prescriptive and ensuring that they are proportionate, transparent, and address the main risks.”

The thing that really irks me, however, about this launch is the narrowness of the call for participation: the BSB “tells the Bar: we want your help”. Simon Thornton-Wood, the BSB’s Director of Education, says that the ‘Future Bar Training’ project is a “real opportunity for the Bar, the public, and the regulator to work together to shape a new era of legal education and training.” Nowhere are legal academics, pedagogic experts, members of other legal professions or the other legal regulators mentioned. I’m sure the LSB will be surprised, saddened even, at being left out of the picture.

This press release, this ‘launch’, feels very rushed. Last autumn,[4] the BSB published a framework for how they were going to respond, in policy terms, to LETR. Little has been publicly said by them since that point. And today’s press release doesn’t really tell us much more.


Steven Vaughan is a Lecturer at the Law School, University of Birmingham. His full bio can be found here: http://www.birmingham.ac.uk/schools/law/staff/profile.aspx?ReferenceId=66986

[1] https://www.barstandardsboard.org.uk/media-centre/press-releases-and-news/bsb-launches-ambitious-new-programme-to-reshape-legal-education-and-training/

[2] https://www.barstandardsboard.org.uk/about-bar-standards-board/consultations/

[3] http://letr.org.uk

[4] https://www.barstandardsboard.org.uk/qualifying-as-a-barrister/letr-next-steps/

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Excalibur sends chill wind… (again)

The latest instalment in the Excalibur case is interesting for many reasons. One is Lord Justice Clarke’s claim that making litigation funders pay costs on an indemnity basis when costs are awarded against the party they are funding on an indemnity basis is not likely to chill access to justice. I do not propose to deal with that at length here here save to say:

  1. This is an extraordinary case by any measure.
  2. The risk of increased cost liability for litigation funders is likely to have some impact on access to justice. The real question is whether such an impact is proportionate.
  3. Should the judgment have a broader impact, it is likely to encourage litigation funders to take a stronger role in assessing the merits of cases and supervising the conduct of claims. Indeed, one of the elements of the case is to question the due diligence of the funders conducted here.
  4. There are merits, but also demerits in encouraging a trend towards greater provision by litigation funders particularly as regards independence of clients and instructed lawyers.

Another interest in the case is something which I have written about before, the conduct of the original claim by Clifford Chance.  A number of interesting matters emerge.

The Fee Agreement

The first is the nature of the representation agreement entered into with their client.  Clarke LJ observes that the agreement “has not been disclosed” but:

it appears that Clifford Chance agreed to provide their services at a 40% discount. In the event of success in the action Clifford Chance would receive an uplift equivalent to 40% of their undiscounted fees, a further 100% of that 40%, and a success fee to be determined by Excalibur in its sole discretion.

I have no problem with firms being able to enter into such an agreement but I do think it raises the question as to what kind of agreement it is and whether it is within the rules regulating CFAs and DBAs. Is it a conditional fee agreement? Is it a hybrid damage based agreement with the damage based element being discretionary? Is it a proper work round of the ban on DBAs until 2013 and the current bar on hybrid DBAs? Are we to take it at face value that there is no damage based element to this arrangement and that the client has a genuine discretion to offer the law firm a contractual gift?  Without more evidence, I think we have to assume the latter, but it seems to me an odd arrangement for arms length parties to enter into.

What the funders were told about the merits of the case and how those merits were assessed

The case involved several litigation funders some of whom, it appears from the judgment, relied solely or mainly on the advice of  Mr Panayides the Clifford Chance partner with conduct of the claim.  It is worth emphasizing that Clarke LJ did not have the benefit of evidence from Clifford Chance or all the paperwork passing between Clifford Chance and the funders.  Also though, in relation to one crucial witness for the funders he says, “I have no reason to doubt that what he there says is substantially accurate.”  What do we learn from this?

It seems to be the case that part of the reassurance offered to funders was by way of a Clifford chance opinion. This may imply that (as one would hope) the firm reviewed the merits of the claim and stood behind a decision that the Excalibur case had, “a strong likelihood of success.”  Of course it is well known that Clarke LJ sees this view as “deeply flawed” but he does not go as far as saying Clifford Chance could not hold that view. He has previously said, however:

Excalibur’s case on [a particular]… topic …had involved it (a) contradicting itself, and (b) developing theories which (i) were not open to it in the light of the way the case has developed …and (ii) were unsupported by the evidence.

…the deceit claim    …had all the hallmarks of a lawyer’s artefact. It did not make sense.

He also accepts for the purpose of this judgment that:

Mr Panayides said that Clifford Chance were so confident that they were on a partial Conditional Fee Agreement, something they had virtually never done; that it was the best claim he had ever seen; and that he had never lost a case in his entire legal career. It was very unlikely that the case would go all the way to trial but if it did it would take place within the year.

And that one of the funders:

…asked if it would be possible to get a QC’s opinion. Mr Panayides said that that would not be possible before the date by which the funding was needed. Mr Lemos’ statement does not explain why there was any deadline, let alone one which should prevent him from obtaining the second opinion which he had sought.

…During the trial Mr Panayides or his assistant would send transcripts and a summary report highlighting the key issues and how generally they thought that the trial was progressing. Mr Panayides’ reports were generally very positive. At no point in the trial did Mr Panayides change his views on the prospects of success.

The same witness claimed not to have been told until January 2013 that there was “a remote possibility” that the Defendants could bring a claim against the funders for costs. The crux of the matter is summarized by the judge in this way:

Mr Lemos [who himself trained but  did not practice as a barrister] says (i) that he and his family were told throughout the proceedings that the claim had a very strong prospect of success; (ii) that he believes that they were misled and deceived by the Wempens just as much as the Defendants were; (iii) that the legal opinion that he was given was flawed from the start and everything flowed from there. At no point were they told to seek legal advice; and they did not think of doing so because they felt that to all intents and purposes Clifford Chance were their legal advisers. They were not personally responsible for the matters which caused me to order indemnity costs.

I do not regard Mr Lemos as having behaved in a morally reprehensible manner or with any impropriety. He was approached by a partner, well known to his family and in a firm of top rank solicitors, who gave him extremely confident advice which was repeated as the case progressed, despite the fissures which were developing in it. He does not appear to have become consciously aware of the legal sink hole which underlay Excalibur’s case and which opened up during its course.

Clarke LJ does not impute to Clifford Chance a lack of belief in their own advice, (indeed he says, “I am sure that Clifford Chance remained confident to the end”) but he does note a judgment by Gloster J (as she then was) referred in June 2011 pointed to obvious problems with the case including, “an obvious laches defence to any claim for specific performance” (based on delay), “the lack of evidence as to Excalibur’s financial or technical capabilities” and , “that Excalibur’s grounds for saying that any Gulf Defendant was party to the Collaboration Agreement were not at that stage “legally or evidentially convincing.”  He also observes, that Mr Panayardes continuing confidence in the case at the later stages, “is surprisingly light of the cross examination of the Wempens”.

Other funders are reported as having received similarly:

‘very upbeat and optimistic’ assessments of prospects of success, which he rated as very high (“the best case he had ever seen in his career”) with prospects in excess of 70%.

These other funders did however do some due diligence on the claim.  Advice was sought by one from Orrick, Herrington and Sutcliffe although this was based on limited documents which interestingly did not include the Gloster J judgment.  That opinion was “heavily caveated” and made plain their heavy reliance on Clifford Chance, in particular them having skin in the game through reducing their fees.  That letter of advice said Excalibur were more likely than not to win.  Allen & Overy also gave an opinion to one of the funders, “to the effect that Excalibur had a “high likelihood” of recovery.” That opinion Clarke LJ describes as “curious” (para. 102) but it at least provide some comfort to Clifford Chance that their judgments may not have been as poor as initially implied.

We are thus left in a very tantalising position.  What was the cause of Clifford Chance’s miscalculation of the prospects of success in this case?  Did they, or particularly the partner in charge, behave appropriately in his discussions with funders?  Was his description of the claim part of the normal biasing towards one’s client interests which occurs subconsciously, or was it part of the lawyer’s advocacy of their client’s position?  To what extent is such advocacy legitimate when dealing with apparently sophisticated third parties?  Or is there a case that unfair advantage was taken?  What is one to make of the family connection between funder and partner?  Ought, the prospects of success have been appreciated (particularly towards the end of the case when further support was sought from funders).  Did the somewhat opaque fee agreement, high stakes and aggressive litigation strategy compromise the quality and independence of the lawyers judgment in this case? Clarke LJ does not say, but seems to leave all options open.

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CEPEJ Data: Common Law Countries, Average but not with Legal Aid?

I have had a chance to have a bit of a closer look at the CEPEJ report.  It compares public spending on various parts of the justice system in a great deal of detail.  Inevitably in seeking to make comparisons, however, it loses some of the detail and suggests things are comparable which may not be.  However, given the interest in the area, I have quickly pulled together some of the key comparative data on England and Wales relative to the other countries.  The full report is eye wateringly long, but I recommend that anyone interested takes a closer look before hypothesising too strongly.

The broad kinds of spending covered is shown in this diagram from the report.


The position of England and Wales in the ranking of European countries (which it should be emphasised contains a very wide grouping of countries from the wealthy to the poor, and with widely varying legal systems) appears to be (on my calculations) as follows.  In broad terms, England and Wales tends to rank about average or significantly lower in comparative spend terms on most indicators other than legal aid, where common law systems generally, and sometimes also relatively rich countries, tend to spend significantly more.  Here are the headlines.  All figures are for 2012, so the LASPO cuts would yet impact on these numbers (although other cuts were having an impact as we will see).  Out of over 40 countries, England and Wales was:

  • 27th highest in the proportion of the annual public expenditures allocated to the whole justice system at 1.8%,below an average of 2.2%
  • 22nd highest in the proportion of the whole justice system budget allocated to the judicial system (courts, public prosecution services and legal aid) at 51.6%, just above average (49.2%)
  • 11th highest in annual public budget allocated to all courts (excluding legal aid and public prosecution) per inhabitant at 42.2Eur, just above an average of 34.8Eur
  • 27th highest in annual public budget allocated to all courts (excluding legal aid and public prosecution) as a proportion of GDP per capita at 15%:  below the average of 0.21%.  The report notes: “It must be stressed that States that benefit from large scale assistance to strengthen the rule of law, in particular from the European Union or other international organisations, automatically allocate relatively high proportions of their budget to their court system. This is the case in particular for Bosnia and Herzegovina, “the former Yugoslav Republic of Macedonia”, Croatia, Poland, Hungary or Bulgaria. Consequently, Western European states or entities, which have higher national levels of wealth such as Sweden, the Netherlands, Norway, Finland, Denmark or UK-England and Wales, seem to spend smaller amount (GDP per capita) to finance courts. This distorting effect must be taken into consideration when making possible comparisons, in order not to draw the erroneous conclusion that a wealthy state or entity would not allocate a significant budget to the functioning of its courts.”
  • 10th highest in annual public budget per inhabitant allocated to the public prosecution service in 2012 at 8Eur, just above average at 11.4Eur
  • 30th in annual public budget allocated to the public prosecution service per inhabitant as part (in %) of the GDP per capita at 042% – well below average (here there had been a significant reduction in E&W between 2010 and 2012 which was masked somewhat by exchange rates).

On legal aid the report notes this:

 A little bit less than 9 € per inhabitant is spent on average by the public authorities to promote access to justice through the legal aid system. However, it seems more relevant to consider the median value in Europe: 2,25 € per inhabitant. The Northern European states commit the largest budgets to the legal aid systems. As it was the case in previous evaluation years, Northern European states have a strong tradition of generous legal aid systems: more than 50€ per inhabitant are spent in the legal aid system in Norway and UK-Northern Ireland and between 20 € and 50 € in UK-England and Wales, UK-Scotland, Netherlands and Sweden. A relatively high amount of the budget (more than 10 € per inhabitant) can also be noted in Ireland, Denmark, Switzerland, Finland and Iceland.

The figures indicate England and Wales were:

  • 3rd in annual public budget allocated to legal aid in 2012, in €per inhabitant at 59Eur.63 well above an average of 8Eur (only Norway and UK-NI spend more)
  • 2nd in annual public budget allocated to legal aid per inhabitant as part (in %) of the GDP per capita, in 2012 at 14% only NI spent more per capita. The average was 0.02%
  • 8% cuts had bitten by 2012 (this figure is softened by exchange rates so the position is worse), one of only 8 states reducing their spend during that period.
  • Norway, and the three UK jurisdictions spend the largest proportion of their justice budget on legal aid (40%+). Iceland, Sweden, Ireland and the Netherlands spend more than 20% most of the others spend less than 10%

In further analysis England and Wales were:

  •  16th in total annual budget allocated to all courts and public prosecution (without legal aid) per inhabitant in 2012 at 9Eur, just above average (53.2Eur)
  • 35th in annual public budget allocated to all courts and public prosecution services (without legal aid) per inhabitant as part (in %) of the GDP per capita, in 2012 at 18% significantly below average (0.28%)
  • 7th in total annual budget allocated to all courts and legal aid (without public prosecution) per inhabitant in 2012 at 83.7Eur significantly above the average 43.3Eur
  • 14th in annual public budget allocated to all courts and legal aid (excluding prosecution services) per inhabitant as part (in %) of the GDP per capita at 28% (just above an average of 0.27%)
  • 9th on total annual budget allocated to the judicial system (courts, legal aid and public prosecution) per inhabitant in 2012 at 5Eur well above an average of 60.6Eur
  • 16th on annual public budget allocated to the judicial system (courts, legal aid and prosecution services) per inhabitant as part (in %) of the GDP per capita, in 2012  at 32% just below an average of 0.33%

One final nugget, interesting in the light of Mitchell and the increases litigants in person in particular.  On Judicial trainingThe report states that:

Less than 1% of court budgets is spent on judicial training in Europe in 2012, which has not improved over the past periods studied by the CEPEJ. Judicial training can be considered as a spending priority (more than 2% of the court budgets) in Armenia, Georgia and Azerbaijan. This budgetary effort is very limited (less than 0.1% of the court budget) in Bulgaria, Italy, UK-England and Wales.


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Justice, justice on the wall, who is the biggest spender of all?

There’s a new comparison of spending on the justice system out by the European Commission for the Efficiency of Justice (CEPEJ) .  I have only had a chance to have a quick look but it supports the view that the government’s claims that we spend way too much on our justice system look rather dubious in comparative terms (unless it turns out they were talking about Northern Ireland all along).  I’ll try and take a more forensic look shortly.

Figure 2.2 from the report is set out below.  England and Wales comes out in the bottom half of countries in terms of overall proportion of public expenditure allocated to the whole justice system.

Justice spend

The figures given for the proportion of justice system budget allocated to the courts, public prosecutors and legal aid puts England and Wales in the middle, just above average.

Justice spend 2

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We abolished the Cab Rank Rule by Mistake

Back in March I wrote this about the Cab Rank Rule and its exceptions suggesting the exceptions were what the Cab Rank Rule was increasingly about.  The rule was disappearing.  I discussed several rather large exceptions to the rule – legal aid, direct access and latterly:

My third example is the way in which the Cab Rank Rule appears to be being used as bargaining chip in arguments about standard terms of business. If I have understood it correctly, the current proposal is that those clients of solicitors who do not agree to standard terms set out by the Bar will be denied the benefits of the Cab Rank Rule. This is odd on a number of levels. Firstly, it seems to be a rather disproportionate response. If a solicitor proposes business on unreasonable terms it would be within the right of the Barrister to turn down the case on the basis that it was not a reasonable fee (or if I am wrong in that an exception could be drafted to cover it which is more proportionate than the blanket exclusion of the rule). Equally, one imagines (indeed has observed) some head scratching bemusement amongst solicitors as to why they or their clients should give two hoots. In this sense the Bar threatens to remove cab rank protection when it is only they who imagine it is a significant protection.

The point about each of these exceptions is that on occasions when the Bar is faced with something it does not like it holds up the Cab Rank Rule as a sign of its own virtue and diminishes it in a sort of ritual sacrifice. It is a kind of conversation with itself that narrows the Cab Rank Rule and erodes its symbolic power.  A power with an effect that is most keenly felt, if it is felt at all, within Bar’s own conscience. Maybe, if the Bar really believes in the Rule, it should seek to reverse that trend and rethink how they deal with exceptions. If they do not do so, they can expect some scepticism when they emphasise the Cab Rank Rule as a signal of significant virtue.


A barristers’ clerk after getting a right to be paid inserted in a contract

A story in legalfutures seems to point to this becoming a reality.  There also seems to be some suggestion that barristers’ clerks cannot negotiate contracts where there is a right to be paid.  It’s a shame Silk has ended, I’d have enjoyed Billy saying to some dodgy solicitor: of course, you only pay us if you feel like it.  The BSB are reported to be collecting evidence on when the Cab Rank Rule is invoked, though one would not expect it to happen very often, and they don’t have (as far as I am aware) any pre-reform data to compare it against.  We’ll get a picture very much looked at through the lens of the Bar’s commercial concerns.  It would actually be quite interesting to know what proportion of work the Cab Rank Rule now actually applies to and who the clients are who benefit from that rule.  It won’t be Joe Public on legal aid or CFAs.  Oligarchs would still qualify depending on whether their solicitors were mean or not in the contract negotiations, because their fee (I’d speculate) will always be reasonable.  Anyone in the middle, it will depend on whether the barrister deems the fee reasonable.  It’s a rule who’s beauty is entirely in the holder of the rule, and who’s star – it appears – has almost entirely waned, unless the Bar Standards Board can find some way to breathe new life into it.

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QASA: time for some embarrassment

The Master of the Rolls has given judgment in the QASA appeal where the barristers choosing to judicially review the LSB’s approval of the BSB’s scheme for QASA lost comprehensively.  The broad brush of reasoning seems to me to be: an acceptance that there is significant evidence that there are quality problems amongst criminal advocates and an absence of evidence that independence would be a problem. Such evidence would be difficult to establish (the Court to Appeal thought) but analagous processes exists which would also compromise independence if it was a problem and they have not been impeached on independence grounds by the Bar.  Also, perhaps most significantly, independence is not a principle that standards apart from things like competence. There was not crumb of comfort there for the losers other than praise for lawyers for the barristers for taking the barristers case pro bono.  I leave it to the reader to judge how impressed one should be by the bar and Baker & McKenzie pro bono-ing for its own with a case of such quality. Article 6 challenges to the legal aid reforms might be a better way to spend their time. I am sure even better ways than that can be offered.

The question still remains as to how long it will be before a QASA scheme is implemented and running.  It’s eight years since Lord Carter’s suggestion that there should be quality assurance for advocates was accepted by government.  The clock is still ticking on eight years plus of significant competence problems (if we accept the view of the Court of Appeal).  Each side of the dispute will be jubilant or outraged.  In truth, everyone should be embarrassed.

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