In the scapegoat business

Law firms report an unprecedented willingness in the City to sue. A different way to handle disputes is increasingingly favoured, Robert Verkaik reports

There is no doubt that desperate times lead businesses into desperate litigation. Traditionally this has meant that during an economic downturn commercial litigators find themselves most in demand. So it is surprising that even as we move out of recession, City law firms are reporting business as usual in their litigation departments.

David McIntosh, senior partner at Davies Arnold Cooper, says the need to find people to blame when things go wrong has recently seen an unprecedented number of cases brought against City professionals.

"There is a trend to see professionals as scapegoats," he says, "and not many claims are being overlooked." The pounds l00m judgment against the accountants Binder Hamlyn and the pounds 600m Canary Wharf lawsuit still facing the UK's largest law firm, Clifford Chance, are evidence of that.

Combine this with residual litigation from the property collapse and pension fiascos of the early Nineties, and most litigators are confident their skills will be in demand well into the recovery.

David Harrel, senior partner at S J Berwin & Co, went back to court last week in the latest stage of the pounds 100m litigation being fought on behalf of the Barings Bondholders.

"Although it is generally accepted wisdom that people do not resort to litigation in good times there is still a body of litigation around," he says. "Disputes that arise have to be dealt with, in boom or bust."

The past five years have been a time of frenetic activity for his firm. "Anybody who has got a reasonably good commercial litigation practice will have had a period of intensive activity from company failures which occurred in the early Nineties, whether it be BCCI, Maxwell or whatever."

More significantly, last year saw the end of the pounds 3.2bn Lloyd's litigation, believed to be the biggest ever litigated settlement.

With all this coming to a close, Mr Harrel suspects one or two commercial litigation departments will be left with some slack. Certainly after Lloyd's, many law firms had to find ways of accommodating the dozens of lawyers who worked exclusively on the settlement programme.

"When you take on a major piece of litigation you need lots of people," Mr Harrel explains, "but you also want to be careful that you are not left with huge teams when it comes to an end."

S J Berwin deals with this problem by drafting in para-legals on a "case- dedicated basis" to undertake the more administrative work. Doing so allows its partners and assistants to run large teams only when they really need to.

Lloyd's is widely regarded as a significant stage in the reform of large- scale commercial litigation practice. The formation of dozens of Names' action groups meant that by banding together individuals could afford to litigate in expensive actions.

The court also took a more hands-on approach to the conduct of the litigation. From the outset Lord Justice Saville, or Mr Justice Saville as he was then, gathered all the lawyers together in the offices of Richards Butler to lay down the ground rules for saving time and money.

One lawyer who came out of the Lloyd's litigation with a red-hot reputation was Wilde Sapte's Philip Rocher. He was described by Michael Deeny, chairman of the litigating Names committee and of the Gooda Walker Action which Wilde Sapte represented, as "simply the best litigator in the City of London".

Mr Rocher, who enjoyed a run of 16 consecutive court victories, believes the majority of lawyers working on Lloyd's enhanced their reputations. "I think it showed how well the legal system can work," Mr Rocher says. "When I gave my clients targets as to the speed as to which I thought things should happen they were sceptical we could achieve them, but we did."

Significantly, the City Disputes Panel also played a role in helping to reach a final settlement. And in many ways Lloyd's anticipated the move towards Alternative Dispute Resolution and the Woolf reforms.

Mr Rocher acknowledges that arbitration is now taken much more seriously by litigators. "As a responsible litigation lawyer you have to offer it to your client as a possible means to settling the case," he says. "People simply don't want to spend that much money in long-drawn-out litigations." Even in the most bitter of litigations, both sides will do all they can to avoid the lottery of going to trial. Arbitration can play on this fear.

"It's not always the case that there is a black-and-white answer and that's why so many cases are settled at the doors of the court," Mr Rocher explains. This year sees the implementation of the Arbitration Act which gives arbitrators greater powers and makes their decisions harder to appeal.

How seriously other law firms are treating ADR is a matter of some debate. So far only a small number of cases have been settled in this way. One view is that lawyers are happy to support ADR publicly but are privately warning off their clients. The lawyers argue that only litigation can really concentrate the minds and force the issues.

Another deterrent is that top litigators may not make very good mediators. Mr Rocher admits that good litigators have to have a steady nerve combined with impeccable judgement.

David McIntosh agrees, adding: "It is also important not to back down when you have to tell the client that the case is not as strong as it should be. You mustn't get carried away with your client's mission and become a campaign litigator. You can have passion but you must be rowing for your side with detachment."

Mr Harrel says "litigation by pure aggression" is not the best way to run a case. "All it succeeds in doing is multiplying the costs."

He believes more and more commercial clients regard litigation as "an arcane art performed by solicitors to their own benefit". This, he says, is why ADR is beginning to take a real hold. "There are already a number of directions before the court to get parties to mediate," he says.

ADR is already well established in the United States, where it serves to counter a litigious culture fed on contingency fee litigation. Here, many law reformers hope that Britain will get the solution before it imports the problem.

But, as Mr McIntosh predicts, "If you increase people's access to justice then you are bound to create more litigation".