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Time for a More Fulsome Debate on ABS

The Advocate Files: Legal Supplier | Time for a More Fulsome Debate on ABS

BridgePoint Financial Services

Time for a More Fulsome Debate on ABS (Alternative Business Structure)

By John Rossos

The controversy around consumer law giant Slater & Gordon shouldn’t be used as a pretext to shut down debate in Canada around adopting Alternative Business Structures (ABS) for law firms, says BridgePoint Indemnity Company Chairman and CEO John Rossos.

“Let’s take a look at ABS as a potential structure and think about how it can be implemented in a way that addresses the legitimate concerns of the legal profession while advancing sound public policy,” he tells Us.

“So as long as the system is designed appropriately, in my view, ABS can be a powerful force that can significantly enhance the competitiveness of the legal services market. However, I think it’s important to ensure that we balance the interests involved. We are dealing with the legal profession and there are certain principles governing the special status and obligations of lawyers to the general public that are inviolable and require protection.”

Currently, it’s illegal in Canada for non-lawyers to own law firms. The issue was a hot-button one in the recent Law Society of Upper Canada bencher election.

The United Kingdom has, however, opened the door to ABS and Australia is home to three publicly traded law firms. The market value of one of those firms, Slater & Gordon, took a major dip this summer after the firm paid £637 million to buy the professional services division of a U.K. firm, Quindell Legal Services, an alternative business structure. But Quindell “had some accounting irregularities that have now forced it to restate its 2013 after-tax profit of £83 million as a loss of £68 million, and to also report that its net assets were about £200 million less than reported,” reports the Financial Post.

Some legal industry observers have said the accounting scandal will mean the end of any move toward ABS in Canada.

However Rossos, whose company provides both legal cost indemnities and funding for Canadian- and UK-based law firms and legal claims, says the accounting controversy associated with Slaters reflects the business judgment of Slaters management team; and to the best of his knowledge it has not impacted the nature and quality of the legal services it offers its clients. In no way should Slaters be used as an excuse to pre-empt Canada’s legal regulators from carefully considering ABS as a viable alternative to the current system of law firm ownership, he says.

“Even though the value of the firm’s shares have been fallen, there is no indication that clients haven’t received top-notch service from Slaters,” says Rossos, adding that the accounting scandal had nothing to do with the lawyers at the firm or the quality of client service.

He says in any discussion around ABS in Canada it’s critical to retain the independence of counsel, to guarantee that appropriate protections are in place to deal with conflicts of interest, and to ensure that clients are given the best possible legal advice to make informed decisions where the free and open communication of information between client and counsel is protected by privilege.

“It’s essential that counsel has unfettered discretion to represent the interests of their clients without any interference from investors,” he says. “As long as that protection is in place, I don’t think it is in our collective best interests to reject a business model that in my view would enable the legal profession to modernize itself.”

Rossos explains that ABS is necessary because of the way many claimant-oriented law firms, such as those that handle personal injury or class-action matters, are undercapitalized.

“The litigation playing field is heavily tilted in favour of big insurance companies that have no shortage of money,” he says. “Claimant-oriented law firms are small businesses with limited access to bank financing and external investment and that means it’s difficult for them to pay for the increasing costs of litigation.

“ABS would more-easily enable them to transfer that risk to investors. And as long as the investors don’t control counsel or impact their ability to professionally serve their clients, it should be a net benefit to the profession as a whole. It would give them access to capital to enable them to properly invest in their practices and increase the quality of the services they offer their clients.”

Rossos says if law firms had greater access to capital, it would also allow lawyers to invest in systems and processes that would modernize their practices and deliver services much more cost-effectively, for the general benefit of consumers.

“What happened with Slater and Quindell is nothing but a red herring and should in no way act as an impediment to discussing ABS in Canada,” he says.

The legal profession needs to take a fresh approach and embrace change.

Deciding against ABS in Canada without a fair debate would be a disservice to lawyers and the general public that they serve, Rossos says.


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BridgePoint Financial Services is a leader in litigation financing in Canada. They are the only full-service provider of innovation funding solutions for plaintiffs, lawyers and the experts involved in advancing legal claims. The company’s goal is to level the litigation playing field and to protect its clients’ rights to full and fair access to justice through Settlement Litigation Loans. Settlement loans can be funded quickly and easily. Their team of friendly loan representatives is ready to process your application.

Discover more about this leader in Financing Solutions for Lawyers and Law Firms in Canada


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