Edward Fennell’s LEGAL DIARY

Diary news, commentary, insights and appointments from the legal world

June 30 2023

Editorial Contact: fennell.edward@yahoo.com

SHORT THOUGHT FOR THE WEEK: Would you prefer to be an accountant?

Luca Pacioli wrote the first book on DOUBLE-ENTRY book-keeping in the 1490s and founded the accountancy profession – but was it really DOUBLE-DUTCH or DOUBLE-CROSSING? Image courtesy of maths.history-st.andrews

The reports today of the successive failings by PwC and KPMG in the auditing of the Stobart haulage business are shocking. Bearing in mind that these are supposed to be world-class names at the peak of the profession one is baffled how the situation could have arisen – or at least been allowed to persist. In the case of Nicola Quayle, the senior partner at KPMG’s Manchester office, it was the third time that she had been fined for her audit work in the past three years. Moreover, the fines which were imposed were derisory given how much these businesses and individuals earn.

Could the same happen in law firms? Readers will be aware that one or two global firms are undergoing severe scrutiny right now. Lawyers can clearly be corrupted by their clients. That is why internal policing and adherence to ethical standards are so important. By instinct lawyers should have an innate sense of justice whoever their clients are. They lose it at their peril. (Unlike maybe accountants).

The Legal Diarist

In This Week’s Edition

+ LEGAL DIARY OF THE WEEK

• The Gender Agenda Highlights the ‘Magnificent Seven’
• They’re Winners – But with a Big Heart
• Building Up to Pro Bono Week
• PI Inflation: It’s All in the Mind

+ CONTRIBUTED ARTICLES OF THE WEEK

• SCRUTINISING INTERPOL: DOES IT NEED BETTER POLICING?

By Amy Woolfson

• MUDDYING THE WATERS: The problems posed by the Thames Water case

By Joanna Ford

– HOW TO BUILD A SUSTAINABLE LAW FIRM

By Gareth Walker

LEGAL COMMENT OF THE WEEK

on Discrimination in cricket and Death and financial relief

LEGAL APPOINTMENT OF THE WEEK

at BURGES SALMON

LEGAL DIARY OF THE WEEK

The Gender Agenda Highlights the ‘Magnificent Seven’

There’s a bridge across to opportunity – but is it too narrow?

It would be fair to say that the legal sector is punching above its weight in this year’s ‘The Times Top 50 50 Employers for Gender Equality’ table – run under the auspices of Business in the Community – with a 14% representation of the total.

These Magnificent Seven gender-warriors include Addleshaw Goddard, Eversheds Sutherland, Linklaters, dwf (formerly Davies Wallis Foyster, the firm run by the formidable Sir Nigel Knowles), Freshfields, Burges Salmon and CMS.

If the title of the table seems novel you would be right. The classification used to be for ‘The top 50 Employers for Women’ but that has now been revamped so that, as the organisers put it, ‘When we use the term gender equality we take this to mean equality for all genders and those who do not identify as a gender, for example, non-gender conforming, gender fluid or non-binary individuals’.

As ever, it’s the direction of travel which is most interesting. ‘Women’ might have been dropped from the awards’ title but it is still a poignant issue in the following analysis of the entries. “The lowest performing areas were Low paid women, Flexible Working and Pay and Reward, with performance across each decreasing from 2022. This was especially the case on support for women on low pay where the average question score dropped by 30%. For the most part, employers did not have initiatives to support social mobility and women on low pay internally or externally, or if they did, this work did not have senior-level accountability.”

Exactly how much of this criticism applies to the legal entrants is not clear. But on the positive side it was stated that, “The most significant improvement was seen in Line Managers…with organisations offering greater support through updated training and performance management indicators to encourage establishing and maintaining diverse and inclusive teams.”

You might like to take that into account when you examine your own organisation.

For the full details go to www.bitc.org.uk/the-times-top-50-employers-for-gender-equality-2023/

They’re Winners – But with a Big Heart

There’s much talk of new model ‘disruptor’ law firms in the UK’s legal sector but the one which is truly disruptive to the conventional legal culture came out top at this year’s The Lawyer Awards. Aria Grace Law CIC was set up just five years ago by ex-Norton Rose Fulbright lawyer Lindsay Healy (left)but has made its mark by creating a completely new business model.

And what does that mean? As the firm itself puts it, by ‘Radically changing how money is distributed for the benefit of its lawyers, clients and society.’

“This win is absolutely massive,” declared Healy, “particularly as it is coming from the most senior figures of the legal industry – for our business model of wealth share which benefits, literally, everyone. This is capitalism done properly and it really blows people’s minds.”

Central to the Aria Grace model is that a select group of charities – foodbanks such as Feast With Us, Age UK, Noah’s Ark Hospice for terminally ill children, Radical Recruit and Hope4 – are baked in as recipients of a regular slice (around 5%) of partners’ profits. And these profits can be very high given that the firm’s lawyers are paid 90% of the fees they earn – a phenomenally high rate by comparison with most City firms.

Of course, this is only possible because Aria Grace has much lower overheads than most firms and it recruits highly experienced lawyers who need less back-up and support. With its headquarters in modest Willesden Green it is also the first corporate law firm in the UK to become a community interest company (CIC).“Their approach marries a true notion of flexible working: attracting the right talent and driving costs down for the client,” said the judges.

But how many other firms are placed to follow Aria Grace’s example? Or indeed would want to?

Building Up to Pro Bono Week

There are still four months (and most of the Summer holidays) to go before this year’s UK Pro Bono Week but the planning starts now. With a target date of 6-10 November the organising committee wants lawyers to get together to think creatively about how they can make a sustained impact through three themes:

1. Changing lives through pro bono;

2. Maximising the impact of pro bono;

3. Pro bono within ESG: from climate to sustainable development (despite, it must be said, that the concept of ESG is already being challenged in some circles!).

“Pro Bono Week has become a central point in the year for the legal profession, with the charitable sector, to focus on how pro bono helps those in need,” said Toby Brown, theChair of the national organising committee and a barrister at South Square Chambers. “Our three themes this year will both celebrate pro bono and drive forward delivery of help in the most impactful way, whilst placing pro bono in the wider ESG context.”

Toby continued: “Pro Bono Week is also an opportunity for organisations to publish reports or launch new initiatives to an engaged pro bono audience and weencouragelaw firms, barristers’ chambers, legal societies, charities, in-house lawyers and law schools to begin planning events and initiatives now, ahead of Pro Bono Week in November.”

Last year’s Pro Bono Week saw 68 external and internal events, both online and in person, involving an estimated 5,000 attendees. No doubt, given the parlous state of the country, there will be a keen desire to boost that figure even further.

For more go to: at https://probonoweek.org.uk/event-plans

PI INFLATION: IT’S ALL IN THE MIND SAYS NEW REPORT

The sums involved in PI claims are going up – but why?

According to a report out this week from Kennedys the finger should be pointing at psychiatric issues.

“Proposed explanations for the increase include the impact of the Covid-19 pandemic, greater use of social media and the impact of austerity,” says the firm’s report Claims inflation and personal injury claims: a global review. “Some would suggest that, paradoxically, awareness efforts may be an additional factor contributing to the rise in mental health problems. As such, we are seeing more attention now being placed on mental wellbeing including in the policy arena.

“Employee mental health is also increasingly becoming a strategic business priority: employers are being urged to put employee wellbeing into the ‘S’ of their ESG strategy. Notwithstanding the importance in understanding and mitigating mental health problems, we are seeing increased psychiatric claims in the disputes setting. And for many jurisdictions, these types of claims are becoming increasingly common and costly for insurers.”

Analysed in the report, were the claims experiences of Kennedys lawyers in Australia, Chile, Denmark, England and Wales, Hong Kong, Ireland, Northern Ireland, Scotland, Singapore, Spain, and the US. Also highlighted were increased litigation costs and professional services spend as factors adding to the challenges for insurers.

“Of particular concern to insurers is the fact that claims relating to psychiatric injury are often associated with considerable awards for damages and high legal costs for investigating and defending them,” observed Richard West, global head of liability defence and partner for Kennedys. “There are also reputational risks for businesses found to be in breach of the relevant legislation.”

For more go to: www.kennedyslaw.com/en/thought-leadership/reports/2023/personal-injury-report-2023-trends-and-future-risks

CONTRIBUTED ARTICLES OF THE WEEK

SCRUTINISING INTERPOL: DOES IT NEED BETTER POLICING?

By Amy Woolfson

In November 2024 Glasgow will host the 92^nd INTERPOL General Assembly. This is only the third time the UK has hosted the General Assembly in the organisation’s 100-year history, and the first time since 1958.

This will be a significant event for INTERPOL as elections take place for key leadership posts, including the new Secretary General. It will also be a significant diplomatic event for the UK, as we host government and senior law enforcement personnel from 195 member states. Inevitably this will include controversial officials from repressive regimes.

The delegates won’t be the only controversial figures. Major General Ahmed Naser Al-Raisi, INTERPOL’s president faces allegations of torture relating to his tenure as a police chief in the United Arab Emirates. This includes the alleged torture of British citizens Matthew Hedges and Ali Issa Ahmed.

Ahead of the General Assembly and no doubt with an eye to potential protests and legal action, the UK has granted INTERPOL, its officials, and delegates wide-ranging diplomatic immunity.

INTERPOL is best known for the Red Notice system. Red Notices enable member states to share information about those convicted of or wanted to stand trial for serious criminal offences, with a view to their extradition.

In many countries a person can be arrested and detained on a Red Notice pending a formal extradition request from the requesting state. Even where arrest and detention are not an immediate risk, a Red Notice can seriously restrict a person’s freedom of movement and can be hugely damaging to a person’s reputation and finances.

INTERPOL tries hard to paint itself as a neutral conduit for law enforcement data sharing, but the reality often falls far short. INTERPOL’s principles of equal access for member states combined with a lack of proactive checks on the contents of Red Notices means that many are improperly targeted. This may be due to bad faith on the part of the issuing state (such as China’s Red Notice targeting World Uyghur Congress chair Dolkun Isa) or simply because poor quality Red Notices pass through INTERPOL’s systems without challenge. For example, a Red Notice might target a person for writing a bounced cheque, despite INTERPOL itself recognising that this is generally a civil rather than a criminal matter.

INTERPOL does have mechanisms for challenging Red Notices, but these are opaque and move slowly. Lawyers are familiar with those member states who are repeat offenders, but INTERPOL takes no steps to sanction these states, or even to subject them to heightened scrutiny.

And yet the UK has become increasingly reliant upon INTERPOL since Brexit. Firstly, having lost access to the European Arrest Warrant system, the National Crime Agency now uses the Red Notice system to share extradition requests with EU member states. And since 2021, it has been possible to arrest and detain a person in the UK pursuant to a Red Notice issued by a ‘trusted’ member state.

The UK Government is unlikely to use Glasgow 2024 as an opportunity to hold INTERPOL to account. But it does present an opportunity for activists to shine a light on its many inadequacies and abuses.

Amy Woolfson is a barrister in the extradition team at 5 St Andrew’s Hill

MUDDYING THE WATERS: The problems posed by the Thames Water case

By Joanna Ford

“Thames Water has been the subject of a number of damaging fines in recent years amounting to some £15m, which places a further burden on its creaking balance sheet with overall debts of £14bn.  The resignation of Sarah Bentley, its chief executive, on Tuesday after she was forced to give up her £1.6m bonus package is a further blow that highlights the turmoil at the water supplier.

Although Thames Water is seeking additional funding from its shareholders, I can’t imagine that this will be a quick or easy process, as it is owned by a consortium of pension funds and sovereign wealth funds, who I understand are sceptical about providing further support having already provided new funding of £500m as recently as March this year.  The conundrum for investors, though, is that if they don’t provide more funding and Thames Water then goes into administration, they will have lost everything.  Whilst Thames Water claimed to have a strong liquidity position as at 31 March, including £4.4bn of cash and committed funding, the reported ‘contingency planning’ indicates that there are serious concerns about the financial viability of the company.  The legacy of former owner Macquarie Bank still weighs heavily on the water supplier, when billions of pounds of shareholder dividends were paid despite Thames’ rising debt.

A special administration regime exists for companies that are too important to fail, such as utility companies, in order to ensure that customers receive continuity of supply and to reduce the risk of financial failure spreading across the market.  This was used successfully with the collapse of energy supplier Bulb in 2021, which was run by professional administrators at Teneo until it was sold to Octopus Energy in October 2022.  The primary objective of administration is to rescue the company so that it can continue trading as a going concern – this is often achieved by the sale of its business and assets to another company within the same industry, which is what happened with Bulb.  The costs of the administration are covered by the government by way of grants, loans, indemnities or guarantees, which are ultimately passed on to the taxpayer.

As with any company insolvency, it is mainly the shareholders that lose out, as they sit at the bottom of the pile when it comes to repayment.  Secured bank lending would be repaid first, before other creditors such as HMRC, employees, and trade creditors.  Insolvent means that a company does not have enough money to repay all its creditors, and so if Thames Water was to go into administration then not all creditors would be repaid in full, and so they would also lose out to some extent – how much will depend on what there is left in the pot to go round.”

Joanna Ford is a restructuring & insolvency partner at Cripps

HOW TO BUILD A SUSTAINABLE LAW FIRM

By Gareth Walker

LEGAL COMMENT OF THE WEEK

TOPIC: This week’s highly critical report on racism, sexism and classism in the cricket community

COMMENT BY: Dr Seema Patel, sports law expert at Nottingham Law School

“In my academic view, if the report contributes to greater equality, improved diversity and wider inclusionary practices in all areas of cricket, it is a welcomed and valuable resource for the sport.

There is a great opportunity to draw upon past practice and design a future for cricket that is progressive and connected to modern society. Having regard for the review and critique of inclusion and exclusion in cricket, it is important to emphasise that cricket has a substantial platform to promote change and influence communities by leading positive shifts in anti-discrimination and by re-defining the traditional notions of cricket participation. 

Indeed, diversity and inclusion provide key human rights and business benefits for sport, and this should be prioritised. At this key moment of diversity and inclusion more widely, a firmer alliance with law and regulation, sport, society, government, and international organisations will strengthen anti-racism strategies and cultivate positive action for eradicating discrimination in sport.”

NOTE: Dr.Patel sat on the Cricket Discipline Commission panel which heard the Azeem Rafiq racism case

TOPIC: The UK Supreme Court’s decision this week regarding an appeal for financial relief following the divorce and deaths of both parties and ruling that further proceedings cannot be taken when a party dies

COMMENT BY: Katie McCann, Managing Partner at Lowry Legal

“This is a disappointing outcome in a case where it appears manifestly unjust for a party to be denied fair and equitable matrimonial provision.

“Mostyn’s clear analysis, logic and fearless assault on the unfairness of the current law has been sidelined.

“This result affirming the current law, could lead to cases where manifestly unjust and unfair outcomes occur where one party is left without access to funds that would have otherwise been available to them if the deceased were still alive.”

COMMENT BY: Rebecca Christie, senior associate and specialist family lawyer, Fladgate.

“The Supreme Court has handed down its judgment in the case of Unger v Ul-Hasan, which considered the question: whether a financial claim on divorce falls away with the death of a party and therefore cannot continue after one of the parties has died.

The Supreme Court ruled that the true construction of the Matrimonial and Family Proceedings Act 1984, when read with the Matrimonial Causes Act 1973, is that proceedings under Part III of the 1984 Act cannot be taken or pursued when one of the parties to that application dies. The court felt that a major change to the law would be required before it was permissible to allow proceedings to continue after the death of one of the parties to the marriage, not only for matrimonial claims of this nature but also for other areas of law including inheritance and bankruptcy. It is therefore a matter for Parliament to deal with and not the Judiciary.

It was acknowledged by the Supreme Court that Mostyn J’s judgment in the High Court, was a “magisterial and potentially seminal judgment”, in which Mostyn concluded that although he was bound by the prior decision of the Court of Appeal in Sugden v Sugden [1957] P 120, it no longer sat comfortably with the modern law surrounding matrimonial property and family relationships on divorce as these have changed.

Given the Supreme Court have indicated the law needs reform on this issue we hope the Law Commission decides to take up the cause.”

COMMENT BY: Flora Harragin, Partner, Farrer & Co

“With today’s ruling the Supreme Court has closed the door to the possibility of an applicant pursuing a claim for financial relief after an overseas divorce following the death of their former spouse. This means that a surviving party will need to consider making a claim against the deceased’s estate under the potentially more limiting route of the Inheritance Act 1975, provided that their former spouse was domiciled in England and Wales when he or she died.  If not, then the surviving party will not be able to make a claim against the deceased’s estate, making this a significant ruling for parties whose former spouses are domiciled abroad.”

LEGAL APPOINTMENT OF THE WEEK

BURGES SALMON

Katherine Flower (left) has joined Burges Salmon as a new partner in its Employment Law team. Formerly with Slaughter and May she will now be working between the firm’s London and Bristol offices.

Flower comes to Burges Salmon with 17 years experience advising FTSE-100 companies at board and C-Suite level on the employment aspects of complex corporate transactions and restructures. She has also dealt with board level exits and appointments, and sensitive investigations and disputes.

 “Katherine’s arrival at Burges Salmon will add further strength to our Employment team and we’re really pleased to welcome a lawyer of Katherine’s calibre to the firm,” said Adrian Martin, the Head of the firm’s Employment team which works for FTSE 100 and 250 listed companies and major public sector employers as well as a wide variety of other businesses. It also operates in the not-for-profit sector and on behalf of senior executives and regularly advises on high-profile and business-critical projects for these clients. 

“The team is also active in helping to shape UK employment law and participates actively in numerous employment law organisations and committees,” it says.

We hope that you have enjoyed this edition of the LEGAL DIARY and, maybe, even found it useful. If so please circulate to colleagues.

Meanwhile do continue sending your legal diary stories, legal comments and insights as well as key appointments to

fennell.edward@yahoo.com