Lawyers must come clean about how they account for time

Times Online, September 08, 2006

Charles Dickens did not like the law. "The one great principle of English law is to make business for itself," he wrote in Bleak House. I was reflecting on this in the wake of the controversy surrounding Avalon Solicitors, the Warrington firm whose senior partner, Andrew Nulty, has been charged with professional misconduct by the Law Society over the handling of compensation claims by sick miners.

Mr Nulty took home £13 million in 2005-06, making him by far the highest earning solicitor in Britain. Nice work if you can get it, and Nulty got it by representing thousands of miners in chest disease claims.

Perhaps Mr Nulty’s background — his father and grandfather were miners — drew him to the plight of his many claimants; regardless of his inspiration, he now finds himself the subject of a Law Society investigation into 12 alleged offences of professional misconduct. Mr Nulty denies the allegations, which include alleged breach of solicitors’ accounting rules, practice rules and principles of practice.

Avalon is a two-partner firm, with Anthony Chorlton its managing partner. Its £21.2 million in fees last year make for a net profit of £15.5 million. This equates to an average profit per equity partner of £7.75 million, though as it turns out the equity evidently lies principally with Mr Nulty, whose £13 million dwarfs his poor colleague’s miserly £2.5 million. But although Mr Chorlton had to content himself with so trifling a sum, Avalon has undeniably made business for itself. The question is, has the firm achieved such extraordinary levels of profit legitimately?

There is nothing, save for the fact of the Law Society charges, to suggest anything other than that the most scrupulous of attention to fiduciary duties, professional ethics and the laws of the land was deployed by Mr Nulty and Mr Chorlton. Until the conclusion of the matter, we are all in the dark as to what may, or may not, have gone on. In the interim, however, whenever there is talk about law firms making a lot of money I always feel that readers might benefit from learning of the one primary mechanism by which the legal system preserves its kleptocracy. (I hasten to add that there is nothing whatsoever to suggest that anyone at Avalon indulged in this.)

Step forward, abuse of the time sheet. It is absurd to pretend that this does not go on. Everyone in a law firm — from trainees to associates to partners — is under pressure not just to hit billable targets, but to exceed them. Failure to do so means a reprimand, a "can you pick your socks up" chat, and ongoing inability to bring home the bacon means unemployment. A young and idealistic solicitor in all but a few firms soon finds that the pressure to repay student loans, save for a marriage, pay the mortgage or the rent creates an intolerable temptation to manipulate timesheets.

One hour becomes two, two hours become four; if a client rings up his call is always three times longer than BT records will show; working on a weekend or late at night means charging double time. There is a reason for this. Billable hours are set at ludicrously high levels for the simple expedient of lining the equity partners’ pockets as much as possible. Sure, some fees will be sliced on taxation — the system by which costs assessors review bills once a case has concluded — but if they are high enough in the first place, the damage can be limited, the profits preserved.

It cannot be otherwise, for the Dickens’ principle must be met. It is to be hoped that Avalon is innocent and that this case does not turn into a scandal, but regardless of its outcome, if the legal system is ever to represent value for money for clients something must be done about the way in which lawyers account for their time.