The economic outlook is grim and many Victorian firms are struggling, but the Garden State is proving that tough market conditions can’t keep an innovative lawyer down. Leanne Mezrani reports.

When Victorian firms set their budgets in May last year, there were whispers that the start of 2013 would signal an upturn in the legal market.

Managing partners were “cautiously optimistic” that the worst of their firm’s troubles were over. With the promise of good times ahead, corporate lawyers, who had been anxiously watching deals dry up, breathed a collective sigh of relief.

Hope can be so cruel.

Melbourne-based consultant John Chisholm says enthusiasm for the year ahead began to wane when firms received their financial figures for the first half of FY 2012-13. Now, two months into the second half, optimism that growth is imminent has all but been extinguished.

“Many will have said January is traditionally quiet anyway, but this year there are not a lot of signs of a pick-up in February,” he says. 

“Commercial activity has remained patchy at best and, in some firms, corporate lawyers are still idle or doing ‘other tasks’.”

While Chisholm admits that markets are about as predictable as Melbourne’s weather, the word about town is that Victorian firms have readjusted their profit forecasts and are now looking to 2014 for any meaningful growth.

“I was speaking to a managing partner last week and they said they just want 2012-13 to end,” he says.

“It’s a tough legal market ... in real estate terms it is a buyer’s market — even if some of the buyers don’t know it.”

The Hays Legal Quarterly Report for Q1 of 2013 confirms that Victorian firms will have to tread water for a little while longer. The survey referred to areas of growth in the Brisbane and Perth legal market, with no practice groups selected for growth in Melbourne.

The result also reflects the trend in the M&A league tables released in January this year, which revealed a decline in the global and Asia-Pacific M&A market in 2012.

Chisholm reminds managing partners who may be putting a positive spin on the figures in front of them, focusing on the peaks rather than the troughs, that most growth over the past six months has generally been the result of firms increasing their fees. “Real growth in legal work in Victoria has not occurred for a while now.”

Consequently, Chisholm predicts redundancies at some firms before the financial year is out. Both Clayton Utz and Ashurst rolled out redundancies before the end of 2012, which Lawyers Weekly understands included a number of positions in Melbourne.

Opportunities in adversity

For lawyers who are still hoping an economic recovery will solve their problems, Chisholm has this warning: firms at all levels, particularly full-service firms, must search out opportunities, efficiencies and innovations or risk becoming irrelevant. 

Firms can do little about the state of the economy but they can better differentiate themselves in an increasingly competitive market, he adds. Adversity, it seems, breeds innovation.

He nominates gender diversity, alternative fee arrangements and flexible work practices as areas where Victorian firms are making positive strides, adding that the big firms can learn a thing or two from some of the progressive boutiques.

“Some of the smaller firms, while not having the good and bad baggage that goes with the big firms, are more flexible, nimble and more open to change, and some are making serious inroads into what has traditionally been big firm markets.”

Lander & Rogers is one mid tier that claims its size allows it to seize new opportunities more swiftly than the larger firms.

The firm’s managing partner, Andrew Willder, believes there’s plenty of money to be made in the Melbourne market if you know where to look. “The entry of the international firms has changed the nature of the domestic legal market and created a number of distinct competitive channels.”

Willder points to new insurance, litigation and retail work, which is being discarded by the newly-merged global firms, as having significantly contributed to Landers’ 15 per cent growth rate last year.

He adds that the firm’s Sydney office, which is now outperforming Melbourne, is further proof that mid tiers can carve out a lucrative piece of the legal market in cities dominated by global firms.

“We’ve continued to grow strongly even though there has been a raft of international mergers,” he says. “We’ve moved into larger premises [in Sydney] to accommodate an increased number of people and provide for expansion.”

But clients haven’t landed in partners’ laps, he stresses; the firm has worked hard to differentiate itself in the market as being unrestrained by the “financial push” of the larger firms and, therefore, flexible in changing market conditions.

Beyond borders

As Landers focuses on local growth, the Law Institute of Victoria (LIV) is encouraging firms to explore opportunities beyond Australia’s borders. Asia has obvious potential, says LIV president Reynah Tang. But to successfully capitalise on growth in this market he believes the legal profession must first develop its cultural diversity and understanding.

“Victoria is a multicultural state and we need to make sure lawyers of diverse cultural backgrounds are working their way up through the legal fraternity and are ultimately reflected in our partnerships, the Bar and the judiciary, so we get that diversity across the legal profession,” he says.

“We’re becoming a global legal profession and to participate in that we need to have the cultural understanding to be able to engage and export our legal services.”

The LIV is itself looking at overseas opportunities, continues Tang. He reveals the body is taking steps to develop a mediation and arbitration centre in Melbourne that he hopes will become part of a “world-class network of centres throughout Australia”. LIV already has the support of the state government for the centre and will also be hosting a conference in 2014 for the National Alternative Dispute Resolution Advisory Council (NADRAC).

Tang says seeking out global opportunities is one of a number of focus areas for the year ahead that form part of the LIV’s strategy: Embracing change and diversity in a dynamic and evolving legal profession.

Another is promoting flexible work practices. Greater awareness of the benefits of working remotely and flexible work arrangements is needed, claims Tang. Bringing these options into the mainstream will reduce the attrition rate of lawyers and keep valuable skills and acumen in the profession, he adds.

“It’s a challenging time for the legal profession and that’s why we need to look for new opportunities and new ways of working that improve the profession.”

While Tang did not nominate the attrition rate of female lawyers as a specific focus area, the Law Council of Australia (LCA) is set to embark on a major female attrition and engagement study, with Victorian barrister Fiona McLeod SC at the helm.

Planning to succeed

McLeod has helped to frame the parameters surrounding the study. with the first part of an extensive report due to be released in June. She reveals that the LCA has engaged a consultant to conduct preliminary interviews with a focus group of women on issues expected to be covered in the study.

Meanwhile, in her role as chair of the Victorian Bar Council, she pipped other states to the post in January by launching the first Bar association Reconciliation Action Plan (RAP) in the country. 

The plan is to attract and retain indigenous barristers through mentoring and work experience programs, scholarships and financial support for practitioners.

 “The RAP is about doing what we can to address the low numbers of indigenous lawyers at our Bar and keeping them there.”

The Victorian Bar joins the LCA, the LIV and a growing number of firms in the state that have adopted plans to promote indigenous equality. 

As diversity and reconciliation initiatives gather steam, McLeod says Victoria’s track record in other areas is poor. She points to the state government’s recent cuts to legal aid as a “massive step backward”.

McLeod was among the 160 barristers and solicitors who attended a protest meeting in December that condemned the move by Victoria Legal Aid (VLA) to cut staff levels by four per cent. She says demand for legal aid is on the rise, driven by the Baillieu Government’s greater focus on preventing family violence. But the expanding workload has not been matched by an increase in funding.

“Government assistance at state level has been eroded significantly over the past 16 years and legal aid slashed by millions,” she says.

Since 1997 the Federal Government’s percentage of funding to the VLA has dropped from more than half to around one third. McLeod is concerned that both the state and federal funding cuts will deny Victoria’s most vulnerable citizen’s access to justice, while the courts struggle to handle a growing number of cases that involve unrepresented litigants.

“People aren’t getting a fair hearing because they are not represented in large part,” she says. “Plus, there are delays and impacts on the system that affect the ability of judges to manage those cases.”

The result, she believes, will be a less efficient justice system. “When there are delays and cases are presented less efficiently, and are more likely to run to appeal”.

What isn’t being considered by the Government is the cost of not funding legal aid, says McLeod, who urges governments to inject more funds into the struggling sector.

Despite this setback, Chisholm maintains that Victoria is “genuinely looking at more innovative ways of doing things”. He applauds the state’s firms and lawyers for their out-of-box thinking, which, he claims, will ensure their survival when the legal market settles into the “new normal”.