Clark, left, and Kennedy's Patrick George

As the economic outlook grows increasingly dreary, litigation lawyers are putting their free time on hold as work flows in at an unprecedented rate.

According to Clayton Utz's managing partner of litigation and dispute resolution, Stuart Clark, the rapid growth in litigious matters over the last year and a half has come off the back of an exceptionally slow period during the economy boom.

"The financial year '07 was, I think, the quietest market I have ever seen," he said.

"The market had been so good for so long that people were simply not interested in getting into disputes. If a deal went bad, or a project ran into problems, there was always another project or deal round the corner.

"Clients were saying to us 'We don't want to get bogged down in litigation; we want really good strategic advice to resolve this thing as quickly as possible and preserve relationships'."

However in July 2007, when the market started to look a little shaky, Clark said it was like "somebody had flicked a switch" and litigation started ramping up.

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"All of a sudden disputes couldn't be compromised quite so easily," he said.

"There was this realisation that the market was beginning to slow and the next deal wasn't necessarily around the corner."

Patrick George, the managing partner of specialist litigation firm Kennedys, concurred: "In times gone by clients were able to settle problems because they could get finance from banks or other institutions to overcome shortfalls in money.

"Now that money is tight it means clients have to pursue people that owe them money, and that's given rise to more litigation," he said.

George said that this became particularly pronounced in the last quarter of 2008, as companies became increasingly desperate to recover money or to avoid paying money.

Not surprisingly, Clark pointed to insolvency litigation as a key source of the increased workflow and he said litigation lawyers are working closely with banking and finance and corporate teams to find strategic ways to avoid putting companies into liquidation.

"What we've seen is a desire on the part of people to try and preserve what is there and deliver as much value as possible to the creditors without bringing the whole structure down," he explained.

Clark also said that litigators are gaining work as a result of the increasing number of inquiries and investigations undertaken by corporate regulators. In Clark's view, corporate regulators - particularly those in the US - are becoming more aggressive, and their investigations often involve Australian subsidiaries of US-based companies.

He believes regulatory activity will only increase under the Obama administration, which will be likely to take a more hands-on, interventionist approach to regulatory activity than its predecessor.

"The position that the Bush administration took with a lot of regulatory issues was very hands off. We anticipate, and our American colleagues are anticipating a significant lift in regulatory activity as a result [of the change in administration]," he said.

- Zoe Lyon