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Trouble shooters
Law Society Gazette – 8 May 2008

Law firms called in by local authorities can expect to encounter an eclectic mix of work, explains Mark Smulian

Not all local government legal teams have the scale of Birmingham City Council, recently featured in the Gazette. But generally speaking the sector is a colourful one.

Councils can be called upon to sack chief executives, complete multi-million-pound regeneration projects, find out if councillors have acted improperly, and potentially defend corporate manslaughter cases.

So when these problems arise, what can local authorities do? Enter the trouble-shooters - solicitors drawn from specialist firms who get called in when councils have legal problems they cannot handle in-house.

Local government once offered a self-contained legal career structure, with councils 'growing their own' solicitors from trainees who might spend their entire working lives in the sector. Indeed, until the 1990s, almost all local authority chief executives were lawyers by training.

But relentless government pressure on councils' budgets has meant that fewer now recruit or invest in the training needed to keep solicitors. Even if they did, it would simply be uneconomic for each council to employ the entire range of legal expertise it might sometimes need.

'There are two circumstances in which external lawyers are called in by councils,' says Stephen Cirell, a section group leader at national firm Eversheds. 'The first is capacity, where a council has not got enough people to deal with something. The second is capability work, which is what we do. These are complex and difficult cases in litigation, human resources, real estate and private finance initiative (PFI) deals, which can tie up a large number of lawyers for a long time, so a council could not do it even if it had the expertise.'

Cirell puts the capacity/capability split at roughly 80/20, and admits 'capacity work is mainly routine, which to be honest the public sector could probably do more cheaply for itself if it still had the people'.

Capability work is where firms such as Eversheds make their money. Cirell says demand is growing, in particular for expertise in creating PFI deals to bring private money into public services. Eversheds has, for example, worked on Europe's largest PFI deal, a 4 billion waste disposal project for all ten councils in Greater Manchester.

Another growing area is a type of property deal - often called asset-backed vehicles, under which councils contribute land and buildings and a private sector partner puts in money and expertise to carry out long-term regeneration of decayed urban areas. This is a new concept and requires complex legal work.

Councils are sure to want external help with the new laws on corporate manslaughter, which took effect in April. In a recent landmark development Barrow-in-Furness Council was prosecuted after an outbreak of legionnaire's disease at one of its leisure centres in 2002, though it was ultimately only fined for a health and safety offence.

'Corporate manslaughter is really serious stuff,' says Cirell. 'I was a prosecutor for a local authority for the first three years of my career and I would not have touched it. It's in a different league to what council lawyers do.'

Cirell began his career with Stockport Council in 1982. He made the move to the private sector in 1993, having made his name by writing a book on compulsory competitive tendering (CCT) - the system then in force that required councils to seek competitive bids for many service contracts.

'Eversheds wanted to build up a local government practice then, and now we do 28 million of local government work a year,' he says.

Ironically, he holds CCT responsible for the decline of councils' legal departments. Tendering was extended to legal services in the mid-1990s, with the result that 'the focus went on cost and councils cut articled clerks - before that, large councils had trainees and there was this conveyor belt of people coming through'. CCT stopped that, he says, and the flow has only been partially restored since CCT was abolished.

'When people retire they are not being replaced, though most councils do have legal departments and there is still an in-house culture in local government.'

Mark Greenburgh, a partner at Birmingham firm Wragge & Co, is a former Conservative leader of Buckinghamshire County Council and qualified as a solicitor while he held that post, joining Wragges in 2000. His specialism is employment law, which is always sensitive and in local government can be a minefield.

'A chief executive might turn to us when they have seen management failings, or their corporate team is not working together and they need external advice, and perhaps also their internal legal advice might not be as robust as the chief executive would want,' he says. 'These are very stressful situations between people who have been colleagues for long periods, and local government is quite collegiate. So it often needs someone from outside.'

Council chief executives, finance directors and monitoring officers enjoy special protections against dismissal, which can mean a quasi-judicial hearing in front of an 'independent person' before any action. Both sides must prepare cases and Greenburgh has handled many, both for councils and individuals.

The public prominence these cases can attain means that his political past is sometimes raised, and he becomes a reluctant public figure in these disputes. For example, he advised Lincolnshire County Council during a complex and lurid dispute following the conviction of former Conservative council leader Jim Speechley of misconduct in public office.

'What I did as a councillor is of no relevance now,' Greenburgh says. 'I have represented councils and people of all political persuasions, but I am their lawyer and a solicitor should represent a client with all the enthusiasm and skill they possess, so it is regrettable if you become part of the narrative. You do need a thick skin, but for every case that hits the media, ten do not.'

Malcolm Iley of City firm Trowers and Hamlins recently attended a meeting of partners involved in public sector work - and found 30 of his colleagues in the room. 'That is far more than there would have been ten years ago,' he says. 'We would not invest like that if we were not expecting growth in this market.' Trowers and Hamlins has around 200 local authority clients. 'The big thing is public/private partnerships. It's going like a train, with joint ventures and major regeneration schemes.'

The firm is also increasingly involved in helping councils make use of powers that they have acquired in the past five years to promote regeneration. These involve prudential borrowing - essentially permission for a council to borrow for investment if it can 'prudently' cover the costs - and the 'well-being power', which allows councils to do anything conducive to the betterment of their area. 'Local authorities are looking to do more things that need outside expertise,'

Iley says. 'I never knew a time when there was so much going on, with councils increasingly using the borrowing and well-being powers.'

However, projects can vary greatly in size and scope. He says he has been involved with a 1 billion local authority, 'but only yesterday another partner was working with a council that was setting up a community trust, and another council that was trying to remove trademark registration preventing a council from doing something in its area'. Like his colleagues, Iley regrets the decline of the in-house legal team. That is where he started, eventually becoming chief executive of Plymouth Council.

'The number of people coming through local government law is at an all-time low,' he says. 'You used to have three or four trainees in big council departments, now you are lucky if there is one. They are not training people, and there is a lot of transfer into the private sector of those they do train, which is hardly surprising because you get paid a hell of a lot more and there is a wider range of things to do. I think the role of in-house lawyers will become more like the corporate counsel in private companies.'

Nick Dobson, senior consultant in local and public law at Pinsent Masons, thinks the well-being power's main effect 'has been that there is now less searching around for legal powers to make something happen'.

He also sees the possible links between using well-being and the coming of local area agreements. These are mechanisms to tie together the objectives of public bodies - for example, the council, the police and the primary care trust - so the public sector works in a coherent way in each area. Multi-area agreements are similar, but cover, for example, a conurbation. Government ministers have encouraged these mechanisms strongly, but the potential for confusion and disputes - and the need for expert legal advice - is obvious.

Dobson says: 'In local area agreements, one sees a tension between what central government thinks should happen and what local politicians think is right for their area. There will be more projects put in place and joint boards and partners involved, and it must be made clear who is responsible. People tend to look to local authorities for leadership whoever might actually be responsible.'

The traditional local authority legal department might in some areas be fading, though there are innovations that could give it new life [see boxes]. But an ability to use their own resources where they can, and external expertise where they have to, should help carry councils through their many and varied legal problems.

Sharing solicitors

Lincolnshire County Council and five of the seven district councils in the area combined their legal teams in April to provide a single service which all members may exploit.

The service has 80 staff at six offices and some tough targets to meet - efficiency savings of 246,000 a year by its second year, a 350,000 limit on its spend on external law firms and annual income from next year of 200,000 by selling its services to other councils.

There is a trend for councils to share legal services to gain economies of scale.

Assistant director Eleanor Hoggart explains: 'Each council can access the entire practice. For example, districts rarely do employment law but the county does, and the districts would have brought in the private sector for that before. It gives them access to expertise that it is not economic for them to have in-house.'

Councils have struggled to recruit solicitors in rural areas and Lincolnshire Shared Legal Service offers them a more attractive range of work - and possibly more money. 'There is a critical mass which allows some flexibility over salaries,' she says.

Decoding the code

One new area of work for law firms will be advising local standards committees on whether allegations that councillors have breached their code of conduct can be substantiated. The code governs the way in which councillors declare interests and conduct themselves towards staff and the public.

The Standards Board for England enforces it, but it will now only directly handle the most complex cases, with many being referred to local committees. These comprise both councillors and independent people from outside the council. Since most allegations involve a prominent local political figure, these cases can prove highly controversial.

'Local authority legal departments will need help with standards investigations referred to local committees, which will represent an increased burden,' says Nick Dobson, senior consultant in local and public law at Pinsent Masons.

Whiter than Wight

No council could spare 33 legal staff to sift through 170 boxes of documents pertaining to a contract dispute. This is why Isle of Wight Council called in Wragge & Co when its chief executive Joe Duckworth decided he wanted to resolve a lengthy saga about how and why a coastal engineering contract was improperly awarded.

'They could either have paid people off and swept it under the carpet or have a full public investigation, and they felt that payoffs would damage public confidence in the organisation,' says Mark Greenburgh, a partner at Wragges. To avoid accusations of any conflict of interest the work was split into an investigation of the contract, outsourced to Sharpe Pritchard, while Wragges probed what had happened in the procurement process. Wragges partner and former police officer Trevor Gibson led the work.

Greenburgh says: 'There were rooms full of material and we used lots of paralegals to comb through the documents, having trained them in what we were looking for. Like the Princess Diana inquest, [the investigation] was held because public confidence was crucial.'

'It's been absolutely massive and has taken more than two years with 50 people working on it,' he says. 'We have done all the negotiation and procurement and have project-managed the deal's development.'

Mark Smulian is a freelance journalist