Small Law Firms Muscled Out By Big Boys, High Costs

Source : The Business Times, 08 Aug 2007

New rules also hamper sole proprietorships

Despite the good times, an unlikely group of people are finding the going tough - lawyers.

More small law firms - which have between one and five lawyers - have been folding up this year than in the past five years.

According to The Law Society of Singapore, the number of small law firms fell to a five-year low of 690 last month.

In the past two years, the number of such firms remained constant at slightly above 710.

Lawyers that BT spoke to were not surprised to hear that their ranks were starting to thin out, pointing to rising costs as the main culprit.

Terence Hua, 33, who has been a sole proprietor for the past one-and-a-half years said: ‘To us, a booming economy represents higher operating costs. Rent goes up, and staff want to be paid more.

‘Survival has been a real question for me, and I’ve been looking at my options in the job market recently. I left bigger firms to be my own boss, but I’m not totally a dreamer.’

Apart from the problem of rising costs, lawyers say that the benefits of a booming economy do not necessarily trickle down to small firms.

Rajan Chettiar, 41, who has been a sole proprietor for the past four years said: ‘The lawyers that enjoy the boom are the big and medium-sized firms because they handle the en bloc sales, and transactional work from increased business activity.’

‘But the small law firms can’t do that work because they lack the manpower needed to execute the deal.’

Hoon Tai Meng who dissolved his firm of five lawyers after 10 years to join KhattarWong this year agrees that size matters.

‘We had to turn away good work because we were too small to execute the deals.’

‘It was difficult to handle corporate transactions above $10 million but now with a big team, there are no limitations.’

And Mr Hua added: ‘Many of us do general work like criminal and matrimonial cases, which do not necessarily increase because the economy is booming. In fact, these days it is difficult to get the constant flow of such work needed to run a business.’

Another problem is that more people are opting to represent themselves in court.

Chief Justice Chan Sek Keong noted that more convicted offenders are appearing in High Court appeals without lawyers, in an interview published in the latest edition of the Singapore Academy of Law’s Inter Se magazine.

BT was unable to get figures from the courts on lawyerless litigants in the past five years. But figures from the Supreme Court show that for this year, about 24.8 per cent of magistrates’ appeals by the accused for the first five months of the year on average were unrepresented.

And while there is more conveyancing work now, fees remain competitive.

Kenneth Tan, managing director of Asia Law Corporation said that conveyancing fees have edged up by about 10 to 20 per cent this year.

And sole proprietor Nicholas Narayanan, 35, who set up his firm this year said that a new rule which kicked in last month requiring lawyers to have two signatures for withdrawals above $30,000 from clients’ accounts presents hurdles for sole proprietors to do conveyancing.

This is because conveyancing lawyers make payments on behalf of their clients, which often exceed $30,000. And it can be difficult for sole proprietors to find another lawyer to sign off every time such payments are made.

The biggest law firms in Singapore have enjoyed strong growth. Since 2003, Allen & Gledhill and Rajah & Tann grew by about 50 per cent to 281 and 225 lawyers, respectively. WongPartnership more than doubled to about 180 lawyers.

CJ Chan said at the opening of the legal year in January that small law firms play an essential role in servicing poorer sections of society, but have not benefited from globalisation and the ‘fruits of Singapore’s economic progress’. It is ‘imperative’ for the Law Society to make a ’special effort’ this year to help small law firms, he said.