The booming WA economy has prompted many businesses to establish or expand their in-house legal teams, creating new professional opportunities for lawyers and new challenges for law firms selling their wares.
Two appointments in Perth have done a lot to dispel the common perception in legal circles that lawyers who take in-house jobs haven’t quite made the grade.
Former Mallesons Stephen Jacques partner-in-charge, Rob Cole, moved to Woodside Petroleum Ltd last year, while former Blake Dawson Waldron practice leader Phil Edmands moved to Rio Tinto Ltd early this year.
They have joined many other lawyers who have taken on the challenge of blending their legal skills with the commercial imperatives of helping their business grow.
The sector was given a fillip last year when West Perth-based St John of God Healthcare was judged to have the top in-house legal team in Australia in the Australian Corporate Lawyers Association awards.
The growth in the number of in-house lawyers is reflected in ACLA’s increasing membership in Western Australia, though the association is not comprehensive in its coverage.
Great Southern legal counsel (and former ACLA state president) Karen Fleischer has observed big changes since she took her first in-house job in the late 1980s.
“There weren’t that many in-house lawyers; the number has grown enormously since then,” she told WA Business News.
The growth in Great Southern’s own team is a prime example.
Ms Fleischer created the legal function when she joined the company in 1999 and now employs six solicitors plus support staff.
To a large degree this reflects the successful growth of the business; Great Southern had 15 head office staff in 1999 and now has 100 staff in head office.
Two recent additions to the sector are Precious Metals Australia Ltd and Heron Resources Ltd, which have appointed in-house lawyers to help manage their planned rapid growth.
Going against the trend has been Woodside, which had 30 in-house lawyers when Mr Cole joined the company a year ago but now has 20.
That’s a big reduction but still leaves Woodside with what is probably the biggest in-house legal team in Perth.
Mr Cole said his review of the internal legal function had been a major focus of the past year and he was pleased the smaller team had been able to manage increased volumes of work.
St John of God Healthcare chief executive Michael Stanford sees his legal team as a critical part of the group’s management.
“It’s fantastic to have someone who can help you decide when something needs to be briefed out, at what level, and what are the right questions to ask, and doing a reasonable amount of the work internally, as well as helping with the strategy,” he said.
St John of God has nine people in the legal department, including four lawyers, a para-legal, support staff and others handling insurance and workers’ compensation.
The legal team is also responsible for corporate governance, compliance and risk management, both clinical and corporate.
General manager legal services Mark Murphy said the in-house team handled a wide range of legal matters, including contracts, property, trade practices, construction, acquisitions and intellectual property.
“An important point about being in-house is that you get to know the organisation really well, you are part of the organisation, and that helps you to be more effective,” Mr Murphy said.
“It’s also more interesting for the lawyer because you get involved early and you can have a real influence on the organisation.”
This view is echoed by Dr Stanford.
“We like to get the legal team involved from the beginning; they are a key part of the negotiation strategy and we find that helps enormously and they enjoy it more too.”
Ms Fleischer agrees that early involvement is crucial if the legal team is to be effective.
“The management team likes to involve us right from the beginning,” she said. “It’s much easier to draft a document if you’ve been sitting in the meetings and you know what they are trying to achieve.”
Mr Cole has found that in-house lawyers can be very efficient and pragmatic in the provision of their services because they bring a thorough understanding of the business to their work.
“With external lawyers, there is time that has to be invested in learning,” he said.
“The in-house lawyers can also build expertise in specialist areas that are not available in the external market.”
Iluka Resources Ltd legal counsel Cameron Wilson believes in-house lawyers need to strike a careful balance in their work.
They need to get involved early and provide robust advice on risks facing the business while also being commercial in the advice they give, he said.
“The last thing you want is too many lawyers getting involved and slowing down the process,” Mr Wilson told WA Business News.
Blake Dawson Waldron practice leader Leigh Warnick, who worked for CRA (now Rio Tinto) early in his career, said one of the biggest challenges for in-house lawyers was to stay independent.
There was a risk that legal counsel could become a compliant servant of a dominant chief executive and may succumb to pressure to meet the demands of managers.
“The challenge for in-house lawyers is to provide quality advice but stay independent; for external lawyers, the challenge is to provide quality advice but stay relevant,” he said.
Mr Cole said his perception prior to joining Woodside was that external lawyers would find it easier to provide independent advice, relative to in-house lawyers who may become ‘bonded’ to the firm’s commercial goals.
In practice, he has been pleasantly surprised by the ability of Woodside’s in-house lawyers to take an independent stance, helped by the fact that he is responsible to both the chief executive and the board.
St John of God’s Mr Murphy believes in-house lawyers find it easier to strike the right balance because they have a better understanding of their business.
“I think law firms are aware of the desire of clients to receive commercial advice, and be solution-minded, but I think quite a lot of them struggle with it,” he said.
When it comes to engaging external lawyers, there is one theme that stands out – legal counsels seek out the best individuals rather than the best firms.
“We have identified particular lawyers that we like to use for particular kinds of work,” Iluka’s Mr Wilson said.
There are some qualifiers to this generalisation.
Legal counsel will engage a big firm when they need help with a high-profile or high-risk matter, such as a takeover or major piece of litigation.
They are also conscious of value add opportunities, such as professional development for their staff.
“If you spread yourself too thin you are not an important client to anyone, so some of the value-add things that lawyers can do won’t be done,” Mr Murphy said.
“The other part is the learning opportunities. We are always looking for opportunities to work with the external lawyers to pick up knowledge that we can apply.”
For instance, construction law specialists at Clayton Utz advised St John of God on the $100 million expansion of its Subiaco hospital.
The in-house team learnt from that experience and was able to handle a lot more of the work for its recent Bunbury and Ballarat building projects.
While most large businesses in Perth have in-house lawyers, there are some surprisingly large companies that do not.
A prime example is nickel miner Jubilee Mines; it is one of the state’s biggest companies but has very simple operations and its executive chairman Kerry Harmanis is a lawyer by training.
In some cases, the trigger to appoint a legal counsel is regulatory change.
That was the case at Subiaco-based medical indemnity insurer MDA National Insurance, which appointed Dianne Browning, formerly of BankWest, about three years ago.
Precious Metals Australia, which is seeking to finalise funding for its $200 million Windimurra vanadium project, separated the roles of company secretary/legal counsel and chief financial officer in order to increase the capacity of its management team.
It recruited Matthew Lilly, formerly of MG Kailis and Alcoa, to fill the company secretary/legal counsel role early this year.
Heron Resources, which is involved in the development of two nickel projects, took a different tack, recruiting Rob Klug to fill a new role of commercial manager and legal counsel.
Mr Klug, formerly of St Barbara, Freehills and Carmichael Capital Markets, said Heron wanted someone who could manage the provision of legal services and provide commercial analysis.