BLG flight team saga: legal threat seen as bold play prior to Clydes merger vote
18 July 2011 | By Katy Dowell
Barlow Lyde & Gilbert’s (BLG) aggressive move in threatening legal action against its departing aviation team will send shockwaves through the insurance sector.
It is the latest in a series of bold moves by the firm that later this month will vote on a £300m merger with arch rival Clyde & Co.
Many observers see the March exit of the eight-strong aviation team to Holman Fenwick Willan (HFW) as a tipping point for the Clydes merger talks, but one insider claims it was “just one of many factors”.
Theirs was a “fiery practice”, says a former partner, but one that was “as profitable as it was contentious”, and possessed a “strong family culture”.
“It was and still is a good team,” the source says. “There may have been differences between them but they always wanted to stay together and work together. They wanted to move together.”
The tipping point for the exit of BLG’s aviation team was its takeover of the Halliwells volume practice last summer.
While this was seen as a bold move by market watchers and one that filled a hole in BLG’s portfolio, internally the reaction from top commercial partners was lukewarm.
“Undoubtedly it was the Halliwells merger that triggered the move,” another source says. “The way they articulated it internally and then just bolted it on in Manchester sent a message that the commoditised market was more important than the premium end of the firm. That may not have been the intention, but it was the perception. It’s a fine balancing act, trying to keep both sides happy.”
Perceptions were that the brand had been moved downmarket and for the aviation team to grow and maintain its top-end client base it needed a new home.
Head of aviation Giles Kavanagh joined BLG in 1998 from aviation set 5 Bell Yard. His departure was the sixth from chambers that year, including Robert Webb QC, who went to head British Airways’ legal and regulatory activities. Unable to stop the exits, the set went on to fold later the same year.
While with BLG, Kavanagh got stuck into his contacts book and used the skills he learned at the bar to secure clients and attract new partners.
When he joined BLG in 1998 he was the fifth aviation partner in a domestic practice that had a strong list of clients.
When he resigned in March, Kavanagh could be credited with building one of BLG’s only true international practices (something it has yet to achieve in other practice areas and another factor in its proposed merger with Clydes), with a stellar client list that includes Rolls-Royce.
He was a popular figure in the firm and, had he won the senior partner race against Simon Konsta back in May 2008, may have taken BLG in the opposite direction. As it was, Kavanagh was one of the elite bunch of equity partners who held sway over the firm.
Since his appointment as chief executive in December 2010 David Jabbari has seen several of these depart BLG - some happily, others not so.
That list includes partners Mike Munro and James Parker, who defected in November last year for CMS Cameron McKenna (The Lawyer, 18 November 2010), and litigation head Julian Randall, who left for Taylor Wessing in October along with partner Tim Strong and Andrew Howell (The Lawyer, 26 October 2010).
News of the aviation team departure was greeted with shock. According to a source close to BLG: “They panicked and begged them to stay.”
Its client list is long and substantial. On the aviation supplier side the firm acts for Boeing and the Ministry of Defence. Contract disputes in the public sector are heightened at the moment, given the cuts being made in the sector.
The team is also acting for Rolls-Royce on its dispute with airline Qantas over an Airbus A380 engine explosion last year that grounded the fleet.
In terms of airline carriers the firm shares client British Airways with Clydes, but overseas it acts for Etihad Airways and Kingfisher Airlines as well as a number of Chinese airlines.
These will all be welcomed by the three-partner aviation team at HFW that has two partners based in London and one in France.
With the additional clout the two BLG Singapore-based aviation partners, Mert Hifzi and Keith Richardson, can add alongside Peter Coles in Hong Kong, HFW can boast a top-end practice that has the ability to service commoditised instructions such as baggage handling claims on an international basis.
There are differing perceptions of BLG’s decision to consider launching a case for breach of fiduciary duty. One source says it was a “knee-jerk reaction - a decision made in anger”, while another says it makes the firm appear “weak”.
However, a further source says that “it sends a clear message to other partners who may be considering an exit while the merger talks are ongoing”.
The aim, according to one source, is to guarantee that a portion of the aviation team income for work going forward will end up at BLG. Whether the matter will end up in the courts, however, is unlikely: firms prefer to settle their disputes quietly.
One insider says: “It’s hugely personal and sensitive. It wasn’t an easy decision for the partners to make and it’s likely that they’ll settle.”
Officially BLG is staying quiet on the move and refuses to comment on whether counsel has been instructed.
In a statement, HFW managing partner Greg Gray said it was a matter for BLG and the departing partners.
The statement added: “We would, however, make clear that we would not as a firm take any steps to encourage partners joining us to not comply with their existing obligations to their firm.”
It is an brave move by BLG, but this is not a firm that is shy of making big statements. It remains to be seen whether the gamble pays off.