6 May 2002
The Royal Automobile Club (RAC) has changed significantly since its inception in London in 1897. Back then cars were the preserve of the rich, and to drive anywhere legally you needed a vital accessory. Not furry dice, but a 'red flag man', who would walk in front of the vehicle to alert foot travellers that you were en route and ensure that you maintained a respectable speed of 0.5mph.
When the red flag man was relinquished a few years later, cars would zoom around the city at an ungodly 10mph causing absolute chaos. Police and other government organisations retaliated, coming down hard on the motorists. As a result, the RAC was established in order to provide the protection that only a gentlemen's club can offer, together with an arena to air grievances. In 1908 the legal services division of the RAC was established in order to protect the members, after two were prosecuted for dangerous driving. Ironically, its principal function was to pay the legal fees of the wealthy members who were prosecuted.
It is a far cry from Jonathan Gulliford's current role as director of legal services. For a start, he has a lot more wheels to oil than worrying about speeding motorists (and now, thankfully, there are Ken Livingstone's traffic-calming schemes in place to assist him).
Gulliford, together with Eddie Ryan, an accountant by training and the managing director of legal services, is on a mission to change the legal landscape. They want to be able to go one step further than what they already offer and advise RAC customers directly on all aspects of law, going against the legally entrenched maxim that in-house solicitors cannot provide services to anyone other than their employers.
RAC Legal Services is a division of RAC Motoring Services, the business arm of the company which was sold to automotive services company Lex Services in 1999 for £437m. The sale followed the demutualisation of the RAC earlier that year. Slaughter and May acted for the RAC on the sale and Berwin Leighton Paisner advised Lex.
Lex is also planning to imminently change its name to RAC to capitalise on the well-known brand name. RAC contributed £39m to Lex's £65.1m profits in 2001, compared with the £9m it made in 1998.
The organisation believes that it has a head start on other companies wanting to provide legal advice to customers directly, such as Asda or Abbey National. With the advent of technology, RAC Legal Services developed into telephone helplines. Any member of the RAC can call up and obtain legal advice on issues such as road traffic accidents, garage disputes, parking ticket disputes and abandoned vehicles. So, up to a point, legal advice is already being given, as Gulliford confirms. "We're in a fairly unique position," he says. "We can already do it up to a certain point. There are exceptions within the employed solicitors' code of conduct relating to membership organisatons, and we've already got a nucleus of what we want to eventually achieve. We just want to expand what's already there."
So where do the external lawyers come in? RAC Legal Services has a panel of 24 law firms with which it works closely. RAC Insurance underwrites 1.8 million insurance policies via its product Legal Expenses Insurance. The policyholder is indemnified for all legal costs and disbursements following on from an event such as a road traffic accident. As soon as a claim is reported to one of the insurance companies used by the RAC, it is sent via a direct link to RAC Legal Services and then on to one of its panel solicitors (depending on the geographical area). Anything involving personal injury (PI) will always be outsourced. The in-housers deal with non-PI matters and recouping some financial losses. But RAC Legal Services feels that this is not enough.
On 20 March 2002, Law Society Council members met to consider two revolutionary proposals. The first would allow solicitors to share fees with non-lawyers and the other was to allow companies to provide legal advice directly to the public via in-house lawyers.
The fee-sharing proposal was thrown out but not so the amendment concerning employed lawyers providing advice to the public. However, the Law Society said that it would have to consult before anything drastic was done.
"Some of the suggestions from the Law Society Council members, that in-house solicitors couldn't advise the public directly without compromising integrity and honesty, is quite frankly outrageous," says Gulliford. RAC Legal Services believes that various Law Society rules are extremely necessary and is fully in favour of those rules designed to protect clients. "But if rules aren't there for client protection, then they're there for the protection of the industry," adds Gulliford.
What the RAC can manage in-house at present is limited. It wants to go the whole hog and provide litigation advice as well as the greater range of legal services. "We want to act on behalf of RAC customers," stresses Gulliford. When a customer calls about a dispute with a garage over work carried out, then it does not want to have to outsource the work to a panel firm. And, says Gulliford, this is what the customers want too. "Customers know who we are and they trust us," he says. "The average perception of lawyers by the public falls into two categories - either unapproachable and aloof or ambulance chasers who can't be trusted. The public as a whole trusts customer service organisations like the RAC."
Gulliford is adamant that the objective is to work in tandem with the Law Society and its 24 panel firms. "Really, what we want is to be the 25th law firm on the RAC's panel," he explains.
RAC Legal Services has a head start, not only because it is already in the realms of providing some advice to customers, but because legislation is on its side. It all started with the Office of Fair Trading's (OFT) report into the legal profession in March 2001, which found that the legal profession was anti-competitive. It gave the profession 12 months to make progress towards undoing some of the anti-competitive behaviour or to prove the OFT wrong. The Law Society has certainly dragged its heels over the issue, waiting 12 months before anything serious was done. "That's not what the OFT had in mind," Gulliford says.
The Enterprise Bill looks set to change things. It is on its way to the Lords and, among other things, it contains a clause that will assist the RAC's cause. Professional Conduct Rules are exempted from the Competition Act 1998. The new Enterprise Bill abolishes this provision, which means that the Solicitors' Practice Rules will have to comply with the provisions of the Competition Act. In preparation, the Competition Commission will take on 20 per cent more in-house lawyers to assist with the new powers to investigate anti-competitive behaviour and review consumers' markets. Gulliford and his team are happy. This is exactly what the red flag man would have wanted.
Director of legal services
|Turnover||£375m (for RAC Motoring Services)|
|Legal capability||Seven qualified lawyers in the UK, plus 25 legal advisers and 20-25 claims handlers|
|\Director of legal services||Jonathan Gulliford|
|Reporting to||Managing director of RAC Legal Services Eddie Ryan|
|Main location for lawyers||Bristol|