12 February 2001
The concept of using a sledgehammer to crack a nut is familiar to Manchester City Council. After all, why shouldn't a local authority, funded by public money and central government grants, use Slaughter and May, one of the most expensive law firms in the country, to advise it on property and development matters?
And where is the problem in using David Beales, one of Slaughters' most senior property partners, who is said by well placed sources to charge around £500 per hour for his services?
Surely such a fee is a mere drop in the ocean when this is the firm that has acted for the council on a plethora of developments, most notably its involvement in rebuilding the area after the IRA bomb struck Manchester on 15 June 1996.
One of the most prominent of these redevelopments was the sale by P&O Shopping Centres of arguably Manchester's most famous monstrosity, the Arndale Centre, which Prudential bought in 1998 for £315m and which is now being redeveloped extensively with a new north wing being added.
Prudential engaged Lovells, one of its two main property firms (the other being Berwin Leighton), to act on the sale and the subsequent £100m redevelopment of the Arndale, which the council, the site's main freeholder, gave the green light to in November last year.
Beales says: "The council is the freeholder and it granted a long lease that is now owned by Prudential which has responsibility for all the shops. [Prudential] has to pay up to the City council because there are restrictions in the contracts which give value back to the City council."
Beales says that the work the firm advises on is not "rocket science", but that's the point isn't it? One local lawyer says: "There are many lawyers here in that field who can provide a good service at half the price - you would think that the council would think the same."
However, Susan Orrell, city solicitor at Manchester City Council, refuses to discuss what rate Slaughters charges the local authority. "The charges are between Slaughters and us. You wouldn't know if we are paying the most expensive charge-out rates anyway." And neither would Central Government or the population of Manchester that is funding the use of such a firm.
One local authority source says: "Maybe Slaughter and May is doing them a fantastic deal or they have some other reason why DLA or Hammond Suddards Edge didn't carry out the PFI work." He adds: "Just because it is PFI, it doesn't make it more complex but there are few firms that can do it. If we get PFI deals the contractors will have their own lawyers."
In fairness, however, Orrell says that the council does use other firms for other areas of work. For example, Hammond Suddards Edge is acting for the council on its PFI Pathfinder initiative, where the public and private sectors are working together to regenerate housing in the region.
Eversheds is advising the council on the development agreements for the redevelopment of Piccadilly Gardens, a notorious site in the middle of Manchester which is sorely in need of attention. Hammonds is acting on construction matters.
And while Eversheds did not have to tender for its role on the Piccadilly Gardens deal, Hammonds did. Slaughters has not had to tender for any of the projects it has been involved in.
The tendering criteria is unclear and Orell is vague about the terms under which work is outsourced. This has not been well received by local firms. As one highly-rated property partner observes: "There has been no tender for this work or anything, although it would depend, I suppose, if you look in the EU journal. But I would have thought that the council would have written to the local law firms about this."
One local authority source says: "[Tendering] really does just depend. Most local authorities have their own standing orders. Certain matters have to be let in certain ways."
These deals are substantial so one wonders what the criteria was. For example, the redevelopment of the Shambles area, where a new Harvey Nichols store is about to be built (see page 35), is a much-vaunted improvement to the city.
The £50m retail development is being headed by Prudential, advised again by Lovells, where the life assurer entered into a development agreement and head lease with the council. It also has a sublease and development agreement with Harvey Nichols, which will be opening its fourth UK store. And Crosby Homes North West, advised by Eversheds, is building an 88-apartment residential tower with a retail level.
Just next door is the major rebuilding of badly damaged Marks & Spencer, represented by Denton Wilde Sapte, which also involved Slaughters acting for the council.
Of course Slaughters is not the only London law firm to have gained work through the redevelopment of the city after the bomb.
One source says: "It is not surprising because many of the companies are based in London and for that reason they use City firms."
But that doesn't seem to be a tangible excuse for Manchester City Council. Is the use of Slaughters on these deals a cache issue? Certainly, an awful lot of money has been sunk into the centre through a mixture of Government money, European Union funds, lottery cash and contributions from the Lord Mayor's emergency funds.
There has also been thousands of column inches given over to the £500m redesign and rebuilding of the centre, headed by Howard Bernstein, chief executive of both the City Council and the Manchester Millennium taskforce, a public and private partnership set up to lead the redevelopment of the city.
As one City of London lawyer says: "Maybe it is an 'IBM' thing, having the brand recognition for such high-profile work." But apparently not. Orell says that she does not want to denigrate other law firms. "Other firms might be acting for other parties, there might be conflicts. We are very pleased with the work that Slaughters has done, but I wouldn't want to belittle other law firms," she says.
A noble sentiment, but what about that other little matter that local authorities have to consider, the Best Value Initiative introduced under the Local Government Act 1999? "It means to secure the best value in the service that the vendor provides. Local authorities have to find a way to provide service to the public and this should be concerned with the three Es - economy, efficiency and effectiveness," explains one local authority expert. "In these circumstances it would certainly raise issues about the appropriateness of using lawyers at this firm to offer best value to the council."
But Orell emphasises that the firm and the council's 110-strong legal department work very much hand-in-hand. And Beales says: "We work very closely with the in-house team. We do the documentation and the City Council lawyers do the planning issues and the highway issues."
Consider this, then. Orell is unwilling to reveal exactly what deal, if any, the council has with Slaughters, so there is a chance that Beales' £500 hourly charge-out rate will be incurred. Beales says that two or three people will work on the deal, including himself. A source says that the hourly rate for a senior assistant is between £350 and £375 an hour. He says: "An assistant will be on substantially less, but then this is Slaughters, so it must be lots more than lawyers in the North are making."
A Manchester lawyer confirms the differential rates: "For a 10-year post-qualification lawyer in the North you would expect to pay £200, for an eight-year post-qualification you would pay £160. In these circumstances I don't know why [Manchester City Council] feels the need to go to London for Slaughter and May which is expensive even by London rates."
Commenting on the Best Value Initiative, Orell says: "I cannot talk about the terms but we are sure we are getting best value because quality equals price."
But one local authority source says: "It really does just depend. It's okay to look at hourly rates, but you also need to look at what skills are available. You have to start off by looking at who can do the work. Yes, it is specialist but there are firms in Leeds, Manchester and Liverpool which can do that work."
But Slaughters had, in fact, worked for the council for 15 years before the advent of the Airports Act 1986, which was brought in to advise the local authority on a deal involving Manchester Airport, in which the council holds a 55 per cent share. And according to Beales, since then "it has just been a constant stream of good quality work".
One source reasons that when Slaughters was first appointed by the council all those years ago there was simply not the choice of firms that Manchester now enjoys. Many of the leading local firms such as Addlehaw Booth & Co, DLA, Eversheds, Hammonds and even Halliwell Landau, now have a national presence. He says: "Remember this is more than 10 years ago and more firms have spread their wings up there now."
But is there any point in crying over spilt milk? Slaughters has done its bit in advising on regenerating the devastated areas of the city, so should local lawyers really feel so indignant?
Yes, they should. With the regeneration of the bombed areas of Manchester came a real sense of the local community working together, emphasised time and time again by the council and Manchester Millennium itself.
Admittedly, there was a lot of work involving many parties and there was the potential of conflicts, but why was the work not tendered to find out which local firms were available and were, more importantly, more than capable of providing the same skills as Slaughters and at half the price?
As one lawyer says: "The streets of London are paved with gold. We just survive on the scraps that are thrown off." n
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