Bankruptcy is big business for the City’s best insolvency set

3/4 South Square acts for companies in trouble – but its own future looks bright. By Joanne Harris

At times during the past months it has been impossible to escape insolvencies. Every day seems to bring news of another company hitting the rocks. Kookai, Golden Wonder, Unwins, Sock Shop… all are in administration.

The rise in insolvencies, administrations and bankruptcies is good news for solicitors, but better news for the barristers at 3/4 South Square, which has built up a reputation as the best insolvency set in town.

Despite murmurings that insolvency litigation is not what it once was, senior practice manager Paul Cooklin describes his chambers as being on “orange alert”. He is not yet turning work away, but from the most junior junior to chambers head Michael Crystal QC, things are apparently pretty busy.

Crystal is, and has been for a long time, the set’s big name. His biggest case remains the £1.2bn Thyssen litigation, which took him to Bermuda for a long period of time between 1999 and 2002. The case threw him into the media spotlight – he was even featured in Vanity Fair – and rumours of a £1m fee abounded.

Crystal is not known as being the easiest barrister to work with. One solicitor described him as a “handful”. However, his reputation as a top silk is solid and well deserved. He is also a deputy High Court judge, a position shared by fellow 3/4 South Square member Gabriel Moss QC. Moss is in huge demand for insolvency and banking work, appearing in an impressive six recorded cases in 2005. The set’s juniors are also popular, particularly Antony Zacaroli, who is praised for his outstanding technical expertise.

Moss and Crystal are joined by another 13 silks and 31 juniors on 3/4 South Square’s roster of full tenants. Members enjoy an average revenue per barrister of £444,000 and chambers contributions of just 11.5 per cent, making them one of the the highest-earning team of counsels in England and Wales.

Cooklin says the set is happy with its size. It is not so small that critical mass is an issue, nor so large that it runs the risk of becoming a small law firm. He and his team of clerks are thus able to keep a tight handle on the set’s management and on work coming in, garnering them as good a reputation as their tenants’.

However, according to City litigation partners, and indeed Cooklin, 3/4 South Square’s reputation is also its Achilles’ heel.

“Occasionally some of them can be a little bit complacent because they’re the pre-eminent set,” says one City partner, adding that some serious competition might do 3/4 South Square some good.

Cooklin’s attitude would seem to back up this view. “It’s going to be hard over the next few years to find another set that matches the quality and depth we have here,” he claims.

The problem is that the current competition does not come from any one place. Serle Court and Erskine Chambers both have small groups of noted practitioners, such as Michael Briggs QC and Richard Snowden QC. 4 Stone Buildings has John Brisby QC. But no other set has quite the number of insolvency specialists as 3/4 South Square, putting it in the peculiar position of being the only chambers really focusing on this area. In other niche practices, such as tax or IP law, there are a number of sets competing for work.

The other question mark over the set at present is how the changing nature of insolvency law will affect its work. Freshfields Bruckhaus Deringer partner Richard Tett points out that, while administrations – particularly in the retail sector – are rising, there are fewer formal insolvencies around, and therefore less actual court work.

“There’s a lot of restructuring work around and there’s a fair amount of insolvency work, but not as much,” Tett states.

Cooklin agrees, but says the changes are affecting the way barristers are instructed rather than how often they are instructed. He estimates that two-thirds of 3/4 South Square’s insolvency work is now advisory and that counsel becomes part of the equation a few weeks after a company is put into administration.

To counter the changes, the set is now increasingly to be found on non-insolvency cases. No fewer than four tenants were instructed on the BCCI litigation that collapsed in November 2005: Mark Phillips QC, Ben Valentin and Tom Smith for successful defendant the Bank of England, and Barry Isaacs for liquidators Deloitte. In October, Richard Adkins QC, Zacaroli and Jeremy Goldring will appear in the multimillion-dollar litigation between NatWest and Rabobank.

The non-insolvency work is becoming more prominent. As well as BCCI, members appeared in the complicated and important insolvency case of HIH Casualty & General Insurance; the House of Lords hearing of Re Spectrum Plus; and the new Gadget Shop litigation. And these were just the headline cases.

Tenants were jetting off abroad, too. A massive 40 per cent of work now takes place in overseas jurisdictions, including Hong Kong, the British Virgin Islands, the Cayman Islands and Continental Europe.

The diversification away from insolvency is, thinks Cooklin, the way forward. “For the specialist set, there’s very much a future,” he says. “However, it’s got to branch out within the areas it’s capable of branching out to.”

It is unlikely that 3/4 South Square will be able to compete consistently with the bar’s ‘magic circle’ of chambers for general commercial work. But cases such as BCCI prove that it can pick up instructions in hefty cases that are not pure insolvency while still keeping a firm grip on its core area.

Top cases in 2005
Three Rivers District Council & Ors v Bank of England
Mark Phillips QC, Ben Valentin and Tom Smith appeared for the Bank of England along with three Fountain Court Chambers members in the BCCI litigation. The lengthy case for misfeasance brought by BCCI’s liquidators Deloitte collapsed in November 2005. Barry Isaacs was also involved, acting for Deloitte.

National Westminster Bank v Spectrum Plus
Gabriel Moss QC was instructed by Allen & Overy on behalf of NatWest in the House of Lords hearing into the Spectrum Plus case. In June 2005, the Lords handed down a decision which set a crucial precedent over the order in which creditors must be paid in insolvency cases.

HIH Casualty and General Insurance Ltd and other companies; McMahon and Ors v McGrath & Anor
3/4 South Square members William Trowers QC, Simon Mortimore QC, Richard Adkins QC, Jeremy Goldring and Stephen Robins were all involved in this high-profile case. Mr Justice David Richards’ October 2005 decision established new principles in the conduct of cross-border insolvencies.

3/4 South Square in figures
Turnover: £20m
Tenants (silks): 46 (15)
Chambers contributions: 11.5%
Revenue per barrister: £444,000
No of staff per barrister: 0.55

Source: The Lawyer UK 100 2005