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2008 a year of financial turmoil Law firms will need to retool from clients in the black to clients in the red BY KELLY HARRIS N ever was there a more aptly named season for worldwide financial markets then the fall of 2008. It was highlighted by collapsing banks, the U.S. credit crunch, plummeting stock values, and government bailouts — as one unnamed, but oft-quoted stock analyst put it, "there are two positions to be in right now, cash and fetal." At one point during the summer of 2008, the Toronto Stock Exchange hovered at 15,000 points, the price per barrel of oil was more that US$130, and the Canadian dollar was at par with the American greenback. As Black September rolled into Black October, oil sat near the US$60 mark, the TSX had tumbled below 9,000 points, and the Canadian dollar was closing in on the 75-cent mark. Despite a global downturn in the economy, the resiliency of its financial markets allowed Canada to move up three spaces to 10th on the World Economic Forum 2008-2009 Global Competitiveness Report (www.wefo- rum.org/documents/gcr0809/index.html). "The big Canadian banks have not been as badly affected by the crisis, the credit crunch or whatever you want to call it," said Andrew Fleming, partner with Ogilvy Renault LLP. However, the credit crisis in the U.S. fuelled by an unprecedented number of delinquent subprime home loans — 21 per cent of all of those types of loans in January 2008 — dried up cash reserves. As it became harder to raise money, the number of merg- ers and acquisitions began to slow. 'Lawyers are a little like death and taxes, we are always there,' said Andrew Fleming. "We've seen an important part of our prac- tice evaporate, in effect, the sort of large public M&A transactions which depend heavily on liquidity in the credit markets," said Flem- ing. "That doesn't mean they've disappeared . . . they haven't disappeared, certainly they've slowed down, they've come to a screeching halt, I guess is a better expression." Fleming, who specializes in business law including company, securities and banking law, and regulatory requirements, said most law firms have yet to feel the pinch of the finan- cial crisis. While saying the need for lawyers is inevitable, Fleming allowed that firms with an established client base are better equipped to deal with fluctuations in the financial market. Firms that survive from transaction to transac- tion will be the ones that get into trouble. "Lawyers are a little like death and taxes, we are always there," Fleming said. "There is move- ment in the marketplace, so we've seen other areas of our practice start to become busier as a result of the turmoil in the marketplace. "The most obvious one, of course, is restructuring and insolvency, but also our practices, like for instance, employment and labour, where one of the principal aspects of a downturn in the economy is employee relations, and outplacement — I guess they call it, instead of firing." Fleming said when all is said and done in 2008, the bottom line at least at Ogilvy Renault will be positive. Adding this past year will not be another 2007 "which was a record year." "So far in 2008 we're not disappointed by the results, we are quite comforted." With less money to go around, commercial real estate projects will likely slow as well, said Jeffrey Lem with Davies Ward Phillips and Vineberg LLP in Toronto. He also said firms will have to look at the other side of econom- ics, insolvency as opposed to growth. "A lot of new development projects will come grinding to a halt," said Lem. He reported that some lenders are already invoking contract clauses that will let them withdraw financing in bad market con- ditions, while anyone trying to renew a fixed-term loan can expect to be hit with higher interest rates, and some may find they are not able to renew their loans at all. "Then, they're going to find it very diffi- cult to refinance because nobody wants new deals these days," said Lem. "We're going to see a lot more power of sale, foreclosure, insolvency, and workout. It's as simple as that. We're going to see it and it's going to happen soon, if it's not well underway." While a slowdown in construction and merg- ers and acquisitions may be easy to predict, what the economy holds for law firms in 2009 is as easy as trying to predict the roller-coaster ride of the stock markets, said Fleming. "The person who can tell me how far up or down the TSX 100 is going to be today, is the same person who can tell me what is in store from a business point of view in 2009 as law firms in Canada." At Stewart Title, it's how we work that sets us apart. We deal in title insurance and related products, undertaking no part of the transaction that has traditionally fallen to legal professionals. Since our inception into the Canadian market, you will find that we have consistently combined comprehensive coverage with unparalleled support for legal professionals. We are dedicated to streamlining your practice and increasing your revenue through our programs and innovative technology solutions. At Stewart Title, we know it's our relationship with our customers that determines our success. That's why service is the foundation of our business and integrity, the keystone in all our dealings. Contact us today at (888) 667-5151 or visit www.stewart.ca. 2008 top news & newsmakers 11 news