Right of the middle

Transparent: Managing partner Nick Nichola says the firm has a collegiate culture

PRIVATE BUSINESS OF 2010 (TURNOVER UNDER $100 MILLION)

Winner: Middletons

Finalists: Ego Pharmaceuticals, TLC Aged Care, Travelforce

Taking risks and operating transparently has helped mid-tier law firm Middletons secure a place as Australia’s pre-eminent private business with revenue under $100 million in this year’s BRW ANZ Private Business Awards.

Established in the early 1800s, the firm has undergone a number of incarnations, engaging in a series of mergers and acquisitions before 2001 when it evolved into its existing structure.

Managing partner Nick Nichola’s introduction to the company came through a merger between Middletons and Moore & Bevins – his former employer, where he worked as a corporate lawyer.

An appetite for change is also evident in Middletons’ more recent history. It has offices in Melbourne and Sydney and in 2008, Nichola presided over the firm’s expansion into the lucrative Perth market on the back of work it was doing there. “Instead of having a team of people continuously flying in and out, we quickly realised it was beyond a temporary thing – it should be made more permanent,” he says.

While Nichola acknowledges a permanent presence in Brisbane would be the next logical step for the firm, he insists there are no current expansionary plans.

He describes the unprecedented market conditions of the past 18 months as “unlike any other economic environment in my lifetime”, drawing a comparison to the recession of the early 1990s.

“That was pretty bad but the GFC exceeded everything,” he says. “Trading conditions were totally different to what I’d been used to.”

At its Christmas party in December 2008, Nichola took the extraordinary step of announcing the firm wouldn’t be adopting a redundancy program in response to declining work volume. The effects of the downturn were yet to be fully realised and Middletons was among the first in the legal fraternity to acknowledge that decisive action was needed.

In hindsight, Nichola says the announcement was premature. “It was an ambitious and bold statement. I knew I had the overwhelming support of the board and partnership and I have no regrets – I wouldn’t do anything differently.”

But he concedes the ensuing period wasn’t all rosy and 2009’s salary review process was “very tough” with pressure not to renege on the statement he had made just months earlier.

Some special remuneration reviews were carried out and put into effect for high-performing staff but the firm hasn’t been immune from high-profile defections. Most recently, energy and resources partner Peter Limbers moved to Blake Dawson.

Nichola was appointed managing partner in January 2005 and his contract will expire in 2013. With the exception of the downturn, his tenure has resulted in steady, sustainable growth over the five-year period.

In last October’s ranking of Australia’s biggest law firms, BRW estimated Middletons’ 2008-09 revenue at $97 million. At the time, the firm employed 259 legal staff. Since then it has hired 23 more.

For the past three years, Middletons has offered parental leave of 14 weeks, higher than any statutory obligation and favourable when compared with competitor law firms. It has also recently introduced an internal forum for working mothers and female staff and set a target to double the number of female partners by the end of this year.

While it’s only staff that are truly privy to the internal workings of a firm, Nichola insists the culture at Middletons is one of transparency and fairness. “Culture is such an intangible thing,” he says. “We’re collegiate, we get to the point. Younger lawyers would say there’s something unique about Middletons.”

The firm is a member of TerraLex, an international alliance network of law firms designed to provide referrals across 100 jurisdictions. It has moved to increase the awareness of the network by establishing an internal client service team, which has led to inbound referrals growing to $400,000 over the past two years.

Locally, Middletons promotes its service and brand proposition largely through high-profile sponsorship arrangements and a transparent corporate social responsibility strategy.

It is the official law firm of the annual Sydney Writers Festival and supports Tennis Australia’s in-house general counsel by providing advice on broadcast contracts and licensing schemes for the Australian Open. It has also negotiated a three-year contract with Perth 2011, which is scheduled to culminate in the ISAF Sailing World Championships next year.

In addition, the firm also engages in a number of community-based programs and pro bono initiatives. It has developed a partnering agreement with Oxfam Australia, which includes the Oxfam Change Course event – a program for indigenous youth – and the Trailwalker program, a fund-raising challenge where participants trek 100 kilometres in 48 hours.

Middletons has also provided more than $1 million of pro bono work and other support for not-for-profit and community partners, 50 per cent of which is dedicated to the St John’s Legal Centre in Darlinghurst, Sydney.

The immediate focus for Nichola is to ensure the firm’s core practice areas – including dispute resolution, intellectual property, energy and resources and major projects – remain on track for growth across the 2010-11 financial year.

It’s a period that’s going to be “tough and challenging”, perhaps more so than the previous year. The IPO market, for example, remains suppressed despite many rumoured moves and, while insolvency has performed well, the expected volume of company administrations hasn’t materialised. “And it’s the same with litigation – there hasn’t been that explosion of cases,” Nichola says.

Market conditions have also led to greater competition among law firms – with less work available, clients are more discerning about quality and perceived value for money, as well as more demanding of partner accessibility.

“I’ll borrow a quote from another managing partner – ‘I don’t subscribe to the theory that quality is a given’ – it’s not,” he says. “I don’t know whether there’s evidence of a flight to quality for the top tier of firms because we frequently compete on quality with Mallesons [Stephen Jaques], Freehills, Allens [Arthur Robinson], Blake Dawson and Clayton Utz.”

Middletons acted for Local Directories in its successful attempt to break Telstra’s copyright over its closely held national directories. The Federal Court ruled in favour of the firm’s client, establishing no copyright in Yellow Pages and White Pages.

Award-winning scientist Veronica James was also represented by the firm in what was described as a “David and Goliath” appeal against listed biotech company Fermiscan Holdings. Having parted ways with Fermiscan in 2006, James took her research in a different direction, developing a revolutionary new way to test for a variety of cancers through examination of skin and nail samples. The judgment ruled in favour of Middletons’ client.

The firm also represented James Hardie’s former general counsel, Peter Shafron, in his appeal against the findings and penalties handed down by Justice Gzell, for breaches of his duties as an officer under the Corporations Act in civil penalty proceedings brought by the Australian Securities and Investments Commission. The appeal followed one of the largest civil prosecutions in Australian corporate history.

One of the firm’s most high-profile cases has been in acting for confectionary company Darrell Lea in the matter of the colour purple. Chocolate giant Cadbury sought registration of the colour purple as a trademark and also issued proceedings against Darrell Lea claiming that the various shades of purple used on some of Darrell Lea’s product packaging and in its store fit-out was misleading and deceptive.

Over the past 12 years, a number of panel work reshuffles in sectors such as banking and finance has resulted in Middletons being appointed to organisations such as Westpac, AWB and HSBC.

The Westpac appointment was of particular significance, given the outflow of legal instructions within banking has contracted quite substantially.

“We’ve done work in the past from Westpac, but we worked very hard to get that appointment,” Nichola says.

BRW

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