Brisbane spent 2011 mopping up after floods and cyclones – but as Kathryn Crossley discovers, the city is still looking forward to a robust 2012.

Brisbane’s lawyers can only describe 2011 as a mixed year. The first weeks saw much of the state flooded, and then the north was buffeted by Cyclone Yasi shortly after. “It has been one of those years that has absolutely flown by,” says Dr Peter Ellender, CEO of Carter Newell. “The severe weather right
through Queensland, and particularly in Brisbane … seems to have squashed the year into about two thirds of an actual year.”

These natural disasters were a huge blow to business confidence and caused many projects to be put on hold. As the disaster recovery process progressed, lawyers turned a watchful eye to the ongoing economic woes of Europe and America, with many clients nervous about the deepening difficulties facing the global economy.

Locally, it’s a mixed picture for business confidence: Queensland’s mining sector has generally survived
the setbacks of early 2011 unscathed and has continued to drive a boom in infrastructure and building and construction work in certain regional centres. But in contrast, cities such as the Gold Coast have endured tourism slumps and very quiet building and construction scenes, and corporate work
remains slow across the state.

Given the hurdles to be overcome by Brisbane’s firms in 2011, the revenue growth reported by the firms ALB spoke with was impressive, with ouble-digit revenue growth on the revious financial year the norm and any expecting to match or exceed this late in financial year 2011/12.

Market
Competition for legal work has grown considerably in Brisbane with several new players arriving in Brisbane in the past 18 months. These include Thomsons Lawyers – following the well publicised defection of nine partners from DLA Phillips Fox - Henry Davis York and Macpherson+Kelley, which entered the market through a merger with BCI Lawyers. More recently, Slater & Gordon announced
in November that it would acquire Queensland-based Conveyancing Works for approximately A$5 million.

The expectation is that the newcomers will have to become profitable by growing market share,
rather than relying on overall market growth. “The legal market in Australia is largely mature. The pie is not growing, so therefore if you want another slice, you have got to take it off someone else,” says Cooper Grace Ward managing partner Chris Ward.

Movement at national firms has also served to promote some client movement to Brisbane firms: “We
win new clients every day who are looking to forge a real relationship with their lawyers. The more
consolidation that happens at the top-tier and international level, the more work comes our way. In that
respect, the reach of the mid-tier firm is greater than it has ever been,” says HopwoodGanim managing partner Bruce Humphrys.

Many lawyers expect the market to remain fluid in 2012. McCullough Robertson chairman Brett Heading
believes Queensland’s capital will soon begin to attract the attention of international players: “the attraction of Brisbane is the sheer volume of capital committed for long term investment in resources and related infrastructure … I anticipate more global firms will be in our market in the next twelve months. This is hardly surprising in view of the economic horsepower of the Asia Pacific region and the problems in Erope,” he says.

Disaster and Disruptions
Natural disasters have clearly taken their toll on Brisbane’s legal fraternity in 2011; business disruptions caused a slow start to the year and damaged business confidence. “Business ground to a halt. People got into that recovery process … and just postponed any of the normal expansionary programs
that they may have, or takeovers, mergers – all of that was put on hold,” says Les Hancock, managing director for Queensland at Macpherson+Kelley Lawyers.

Flooding of the Brisbane CBD meant a number of law firms were forced to close their offices, with some closures lasting a week or more. Those firms that were fortunate enough to avoidflood disruptions in the CBD were still faced with delays emanating from clients’ and opposing parties’ office closures.

As recovery activity got underway, firms fielded enquiries from clients. For some, the natural disasters have brought considerable work. Cooper Grace Ward has been advising a major insurer on issues arising from the disaster. “The huge claims handling processes alone were just phenomenal. In a month they were getting the number of claims they might get in two years,” says Ward. “In the first
three to four months a lot of it was just working with our client through that whole process and then the
Queensland Floods Commission of Inquiry was announced in February ... a lot of work has gone into the reparations for the hearings, and then subsequent to the hearings there will be a lot of work in terms of the report itself.”

For HopgoodGanim, the work has come from the other angle: “We’ve seen an increase in work related to the repair of both State infrastructure, and retail, commercial and residential premises on a smaller scale,” says Humphrys.

Despite some strong activity in this area, many firms told ALB that far less work was coming through from the recovery than originally expected. “Generally, flood recovery work has been a bit of a mixed bag for local law firms, we have seen legal work coming through from affected body corporates and businesses, but there has not been the volume of work that may have been initially anticipated,” says McCullough Robertson’s Heading.

Resources and Mining

Unsurprisingly, resources and mining work has continued to bolster Queensland’s legal practices over the past 12 months, led by the state’s flagship LNG projects at Gladstone. According to the Minerals Council of Australia, construction work on new resources projects in Australia rose by 31 percent over the 2011 calendar year and investment in machinery and equipment rose 20 percent during the year.

This gives some insight into why Brisbane firms are continuing to grow despite a patchy local economy.
It is clear that the resources sector has remained strong despite project delays caused by wild weather in January and February. “Because there’s demand in mining and infrastructure, other industries such as consultants, the property industry and services are going gangbusters. That’s creating a whole influx of additional work in different sectors, based on the activity in the mining sector. That’s all over the state, and includes the areas such as Gladstone, Mackay and Mount Isa,” says Andrew Johnson, partner at
Mills Oakley.

Although all areas of resources work were strong, coal seam gas has garnered the greatest attention
and landholder rights have become the issue du jour. “The number of properties affected by wells has
substantially increased, and the big players have substantially increased their activity in the last 12 to 18
months,” says Hancock. He adds that advice sought by landholders in this area primarily centres on “how to manage the coexistence on the properties, the disruption to business and fair compensation.”
The sector has also seen growth in regulation. “There is of course some strong public debate in [the coal seam gas] area, and government looking to respond to that public debate,” says Ellender. “We’ve got quite a bit of change in Queensland with the government active in areas such as strategic cropping land and urban restricted areas which are coming into play and affecting the way in which those industries are being run. Then at the federal level we’ve got the impact coming through of the resources tax and the carbon tax also affecting some key clients in Queensland.”

Many lawyers expect these legislative changes will keep them busy in 2012. “As the regulation governing Australia’s and specifically Queensland’s resources industries continues to increase in both number
and complexity, the work for our resources and energy practice in 2012 and beyond is likely to include
a significant component relating to regulatory compliance,” says Martin Klapper, partner and head of resources and energy at HopgoodGanim.

Infrastructure
In recent years Brisbane has been home to numerous major infrastructure projects. “It’s clear that what used to be regarded as a major project is now the industry standard,” says Heading. Infrastructure work across the state remains strong, with the size and number of projects meaning that numerous Brisbane firms have been busy advising head contractors, subcontractors and other project parties.

Current projects under construction include Brisbane’s A$4.8 billion Airport Link and the A$1.5 billion Legacy Way project. Further south, the A$1 billion Gold Coast Rapid Transit project that was announced in June 2011, is set to become Australia’s first wholly internationally funded PPP.

However, after the unexpected expenditure on post-flood and cyclone repairs to state infrastructure,
government spending on major infrastructure projects may remain limited for some time, and the
emphasis on infrastructure work is expected to shift further to the privatesector. “The government doesn’t have a lot of money to use at the moment for launching new projects; they’re trying to get the budget back into surplus, but they’ve pre-committed to a phenomenal amount of projects in the last few years so there’s a huge amount of ongoing activity,” says Johnson.

The impending Queensland state election will also keep government infrastructure work quiet for a few
months. “It may be mid year, or even later before there’s some clarity and direction around government
developments,” predicts Heading. In the private sector, infrastructure to support resources projects remains of critical importance. “Rail and port infrastructure are the obvious examples but the impact of many new developments proposed for Queensland, principally but not solely in coal and CSG, will require significant investment in electricity generation and transmission, transport and water supply,” says Klapper.

Heading agrees: “This will be necessary to enable the pipeline of coal mining projects planned to
come into production over the next few years. The range of legal work will encompass everything from
land acquisition, project approvals, construction and financing.” It seems Brisbane’s infrastructure lawyers can expect to be busy well into 2012.

Building and Construction
Brisbane’s building and construction lawyers reported some pick up in the sector during the second half of 2011, but say that work has been patchy throughout the year. “The building sector associated with the resources industry is still strong, but in terms of pure commercial building and construction there is not so much activity, and restricted finance is a major factor here,” says Ellender.

For many lawyers this has meant periods of considerable activity followed by quiet. “The intensity of
the work is something that you have to cope with,” says Ward. “It normally starts off very quickly and there is an intensity of work that goes around the whole tender process and then you come to a halt whilst the tender process is resolved … In some respects,it is probably not unlike the M&A space where it is all systems go and then when it finishes, certainly there is then a hiatus period, while you wait
for the next transaction.”

Although work remains stop-start, it is an improvement on previous years. “In 2006/2007 there were 15 cranes in the CBD building high-rise towers and residential towers,” says Johnson. “During the GFC for two years there were none. We’ve got four or five in Brisbane at the moment and on the outskirts of Brisbane there’s activity in the infill residential market. There’s demand for investor stock; there’s
a terrible housing and affordability crisis in Queensland in terms of stock but our clients seem to be finding the price point and going to the market and getting good pre-sales.”

However, as with other areas of Brisbane legal practice, resources projects are a key driver of the
building and construction sector. “There is a strong demand for building to support resources and
infrastructure-focused regions throughout the State,” says Tony Baldwin, partner and head of
HopgoodGanim’s commercial property practice. He adds that several largescale accommodation projects for mine workers in regional Queensland are now underway to address the severe lack of available housing in those areas. “In regional areas like Gladstone and Mackay, the property
market is booming. Gladstone is off the Richter scale and people are trying to catch up with that demand,” says Johnson.

Insolvency
Insolvency work remained strong in 2011 with large corporate insolvencies, receiverships and administrations. Lawyers reported growing levels of mortgage stress in both commercial and residential spaces: “there are still people whose businesses are stressed, and I don’t think there’s any change to that. It’s not likely for another year or so, particularly when refinance is almost impossible for anyone that’s in a stress mode,” says Hancock. In addition the last months of 2011 saw increased mortgage debt recovery work. In particular, receiver and manager sales remain high, andaccounted for approximately one third of all commercial sales in Queensland.

Despite the activity, much of this work has not reached law firms. “In a large number of cases,” says Ward, “clever lenders and mortgagees are working with their borrowers. I think there is a lot happening behind the scenes that we will never see.”

Darrell Jardine, partner and head of HopgoodGanim’s litigation and dispute resolution practice, agrees.
“There have perhaps not been as many appointments as expected in areas such as receiverships. It seems that some banks were performing an informal receivership under their supervision, rather than appointing an insolvency practitioner, to minimise costs. In this respect, the insolvency figures out there
at the moment might be inaccurate, as they will overlook companies and people that ordinarily would have been factored in but haven’t been because their banks dealt with them informally.”

Despite this trend, ongoing difficulties in the tourism and retail sectors, and global economic uncertainty mean that insolvency lawyers can still expect strong workflows from 2012.

What Next?
While Brisbane’s firms are in many ways at the mercy of global economic conditions, the state’s booming resources sector is expected to continue to provide some insulation. For most firms, the strategy for 2012 is to focus on their strengths and to consolidate their positions. While most of the firms
ALB spoke with are looking to grow staff numbers, any changes will be made with a close eye on the markets. “Obviously, you need to keep an eye on the outside world but at the end of the day it is your ability to get your internal workings in proper shape that will drive your ability to capture work … I think surviving and growing will be looked at in retrospect as a huge measure of success in the next couple
of years,” predicts Ward. “We hope it will be quite a reasonable year but I do not think we will be setting records in terms of growth or profitability.”