As Holman Fenwick celebrates the opening of its Perth office, managing partner Gavin Vallely shares his thoughts on the firm’s Australian journey

Clients apparently love Holman Fenwick Willan – even on the other side of the table, according to managing partner Gavin Vallely. It’s an odd compliment, but it does make sense. “We often find ourselves in the situation where clients would actually prefer to see us on the other side of a transaction as well because they want a firm that has the experience,” says Vallely. “They prefer to have us as an opponent, because they’re confident that the matter will be dealt with sensibly and fairly. We solve conflicts constructively and, by and large, clients respect us for that. In fact in a recent commercial transaction we had clients wanting us to do everything. In the unwinding of a financial transaction the bank wanted us to undertake work for the bank while the borrower wanted us to act for them as well!”

These days HFW has diversified beyond its traditional shipping roots and now places a strong emphasis on its expertise in “cradle to grave” operations in what might broadly be described as the commodities sector. “We are involved in every stage - finding the product, extracting and producing the product, selling the product, moving the product, delivering the product and storing the product,” says Vallely. “A key distinguishing feature between us and other firms servicing clients is that no other firm has the breadth of experience and depth of resources we have both in Australia and internationally.”

Australian entry

Just as Baker & McKenzie are entitled to feel a little miffed at suggestions that the internationalisation of the Australian market is a new trend (Bakers have been here since 1964), HFW may also beg to differ with any suggestion that the British invasion began with Norton Rose and Allen & Overy in 2009 – HFW arrived in Australia three years earlier in 2006. Nor is Vallely convinced that the Magic Circle model of taking over local firms is the right formula for success.

“One of the major challenges for the firms newly arrived in Australia and targeting project and finance work is that this area of the local legal market is mature with a number of firms having significant experience and already providing a high quality service,” he says. “As a result there may be a challenge in distinguishing the service offering of a rebadged local firm; especially if it is going to be more expensive than an Australian firm offering similar services. We are hearing clients clearly saying that rebadged local firms do not necessarily satisfy what they are looking for in an international firm.”

It is interesting to note that when HFW decided to enter the Australian market, the first destination of choice was Melbourne. “Melbourne is the largest commodities trading and bulk chartering centre in the Southern hemisphere,” says Vallely.

“Many of the partners now at HFW had been servicing these sectors for more than 20 years at the time of the establishment of the Melbourne office and were well known internationally.” As a consequence, much of the work generated by the Melbourne office did not have any geographical nexus with Melbourne or Victoria in a practical sense, other than several major energy, mining and agricultural companies having their corporate headquarters in Melbourne. “Accordingly, the skill sets, experience and client base of the Melbourne office resulted in it servicing national and international work and, indeed, this remains the case,” says Vallely.

The Melbourne office was soon followed by a Sydney presence and, in June this year, a Perth office. “From the moment we entered the Australian market in 2006, establishing a Perth office had been part of the regional strategy. We had already been servicing clients in Perth and Western
Australia for many years,” says Vallely. “Existing clients in the offshore energy, mining and agricultural sectors based in Perth had been indicating for some time that if HFW were to establish an office in Perth we would have their support.”

Vallely admits the Perth market was a difficult place to establish a presence. “At an operational level, it was a challenge to locate office premises which met our requirements,” he says.
“Office premises for professional service firms in the Perth CBD remain at a premium. However, once we were able to secure our premises, we were able to progress very quickly.” The firm had
already earmarked existing partners, Hazel Brewer and James Donoghue, for roles in the Perth office as well as ex- Corrs Perth managing partner Julian Sher. “The Perth office will harness our growing presence in the energy, natural resources and agricultural sectors which continue to undergo substantial growth in Australian and the wider Asia-Pacific region,” says Vallely.

Ports and the resources boom

Australia has a shortage of port capacity and if the difficulties with the troubled Oakajee project in Western Australia is anything to go by, the solution may lie some distance in the future. Port terminal development and associated supply services are core practice areas at HFW and Vallely has been keeping a close eye on the issue. “The increase of Australia’s export capacity through port expansion and supporting inland transport infrastructure is essential to our future prosperity,” he says. “However, the legal, political and environmental issues that need to be worked through in many instances make the process more complicated and time consuming than is the case relative to existing or potential competitors operating in other jurisdictions. We have to be careful not to lose the competitive advantage we have through proximity to our major markets and the quality of our product by failing to address our supply chain issues.”

Quite simply, it’s a case of making hay while the sun shines and Vallely says that Australia has had a patchy performance to date. “An example of how we were unable to maximise the opportunities presented during the boom prior to the GFC is presented by the vessel queues at the East coast
coal ports where waiting time to load was regularly 40 days,” he says. “In addition to incurring substantial demurrage costs which comes straight off the bottom line for our exporters, port congestion impeded our capacity to export product at record prices so the financial impact was twofold in terms of increased cost and reduced throughput.”

However, he notes that port congestion in Western Australia is a little different from the East coast
in that it is largely a product of new entrants requiring access to rail and port infrastructure to ship product from new or expanded mines.

A major question for firms such as HFW is the extent to which the current global economic uncertainty is going to impact on the Australian resources boom. Like many lawyers with clients in the resources industry, Vallely says that most of the projects he has seen are of a long term nature and he has not seen any evidence of projects or expansions being cancelled. “However, it is conceivable that the position will change if we enter a “double-dip” recession as is being forecast by several analysts,” he concedes.

It will be interesting to see what the impact will be on resources M&A. “With regard to acquisitions, should there be a significant “correction” in commodities prices with or without a “double-dip” recession, it is likely that we will see some of the large energy and mining companies, including those from China and India, taking advantage of the volatility to acquire quality assets from companies that are in need of cashflow to service debt as credit remains tight,” predicts Vallely. ALB