Insights into the world of debt recovery – An interview with Kannigan Attorneys Incorporated
20 Aug 2020
We were privileged to recently interview one of Taurus Capital’s esteemed clients, Kimmona Kannigan, Director of Kannigan Attorneys Incorporated. Our discussion focused on the widespread impact of Covid-19 and the subsequent lockdown on the legal industry, and debt recovery firms in particular. Kimmona’s astute insights into the constraints and opportunities facing this facet of the legal sector shed light onto a number of critical considerations for firms operating in this space.
Taurus Capital: Tell us about your firm, Kannigan Attorneys and its areas of specialisation.
Kimmona: I was in partnership under a previous law firm for a period of three years and I took the plunge and made the decision to open an independent practice. Our firm was registered in February of 2020 but officially opened for business on the 2nd of March 2020. Our areas of specialisation are banking law and commercial recoveries.
On a day-to-day basis, our services cover retail and corporate work for a major bank and this includes everything from liquidations and sequestrations to asset repossessions for both retail and corporate divisions of the bank. In the current economic climate the practice has gotten considerably busier.
Taurus Capital: Whereas normal law firms operate on an hourly fee basis, debt recovery firms have a different billing structure. Can you unpack this for us?
Kimmona: We would be amiss to assume that every debt recovery firm bills in accordance with a set fee structure and can only speak to this in respect of our practice which is governed by an SLA which is unique to our client. Our billing is milestone-based and as such fees may be debited as the matter progresses through the various legal stages. Milestones include receipt of instruction, issuing of summons, obtaining judgement etc.
Taurus Capital: And in the event that the application for default judgement is uncontested and everything has run as it’s meant to, what is the general period of time from commencement to completion of this process?
Kimmona: Historically it took us approximately four months from inception to finalisation of the matter.
Taurus Capital: How has Covid-19 impacted this turnaround time and the ability to fulfil the key billable milestones?
Kimmona: The global pandemic has slowed everything down which has had an impact on the functioning of the courts in the various jurisdictions, service by way of sheriff as well as postal services and the courts have migrated from a manual system to an online platform called Caselines. There has been a number of challenges in utilising this new platform due to various issues including skeletal staff at the court, as well as a backlog on matters. In light of the fact that this is a new platform, it would appear that court officials and law firms alike are currently learning how to navigate the system. Matters that took four months to finalise could now possibly take between six to eight months. Logically this has a knock-on effect on reaching billable targets.
Taurus Capital: In addition to the time delays, how did lockdown and the subsequent regulations passed affect your industry?
Kimmona: The first issue experienced was the directive handed down by the National Credit Regulator which effectively suspended the period of dies. Owing to the fact that our client is a banking institute, they are obliged to abide by the various directives handed down by the NCR. In other words, we were unable to proceed with legal action in respect of matters falling within the National Credit Act. The suspension of dies endured from 26 March 2020 to 17 June 2020.
The second issue was that under the state of disaster declared by the President, regulations passed under the Disaster Management Act, under lockdown levels 4 and 5, expressly prohibited commercial recovery work. In terms of these regulations, anything construed to be debt recovery work was not permissible. The aforementioned regulations were revisited under lockdown level 3 and it transpired that commercial recoveries were then allowed, subject to execution being held in abeyance. These were some of the biggest issues and constraints that carried an adverse impact for our practice.
Taurus Capital: What was the impact of these regulations? It must have been a scary time to be the managing partner of a new debt recovery firm.
Kimmona: It was an unnerving time however having regard to the economic climate and the historical challenges experienced on both a national and international level including the 2009 crash, we appreciated that the current constraints were temporary.
Being unable to litigate on commercial matters for an extended period of time and the fact that we are a new practice did apply a degree of financial pressure. However the greater challenge arose subsequent to the moratorium on instructions being lifted as a greater capital outlay was now necessary in order to run a fully-fledged, fully operational practice. Taurus Capital mobilised in filling that gap. In addition, their continued reassurance every step of the way provided peace of mind and a level of stability during these uncertain times.
Taurus Capital: For the average recovery firm, what are the options available to the managing partner to fund that gap?
Kimmona: One of the options that firms can pursue is a bank overdraft facility, however a practice must have an established track record for a period of 12 months in order to qualify for a facility. The second option is to fund the practice in a personal capacity which carries various risks.
Taurus Capital: If you had to compare approaching a bank vs a specialist funder, what would the downsides of the former option be?
Kimmona: In our case, our challenge was that we didn’t even qualify for an overdraft as we were a new practice. We were initially advised by our business banker that we needed to have traded for a minimum period of 6 months in order to qualify for an overdraft facility. Pursuant to Covid-19 hitting our shores, the banks’ appetite for risk diminished and the minimum period doubled to 12 months. In addition, the banks demonstrate neither personalised service nor appreciation for the various nuances in the legal industry.
Taurus Capital: In contrast to your experience with the bank, what has been your experience of working with Taurus Capital?
Kimmona: The first benefit of working with Taurus Capital is that they don’t hinder start-up practices, they help them. For a new practice like ours, a banking facility was not even an option. As alluded to above, a banking facility was not an option for our practice based on their minimum requirements. It was at this juncture that Taurus Capital stepped in.
I would be amiss not to commend Taurus on their impeccable levels of professionalism and their general work ethic. It was apparent that they worked tirelessly to vet our practice and to make the necessary representations in order to ensure that funding came through timeously. It has been the greatest pleasure working alongside Taurus Capital.
Taurus Capital: Did you find that their understanding of the legal world and their ability to empathise with the challenges of running a legal practice aided your experience while applying for funding?
Kimmona: The great thing about Taurus is that this is what they do – they exist to fund law firms. It is clear that they have a great appreciation for how the system works and the unique cashflow patterns within the legal industry. A completely objective funder may not necessarily be cognisant of how the system works and how milestones are achieved. Taurus’ unique understanding definitely aids the process. In addition, they are mindful of the implications that the pandemic carries and the far-reaching impact on law firms and as such solutions are tailored accordingly. Their effort to form a personal relationship as well as their personal touch was immensely valuable and reassuring particularly because we are a start-up practice.
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