From my experience of client-lawyer relations in Australia, where I first practiced as a lawyer, a spate of cases where lawyers had defrauded clients and absconded with trust funds, led me to realize there was a gap in the market for intermediary legal services to help consumers find the right lawyer and to assist in managing their legal cases.
As a result, I started a service called ‘Prime Law Brokers’ which helped consumers take control of their legal cases, monitor their solicitor’s quality of service and the billing process. Prime Law Brokers was to be the precursor for the development of the legal referral industry worldwide, helping private clients locate suitable lawyers to meet their specific needs.
In the UK, private client services have recently become a hot topic given the number of High Net Worth individuals (HNW) entering from Eastern Europe and other parts of the world. As head the Legal Case Management department at Oracle Capital Group, I act as an intermediary referring these HNW Individuals to lawyers.
A family office will often have internal legal counsel (or legal case manager) to oversee the work of external lawyers for their clients. In that context, a ‘legal case manager’ effectively performs the role of in-house counsel for private clients. Acting in this capacity for many years, I have identified the inherent problems within lawyer-client relations, particularly the issue of payment for legal services, which is especially relevant when lawyers provide services to individuals from non-English-speaking countries. For these clients, legal case management services are absolutely essential as they help overcome language and cultural barriers.
Whilst many Russian lawyers readily find themselves in challenging economic political and commercial realities, performing an almost servile function to wealthy clients, English lawyers posses a much more confident and independent stature when it comes to dispensing professional advice and billing for it.
I believe this confidence is often the cause for a common mistake made by lawyers when billing HNW clients. Unfortunately, lawyers sometimes forget that HNW individuals did not become wealthy by being stupid. As a result, I spend a significant portion of my time examining lawyers’ invoices on behalf of wealthy clients and negotiating them down.
This dissonance of opposing objectives – that lawyers will naturally try to optimize their firm’s balance sheet, whilst clients will naturally want more value for their money – results in the inherent conflict of interest that resides in relations between English lawyers and their foreign clients, a dilemma which is exacerbated further when a billing dispute erupts in the middle of a legal case. A common approach used by lawyers in such circumstances is to simply refrain from providing additional advice until their bills are settled.
This is a very effective lever to ensure payment. But, if abused, it tends to anger clients, who find themselves suddenly in a ‘no-win’ position – if they continue to dispute their lawyer’s bills they may risk losing commercial advantage in a business deal, or show weakness to an opposing party in a contentious matter.
By this stage, clients have as a rule already invested considerable time and money into their legal case. They will have little choice but to capitulate to their lawyer’s payment demands. Such lawyer-client relations, if left without conciliation, are not likely to be long-lasting.
I have arrived at a solution which enables lawyers to get paid as much as they want without the risk of offending their clients, which I call “Deferred Billing Disputes”.
The solution is simply to finance the disputed portion of the lawyer’s bill in a direct financing facility like a straight personal loan. This is not be confused with classic litigation funding which involves sharing part of the proceeds from a litigation outcome with the financier – which we do not do.
An example is that a lawyer presents a bill for, say, £20,000, and the client disputes say, 50% (i.e. £10,000). If the lawyer can receive immediate payment of his bill and avoid a protracted problem, he will of course be more receptive to deferring the dispute. The client can obtain direct finance over the disputed 50% portion of the bill (or even the entire bill).
Subject to agreement between the lawyer and client, the legal case manager can help arrange the necessary credit through a specialised finance company. The interest rate for the credit facility will be in the vicinity of about 6%. Thus, by financing the disputed portion of the bill the overall cost of the solution will only be £600 (plus application fees).
At this point, the client is happy because instead of capitulating to his lawyer’s demands, and paying the disputed bill from his pocket, he has deferred the dispute and only paid a financing application fee (of around £100). At the same time, the lawyer is also happy because he has received full payment of his bill, and can carry on with the substantive legal work on his client’s behalf.
One can argue of course that both the client and the lawyer are merely putting off the inevitable i.e. they will eventually have to deal with the disputed amount. But direct financing has inherent benefits. It enables both sides to take a necessary pause and allow heated emotions to subside, before reviewing the dispute in the context of the case result.
If the client is ultimately successful, he may feel very different about the lawyer’s costs in retrospect. Conversely, if the result is negative the lawyer may be more receptive to reducing his total charges.
Since my initial experience with financing legal costs, I have found that it has many more applications, where such credit solutions have offered benefits to both lawyers and clients. For example, cases where unexpected costs arise, such as ‘security-for-costs’orders, or negative awards made against clients and large retainer requests by solicitors to cover the costs of, for instance, high profile barristers.
Whilst these examples may seem irrelevant to HNW individuals, often these unexpected costs simply fall outside the client’s budget, irrespective of how large the original budget was. As a result, suspicions about lawyer’s ‘true’ intentions will start to rise in the client’s mind and the pillars of trust upon which relations were first built will begin to develop cracks.
A financing solution acts as a buffer. It enables lawyers to offer their clients a moment of respite in neutral territory away from strained relations. Instead of exerting pressure on clients over bill payments, the lawyers empower their clients by suggesting a financing solution.
Ultimately this gives clients a dignified voice to communicate with their lawyer and continue their legal case. Financing legal costs can have a significant impact for not only the HNW community but also on the question of access to justice for ordinary consumers.
