11 Aug A Debate on Legal Fees South Africa
Legal Werk, the LPC, clients and Tech services debate the need for change in the legal sector.
On 24 July 2019, a debate of legal fees took place at the Old Mutual facility in Sandton. The panel included Mr Kevin Lester, Head of Legal at Anglo American, Ms Naomi Thompson, a VP at Exigent Group Limited, Ms Rochelle Francis-Subbiah on the advisory committee to the South African Law Reform Commission (SALRC), Ms Yolelwa Sikunyana, a managing partner at Sikunyana Inc and Tshepo Legodi from the IDC. I sat on the panel with regards to inputs from the Bar.
The subject of the debate was on legal fees and the debate sought to include a broad range of legal buyers as well as legal service providers against the legal regulator.
Some of the questions included questioning of myself with regards to a perception of counsel “to overreach on fees.” That topic will be dealt with in a separate post. In this particular feed, I would like to address the main crux of the debate, which was a call particularly from legal buyers to the legal fraternity to reform not only the manner in which legal fees are raised and issued, but the actual management of legal practice going forward.
As one of the panel members indicated, the legal system in South Africa is essentially a 400 year old system which is trying to operate in a modern 21stcentury world. The indication from legal buyers is that the legal system as well as legal service providers have not kept up with technology, artificial intelligence (AI) as well as the need to reform the concept of all clients which is that the service must provide a value.
A panel member indicated that in European countries, the concept of legal management consulting as well as legal innovation has become the norm and this includes inter aliathe following:
The concept of providing legal services as part of a project management framework. In other words, that a specific matter should have a definite scope, a project design, an initiation and project phase as well as a close out phase.
The emphasis on any type of project management is underpinned by the following:
Quality, time and value management.
This is achieved through communication, transparency, collaboration and communication.
It was indicated by legal buyers not only in South Africa but abroad, that the tendency in South Africa is to approach legal matters from an hourly billing perspective rather than seeing matters as a project whereby legal service providers can provide value.
I was asked about this from a counsel perspective, and I indicated that the concept of value is difficult to define in a litigation setting as per counsel since counsel have two roles, which is to offer advice or opinion, alternatively high conflict adversarial litigation. In a commercial matter for example, should the parties try to retain a high value contract, there may well be value in the assistance of a legal team. However, when litigants litigate in their own personal capacities, for example if it is a child-related or a divorce matter, and you are dealing with a finite level of resources, it may well be that the parties feel disillusioned and see the purchase of legal services as a “grudge purchase”.
The elephant in the room so to speak was Section 35 of the Legal Practice Act 28 of 2014 which states as follows:
“Fees in respect of legal services
(1) Until the investigation contemplated in subsection (4) has been completed and the recommendations contained therein have been implemented by the Minister, fees in respect of litigious and non-litigious legal services rendered by legal practitioners, juristic entities, law clinics or Legal Aid South Africa referred to in section 34 must be in accordance with the tariffs made by the Rules Board for Courts of Law established by section 2 of the Rules Board for Courts of Law Act, 1985 (Act 107 of 1985).
(2) The Rules Board for Courts of Law must, when determining the tariffs as contemplated in subsection (1), take into account-
(a) the importance, significance, complexity and expertise of the legal services required;
(b) the seniority and experience of the legal practitioner concerned, as determined in this Act;
(c) the volume of work required and time spent in respect of the legal services rendered; and
(d) the financial implications of the matter at hand.
(3) Despite any other law to the contrary, nothing in this section precludes any user of litigious or non-litigious legal services, on his or her own initiative, from agreeing with a legal practitioner in writing, to pay fees for the services in question in excess of or below any tariffs determined as contemplated in this section. …” (emphasis added)
The representative from the SALRC, indicated that comments were still being submitted with regards to Section 35 and further that it was “extremely difficult”to regulate a legal industry which is determined by various role-players including top commercial law firms including sole proprietors as well as jurisdictionally different types of firms providing and catering for different types of clients and legal services.
According to Section 35(4), the South African Law Reform Commission must, within 2 years after the commencement of Chapter 2 of the Act, investigate and report back to the minister with recommendations on the following:
(a) The manner in which to address the circumstances giving rise to legal fees that are unattainable for most people;
(b) Legislative and other interventions in order to improve access to justice by members of the public;
(c) The desirability of establishing a mechanism which will be responsible for determining fees and tariffs payable to legal practitioners;
(d) The composition of the mechanism contemplated in paragraph (c) and the processes it should follow in determining fees or tariffs;
(e) The desirability of giving users of legal services the option of voluntarily agreeing to pay fees for legal services less or in excess of any amount that may be set by the mechanism contemplated in paragraph (c); and
(f) The obligation by a legal practitioner to conclude a mandatory fee arrangement with a client when the client secures the legal practitioner’s services. In conducting this investigation in terms of Section 35(5), the SALRC can take various factors into consideration including best international practices, the public interest, the interests of the legal profession and the use of contingency fee agreements as provided for in the Contingency Fees Act 66 of 1997.
The SALRC indicated during the discussion, that the area of concern in the debate was not so much for the indigent who have already been provided for in terms of legal aid or even the super rich who can easily afford legal services of their choice but the emphasis of concern is in what they call the “missing middle”.
The SALRC indicates that the provision of legal services, in particular hourly billing, is simply not feasible for the vast majority of the middle class.
In answer to these concerns, legal buyers indicated that there is a growing resistance in multi-nationals and lucrative national companies towards so-called “big law firms”operating from so-called “big expensive buildings”in the Sandton area.
Their emphasis has become on engaging with legal practitioners to find a “solution”to the hourly billing crisis including fixed fee agreements as well as arrangements whereby the business sector can increase the volume of legal matters whilst fixing a fee.
“There is a profound message here for lawyers – when thinking about technology and the internet, the challenge is not just to automate current working practices that are not efficient. The challenge is to innovate, to practice law in ways that we could not have done in the past.” Susskind
The risk to Counsel
A concern for me as counsel, and this shall be addressed in a separate article, is that the role of counsel per sedoes not envisage a “volume increasing”process. Counsel obtain a brief give that requisite brief the necessary time and skill and meet specific instructions. The role of counsel does not envisage taking on multiple matters and producing precedents for each one and increasing volume. Hence, it shall need to be debated how these proposed fee arrangements which could conceivably be implemented across the board with regards to attorney firms, would impact on the briefing of counsel.
Reforming legal business models
The call for an overhaul of the business model for the provision of legal services is not unique to South Africa but has been debated in particular within the United Kingdom, Canada and America for several years.
In researching this topic, futurists such as Richard Susskind have stated the following:
“These new players are not committed to traditional ways of working. They do not believe, for example, that all legal work should be undertaken by expensive lawyers working in expensive buildings and expensive city centres. They do not insist, as many traditional lawyers still maintain, that legal work is best undertaken on an hourly billing basis. They are not constrained by old ways of working. They are passionate about change, and they are often better business managers than most lawyers, who tend to have little training in actual running of commercial concerns.” (Susskind R, Tomorrow’s Lawyers)Susskind indicates that this legal reform and the “liberalisation of the provision of legal services” goes hand in hand with enhanced “entrepreneurial skills”. The vision of Susskind includes a rapid amalgamation of technology and AI into the provision of legal services. In this regard, Susskind berates the legal fraternity for failing to embrace emerging technology systems as well as the “irrational rejectionism”and “visceral dismissal”of technology by the legal profession.
Susskind implores the profession as follows:
“There is a profound message here for lawyers – when thinking about technology and the internet, the challenge is not just to automate current working practices that are not efficient. The challenge is to innovate, to practice law in ways that we could not have done in the past.”
Obviously, the advancement of the legal profession to include technology, cannot exclude the court system which desperately needs an overhaul with regards to automating its systems.
It is interesting that overlapping this debate with the SALRC, a recent practice directive indicated that counsel can finally submit practice notes and heads of argument in the Pretoria High Court. However, this is not even scratching the surface in terms of the possibilities. Futurists such as Susskind foresee the possibility of mobile and virtual courtrooms, online filing systems and paperless litigation. This “futuristic utopia” could conceivably cut down the provision of costs of legal services dramatically, save time and create platforms of accessibility for litigants in remote places and areas.
I pause to wonder if this envisaged Brave New World will miss out on the personalised approach of the traditional system, the witty retorts and rich tradition of John Mortimer’s Rumpole of the Old Bailey and the BBC classic Kavanagh QC in the relentless request for streamlining, automation and cost cutting.
In conclusion, it was reiterated at closing of the debate that the reform cannot merely start with the industry itself it also needs to start with the manner in which the legal courses at universities are presented to students. The process would entail considerable collaboration between various sectors of the provision of legal services including the buyers of legal services, attorneys, counsel, the judiciary and service providers for such a system such as AI and IT service providers.
There are considerable opportunities for legal service providers who are robust enough to anticipate the risks of a changing business mindset, which is showing a lack of appetite and a resistance to hourly billing. Moreover, there may well be increased flexibility, creativity and opportunity in particular for millennials who are able to fluidly transit between the practical realities of offering a legal service to a client in need of assistance as well as the use of online and AI specialisations.