Law, Regulation, Risk

Q&A: Keep legal costs in check

Question
A business owner from Kooyong, Victoria asks:

My business just grappled with three legal issues: tax, employment law and then a supplier contract. Then my lawyers invoiced me $43,938. What they did was comprehensive but, at this price, I feel gouged right down to each email and call. This amount has blindsided me. Any tips to prevent lawyers doing this to me again?

Answer
Kenelm Tonkin,
Chairman, Tonkin Corporation answers.

Try these 13 tips for slashing legal costs:

Tip 1. Carefully match company to law firm by size. If you own a small operation, go for a quality mid-sized firm or a former partner of a mid-tier company who is out on his own. This latter option is fantastic at achieving top service. Large firms are prohibitively expensive for SMEs. This matching rationale is also how to find a good accountant;

Tip 2. Seek specialists. Repetition makes a lawyer fast. Generalists are slow and time is money. So, rather than think about hiring one lawyer, approach this more as the development of a panel of specialists lawyers. You will have an employment solicitor, a general commercial litigator for contractual matters, an IP attorney, a tax lawyer and whatever practice specialists needed for your type of business;

Tip 3. Test accessibility. Before instructing a solicitor, call multiple times at unexpected moments. Accessible lawyers yield quicker results, cutting costs;

Tip 4. Assess efficiency. Visit the lawyer’s office. Turn up early which unexpected. Is the firm well-ordered or chaotic? Eschew the posh conference room. Instead, ask to talk at the solicitor’s desk. Is it a muddle of competing files or is the professional in control. Better, see if your prospective advisor will come to your office without charging you the travel time;

Tip 5. Be clear. Proclaim your cost-sensitivity. Say it first. Say it often. The earlier in the relationship you make obvious your cost sensitivity, the better. If you are building a panel of specialist law firms, try running a bidding process such as I described in Q&A: Put it out to tender;

Tip 6. Check commerciality. Explain your problem. Ask “What will this cost overall?” Equivocation and obfuscation are red flags. Counsel unable to articulate your cost-benefit trade-off will cost you dearly.

Tip 7. Cap costs. Ask “Will you take my instructions on a fixed fee basis?” If no, beware.

Tip 8. Quiz a client. Ask “Did this lawyer honour his fee estimate and achieve the result you wanted?”

Tip 9. Insist on a cost agreement. Defining the scope of work unambiguously is a prerequisite. To save money, stick to that scope.

Tip 10. Maximise oral, minimise writing. Unnecessary emails, memos, written opinions and letters exponentially increase your costs. Demand a lean carriage of your matter.

Tip 11. Write notes. Legal issues recur. If you record your lawyer’s advice and learn the law, you won’t need to revisit old ground in the future.

Tip 12. Select trustworthy lawyers. Trust, honesty and chemistry lead to lower costs.

Tip 13. Focus on results not process. Do not become lost in the solicitors’ labyrinthine technical process. Diversions are costly. Stay true to the business owners’ creed of achieving the most efficient result.

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