Law firms are dealing with more fee-recovery issues and some have been forced to delay staff salaries, or launch disputes against non-paying clients. The problem has taken its toll recently in the United States, where a number of disputes have been launched between high-profile firms and longstanding clients.
In July, Bingham McCutchen filed suit seeking US$760,000 in unpaid legal fees from Capital Properties, who had reportedly been clients of the firm for over two decades. Morgan, Lewis & Bockius also filed a suit for US$2.5m in fees from Home Solutions of America, and Kostelanetz & Fink is suing a former client from KPMG, on an alleged outstanding legal bill of US$1.3m.
Indian firm FoxMandal Little admitted earlier in July that it had not paid their staff salaries because clients had not paid them. “It’s not a case where there isn’t work; we have a lot of work, but it’s just that the bill has been raised and clients haven’t paid,” said a source at the firm.
However, some law firms in Singapore that hire debt collectors to recover fees have been advised against the practice, as it could breach codes of professional conduct. The Law Society of Singapore recently issued a notice stating that hiring debt collection agencies could “adversely affect the standing and perception of the legal profession in the eyes of the public. [Lawyers] should bear in mind that they owe fiduciary obligations to their clients and that the courts are the ultimate arbiters of the recovery of any legal fees and expenses. It would therefore be improper for [firms] to recover their fees and expenses by adopting a method used … in ordinary creditor-debtor relationships.”
Although law firms offer debt recovery services themselves, as a result of the notice pressure on them to recover fees internally will be greater. Singapore-based recovery agency Milliken & Craig expects to see a drop in instructions received from law firms as a result. “We have worked with several firms in the past to collect from their slow-paying debtors in Singapore and abroad. With the latest directive from the Law Society, we do not see any possibility of working with Singapore law firms,” the company said in a statement.
However, while Singapore’s law firms should expect to see more work handling debt recovery issues, Tan Min-Li, a partner and co-head of the corporate finance practice group at Colin Ng & Partners, says that these problems are not widespread among local law firms. “Firms which have been using the services of debt collectors may initially be affected by having to allocate additional time and resources to pursue outstanding claims but, in the long run, they can pre-empt it by adopting different billing and collection mechanisms,” she says, “such as asking for monies to account and rendering interim bills. Ultimately, if you serve your clients well, you should get paid.”
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