South Africa’s legal system has evolved a great deal since Van Riebeeck brought Roman-Dutch law to the Cape in 1652, but corporate structures haven’t changed much in a century. Consider, for example, the foundation dates of South Africa’s so-called ‘Big 5’ law firms. The oldest, Cliffe Dekker Hofmeyr, was begun in 1853. The youngest, Norton Rose Fulbright South Africa, was founded in 1922. Webber Wentzel, South African Law firm of the Year seven times in the last decade, opened its doors in 1868.
But in 2011, little noticed, a Cape Town-based lawyer called Yvonne Wakefield founded a company called Caveat Legal, based on a radically different model, which is today reshaping the global legal industry.
“Entering the profession was a serious wake-up call for me,” recounts Wakefield, who joined the Cape Bar in 2005. “I quickly realised that my profession had developed in such a way that lawyers were, and still are, forced by heavy overhead structures to charge fees that don’t bear much relation to the work delivered. There’s that saying about ‘the doors of the Court being open to everyone, just like the Ritz’. It’s true.”
A Cape Town lawyer brings new vision to an old profession.
After completing an LLM at UCT, Wakefield took time off to have two children, but in 2011 she was anxious to get back to work.
“One day, my father-in-law dropped by carrying an issue of Forbes. He said there’s an article in here you have to read. It was about this big-firm lawyer based in the US who had - also while taking time off to have kids - started a successful legal services company, drawing on the skills of lawyer friends who were away from work for similar reasons. I read the article, and the next day pronounced to my husband that this is what I wanted to do,” she says.
Being virtual, the business took a mere two months to set up. Wakefield rounded up five acquaintances who had left jobs at big law firms for varying reasons, but who “still loved the work”, and were on the look-out for alternative ways to keep doing what they had been trained to do. Caveat’s sales proposition was an enticing one - big law firm expertise at roughly half the price. The timing, moreover, was perfect.
“In the US and UK, the move towards more flexible, less expensive alternatives to the big law firms was well underway in 2011, and although the same pressures were in place in South Africa, there had been no innovative responses from the industry,” she says.
The global attention being paid to the high asking fees of big firms (and to the quality of work rendered) had its roots in the global financial crisis of 2008, and to a significant extent with the publication the same year of Richard Susskind’s The End of Lawyers – Rethinking the Nature of Legal Services.
“The biggest strategic issue facing any law firm in the world today,” Susskind told Forbes, “is the extent to which they continue doing routine and repetitive, administrative, process-based work. What clients are saying is ‘we don’t mind paying law firms high fees for the difficult stuff, but on a big dispute, if you look at the document review exercise, or on a big deal, if you look at the due diligence exercise, we don’t really need expensive young people in expensive buildings in expensive cities doing this’.”
In the US and UK, the alternative model that came to the fore was one which used the internet to create a virtual firm comprised of freelance lawyers and abetted by new software that takes care of a number of tasks traditionally performed by junior lawyers. Initially referred to as ‘alternative legal service providers’ these companies, including Axiom Law, which today employs 1,500 personnel across three continents, began pushing the neologism ‘NewLaw’, as a way of distinguishing themselves from ‘BigLaw’.
Wakefield did something similar, creating a ‘panel’ of former big firm lawyers (50 at present count, including highly regarded legal minds like former Bowman Gilfillan partner, Hans Muhlberg) whose skills collectively cover all the major commercial legal fields.
“The fact that our panel members are essentially independent freelancers makes our offering completely flexible,” she says.
“One client might need a small set-up of terms and conditions for its website, and another client might need a team of eight for a year to see to the creation of a big international Aid company. We can do it all, and at roughly half the cost of your big law firm because we don’t carry the expense of salaries, big buildings, art collections or support staff.”
The absence of overheads means the panel members come away with more per hour than they would take home in big firms.
“Plus they work when they want, where they want and as much as they want,” says Wakefield, adding that she has been surprised at how many male lawyers have expressed an interest in working this way.
“I thought initially it would be mostly lawyer moms who wanted a bit more flexibility in their lives, but it’s more or less a 40/60 split between male and female panel members at the moment. I think this is partly because lawyers are increasingly making lifestyle-related work decisions, particularly in Cape Town,” she says.
Working conditions in the big law firms have also contributed to Caveat’s success.
“The deals simply aren’t there for the big firms at the moment,” says Wakefield, “so they’re not hiring as many people as they used to, and they’re becoming much more ruthless in relation to the fee targets that their lawyers need to reach every month. So we’re finding that highly skilled, highly experienced big firm lawyers are getting in touch with us, and in such numbers that we’re turning away five out of six applications.”
Commercial lawyers make up Caveat’s core team, with the rest covering a wide range of specialty areas, including the fields of banking and finance, environmental, energy, construction and employment law.
Wakefield is delighted by the direction in which Caveat has organically developed and is now starting to settle, which is mostly in the investment space.
“A very large portion of our work is done for private equity firms and venture capitalists. We will do everything for them from due diligence to the drafting of transaction documents, and what’s really nice is we’ve gained traction in this space mainly through word of mouth,” she says.
In addition to this corporate work, Caveat serves two other markets: small-to-medium businesses requiring the services of senior legal professionals on an ad hoc basis, and also law firms requiring additional staff capacity or specialty expertise. Being a private company the management team is unable to supervise the work of panel Members, and as such there is reserved work that Caveat cannot do, such as litigation and conveyancing.
This has not stopped Caveat from competing for big deals with the Major law firms, and with considerable success.
Whatever the future holds for Caveat (and Wakefield suggests that expansion to the UK might be on the cards), the company has already, in its five years, done more to streamline the way lawyers work than most others have done in a hundred.