Former managing partner at Freehills, Paul Montgomery said reports about the approach being taken by corporate counsel from major banks to managing law firm relationships are minus the concept of value. In a letter to the Australian Financial Review, Montgomery said law firms need to respond to this reported trend by engaging their banking clients in a discussion about what good value is.

“There is nothing wrong with high fees, provided there is a commensurate level of benefit,” said Montgomery, who is now the faculty head of the Centre for Professional Services Management.

“If a corporate counsel received a high level of benefit for a reasonable cost, they might conclude they made a good purchase, or even a bargain purchase,” he said.

He made a distinction between behaviourally loyal and attitudinally loyal clients. The former, he said, may continue to use the law firm, but are looking for a better deal elsewhere, without seeking to improve and deepen the relationship. Comments about legal costs that do address the issue of value suggest that clients are behaviourally loyal, he said. “Law firms should be concerned.”

Attitudinally loyal clients, on the other hand, would work on the relationship because they derive value from it. “They would make positive comments only about their legal service providers in the public domain,” Montgomery said. It is necessary to achieve a close working relationship that accommodates the supply of value and gives a law firms a fair return, he said.

“Talk of one party holding power, while reflecting the economic reality, does not help create an appropriate environment,” he said.