Advertising for Personal Injury Legal Services

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1 Advertising for Personal Injury Legal Services National Legal Profession Taskforce 3 December 2009 GPO Box 1989, Canberra ACT 2601, DX 5719 Canberra 19 Torrens St Braddon ACT 2612 Telephone Facsimile Law Council of Australia Limited ABN

2 Table of Contents Executive summary...3 Background...4 The insurance crisis and personal injury law changes...4 Prohibition in NSW...4 Other advertising restrictions...5 Rationale for advertising restrictions/prohibitions...5 Prohibition unnecessary...6 Censorship...7 Reduced competition...8 Access to justice and information...9 Freedom of speech...10 Double standards...10 Personal Injury Legal Services Advertising Page 2

3 Executive summary 1. On 2 November 2009, the Standing Committee of Attorneys-General (SCAG) referred the issue of a national ban on personal injury legal services advertising to the Council of Australian Governments (COAG) National Legal Profession Reform Taskforce. 2. This submission details the Law Council s opposition to any blanket ban on personal injury legal services advertising and proposes a reasonable model to regulate all legal services advertising. 3. The Law Council opposes any blanket ban on personal injury advertising because such prohibitions: (a) (b) (c) (d) (e) (f) are unnecessary; amount to little more than censorship; are anti-competitive, restricting the capacity of new law practices to establish themselves alongside existing and established firms; limit access to justice and the appropriate information for injured people about their legal rights; restrict freedom of speech; and impose double standards for lawyers, depending on whom they represent, contrary to the objectives of national legal profession reform. 4. The Law Council considers that appropriate regulation of legal services advertising standards is a reasonable response to the concern identified by SCAG. Regulation of legal services advertising should be addressed in professional conduct rules, not legislation. These rules will ensure: (a) (b) advertising in any medium meets an appropriate standard and is not false, misleading or deceptive, or likely to bring the legal profession into disrepute; and advertising regulation is uniform for all legal practitioners and law practices in Australia. 5. On 28 November 2009, the Law Council Directors formally adopted the Australian Solicitors Conduct Rules, containing uniform provisions in accordance with the Law Council s recommended approach to legal services advertising. It is suggested those provisions are sufficient to address the concern about advertising for legal services. Personal Injury Legal Services Advertising Page 3

4 Background The insurance crisis and personal injury law changes 6. Restrictions on personal injury legal services advertising was commenced in NSW and Queensland in the wake of the liability insurance crisis around The restrictions were based on the premise that Australia was developing a litigious culture, spurred on by aggressive marketing practices of personal injury lawyers. 7. In , the liability insurance industry in Australia became unsustainable following the collapse of HIH Insurance and the shock felt globally following the 11 September 2001 terrorist attacks in New York. However, by the admission of the Insurance Council of Australia, prior to these events the insurance industry was already setting premium prices at unsustainable levels due to intense competition in the liability insurance sector Tort law changes in a number of jurisdictions were made following the Review of the Law of Negligence in 2002 (Chaired by Justice David Ipp) (the Ipp report), which recommended thresholds limiting access to damages for non-economic loss, as well as restrictions on other heads of compensation, legal costs, etc. 9. It is worth noting that the Ipp report made no recommendation with respect to advertising for personal injury legal services. Notwithstanding this, both NSW and Queensland acted independently to restrict advertising by personal injury lawyers, law practices and third parties. Prohibition in NSW 10. In NSW, a comprehensive ban has been applied, preventing lawyers from any form of public notice (whether on a website, billboard, newspaper, television, radio or telephone directory, etc) which tends to promote personal injury legal services. The Legal Profession Regulations 2005, regulation 24, states: (1) A barrister or solicitor must not publish or cause or permit to be published an advertisement that promotes the availability or use of a barrister or solicitor to provide legal services if the advertisement includes any reference to or depiction of any of the following: (a) personal injury, (b) any circumstance in which personal injury might occur, or any activity, event or circumstance that suggests or could suggest the possibility of personal injury, or any connection to or association with personal injury or a cause of personal injury, (c) a "personal injury legal service" (that is, any legal service that relates to recovery of money, or any entitlement to recover money, in respect of personal injury). Maximum penalty: 200 penalty units. 1 For example, Dallas Booth, Tort Law Reform A Response to the Hon JJ Spigelman AC, Chief Justice of NSW, Insurance Council of Australia, Annual Conference, Sydney, 11 March Personal Injury Legal Services Advertising Page 4

5 (2) A contravention of this clause by a barrister or solicitor is declared to be professional misconduct. 11. The prohibition against personal injury advertising in NSW exists in addition to the general stricture on false or misleading advertising in ss 84, 149 and 176 of the Legal Profession Act 2004 (NSW). Other advertising restrictions 12. In Queensland, the ban is less comprehensive than in NSW, though still highly restrictive of the content and manner of personal injuries legal services advertising. The Personal Injuries Proceedings Act 2002 (Qld) (PIPA) prohibits a lawyer from: advertising personal injury services except by means of a statement that includes only the lawyer s name and contact details, together with information as to any area of practice or specialty of the lawyer that is published by an allowable publication method. An example of advertising that is restricted is advertising personal injury services on a no win, no fee or other speculative basis The PIPA therefore permits lawyers to advertise in a defined, minimalist format, but precludes lawyers from indicating in those advertisements that they will offer representation on a no win, no fee basis. This is despite the fact that a majority of personal injury cases would never commence unless some legal professionals were prepared to carry the cost of running the case and recoup those costs and their fees at the conclusion of the matter. 14. Similarly, Part 3.2 of the Legal Profession Act (NT) (ss ) restricts the publication of statements that are made with the intention of encouraging people to make claims for personal injury. NT Practitioners are allowed to publish a statement of their name and contact details, and details of the practitioner's areas of speciality. 15. A number of other jurisdictions do not specifically address personal injury legal services advertising, but impose general strictures on misleading or deceptive advertising and advertising which tends to bring the profession into disrepute. These reasonable forms of regulation have their foundation in consumer protection and protection of the profession from the isolated actions of its individual members. Rationale for advertising restrictions/prohibitions 16. The NSW Attorney-General, Hon John Hatzistergos MP, in his second reading speech to the NSW Legislative Council on the Legal Profession Legislation Amendment (Advertising) Bill 2003, stated: The manner in which lawyers' services are advertised and marketed can have a detrimental effect on both the court system and the availability of affordable insurance. For this reason, regulations made under the Legal Profession Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 prohibit lawyers from advertising in relation to personal injury work or work except in limited, specified ways 2 Explanatory Notes, Personal Injuries Proceedings Act 2002 (Qld). See Personal Injury Legal Services Advertising Page 5

6 This is critical to ensure that such advertising does not have a detrimental effect on the court system and on public liability and workers compensation insurance premiums The Explanatory Notes to the Personal Injuries Proceedings Act 2002 (Qld) state in similar terms: The Bill also seeks to address pressure on insurance premiums from increasing volumes of claims by imposing restrictions on lawyer advertising, and facilitating expressions of regret by defendants. 18. Accordingly, the primary, express reason for prohibiting or restricting personal injury legal services advertising was to reduce litigation. Advertising by personal injury lawyers was regarded as contributing to a so-called litigation culture in Australia, increasing the number of litigated personal injury compensation claims and driving up insurance premiums. 19. The NSW Attorney-General, in his recent public statements which have prompted SCAG s referral of this matter to the Taskforce, has identified a different rationale for a national prohibition on advertising, arguing that personal injury legal services advertising practices are predatory, deceptive and sully the reputation of those professional and responsible law firms who make up the greater part of the legal services industry. 20. The Law Council rejects both of these rationales as unfounded and insufficient to justify interference with reasonable and appropriate advertising for personal injury legal services. The following sets out the reasons personal injury legal services advertising should be regulated, but not be prohibited. Prohibition unnecessary 21. The Law Council submits that it is now well established that the so-called litigation explosion, which formed a substantial part of the rationale for restricting the rights of injured people to take legal action against a negligent defendant, was a myth. 22. In 2005, the Law Council commissioned an independent expert, Professor Ted Wright (Dean of Law, Newcastle University), to examine trends in litigation across Australia from , through surveying claims filed in civil jurisdictions of State and Territory lower and superior courts. Professor Wright s report, entitled National Trends in Personal Injury Litigation: Before and After Ipp, was released in Its primary conclusion was that: there is little or no evidence of a sustained, significant increasing trend in claims prior to the Ipp inspired reforms. Likewise, however, that data indicates in most jurisdictions that there has been an appreciable (in some states dramatic) decline in litigation since the tort law reforms were enacted The insurance industry in Australia has countered that the insurance crisis was precipitated by spiralling claims costs, not increasing claim numbers. Whilst it is difficult to assess or verify that response, it does amount to an admission by the 3 See aedcadf04d87c792ca256de400047db6/$file/c9803.pdf 4 Professor E W Wright, 2006, National Trends in Personal Injury Litigation: Before and After Ipp, Law Council of Australia. Personal Injury Legal Services Advertising Page 6

7 insurance industry that there has never been a substantial increase in either litigated or non-litigated claims, that would justify advertising restrictions or any other legislative changes limiting common law rights of plaintiffs. 24. It is submitted that restrictions on personal injury legal services advertising have no impact on the size of damages awards. As noted above, the argument that there was a litigation explosion has been debunked by independent research and dropped by the insurance industry as a basis for changes to personal injury laws. Therefore, there can be no suggestion that advertising restrictions on personal injury legal services are necessary to curb litigious behaviour. It is well established that there was no general trend of increasing litigation in Australia, and in any event laws enacted since 2002 have already dramatically reduced rates of litigation. Further, data on profits enjoyed by injury/liability insurers after changes to personal injury laws from 2002 are evidence that claim costs are well and truly under control. (The Law Council would be pleased to provide that data and any other information to support these submissions, if so requested by the Taskforce). Censorship 25. In the absence of any basis in fact for suggesting the restrictions on advertising are necessary to address a litigious culture, such restrictions can only be characterised as censorship and an unreasonable limitation on the right of lawyers to conduct their business. 26. Only tobacco companies are subject to more draconian advertising restrictions, while alcohol and junk food advertising continues to be treated as acceptable in Australia (including NSW and Queensland) and overseas. Personal injury lawyers clearly do not present a public health or policy concern and, in fact, provide an important service to the community. Accordingly, it is difficult to understand the basis upon which a prohibition on advertising for personal injury legal services could be justified. 27. The Law Council does accept that the form and content of legal services advertising should be subject to limitations, to balance the legitimate right of legal professionals to promote their practices with consumer protection and the broader interest of preventing damage to the image of the legal profession 28. Appropriate rules with respect to advertising (as already exist to varying degrees in most jurisdictions) should be sufficient for this purpose. However, complete or even partial prohibition or censorship is not justified and should not be contemplated. Jurisdictions which presently restrict or prohibit advertising on this basis should repeal the prohibition/restrictions in favour of a national uniform legal profession law. Regulation should occur by way of uniform professional conduct rules, applying a uniform standard to all practitioners. 29. It is noted that the Australian Solicitors Conduct Rules, adopted (as amended) by the Law Council Board of Directors on 28 November 2009, sets out a reasonable model provision in rules 5 and 35, which would provide a good standard for all solicitors. The rules state as follows: 5. Dishonest and disreputable conduct Personal Injury Legal Services Advertising Page 7

8 5.1 A solicitor must not engage in conduct, in the course of practice or otherwise, which demonstrates that the solicitor is not a fit and proper person to practice law, or which is likely to a material degree to: be prejudicial to, or diminish the public confidence in, the administration of justice; or bring the profession into disrepute. 35. Advertising 35.1 A solicitor or principal of a law practice must ensure that any advertising, marketing or promotion in connection with the solicitor or law practice is not: False; Misleading or deceptive or likely to mislead or deceive; Offensive; or Prohibited by law 35.2 A Solicitor must not convey a false impression of specialist expertise and must not advertise or authorise advertising in a manner that uses the words accredited specialist or a derivative of those words (including postnominals), unless the solicitor is an accredited specialist under a Scheme operated by the relevant professional body. Reduced competition 30. Advertising restrictions limit competition among personal injury lawyers because they make it very difficult for new practices to offer personal injury services or immediately specialise in that area of the law. Plaintiff lawyers who practice personal injury law are generally highly specialised; and well established firms already have a significant advantage in terms of reputation. Those with a legal complaint arising from a personal injury will often seek representation from established law practices with a strong reputation. New law practices, or existing practices which have not previously offered legal assistance for personal injury matters, face great difficulty competing among established personal injury law practices if they are not permitted to promote their businesses in the usual way and attract clients. 31. Conversely, law practices which act for defendants or their insurers, or in other areas of the law, are generally subject only to restrictions in respect of misleading or false advertising. This, along with a myriad of legislative changes setting out prescriptive claims procedures for plaintiffs, increases the cost of plaintiff legal services (comparative to defendants), diminishes the number of law firms engaged in personal injury law work (to the detriment of injured plaintiffs) and renders the simple act of promoting one s legal practice to be professional misconduct. Personal Injury Legal Services Advertising Page 8

9 Access to justice and information 32. One of the key objectives of advertising restrictions imposed in NSW and Queensland was to target law practices offering legal assistance on a no win, no fee basis. It was clearly considered that such firms were responsible for the alleged increase in personal injury litigation (noting the litigation explosion theory has been disproven). 33. In reality, plaintiff firms offering assistance on a no win, no fee basis will rarely promote a frivolous claim, as those firms receive no benefit and bear a significant cost if a claim proves to be unmeritorious. 34. Firms offering no win, no fee services assist those who might otherwise be unable to bring their claim due to the cost of legal representation. Accessing justice through the civil justice system is very expensive and involves many uncertain costs, which the majority of people are generally unwilling or unable to bear, particularly in circumstances of injury/impairment and associated vulnerability and incapacity. Conversely, defendants in proceedings will typically assign their liabilities to an insurer with comparatively enormous resources to defend claims brought against their insured. 35. Firms which act for plaintiffs on a no win, no fee basis therefore bridge a substantial gap in Australia s civil justice systems. Legal aid rarely extends to persons seeking compensation for personal injuries and, given the present strain on legal aid schemes, is unlikely to extend to new areas in the foreseeable future. Litigation funding in Australia is a fledgling industry and does not assist individual litigants. Litigation assistance funds, such as the Law Society of South Australia s Litigation Assistance Fund, are incapable of funding all claims, regardless of how meritorious they may be. 36. Injured people also need access to appropriate advice and information about their rights, remedies and obligations, particularly following complex changes to personal injury laws, which have restricted the rights of injured people to claim compensation. 37. It is noted that, in this respect, prohibiting personal injury legal services advertising involves a fundamental contradiction in policy. The community broadly supports the right of injured people to take action to recover fair compensation for their losses, because it promotes personal responsibility for negligence and ensures justice for civil wrongs. However, proponents of advertising prohibitions oppose the bringing of that right to the attention of those who might exercise it. 38. Advertising restrictions limit the information accessible by injured people, including the possibility that they may have a common law or statutory claim for injuries and impairments they have suffered as a result of another person s negligence. They may also be unable to understand from a particular telephone book listing whether a legal practitioner has specialist accreditation in torts or practices in a number of other areas. Such information is important to assist people in selecting a lawyer who is appropriate for their circumstances. 39. As remarked by Justice Kirby (as he then was) in Australian Plaintiff Lawyers Association & Ors v Legal Service Commissioner of NSW & Anor [2004] HCATrans 373 (5 October 2004): I can tell you out there in Australia there are plenty of people who do not know their legal rights and are very afraid of exercising them, are very fearful of the Personal Injury Legal Services Advertising Page 9

10 costs and rightly so, and until they are given some help they do not get access to the courts or to the law. As a Justice of this Court, a regulation that stops people getting that is a matter of concern to me. Freedom of speech 40. There is no Constitutional protection for the freedom of speech in Australia. Governments can, and often do, legislate to limit, censor or ban the expression of certain views, statements, speeches or publications, for example by enacting defamation laws, racial vilification laws and sedition laws. However, there is a general expectation in a democratic and free society that such strictures will be imposed only to prevent foreseeable harm to others in the community. Bans or restrictions on legal services advertising could hardly be said to meet this standard. 41. Advertising restrictions have previously been applied to the marketing of tobacco products, therapeutic goods (under the Therapeutic Goods Act 1989 (Cth)) and films (under the Classification (Publications, Films and Computer Games) Act 1995 (Cth)). Advertising restrictions in relation to tobacco, therapeutic goods and films were imposed in the public interest, overriding the ordinary right of business promotion in a market economy. In relation to cigarettes, advertising restrictions prevent the marketing of known harmful and addictive substances, which have generated a major public health concern. In relation to therapeutic goods, such as prescription medicines, advertising restrictions are not applied to marketing directed at health professionals, but prevent advertising directed at consumers because such goods are not appropriate for general sale in the absence of a medical opinion (and valid prescription). Restrictions on film advertising exist to ensure general film or television viewers are not exposed to inappropriate content. 42. However, as earlier noted, it is now clear that there was no litigation explosion this is acknowledged by the insurance industry and demonstrated by Professor Wright s report into litigation trends. Therefore, the fundamental underpinning for the introduction of a ban on personal injury legal services advertising in NSW and Queensland does not exist. The restriction in this case does not serve any public interest that would necessitate a restriction on advertising to the extent that has been carried out in NSW and Queensland. 43. It is not disputed that unbridled advertising in any industry or profession can be detrimental, hence the need for appropriate standards to prevent advertising that misleads or deceives, or which does not meet an appropriate standard. Double standards 44. Advertising restrictions imposed on personal injury lawyers mean that different standards now apply to legal professionals in NSW and Queensland, depending on whom they represent. 45. This is anomalous, as a lawyer representing a plaintiff will be subject to more restrictive requirements in terms of promoting their law practice than the lawyer on the other side of the bar table, representing the defendant. 46. Double standards in regulation of any profession are undesirable, particularly for the legal profession in light of the current efforts to introduce nationally uniform regulation of lawyers. Personal Injury Legal Services Advertising Page 10

11 47. There is nothing achieved by imposing this double standard. The average number of personal injuries claims filed in Australian courts has dropped by over 60 per cent since 2002 (over 80 per cent in some jurisdictions). 5 Liability insurance, since 2002, has been a highly profitable industry. Moreover, if advertising practices by some law practices are predatory and deceptive (as claimed by the NSW Attorney- General), the mischief can be addressed by simply empowering legal bodies to regulate advertising which is misleading or deceptive, or which damages the image of the profession. 5 Professor Wright, 2006, Ibid. Personal Injury Legal Services Advertising Page 11

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