NATIONAL COSTS LAWYERS CONFERENCE LAW INSTITUTE OF VICTORIA

Transcription

1 NATIONAL COSTS LAWYERS CONFERENCE LAW INSTITUTE OF VICTORIA Speech given by Catherine Gale, President, Law Council of Australia. 10 February, 2012 GPO Box 1989, Canberra ACT 2601, DX 5719 Canberra 19 Torrens St Braddon ACT 2612 Telephone Facsimile Law Council of Australia Limited ABN

2 INTRODUCTION Good morning ladies and gentlemen. I'd like to start today's proceedings by thanking the Law Institute of Victoria for the opportunity to speak with you this morning. My name is Catherine Gale and I am the President of the Law Council of Australia. The Law Council of Australia brings together the Law Societies and Bar Associations of each state and territory, together with the Large Law Firm Group 17 constituent bodies in all to present a single voice of the Australian legal profession on issues of national and international importance to our profession. In that capacity, the Law Council has worked to achieve nationally uniform laws governing the legal profession, legal practice and the provision of legal services in Australia. One of the core objectives our efforts is to create an efficiently functioning national legal services market by eliminating state and territory regulatory differences. National legal profession reform is something that has been a high priority for the Law Council for a number of years. It's a significant reform process that we have put a substantial amount of work into. There are many different elements we have needed to address when constructing a new set of rules to govern a national profession NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 2

3 From business structures to fidelity funds to practising certificates, there have been a number of barriers we've needed to negotiate to get the framework right. We re confident the new legal profession national laws and legal profession national rules reflect the right balance in addressing the concerns with a national profession. We ve had a tremendous amount of good faith and constructive input from a number of jurisdictions in helping us develop the national profession to where it is today including in Victoria. The host jurisdiction for the new national profession was announced in October last year and it is pleasing to see that this conference is being held in Victoria, especially given Victoria is the host jurisdiction for the new national legislation. And so it's appropriate today that we address the issues of legal costs at this conference as it has been an important issue for the Law Council in establishing a national legal profession. This morning I will highlight some of the important changes in the costs provisions of the draft National Law compared to the current legislation that operates in Victoria and outline the views of the Law Council with respect to those changes. PROGRESS UNDER THE MODEL LAWS PROJECT The draft National Law that you are considering today builds upon and extends a national reform agenda that has been underway for many years. The Legal Profession Model Laws project that ran from about 2002 to 2006, under the guidance of the Standing Committee of Attorneys- General was a considerable step forward in national consistency NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 3

4 That Project produced the Legal Profession Model laws. The current Legal Profession Act in Victoria is based on the Model Bill, as is the Legal Profession Act of every other state and territory except South Australia, which still operates under its 1981 Legal Practitioners Act. Yet despite the gains made by the Model Laws Project, a considerable number of undesirable differences in regulatory requirements across jurisdictions remained. While some individual differences might not seem particularly significant in themselves especially for practitioners who do not have clients in other jurisdictions when the differences are taken as a whole it becomes quite apparent that we are still a long way away from a uniform legislative basis to support seamless national legal practice. Two legal costs topics that come to mind are the disclosure threshold and billing. In Victoria the current threshold before costs disclosure is required is $750, whereas in many other jurisdictions the threshold is $1500. In the area of billing, in Victoria and some other jurisdictions, a bill can only be sent by to a sophisticated client who asks for it to be given electronically, whereas in other jurisdictions a bill can sent by to any client who asks for it to be given electronically. Now you might think that these kinds of differences don t matter much in the scheme of things, that they are only just micro-irritants - but consider the different practice management arrangements that cross border practices have to deal with because of different disclosure thresholds NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 4

5 Consider also that some national law firms have established centralised billing departments and employ people whose job it is to ensure that their bills comply with the peculiar billing requirements of each jurisdiction. This kind of response to regulatory differences increases the complexity and cost of providing legal services, and is ultimately born by clients. Now consider: o jurisdictional differences in the fit and proper person tests for admission and for practising certificates; o differences in complaints resolution procedures and remedies; o different classes of practising certificates; o differences in PII exemption arrangements for interstate practitioners; o differences in practising certificate requirements for government lawyers; o differences in conditions on practising certificates; o differences in legal profession rules; and o differences in costs agreement provisions. Collectively, these kinds of differences continue to stand in the way of seamless legal practice across state and territory borders, regardless of a practitioner s home jurisdiction. LEGAL PROFESSION NATIONAL LAW PROJECT The Legal Profession National Law Project was established by the Council of Australian Governments in 2009 as an additional microeconomic reform initiative toward a seamless national economy NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 5

6 Not only is the legal services sector itself a significant source of economic activity, it also facilitates economic activity in other sectors of the economy. Also, the Australian legal profession is increasingly engaging in the international legal services market. A single Australian legal profession, operating in a seamless national legal services market under the same rules, obligations, benefits and consumer protections, regardless of the state or territory within which a legal practitioner practices, or a client seeks the professional services of a legal practitioner, has been a goal of the Law Council for over 20 years. The Legal Profession National Law Project therefore presented one of those once in a life-time opportunities for a coalition of needs between governments, the profession, consumers and regulators in regulatory reform on a national scale. The draft Legal Profession National Law, which was developed over a period of nearly two years, is the product of taking those needs, contributions and perspectives into account. The National Law attempts to achieve a sensible balance between these sometimes competing perspectives, while aiming for simplification, national uniformity, flexibility, consumer protection and an ongoing role for the legal profession, under a national regulatory framework in which the co-regulatory approach between government and the profession is retained. THE NATIONAL LAW REGULATORY FRAMEWORK The draft National Law establishes a very different regulatory framework to the one we ve been accustomed to in the past NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 6

7 The new regulatory framework will provide considerable flexibility and an enhanced role for the legal profession in shaping and managing regulation of the profession. The key opportunities are: A seven member National Legal Services Board will be established to ensure efficient, targeted, effective and consistent regulation throughout Australia. The legal profession will nominate three of the six board positions, and may nominate and must concur with the nomination of the seventh Board member the Chair. A National Legal Services Commissioner will be established to ensure the legislation is applied and administered consistently throughout Australia in areas such as, complaints-handling, trust accounting, and general compliance. In practice, the majority of day-to-day regulatory functions must be undertaken by local representatives of the Board and Commissioner in each jurisdiction. Apart from complaints and discipline matters (for which a local representative must be an independent entity) each State and territory government will decide which entities will be local representatives. The National Law will be considerably shorter than the existing Legal Profession Acts. This will be achieved by: The National Law setting out core principles and core legislative rules only. Lengthy prescriptive rules that currently exist in primary legislation being relocated to National Rules. The ability to reduce regulatory burdens will be enhanced because: National Rules will be made by the National Legal Services Board. This will, over time, mean that the National Board can change National Rules to reduce, alleviate or eliminate unnecessary regulatory burdens. The National Legal Services Board and National Legal Services Commissioner will set policies, practices, guidelines and directions as to how the national law is to be administered and regulatory functions carried out. This means policies, practices, guidelines and directions can be simplified over time to ensure NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 7

8 administration of the National Law and National Rules remains targeted, effective and efficient. The legal profession will be responsible for developing National Rules relating to professional conduct, legal practice and continuing professional development. It is important to recognise the significant role National Rules will play in the regulatory framework. As I mentioned, National Rules provide great flexibility and responsiveness to the workings of the National Law. A key objective for the Law Council between now and the commencement of the national regulatory framework is to look closely at the National Law and draft Rules that were developed for the May 2010 Consultation Draft legislation and identify the opportunities to shape and influence the National Rules. Another important design aspect of the National Law is the ability of the National Board and National Commissioner to issue guidelines to local representatives about practical issues in administration of the National Law and Rules. These present an opportunity for the national authorities to provide certainty to the profession about steps that can be taken to meet the obligations of the National Law and National Rules. The Law Council has established an implementation steering committee which includes representatives from each Law Society, the Bar Associations and the Large Law Firm Group. One of the areas of focus for the Implementation Steering Committee will be National Rules and guidelines. This provides an ideal opportunity for issues and ideas that come out of conferences such as this National Costs Lawyers Conference to NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 8

9 feed into the Law Council s recommendations about what needs to be included and provided for in the National Rules and Guidelines. THE LEGAL COSTS FRAMEWORK UNDER THE NATIONAL LAW The draft National Law introduces a number of significant changes in the area of legal costs, which were the subject of considerable discussion and debate among constituent bodies when developing the Law Council s substantive submission in response to the May 2010 draft National Law. In broad terms, the new costs provisions reflect two fundamental policy principles: That legal costs should be fair and reasonable; and That clients should be provided with the information they need to make an informed decision about the costs involved in proceeding with their matter in the way agreed between the client and practitioner. To these can be added a third principle: That disputes between clients and practitioners about costs should be able to be resolved quickly and fairly. The substantive provisions of the draft National Law have come a long way between the first draft released in May 2010 and the latest draft, dated 31 May 2011 and publicly released in September The significant changes for the profession - which you might also be discussing during the course of this conference are as follows. Commercial and government clients NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 9

10 The National Law replaces the previous concept of sophisticated client with a new concept of commercial and government client. The new definition embraces the kinds of entities included under the previous definitions in the various Legal Profession Acts, and also provides flexibility for the list to be expanded by way of the National Rules. Commercial and government clients are generally excluded from the new costs provisions apart from some provisions relating to conditional costs agreements and contingency fees. This reflects a policy position that commercial and government clients are usually repeat purchasers of legal services who have the knowledge and ability to negotiate legal costs without the need for the kinds of protections provided to what we might call retail consumers of legal services. Third party payers The National Law essentially follows the definition under the Legal Profession Act. There is some clarification that the obligations of a third party payer to meet costs can arise under contract, legislation or otherwise and clarification that a third party payer cannot be a law practice engaged by another practice. The more important change is that provision is made for National Rules to declare that particular references in the legislation to a client can include references to a third-party payer. Fair and reasonable legal costs The National Law expresses the principal that legal costs must be fair and reasonable NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 10

11 The concept is declared to extend to costs being proportionately and reasonably incurred, and proportionate and reasonable in amount. This is a significant change from the current Legal Profession Act, where legislative statements about reasonableness and fairness are to be found in the costs assessment provisions as matters for consideration where a dispute about legal costs arises. The National Law brings questions of fairness and reasonableness of costs clearly into focus for clients and practitioners at the time the engagement is negotiated and confirmed. The policy drivers for this change were canvassed by the Taskforce in its 4 November 2009 Discussion Paper on Legal Costs. In that Paper the Taskforce identified a number of issues: The information asymmetry that exists for retail consumers of legal services who tend to be infrequent purchasers of legal services and have less experience or information when engaging a legal practitioner. The potential disadvantage of information asymmetry for retail consumers in their relationship with their lawyer often at times of heightened sensitivity when urgent and significant decisions need to be made. The disproportionately negative impact on the reputation of the profession that flows from the fact that the primary ground of complaints is about legal costs charged to retail consumers.. From a public policy perspective this change (together with the changes to disclosure obligations) is a logical response to concerns about the ability of most retail consumers to fully appreciate the legal process and the costs involved. The change is also, as the Taskforce pointed out, not inconsistent with thinking by Attorneys-General in early 2009 about New South Wales NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 11

12 proposals to constrain overcharging; the NSW Civil Procedure Act 2005; the observations of Justice Sackville in Seven Network Ltd vs. News Ltd 1 ; or the Victorian Law Reform Commission s 2008 Civil Justice Review. In its Submission to the Taskforce the Law Council did not raise objection to the principle of fairness and reasonableness being more clearly stated in the legislation. What was questioned was: The need for a single test for determining what constitutes fair and reasonable ; The need for indicia of fairness and reasonableness to be readily applicable to the particular facts and circumstances of each case; and That the introduction of a requirement for proportionality is unworkable and should be omitted. The criteria now set out in clause of the May 2011 version of the National Law are a considerable improvement over what appeared in the May 2010 Consultation draft legislation, and address the first two points I mentioned. What remains to be dealt with by way of a National Rule (if the profession proposes one) is the question of what proportional means, as well as any other matters about fairness and reasonableness that can be usefully dealt with in a National Rule. Disclosure obligations The final change I want to touch upon in the time available to me is the controversial requirement that a law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the matter and the proposed costs. 1 [2007] FCA NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 12

13 The controversy is not about the principle I m sure we would all like to be satisfied that our clients understand our advice about how to progress their matter and the likely costs. The controversy has been about how to satisfy the subjective test that all reasonable steps had been taken. For example, can a lawyer assume that silence or inaction denotes consent? If a client signs a disclosure document or costs agreement, does that evidence informed consent? Or, if English is not the client s first language, would a lawyer be required to arrange for documents to be translated and for an interpreter to be available? In our Submission to the Taskforce, the Law Council put the view that what is involved in taking reasonable steps is inherently uncertain. Also, because a failure to take reasonable steps can have serious consequences for the validity of a costs agreement and recovery of legal costs, it is imperative that the National Law (and/or National Rules) should provide a greater level of assurance for practitioners about what actions would satisfy the reasonable steps requirement. The present position is that no change has been made to the National Law to insert criteria that would satisfy the test. Indeed, I think it would extremely difficult to draft legislative criteria given the wide range of circumstances lawyers encounter in practice. The task for the Law Council is, therefore, to develop a proposal for a National Rule or a national guideline that will provide practitioners with information and assurance about the kinds of steps or actions that can NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 13

14 be taken in various situations to satisfy the reasonable steps requirement. CONCLUSION In conclusion, I d like to again reiterate the significance of these reforms and the benefits they will deliver all legal practitioners in Australia. We re now the closest to a national profession we ve ever been. The issue of costs is a complex one in the context of the legal profession and I hope today s speech will give you a better overview of how it will work within the new national profession. And furthermore, I hope it will stimulate further conversation on the issue and encourage you to keep an eye on the project as it nears the end of its implementation stage. I wish you success in your deliberations today and hope that the issues you discuss and ideas you generate will be captured by the conference conveners and included in the thinking we need to do on shaping National Rules and guidelines about the costs provisions in the National Law. Thank you. Disclaimer: This document remains the property of the Law Council of Australia and should not be reproduced without permission. Please contact the Law Council to arrange a copy of this speech NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 14

15 Vanessa Kleinschmidt Director, Communications and Stakeholder Relations m e NATIONAL COSTS LAWYERS CONFERENCE SPEECH FINAL DRAFT Page 15