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Chapter 3

LAWYERS

The Government is committed to reform of the legal profession to ensure greater competition within the profession, as well as increased choice and improved service for consumers.

The Government will continue to work with the States and Territories to achieve national reforms in areas that require State and Territory action, including the implementation of competition principles across the legal profession, the achievement of a national legal services market and the freeing-up of restrictive practices.

The Government will also work with the States on a number of complex matters that require further investigation, such as whether lawyers should be able to work in partnership with other professionals and whether there are further areas of legal work that can be undertaken by non-lawyers.

While the Commonwealth's constitutional power to regulate the legal profession directly is limited, the Government is ready to take action on matters that are within its power to ensure greater consumer focus in the profession.

The Government will require lawyers acting in federal matters to disclose a range of information to prospective clients about likely costs, lawyers' charges, alternative dispute resolution and complaint mechanisms.

The Government supports reforms under consideration by the Council of Australian Governments to move to market-based measures for establishing the price of legal services and has commissioned the Prices Surveillance Authority to undertake a survey of legal fees as a guide for consumers on prices of legal services.

Until the achievement of a fully open and competitive market, the Government supports the continued existence of fee scales and will ensure that the fee scales that apply in federal courts will be comprehensively reviewed and overhauled, with a view to developing a simpler structure and more accurate charging rates.

The Government is prepared to introduce reforms in a number of areas if the States do not do so, including legislation to remove restrictions on advertising by lawyers and legislation to permit uplift contingency fees (subject to safeguards) in appropriate federal matters.

Lawyers are the front-line of the legal services industry. Generally, a lawyer is a person's main contact with the legal system, whether for transactions such as drawing up a will or buying the family home, or for those occasions where litigation may be necessary, such as in a family law matter.

Client satisfaction in legal matters depends to a great extent on the integrity and responsiveness of the legal profession. The profession has been criticised for a lack of consumer focus and for clinging to antiquated practices which are mystifying to their clients and which, in many cases, unnecessarily increase costs, cause delays, and restrict consumer choice. Government regulation and professional association rules often restrict competition between practitioners and prevent lawyers from making what, in other industries, are normal commercial decisions about the organisation of their business. The Government beleives that the public interest is best protected through ethical and professional conduct rules, rather than blanket restrictions on the competitive and commercial behaviour of practitioners.

In recent times, there has been greater willingness to embrace reform. The Law Council of Australia, which represents all State and Territory legal professional associations, released its own reform proposals in July 1994 entitled Blueprint for the Structure of the Legal Profession (the Law Council's Blueprint). In April 1995, the Law Council released further documents outlining proposals for implementation of a national legal services market. The Law Council's Blueprint remains the core document in relation to these proposals. Reform of the legal profession has also been considered by the Trade Practices Commission in its report, Study of the Professions - Legal.

The Government welcomes the spirit of reform moving through much of the profession. That spirit must be encouraged. The reform process must continue.

The regulation of the legal profession is primarily a matter for the States and Territories. The Commonwealth does not have the constitutional power to regulate the profession comprehensively. However, the Commonwealth does have power over certain elements of the profession, for example, incorporated law firms and firms engaging in interstate trade or commerce. Traditionally, the legal profession has been governed by laws of the States and Territories, and by the rules of each State-based legal professional association. The Commonwealth has been actively involved in the development of reforms with the States and Territories in the Legal Services Group of the Council of Australian Governments, which comprises senior representatives of Commonwealth, State and Territory Governments.

While recognising the constitutional limitations on its powers, the Government is committed to reform of the legal profession on several fronts. First, we strongly support the reform process underway in the Council of Australian Governments in areas where unilateral Commonwealth action would not be effective for constitutional reasons. This includes, for example, the issue of practising certificates for barristers and solicitors. Secondly, the Government is prepared to take unilateral action if the States do not, in areas where Commonwealth action is possible but this may not be the most desirable or effective option. Advertising by lawyers is one such area. Thirdly, the Government will undertake reforms in the federal sphere where it can do so effectively. This includes, for example, setting standards for the disclosure of information by lawyers to their clients.

The Government is committed to achieving an effective national legal services market. Our strategy is to take action where we can do so effectively, while continuing to support the cooperative development of reforms with the States. The Government has been actively pursuing reform of the legal profession on a cooperative basis with the States and Territories as part of our agenda for micro-economic reform. The Commonwealth convened the National Competition Policy Review Committee of Inquiry in 1992 to develop a national competition policy covering, among other sectors, the professions. The package to implement that policy was adopted at the meeting of the Council of Australian Governments in April 1995.

The Government firmly believes that governments should restrict intervention in the legal services market to the minimum necessary to protect consumer interests and to maintain the integrity of the judicial system. Removing inappropriate anti-competitive regulation and professional association rules should substantially reduce costs and improve consumer service by the profession. Such an approach will, of course, need to take into account the public interest. The public interest is best assessed on a case-by-case basis. The Government believes that, as far as practical, the competition aspects of the profession should be regulated under the general market conduct rules of the Trade Practices Act, as will be the case for other professions.

COMPETITION IN THE LEGAL PROFESSION

In a historic agreement in April 1995, the Council of Australian Governments agreed to implement the national competition policy package. That policy will provide for a cohesive set of competition principles applicable to every sector of the economy, designed to deliver benefits to consumers and business alike. Among other matters, the national competition policy package provides for the extension of the Trade Practices Act 1974 to all unincorporated businesses including the professions. These reforms are a major part of the Government's ongoing process of micro-economic reform.

The competition policy reforms, which will be implemented by joint Commonwealth-State action across the entire economy, will have a significant impact on the legal profession and bring major benefits to consumers of legal services. Application of the competitive conduct rules of Part IV of the Trade Practices Act to the profession will promote greater competition within the profession. The conduct of legal firms will be opened to the scrutiny of the Australian Competition and Consumer Commission. The Australian Competition and Consumer Commission will be formed by the merging of the Trade Practices Commission and the Prices Surveillance Authority. Lawyers will be prevented from engaging in anti-competitive arrangements, such as those that have the purpose, or effect, of fixing or controlling prices or arrangements that involve exclusionary conduct.

As part of the national competition policy package, Governments have also committed themselves to a process of legislation review. The aim is to eliminate regulatory restrictions on competition, except where these restrictions serve the public interest. Governments have agreed to assess their regulations to determine whether measures other than anti-competitive regulations can accomplish the same policy objectives.

Due to limitations on the Commonwealth's constitutional power, unincorporated businesses operating solely intra-State, including legal firms, currently are not covered by the competitive conduct rules in the Trade Practices Act. This will be changed by the Competition Policy Reform Bill currently before the Commonwealth Parliament. The Bill creates a version of the competitive conduct rules of the Trade Practices Act applicable to all `persons' not just `corporations'. This version will be known as the Competition Code. Under the agreement reached at the April 1995 meeting of the Council of Australian Governments, States and Territories will apply the Competition Code within their jurisdictions by State and Territory application legislation. In addition, agreement was reached on a procedure under which amendments to the Competition Code will require the approval of the Commonwealth and at least three of the jurisdictions participating in the national competition policy. This cooperative Commonwealth-State-Territory approach ensures seamless coverage of business.

In a further major change to the existing competition policy regime, the Competition Policy Reform Bill will provide for a more transparent process for State and Territory laws that exempt conduct from the competitive conduct rules. Currently, anti-competitive conduct can be exempted from the competitive conduct rules of the Trade Practices Act by State or Territory legislation or regulation. Many of the rules that currently operate in the legal profession are entrenched in State or Territory legislation and would, under the present system, be hidden from scrutiny for any anti-competitive effect.

In future, State and Territory exemptions will have to be enacted in legislation, with explicit reference to the Trade Practices Act and existing exemptions that do not meet this transparency requirement will lapse three years after the Competition Policy Reform Bill receives Royal Assent. Exemptions will continue to be subject to a Commonwealth override power. State and Territory Governments have also agreed to provide to the Australian Competition and Consumer Commission written notice of their legislated exemptions. These new arrangements should ensure that anti-competitive conduct is permitted only where a clear public interest has been demonstrated through an open, transparent process.

The application of competitive conduct rules alone will not address all the practices that have been identified as anti-competitive in the profession. Practices that are required by the rules of the profession, such as restrictions on rights to practise nationally and the division between barristers and solicitors, may not be corrected automatically.

The Government has a clear agenda for reform in all these areas, and will pursue these issues vigorously with the States and Territories in the Council of Australian Governments.

While there have been encouraging developments in some States, others have been slow to introduce necessary reforms. There is also the risk that, in the absence of progress by the Council of Australian Governments, jurisdictions will establish separate regulatory regimes which will increase rather than decrease the obstacles to a genuine national market in legal services. Prompt joint action by the Commonwealth and the States is needed to ensure that regulation of the legal services industry is consistent across jurisdictions. The Government is determined that vital reforms that are in the interests of national competitiveness will be achieved in the legal profession and across the economy. While the Government is keen to achieve reform in a cooperative endeavour with the States and Territories, we will, if necessary, consider implementing reforms in the legal profession within the Commonwealth's own sphere.

REFORM OF THE LEGAL PROFESSION

STRUCTURE OF THE PROFESSION

A National Legal Services Market

The Government strongly believes that there should be a national market for legal services so that a person admitted to practise in one State or Territory automatically should be able to practise in all Australian jurisdictions. Rules that restrict lawyers from practising nationally, or that impose high charges on interstate practice, decrease national competition and add to the costs ultimately passed on to customers.

The establishment of a national legal services market is also the principal objective of the Law Council's Blueprint. In order to achieve this goal, the Blueprint supports a range of reforms, including automatic recognition of practising rights throughout Australia, uniform admission requirements and entry requirements that are not anti-competitive.

There are three issues in relation to uniform national standards for admission. The first issue is the minimum level of academic study, the second concerns practical legal training and the third is the question of any minimum period of supervised experience that is necessary to obtain an unrestricted practising certificate. Both the Hilmer Report on competition policy and the Access to Justice Report have recommended that standards for admission to the profession should maximise competition in the legal services market without compromising the competency of practitioners. The Access to Justice Report, for example, noted that requiring a compulsory period of supervised practice as a qualification for an unrestricted practising certificate could be abused by incumbents to restrict entry to the profession. National standards for admission to the profession should therefore be developed with the aim of promoting competition clearly in mind.

The Law Council's Blueprint has endorsed the Uniform Admission Rules developed by the Consultative Committee of State and Territory Law Admitting Authorities. These rules set out academic qualifications, but left open some issues concerning practical legal training. Both the Law Council's Blueprint and the Committee now have proposed uniform standards for the content of practical legal training and for periods of unsupervised practice. The Committee's proposals have been considered by Attorneys-General and Chief Justices. Implementation, and the question of which requirements may be completed prior to admission, are matters for action by the admitting authorities of the States and Territories.

The Law Council's Blueprint also contains proposed uniform requirements for continuing legal education after admission to practice.

The moves towards a national legal services market are welcome and will increase the efficiency and competitiveness of the legal profession overall. However, remaining obstacles to national practice need to be addressed. The Law Council, in its Blueprint, has suggested that there should be a uniform approach Australia-wide to cover the areas of accountability for money, record keeping and requirements for fidelity funds to recompense clients who are defrauded by their lawyers. The Council also makes recommendations concerning uniform national professional indemnity insurance.

The Government considers that these issues, including others such as the development of a national code of ethical rules, must be addressed as part of the overall proposals for the creation of a national legal services market. The Commonwealth will pursue these issues vigorously with the States and Territories in the Council of Australian Governments and the Standing Committee of Attorneys-General.

Despite widespread agreement on the steps that need to be taken to create a national legal services market, separate admission to practise is still required in all States and Territories. Significant moves towards a national legal services market were made in 1992 when Australian Governments agreed to a mutual recognition scheme to ensure the free movement of goods and services in Australia. For lawyers, as for all professions and occupations, the mutual recognition agreement means that a practitioner entitled to practise in one State is entitled to practise in another State. However, the mutual recognition scheme does not require the grant of automatic practising rights in all Australian States. Rather, the scheme requires lawyers to seek registration in the other States in which they seek to practise on a short-term basis and pay registration fees.

The Government's mutual recognition scheme, while an important first step, could be enhanced by measures that do not require a lawyer to take out registration in a State when they only wish to practise on a temporary or ad hoc basis. The Government urges the legal profession to accelerate the progress of reform started with the existing mutual recognition scheme.

The Divided Profession

In some States in Australia, a formal division between solicitors and barristers is entrenched in legislation or professional rules. The Government does not believe that such formal divisions between barristers and solicitors are either necessary or desirable. A number of States have never had a division between barristers and solicitors that is entrenched in legislation. However, a specialist advocacy bar is maintained in these States in response to market forces.

The Government believes that formal divisions between those who practise as barristers and those who practise as solicitors are anti-competitive. While the Government does not oppose the existence of separate specialist advocacy within the profession, it firmly believes that the existence of a separate Bar is not dependent upon rules that restrict barristers from undertaking the work traditionally performed by solicitors. The experience in jurisdictions without such rules is that a voluntary Bar Association can prosper without preferential treatment under government regulation.

Rules, for example, that prevent barristers contracting directly with clients can encourage unnecessary duplication of services with solicitors and barristers working on the same matter. The division restricts barristers from performing work reserved for solicitors, thus reducing the services barristers can offer. Such divisions tend to reserve the term `barrister' to one group that is associated with specialist advocacy skills. Some solicitors, however, are as skilled in advocacy as some barristers.

Restrictions of this nature limit competition between lawyers, and can reduce choices and increase costs for clients.

There have been some reforms in this area recently. In New South Wales, where comprehensive reforms have taken place, the Legal Profession Reform Act 1993 provided that legal practitioners could be admitted as both barristers and solicitors. However, the effect of this reform is limited by the requirement that a practitioner can hold a practising certificate as either a barrister or solicitor but not both.

Other States have taken some steps towards addressing this issue. For example, while Queensland remains the only jurisdiction where a practitioner can be admitted as either a barrister or solicitor but not both, the Queensland Government recently has agreed to reform the structure of the legal profession in Queensland to permit the admission of all legal practitioners as barristers and solicitors.

The Government applauds the progress that has been made in freeing up the structure of the legal profession. The Government encourages the speedy progress of the remaining reforms that are needed to make the divided legal profession in Australia a thing of the past. As the Commonwealth has limited constitutional power to regulate the legal profession comprehensively, we will continue to press the States for reform in this area through the Council of Australian Governments and the Standing Committee of Attorneys-General.

INFORMATION FOR LAWYERS' CLIENTS

Advertising

Advertising is a key mechanism for better informing the public about the services of lawyers and enhancing competition among lawyers. Advertising by lawyers in Australia is a relatively recent phenomenon and is subject to a number of restrictions. The nature and extent of those restrictions vary from State to State. Some States restrict the advertising of fees or discount rates, or advertising by way of testimonials or endorsements as to the lawyer's achievements. These restrictions are anachronistic in a modern economy where advertising is a primary source of consumer information about fees and services. Most people do not have regular dealings with a lawyer or even know someone who does. People need access to open information. Advertising by lawyers, for example, would enable clients to compare lawyers' prices and claims to specialisation.

A number of recent reports to Government, including the Access to Justice Report and the Trade Practices Commission's Report on the legal profession, suggest that restrictions on advertising keep consumers ignorant about legal services and thus increase the power imbalance between lawyers and infrequent customers of lawyers. They argue that customers are not as well-equipped to assess the fees or services offered by lawyers, or to negotiate fair cost arrangements. Advertising restrictions can also be a barrier to entry for new lawyers, who potentially could increase competition and reduce prices.

The Government will continue to pursue reform with the States and Territories to remove all restrictions on advertising by lawyers, except for those restrictions on advertising that generally relate to business conduct in all sectors of the economy prohibiting false, misleading or deceptive advertising.

In the event that the States do not move to abolish remaining restrictions on advertising, the Government will legislate to remove restrictions on advertising by lawyers to the extent of its constitutional power.
The establishment of guidelines as to what might be regarded as misleading or deceptive advertising in the legal context will result in more accurate and helpful advertising of legal services. This will assist consumers in selecting appropriate services. It also will prevent consumers from suffering as a result of false or misleading advertising.

The advertising of specialist legal services could also be examined in the context of preparing general guidelines for advertising by lawyers. Specialist accreditation schemes for lawyers exist in a number of States and Territories. Some of these schemes relate only to specific areas of legal practice while others apply to all areas of the law. Accreditation schemes are useful in providing consumers with more information about the types of legal services provided by the legal services market. However, some States prevent non-accredited lawyers from advertising themselves as specialists. This limits the information available to consumers about the legal services market. Guidelines may assist in this context to determine when it is appropriate for lawyers to advertise as specialists. For example, guidelines may address the question of whether lawyers have to be accredited, or practice for a certain number of years, to be able to advertise themselves as specialists.

In conjunction with the freeing-up of advertising, the Federal Bureau of Consumer Affairs, working with the Trade Practices Commission, consumer groups and the legal profession, will develop guidelines for the profession on the advertising of legal services.
The Government is committed to a cooperative approach to this issue with the States and Territories. It supports the position of the Legal Services Group of the Council of Australian Governments that lawyers should be free to advertise their services subject to limits on false, misleading and deceptive advertising.

Disclosure of Information by Lawyers

In addition to the general information that advertising will provide, the Government believes that lawyers should be required to provide their clients with detailed up-front information before taking on a case. This information should cover the lawyer's charges, the likely costs of the client's case, the prospects of success, information about alternatives to litigation, and the avenues for redress if the client is dissatisfied with the conduct of the case or the fees charged at its conclusion.

Coupled with the abolition of restrictions on advertising, such information would provide consumers, especially people who do not use lawyers often, with the ability to realistically compare charges and services. It would also encourage lawyers to develop more competitive services and prices.

The availability of more information about legal services would reduce a client's uncertainty about potential costs and allow people to plan for legal expenses. If, at the outset, clients are advised about the possible magnitude of legal costs, they may consider alternatives to litigation. Up-front information disclosure about legal costs would also put a client in a better position to judge the reasonableness of fees that eventually are charged, and whether there is any ground to object to those fees. There are some requirements for disclosure of this sort of information in the Family Court and in Queensland, South Australia and New South Wales.

The Government is strongly of the view that, as part of a national legal services market, there should be standard rules requiring the early disclosure to clients of relevant information, especially as to costs. Such rules were supported by the Access to Justice Advisory Committee.

The Government will develop model rules for information disclosure by lawyers, drawing on best practice in the States and on the recommendations of the Access to Justice Advisory Committee. These rules may serve as a national standard for adoption by other States and, in any event, will be applied in federal matters.

The Government will legislate to require lawyers, in federal matters, to inform their clients about likely costs, lawyers' charges, alternative dispute resolution and complaint mechanisms. about lawyers

Access to Independent Information About Lawyers' Fees

In addition to the material provided to clients directly by their lawyers, the Government considers that it is important for consumers to have access to independent fee information. Information about average fees for particular types of legal services, the way in which legal fees are calculated, the overall costs of common transactions, and the range of costs for litigated matters, would assist consumers to assess the fee arrangements being proposed by their own lawyers. Access to such information will empower Australians who are unfamiliar with the legal market to negotiate about fees and stimulate a more competitive, consumer-oriented response from lawyers.
The Prices Surveillance Authority[1] will undertake a survey of legal fees in 1995. The results of the survey will be readily available to the public. The survey results will be a guide to prices of legal services for consumers and will assist consumers to shop around for the best priced legal services.
The survey data will provide consumers with information about the cost of various legal services, from flat-rate transactions - such as wills and conveyancing - through to rates and charging practices in more complex areas, such as litigation.

Revision of Fee Scales

Each federal jurisdiction has a standard set of fee scales, which list the fees applying to matters in that jurisdiction. Lawyers can agree with their clients to charge on a different rate to the scale. In the absence of such an agreement, the scale rate will apply. Scales are also used as the benchmark for assessing the costs which are to be paid by a losing party towards the costs incurred by the winning party in a case.

Fee scales can be useful to consumers because they can provide information about fair and reasonable legal costs. However, in many areas, the fee scales have become either too complex or so out-of-touch with market rates that they are rarely used by lawyers to bill their clients. This leads to significant discrepancies between the amount charged to a client by their own lawyer and the amount which the client can recover from the other side if the client wins the case.

The Access to Justice Advisory Committee recommended the abolition of fee scales given the shortcomings of the existing scales. The Committee noted criticisms of the scales, including that there is a lack of consumer awareness of the scales, and that they can be anti-competitive by reducing the market pressure to compete on prices and service delivery.

The Government supports reforms under consideration by the Council of Australian Governments to move to market-based measures for establishing the price of legal services. Such reforms are dependent upon the necessary competitive reforms and conditions being in place to warrant such a move. Until the necessary competitive conditions are in place, the abolition of fee scales could disadvantage consumers. Accordingly, while the Government supports the long-term objective of abolishing fee scales, in the interim we support the revision of federal fee scales.

In the federal jurisdictions, the actual costs that underlie various legal transactions have not been assessed for many years. The current federal scales reflect only the original and outdated prices as indexed over the past ten years.

The structure of the scales does not appear to reflect the way in which legal work is undertaken nowadays. As a result of significant changes in wage setting and in technology, many scale items may not accurately reflect the true value of services rendered. For example, the scales include distinct and not insignificant charges for writing letters. Given the advent of word-processing in legal firms, that task is much more simple and routine than the fee scales suggest.

The fee scales that apply in federal courts will be comprehensively reviewed and overhauled, with a view to developing a simpler structure and more accurate charging rates.
Apart from the consumer information benefits and the potential to significantly reduce costs in certain areas, there are likely to be long term indirect benefits resulting from the revision of fee scales. Understanding the full extent of current costs, and the factors that have a significant bearing on those costs, could be a most useful first step in targeting high cost areas of legal services for reform. Such reform could include simplifying laws and procedures, thereby ultimately reducing costs.

LAWYERS' FEES

CONTINGENCY FEES

The Commonwealth considers that more flexible and transparent charging practices within the legal profession will be encouraged in an environment where anti-competitive practices are minimised. One method of encouraging more flexible arrangements would be to permit contingency fees. Essentially, contingency fees enable lawyers to charge on a "no-win no-fee" basis. This is quite different to the usual practice where lawyers' fees are paid whether or not the client's case is successful.

Contingency fees can have a number of significant advantages, including more flexible and competitive charges. Such fees also encourage lawyers, who generally are in a better position to assess and absorb risks, to take on more of the risks of running litigation. They also provide the lawyer with a direct financial interest in the success of the case, unlike the present arrangements where lawyers get paid no matter what the result.

Contingency fees have been part of the legal landscape in a number of overseas countries for many years. Recently they have been permitted in South Australia and New South Wales. The Queensland Government also is committed to the introduction of contingency fees. Consultation is underway in relation to the possible forms of such fees.

The Government is aware of concerns that have been raised from time to time about the possible ill-effects of contingency fees, such as the potential for increased litigation. However, after assessing those concerns, the Government does not consider that they are well founded. The risk being borne by the lawyer on a contingency fee arrangement will discourage lawyers from running worthless cases. Moreover, the increased access to the courts that contingency fees may allow will enable people of limited means to use the law, quite properly, to protect their rights or to be compensated for harm.

Concerns have also been raised that lawyers will charge contingency fees, and thus seek an additional fee for success, in sure cases that they previously might have undertaken on a purely speculative basis. On a speculative fee basis, lawyers are paid only their normal fees in the event of a win. Again, the Government considers that this concern can be addressed by requiring lawyers, before proposing a contingency fee arrangement, to assess the risks of winning or losing the case, advise the client in writing of that assessment, and be able to defend the imposition of a contingency fee on the basis of those risks.

Contingency fees may be determined in a number of ways. For example, in the United States it is common for contingency fees to be calculated as a proportion of the amount of damages awarded. That system has given rise to concerns that lawyers collect windfall gains out of all proportion to the work done and that clients with prospects of lower awards will be disadvantaged. By comparison, in New South Wales, contingency fees are calculated on the basis of the lawyer's normal fee with an extra `uplift' percentage of that fee added to the total cost of the lawyer's service.

The Government supports the use of uplift contingency fees as part of the overall process of increasing choice for consumers and increasing access to the courts, when necessary, to seek redress.

The Government is committed to cooperate with the States, Territories and the legal professional associations to develop options to permit uplift percentage contingency fees, along the lines of the approach adopted in New South Wales.

The introduction of contingency fees will be complemented by the establishment of a national disbursements fund.[2] A contingency fee arrangement may only extend to the lawyers forgoing their professional fees until the case is successfully concluded. However, there are a range of up-front costs that must be met during litigation, such as fees for medical reports and witness expenses. The establishment of a national disbursements fund will enable litigants to apply to the fund to meet the necessary upfront costs of litigation. This will enable clients of limited means to obtain legal services from lawyers who are willing to provide their services on a contingency fee basis. The funds provided by this scheme will be repayable, with an administration fee, only if the client wins the case.

In the event that other State and Territory Governments do not move to permit contingency fees, the Commonwealth is prepared to introduce uplift contingency fees in federal matters. Contingency fees would not be introduced in family or criminal law cases. The introduction of contingency fees would be accompanied by safeguards for clients, such as a requirement that lawyers assess the risks of winning or losing a case and provide a written assessment of these risks to clients when proposing a contingency fee arrangement.

LAWYERS' BUSINESS STRUCTURES

There are various restrictions on the types of business structure available to lawyers. A number of States prevent lawyers from practising in partnership with other professionals, which precludes the establishment of multi-disciplinary practices. Some States prevent lawyers from forming companies. Other States permit incorporation but prohibit limited liability and require joint and personal liability.

Clients may require the services of professionals other than lawyers in connection with the resolution of their legal problems. Multi-disciplinary practices respond to this need by combining different occupations and professions within the one firm. The Access to Justice Report noted that the `one-stop shopping' provided by multi-disciplinary practices is convenient for clients in that it saves them time, reduces their transaction costs and increases the choice of the types of legal services available.

The Access to Justice Report also noted that restrictions on incorporation may increase business costs and hinder law firms from choosing the most efficient type of business structure.

The Government considers that more flexible business arrangements for lawyers would contribute to a more responsive legal services market. However, there are complex questions of ethics, liability and consumer protection that need to be resolved before any wholesale move to adopt new arrangements is made. Work has commenced under the auspices of the Council of Australian Governments to identify and assess these issues. The Government supports that work and encourages further progress in the investigation of more flexible business structures for lawyers.

COMPLAINTS ABOUT LAWYERS

Better information and increased choice is, of course, only part of the equation. Consumers also need the protection of an effective and independent complaints system to which they can turn if there is a dispute over a lawyer's fees or conduct in handling a case.

It is essential that such a system is accepted by the general community as an objective mechanism for dealing with complaints against lawyers that provides effective redress for aggrieved customers. There is significant evidence to suggest that some of the existing mechanisms do not fulfil these objectives. Recent reports, including the Access to Justice Report, have pointed out that some existing schemes are perceived to be dominated by lawyers, and that these schemes are not seen to deal sympathetically with client grievances.

The Government considers that there are a number of principles that should underlie any disciplinary and complaints mechanism. These principles are based on work done by the New South Wales Law Reform Commission in its report Complaints Against Lawyers and endorsed by the Access to Justice Advisory Committee. They are:

The Government considers that there would be widespread community agreement on these best practice features of a complaints and disciplinary system. They can represent achievable national standards. Some initiatives already have been implemented in some States. A scheme based on these standards largely has been implemented in New South Wales. Recently, the Queensland Government also agreed to implement a new system to handle complaints against lawyers. One of the aims of the proposed new system in Queensland is to make the process more independent of professional associations, along the lines of the New South Wales system. In Victoria, the creation of a complaints system which is transparently fair and independent of legal professional associations, and the establishment of a legal ombudsman, also have been proposed. While there has been some reform in other States and Territories, significant change is still required.

The Government strongly supports reform of the complaints systems applying to lawyers and is pursuing this matter with the States and Territories. We will press for the introduction of independent and effective complaints systems through the Council of Australian Governments and the Standing Committee of Attorneys-General.

RESERVATION OF LEGAL WORK TO LAWYERS

In encouraging greater competition between lawyers, the Government considers that there should be no automatic presumption that all legal work must be performed by lawyers.

A number of recent reports have highlighted the fact that a great deal of legal work already is undertaken by non-lawyers. Legal work conducted by non-lawyers includes conveyancing, incorporation of companies, advice on taxation matters, wills and probate, advocacy in various tribunals and in summary prosecutions in magistrates courts, and mediation and arbitration. These are but some of the areas where non-lawyers currently provide services.

The Government is aware of concerns voiced by the legal profession about the conduct of legal work by non-lawyers. Such concerns relate to the maintenance of standards, the protection of consumers' interests in quality work, and the provision of safeguards such as professional indemnity insurance. These concerns need to be taken into account.

However, the Government considers that there may well be scope for further work to be undertaken by properly trained paralegals in areas of the law currently restricted to lawyers.

In this area, there are real issues of affordable choice for consumers. Our view is that the further opening up of work to non-lawyers could assist in making services cheaper and in creating a climate for more consumer-oriented services, as lawyers respond to the increased competition for work.

The Government believes that further investigation needs to be undertaken into possible areas of legal work that could be undertaken by non-lawyers. The Government considers that this issue should be examined as part of the cooperative process under the Council for Australian Governments. We will contribute to that process by commencing an investigation into the possible work within the federal sphere that could be conducted by non-lawyers.
We believe that the initiatives in this Statement to reform the regulation of the legal profession will benefit consumers in a number of ways. Greater competition in the legal profession will improve the responsiveness of the legal services market and make lawyers more client focused.

Many of the initiatives in this Statement are aimed at ensuring that consumers will obtain more information about legal services. Moves to introduce mandatory information disclosure requirements, the establishment of a survey of legal fees, the review of federal fee scales and the abolition of advertising restrictions on lawyers will provide consumers with much greater information about the legal services market and improve their position in dealings with lawyers. The availability of more information on legal services for consumers will ensure that they are able to make better decisions about the different types of legal services in the market and the reasonableness of the costs of such services. The Government's commitment to introduce contingency fees in federal matters, unless the States move to introduce such fees, will improve access to legal representation in some cases.

The Government remains committed to cooperate with the States and Territories, through the Council of Australian Governments and the Standing Committee of Attorneys-General, to progress other reforms to the legal profession such as the establishment of a national legal services market, the establishment of independent systems for complaints against lawyers, the investigation of more flexible business structures for lawyers and the investigation of legal work that could be conducted by non-lawyers.


Endnotes

[1] Under the Competition Policy Reform Bill 1995, the Prices Surveillance Authority will be merged with the Trade Practices Commission to form the Australian Competition and Consumer Commission.

[2] See `Legal Aid'


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