Background

On 30 April 2009, the Council of Australian Governments (COAG) agreed to create a National Legal Profession Reform Taskforce (Taskforce) to establish a nationally uniform set of laws and rules governing the legal profession in Australia.

The creation of the Taskforce was a defining moment in the area of legal profession reform, a movement which began in its modern form with the Law Council of Australia’s 1994 paper, Blueprint for the Structure of the Legal Profession.

The reforms, as contemplated by COAG at that time, were to be structured for the benefit of both the profession (including those charged with overseeing the profession) and also consumers of legal services.

Proposed National Law

In April of this year, the Taskforce presented its draft legislation to COAG (National Law), together with an impact statement and a consultation report calling for submissions on the proposed reforms. A three month consultation period, concluding on 13 August 2010, was provided to allow stakeholders to comment on the proposed legislative changes.

The Taskforce has targeted the following key areas for legislative reform: a new national regulatory framework (to work alongside local representatives with delegated authority), a national legal profession with one centralised admission process, a reduction in the regulatory burden for multi-jurisdictional law practices (for example, the requirement to obtain professional indemnity insurance in only one jurisdiction without needing to obtain exemptions in other jurisdictions) and an increased focus on consumer protection, particularly with respect to legal costs.

Given the varying interests of the individual States and Territories, it is unsurprising that the draft National Law has provoked substantial debate and COAG has received numerous submissions from interested parties including the Law Council of Australia, the Business Council of Australia, regulatory bodies in the States and Territories and consumer groups. COAG also conducted a consumer survey over a 6-week period, the results of which are being used to create a report for the consideration of the Taskforce.

The Law Council’s response

On 13 August 2010, the Law Council of Australia submitted its response to the Taskforce’s proposal, confirming its general support of the Taskforce’s efforts in streamlining the profession. The Law Council’s response also highlights the elements of the National Law with which the Law Council does not agree. The Law Council’s response was prepared in conjunction with the State and Territory law societies and with bar associations nationwide.

The Law Council criticises the Taskforce’s failure to provide updated costing information and funding proposals alongside its draft legislation was criticised, as that uncertainty makes it difficult to review how the new legislation will be received at ground level. In the words of Hylton Quail, President of the Law Society of Western Australia in his letter to the Chairperson of the Taskforce, Roger Wilkins AO,

“any simplified system of regulation of the profession should not result in an increase in the cost of regulation for either consumers or legal practitioners”. The Taskforce has estimated that “the net annual benefit of the proposed reforms to Australian regulators and law practices is $16.9 million in the first year and $17.7 million per year thereafter”.

As such, any proposal to pass on the financial burden of implementing the reforms to practitioners or consumers (or both) is not likely to be well-received by either group.

The Law Council endorses the proposed simplification of the process of foreign lawyers being admitted to practice in Australia and has made some suggestions as to how the National Law can be improved to streamline this process even further. It hopes that by removing barriers to foreign lawyers practising in Australia, the system of mutual recognition of legal qualifications will also benefit, leading to enhanced competitiveness of Australians on the international stage including within the arbitration space.

The Law Council expressed concern that the proposed amendments to the current penalties regime contemplate a more onerous set of civil and criminal penalties for breaches of the National Law than is currently applicable under the Legal Profession Acts. In the Council’s view, the stricter penalties under the National Law (particularly criminal penalties) would potentially result in an increased strain on tribunals and courts, as well as having an unfairly prejudicial effect on practitioners facing criminal penalties. The Law Council gives the example that a breach of section 3.5.12 (which requires a practitioner to respond in writing to a notice) may result in the imposition of a criminal sanction. The Law Council argues penalties imposed for breaches of the National Law should differentiate between conduct which is disciplinary in nature, and conduct which is serious enough to warrant the imposition (and associated stigma) of a criminal penalty.

The Taskforce’s treatment of the legal costs framework at section 4.3 of the National Law has also triggered a negative response from the Council. The proposed reforms impose a more onerous obligation on law practices to ensure that they have taken all reasonable steps to ensure that the client has understood and consents to any proposed course of action, and to the estimated costs associated with that course of action. The Law Council argues that the proposed changes diminish the role of the signed costs agreement as evidence of the nature of the lawyer/client relationship. Perhaps the greater concern is that the suggested reforms impose a subjective “reasonableness” test which carries an inherent risk of uncertainty as to when a law practice actually discharges its obligations to disclose information to clients.

COAG has requested that the Taskforce consider all the submissions and report back before the end of this year.