The failure to rein in rapacity

Legal profession regulation is a structural mess ... Former Queensland legal services commissioner, John Briton, says the professional associations should vacate the regulatory field ... Too much self-interest, not enough consumer protection ... Law firm cultural issues unaddressed ... Shameful billing practices 

John Briton, the former Queensland Legal Services Commissioner, has launched a scarifying critique on the legal profession's regulatory regime and its lack of regard for the interests of consumers. 

He told a recent legal ethics colloquium in Melbourne that the professional associations should have no role in monitoring or enforcing members' professional standards.

He also criticised current billing practices, which "should shame the profession" and are a demonstration of longstanding regulatory failure. It is not the first time he has made known his thoughts about the limitations of the present regulatory arrangements for the profession. 

Briton's view of the legal profession uniform law, which applies in NSW and Victoria, is that it is an improvement in the management of complaints, goes backwards in respect of compliance audits, and was past it's use-by-date even before the ink was dry when it comes to testing the fairness of costs agreements. 

He quoted with approval Lord Hunt's review of the English Clementi reforms: 

"Lawyers can no longer rely on the public universally and unquestionably endorsing a perception of them as a peculiarly selfless breed ... motivated solely by a strong ethos of service, deserving of automatic respect and capable of being left to regulate their own affairs ... The era of unquestioning acceptance - or deference - is over and those few remaining diehards who still hark back to the days of total professional self-regulation had better wake up to that fact." 

The message still has not penetrated, because credible surveys show that only one in three people believe lawyers are honest and ethical, which compares poorly with the four in five who believe nurses, pharmacists and doctors are honest and ethical. 

Lord Hunt: wake-up

Structurally, the regulatory regime is a mess. On the eastern seaboard, Queensland allows the commissioner to delegate complaints to the professional bodies for investigation, but not the final decision. In practice, the commissioner has only delegated complaint investigations to the bar, not the law society. 

In Victoria and NSW, the legal profession uniform law (LPUL) allows commissioners to delegate complaints to the professional bodies for both investigation and decision - subject to the legal services commissioners' general oversight and control. 

Like Queensland, the Victorian commissioner has decided to only delegate his powers to investigate, but not to decide disciplinary complaints, and only to the bar association. 

In NSW, the commissioner delegates the large majority of disciplinary complaints to both professional bodies, along with a delegation of his powers to investigate and decide. 

So the NSW commissioner only reviews how the law society and the bar association deal with complaints. The professional bodies in NSW are in the box seat when it comes to handling complaints about their members. 

When it comes to trust account investigations, the Victorian Legal Services Board has delegated responsibility to the Law Institute, with the board retaining oversight. 

However, in Queensland and NSW the law societies have kept direct responsibility for trust account work. 

Again, with compliance audits, the Victorian Law Institute has been delegated responsibility, subject to oversight by the board, whereas in Qld and NSW direct responsibility for conducting audits rests jointly with both the commissioners and the law societies. 

Briton: scandalous billing practices

Only Victoria allows those three functions to be exercised independently of the profession or under independent oversight, although by different bodies. 

Briton complains that throughout the regulatory system there is a failure to properly engage with consumers. Victoria alone has one consumer representative on the seven member Legal Services Board. 

He says this reflects the fact that the profession is "more responsive to practitioners' concerns than those of the general public", i.e. self-interest prevails. He adds there is also a hidden underbelly of complaints that are never reported, and one of the areas where misconduct can be hidden is in the way clients are billed. 

During his 10 years as the Queensland Legal Services Commissioner he found widespread billing rorts: undisclosed mark-ups or secret profits on outlays; billing in excess of the 50/50 rule; billing in six minute units for work that took far less time; charging an uplift for "care and consideration" up to 50 percent or more on top of time costed bills; substituting an itemised bill in a higher amount for an earlier lump sum bill if consumers requested the lump sum bill be itemised; and cancellation fees. 

These practices are rarely, if ever, named in complaints, yet by their nature they are likely to reflect the standard operating procedure of a firm. There is a "systematic regulatory failure to rein in rapacity". 

Briton argues that a carefully a targeted, proactive program of trust account investigations is "well suited to identify and scope problematic billing practices across whole classes of law firms - firms which practise succession law, for example, to test claims that some of them may be charging grossly disproportionate costs in speculative family provision matters in ways that are eerily familiar to the grossly disproportionate costs which some lawyers charged in speculative personal injury matters in Queensland in the early 2000s and which prompted the enactment of the 50/50 rule". 

Complaints, disproportionately, are directed to "retail" practitioners, so much so that commercial lawyers are only nominally subject to regulatory scrutiny. 

When Briton conducted surveys he found that lawyers disagreed on fundamental issues, such as whether it was ethical to charge for care and consideration on top of a time-costed bill. There was similar disagreement among barristers as to whether it was justifiable to charge cancellation fees. 

"It is extraordinary, is it not, that lawyers give such varying and even diametrically opposed answers to questions which, from whichever way you look at them, are fundamental questions that go to the very heart of their ethical and fiduciary obligations to their clients?" 

Briton suggests three amendments to Victoria and NSW's legal profession uniform law: 

• To give the regulators unfettered discretion to conduct a compliance audit of a law firm; 
• To require that responsibility for complaints, trust account investigations and compliance audits be exercised by just one independent regulatory authority in each jurisdiction; and 
• To replicate the unfair contract terms in the Australian Consumer Law. 

The former legal services commissioner says that the regulatory system is designed to be entirely reactive and premised on the "merest of mere minimum standards". 

It achieves little, other than for an "uncertain deterrent effect" and it directs attention almost exclusively to individual lawyers and not the underlying "cultural issues" in law firms. 

Here's the short version of John Briton's paper Between the idea and the reality falls the shadow.