1
Dear Emma
Thank you for your response.
I will address my response to you in three separate segments.
1. The evidence supporting the claim that there is systemic abuse by the legal profession
of Australian consumers in relation to Inheritance matters.
2. The reasons it is in the national and international interest of Australia to prevent this
consumer abuse by lawyers of Australian families in regards to inheritance matters.
3. The reasons why the ACCC does not receive complaints about these matters and why
Australian consumers are denied their consumer rights when dealing with the legal
profession in inheritance matters and the need for the ACCCC to act now in the
national interest.
One
The evidence supporting the claim that there is systemic abuse by the legal profession of
Australian consumers in relation to Inheritance matters
In your reply you state the following.
The ACCC endeavours to focus on systemic or widespread issues rather than trying to
resolve all individual consumer complaints. In general, investigations are conducted
confidentially and the ACCC does not comment on matters it may or may not be
investigating.
Is inheritance abuse of families by lawyers, or law firms wide spread and systemic?
I would like to point you to three separate documents that suggest the problem is wide spread
and systemic in nature.
a. Summary of the 2010 Succession Law Round Table convened by the Legal Services Commissioner of Victoria Ref pg 4.
(b) Probate and estate law generates a high level of complaints Succession law, involving wills, probate and estate law, consistently attracts a high number of complaints each year. Since the LSC was established, this area of law has attracted high complaint numbers. For the four year period from 1 January 2006 until 31 December 2009, a total of 919 complaints had been received about lawyers relating to probate and estate matters. These complaints contained 1411 separate allegations; some complaints contained more than one allegation. The most common complaints made about lawyers in the area of probate and estate include:
2
• overcharging (for work done, not done or for a bill exceeding the quote) • failure to communicate with the client or another solicitor • negligent service (including bad case handling and bad advice) • delays • other professional conduct matters
b. Civil Justice Research Group, Melbourne Law School, University of Melbourne presents: The Impact of Australian Consumer Law on Lawyers Monday 28 May, 2012 6pm – 7.45 Melbourne Law School. Please refer Pg 34
Steve: Again, I don't think you'll get any disagreement on any of that. A couple of points. The first point is we've had unconscionable conduct for a long time and indeed we use it all the time. We just rarely use that terminology. I recently went to senior counsel in New South Wales to try to get a complaint of unconscionable conduct against a particular firm because of a whole range of overcharging. Because again, we're a disciplinary unit, not a compensatory one. The difficulty we often have, and VCAT probably has some of these difficulties too - we certainly have it big in New South Wales, I hope you don't have it as big here - and that is that you get what we call our frequent flyers - the practitioners that are very well known to us that are always doing a little bit wrong. Often not enough in any one of those cases to be wrong enough for us to really get them. We negotiate a lot of complaints, we mediate a lot of complaints, but I'd like to see them depart from the legal profession. The only way that I'm going to be able to do that now is to use unconscionable conduct. I use it under the old Contracts Review Act. Jeannie: Well actually yes, the NSW Contracts Review Act is broader again I think.
Steve:
Exactly. Well that's what I use because again, as a regulator of the profession, I can
do that. But again I have to stress, because this is not based on consumer rights.
What you're talking about is a different thing and they can coexist. I don't think one
has to take over from the other. The issue of coexistence is what's really important.
Because as Michael said, we couldn't - I come from legal service. I couldn't agree
more that that sort of thing which we've all seen a billion times, and we as regulators
see constantly and our staff get immensely frustrated. But our job is to try to shift
that whole regime, not get individual settlements for individual people necessarily.
So when we're talking about what we're trying to do - that's why I talked a bit about purpose. The concept of purpose is to actually make the profession understand this.
3
We have an education role to try to do that and to try to achieve change in the profession to make it more professional and better for consumers. So it's working together that we need to do, it's not one or the other. I think that once we get in the national laws, I’m a big fan of moving to principle base regulation rather than prescriptive. I love unconscionable conduct. I'd love to have just that because that gives me so much more leverage to deal with practitioners but ultimately you're going to have a real problem with proof. In all of your matters - in all the matters when you talk about unconscionable conduct, it is so common to us that you have one person's word against another. The extraneous evidence in the consumer jurisdiction, you might have much more ability to get that evidence in. We don't. So there's, again, congruency here that would be useful, but for us when we get somebody who says I was bullied into signing this contract, then the lawyer comes back and brings forward the interpreter, and brings forward the signed agreement and everything else, that’s the end of it for us. We can't pursue it any further. Even though there might be a smell there. So there are real issues there around proof that are difficult in a disciplinary term.
That's why we try to settle - as Michael said - we try to resolve so many of these
complaints before we get to discipline because disciplines the last gasp and it doesn't
give the consumer usually anything.
Jeannie:
Can I just make a comment there then. It seems then that it's important for regulators to talk to each other a lot. Steve: We do.
Jeannie:
Because your comment about the repeat offenders - the Australian Consumer Law
provisions on unconscionable conduct say - actually specify that engaging in a course
of conduct can be unconscionable. So that repeat offender who you're saying is
offending again, and again, and again, might not be unconscionable conduct in a one
off situation but it might be again, and again, and again. It's quite possible that it
would actually be caught under this legislation.
4
c. Victorian Succession Law Terms of reference.
In summary. We have the Victorian Legal Services Commissioner holding a round table discussion on the issues regarding complaints against lawyers with regards to inheritance matters that amount to at least 900 complaints from the public over a four year period in the state of Victoria alone. We have the N S W Legal Services Commissioner admitting they have serial offenders who remain in the profession and that his staff are continually frustrated. We have the Victorian Attorney General Identifying the issue in his terms of reference to the review of inheritance laws in Victoria. I leave you to make your own assessment!
Two.
The reasons it is in the national and international interest of Australia to prevent this
consumer abuse by lawyers of Australian families in regards to inheritance matters.
In your reply you state the following.
The ACCC cannot pursue all the complaints it receives. While all complaints are carefully
considered, the ACCC must exercise its discretion to direct resources to the investigation and
resolution of matters that provide the greatest overall benefit for consumers and businesses.
The ACCC’s Compliance and Enforcement policy describes in more detail how this
5
discretion is exercised. This policy, which is available on the ACCC’s website
[www.accc.gov.au/policy], lists a number of factors that are weighed including whether
conduct raises national or international issues, involves significant consumer detriment or a
blatant disregard of the law.
In summary.
Approximately 150,000 Australians die every year leaving an estate worth an average of
$500,000 each. The majority of the costs incurred of transferring these assets to the families
of the deceased are legal costs. They amount to somewhere between 5% and 10 % of the
value of deceased estates an amount of between 4 billion to 7.5 billion dollars per year.
A large percentage of this money is wasted due to an inefficient time consuming and
unaccountable legal process. A process designed by lawyers, administered and run by
lawyers for the benefit of lawyers.
If Australian Consumer Law were applied to this process and the industry were cleaned up I
would estimate a saving in the region of 50%, the accumulative effect over a ten year period
being in the order of 30 to 50 billion dollars being held by Australian families instead of
going into the pockets of a few privileged lawyers.
As you can see the scope for an overall benefit for consumers if there were systemic abuse by
the legal profession is significant.
Also if there were systemic abuse by the legal profession in the area of inheritance transfer it
does raise national or international issues and involves significant consumer detriment and
could well be a blatant disregard of the law.
If we as a nation turn a blind eye to a systemic abuse by our legal profession at a time of
family vulnerability within our own community then how will we be regarded by people who
live outside of our community? How will the international community see us as a nation that
permits its legal profession to cannibalise family inheritance, so as to increase their living
standards whilst disregarding the needs of the families of the deceased.
Three
The reasons why the ACCC does not receive complaints about these matters and why
Australian consumers are denied their consumer rights when dealing with the legal
profession in inheritance matters and the need for the ACCCC to act now in the
national interest.
In your reply you state the following.
Your complaint has been recorded by the ACCC and will be used in monitoring whether
there is a level of conduct by Russell Kennedy Solicitors or a pattern within the legal industry
which may raise concerns sufficient to warrant intervention by the ACCC.
However, the Legal Services Commissioner is responsible for the receipt, investigation and resolution of complaints about legal practitioners, which includes the settlement of disputes between legal practitioners and their clients. Where the complaint is about the costs
6
charged by a legal practitioner or where it is alleged that the legal practitioner’s actions caused financial loss, the Legal Services Commissioner will attempt to resolve the dispute. Further information about how complaints are made and how complaints are dealt with is available on the website of the Legal Services Commissioner.
In summary
Hear lyeth the conundrum. Again I refer you to:
Civil Justice Research Group, Melbourne Law School, University of Melbourne presents: The Impact of Australian Consumer Law on Lawyers Monday 28 May, 2012 6pm – 7.45 Melbourne Law School. Both the N S W and Victorian Legal Services Commissioners have an agreement with their respective fair trading regulators and the ACCC to handle complaints against lawyers. These regulators have a completely different philosophical view of the law in relation to consumer rights. Ref Pg10 Steve Consumer laws give consumer rights. The Legal Profession Act does not give consumer rights, that's not its intention. So we have a completely different philosophical starting point. The next thing I want to say is - and this might sound trite but I think it's really important - the consumer laws deal with consumer rights. The Legal Profession Act deals with client protection. Clients and consumers are different beasts. They have different rights, they have different responsibilities, they have different definitions, they have different philosophical starting points and ending points. So that the legislation that we administer is not designed to give consumers virtually anything. That's not it's point. Its point - the point of the legislation is actually to protect society from unscrupulous lawyers who actually breach their ethical duties to such an extent that they should be struck off, fined, or otherwise dealt with. Again, this is just a skating over the top of so many areas. Pg 11
So the next thing I wanted to talk about is some definitional problems. Those two purposes are so
simplistically stated by me in a very short period of time could give rise to weeks of discussion. It's
really important that we engage in those weeks of discussion and I hope that one of the things that
comes out of this is a desire to actually do a hell of a lot more research and a lot more exploration of
those issues than we have time to do tonight. I was having a discussion with Rod Sims about six
weeks ago about the decisions behind the ACCC, or what they considered their purpose to be. In
part of our discussion he was making the statement that he felt that the ACCC was very good at civil
prosecutions, but absolutely hopeless at criminal prosecution. They were really bad at dealing with
anything to do with crime because they didn't understand it.
Pg 12
7
I thought that was a very honest and very brave statement, and probably very true. I would say the same thing about us. I mean we are not criminal prosecutors. We are prosecutors to the Briginshaw standard not the criminal standard, and there's a big difference. But what the really interesting thing was is they were defining unconscionable conduct, which is a term that’s very familiar with regulators in the legal role, completely different than the way we would define it. They were using a criminal standard. Now if there are two bodies that are dealing with the same area of law with such fundamentally different definitions - approaches to something as simple as unconscionable conduct, we have problems.
I think that that's going to be one of the major issues here that need to be explored. It's for
one of the reasons that - as Michael said - we have worked in New South Wales, and I know
Victoria is doing that now and Queensland already has, got an memorandum of
understanding (MOU) with the Department of Fair Trading so that all complaints against
lawyers will be referred to us. Now is that good for consumers? Possibly not. Because at the
end of the day what we deal with is disciplinary actions, not benefits to consumers. So we
have these different philosophical approaches that are fundamental and they're not easily
reconciled within our present legislation at all.
Pg 15
Why is a lawyer more protected than a plumber or whatever? The reason is, again, fiduciary
relationship. We are a profession. As a profession we have a responsibility. The primary
responsibility of the profession is to provide a service to the community. That's why this
concept of gross overcharging actually ends up being a disciplinary matter and not a matter
of client rights.
So it's not going to change anything and quite frankly, there's almost no cases before our Fair Trading jurisdiction about lawyers anyway. If you try to do a search for them they just don't exist. Now whether or not that's a good
thing, or a bad thing, or a statement of the problem I can't say. But what we really need to
do is develop guidelines. John Briton's developed some. We need to go much further than
that. We need to start working out a definitional harmonisation between regulators. I
include the ACCC, ASIC, and all the other regulators. We need to be together on this and
we're not. Regulators hardly ever even talk to one another, let alone try to harmonise their
definition. Finished.
Pg 17
So we settle lots of these matters. But it's not a consumer right issue and it never has been
Jeannie
Because the learning in this area is that often consumers will not actually - it's about giving consumers rights but it's also about empowering regulators. Because of the imbalance in information, knowledge, expertise, resources, the learning is that consumers often won't
8
pursue complaints because they don't have the capacity to do that. I would've thought that's particularly pertinent in the relationship of solicitor client. Because if a client comes to a solicitor or a lawyer seeking legal advice, by definition they don't have expertise in that area, so if their relationship with the lawyer goes wrong, they actually probably are unlikely to pursue legal remedies. Hence the role for the regulator.
As a consumer lawyer I'm surprised by your comments on itemised bills being against the
interests of legal service consumers because one of the themes that underlies most
consumer law is information, providing good quality information to consumers so they're in
the position to make good decisions. That disclosure - truth in consumer transaction is one
of the biggest themes and considered consumers fears. So the fact that to ask for an
itemised bill is against the interest of the consumer perhaps illustrates your point I think
about the very different perspectives taken by regulation of profession, professional
standards, and the consumer perspective which is actually information is fundamental.
But if the process is that all complaints against costs are referred to you, rather than dealt
with through Consumer Affairs or its equivalent, then that issue - it's just the point you're
making that that issue is never going to be dealt in…
Pg 34
Steve: Again, I don't think you'll get any disagreement on any of that. A couple of points. The first point is we've had unconscionable conduct for a long time and indeed we use it all the time. We just rarely use that terminology. I recently went to senior counsel in New South Wales to try to get a complaint of unconscionable conduct against a particular firm because of a whole range of overcharging. Because again, we're a disciplinary unit, not a compensatory one. The difficulty we often have, and VCAT probably has some of these difficulties too - we certainly have it big in New South Wales, I hope you don't have it as big here - and that is that you get what we call our frequent flyers - the practitioners that are very well known to us that are always doing a little bit wrong. Often not enough in any one of those cases to be wrong enough for us to really get them. We negotiate a lot of complaints, we mediate a lot of complaints, but I'd like to see them depart from the legal profession. The only way that I'm going to be able to do that now is to use unconscionable conduct. I use it under the old Contracts Review Act. Jeannie: Well actually yes, the NSW Contracts Review Act is broader again I think.
Steve:
Exactly. Well that's what I use because again, as a regulator of the profession, I can do that.
But again I have to stress, because this is not based on consumer rights. What you're talking
9
about is a different thing and they can coexist. I don't think one has to take over from the
other. The issue of coexistence is what's really important. Because as Michael said, we
couldn't - I come from legal service. I couldn't agree more that that sort of thing which
we've all seen a billion times, and we as regulators see constantly and our staff get
immensely frustrated. But our job is to try to shift that whole regime, not get individual
settlements for individual people necessarily.
So when we're talking about what we're trying to do - that's why I talked a bit about purpose. The concept of purpose is to actually make the profession understand this. We have an education role to try to do that and to try to achieve change in the profession to make it more professional and better for consumers. So it's working together that we need to do, it's not one or the other. I think that once we get in the national laws, I’m a big fan of moving to principle base regulation rather than prescriptive. I love unconscionable conduct. I'd love to have just that because that gives me so much more leverage to deal with practitioners but ultimately you're going to have a real problem with proof. In all of your matters - in all the matters when you talk about unconscionable conduct, it is so common to us that you have one person's word against another. The extraneous evidence in the consumer jurisdiction, you might have much more ability to get that evidence in. We don't. So there's, again, congruency here that would be useful, but for us when we get somebody who says I was bullied into signing this contract, then the lawyer comes back and brings forward the interpreter, and brings forward the signed agreement and everything else, that’s the end of it for us. We can't pursue it any further. Even though there might be a smell there. So there are real issues there around proof that are difficult in a disciplinary term. That's
why we try to settle - as Michael said - we try to resolve so many of these complaints before
we get to discipline because disciplines the last gasp and it doesn't give the consumer
usually anything.
Jeannie:
Can I just make a comment there then. It seems then that it's important for regulators to talk to each other a lot. Steve: We do.
Jeannie:
Because your comment about the repeat offenders - the Australian Consumer Law
provisions on unconscionable conduct say - actually specify that engaging in a course of
conduct can be unconscionable. So that repeat offender who you're saying is offending
again, and again, and again, might not be unconscionable conduct in a one off situation but
it might be again, and again, and again. It's quite possible that it would actually be caught
under this legislation.
10
In Conclusion.
The Legal Services Commissioners in each state handle all consumer complaints against
lawyers, as all complaints referred to any of the departments handling consumer law
complaints. refer the complaints against lawyers to the various legal services commissioners,
as you have done with my own complaint, all complaints against lawyers are managed by
legal services commissioners. Legal services commissioners have a completely different
philosophical approach to consumer law. Consumers have no rights; consumers become
clients who are a different animal to consumers. The methods of determining misleading and
deceptive conduct, unconscionable conduct or empowerment in a contract over a consumer
are also different. This is why the ACCC never gets complaints against lawyers and therefore
can say it is not aware of the systemic abuse by them of Australian consumers.
Michael McGarvie the Victorian Legal Services Commissioner has stated that the ACCC and
the various Legal Services Commissioners can exchange information; Steve Mark the N S W
Legal Services Commissioner has admitted that the regulators only communicate on
occasions. The ACCC needs to “Act” and request the relevant information from the various
legal services commissioners. By obtaining those files, the systemic abuse of Australian
Families within Inheritance matters by lawyers would then be exposed and a remedy for this
abuse could be actioned.
This would provide a significant overall benefit for consumers and businesses and would
address conduct by the legal profession that raises national or international issues, involves
significant consumer detriment or a blatant disregard of the law.
I trust you can see the dilemma for Australian consumers and the benefits to our nation that
would flow from an investigation by the ACCC of the legal profession’s systemic abuse of
our families when dealing in inheritance matters and will do everything within your power to
assist.
Yours Sincerely
Diarmuid Hannigan.
11
The Impact of Australian Consumer Law on Lawyers
The following is a transcript of proceedings of a roundtable held at
Melbourne Law School on Monday 28 May 2012 to consider the impact
of the Australian Consumer Law on Australian lawyers.
http://civiljustice.law.unimelb.edu.au
Page 2 of 46
Civil Justice Research Group, Melbourne Law School, University of Melbourne presents:
The Impact of Australian Consumer Law on Lawyers
Monday 28 May, 2012 6pm – 7.45
Melbourne Law School
Order of Proceedings
1. Welcome Gary Cazalet, Director CJRG, Melbourne Law School
2. Why we have brought you together
Linda Haller, Melbourne Law School
3. Regulatory overlap, including billing for ILPs and Victoria’s approach to
the two sets of regulation Michael McGarvie, Legal Services Commissioner, Victoria
4. Different objects/purposes of the ACL and Legal Profession Acts and of
regulators themselves Steve Mark, Legal Services Commissioner, NSW
5. Misleading Conduct and Debt Collection
Gerard Brody, Policy & Campaigns Director, Consumer Action Law Centre
6. Unfair Contract Terms
Jeannie Paterson, Melbourne Law School
7. ACL and Litigation
Linda Haller
8. General Discussion - Where to from here?
Page 3 of 46
Welcome [Gary Cazalet as Director of the Civil Justice Research Group,
Melbourne Law School, welcomed those present. He acted as
facilitator for the evening’s proceedings.]
Linda Haller: There are various schools of thoughts as to the degree to which the
Australian Consumer Law does impact on lawyers and the extent of
its impact. It seemed to be very timely to bring people together and a
great opportunity to have regulators here as well as remind ourselves
of the civil liability that can arise through the Australian Consumer
Law. Sometimes when we're thinking about regulating lawyers it's
easy to just think about one little corner of the regulatory landscape.
This is a great chance to step back from that and think about civil
liability under the Australian Consumer Law, the different remedies,
and different regulators as well.
I also wanted to give the apologies of John Briton, the Queensland
Legal Services Commissioner. He very much would like to have been
here and sends his apologies. His office has really done some very
important work in this area and has published a regulatory guide.
Copies can be downloaded from:
http://www.lsc.qld.gov.au/publications/regulatory-guides
(Regulatory Guide 2)
Facilitator: Okay, well thank you Linda. So I'd like to introduce our first speaker
Michael McGarvie. Michael McGarvie was appointed to the position of
Legal Services Commissioner in December 2009. Prior to this he was
the CEO of the Supreme Court for three years. Between 1983 and
2006 he practises as a solicitor in a private firm where he specialised
in civil litigation over consumer and workplace rights and dispute
resolution. Michael's going to speak about regulatory overlap.
Page 4 of 46
Michael McGarvie: Thank you very much. Delighted to be here. I've addressed four
teaser questions contained in the flyer advertising tonight’s
proceedings: does the Australian Consumer Law (ACL) give
regulators greater powers, will lawyers retain it and scrutinise it more
closely, how do you enforce consumer guarantees, and what's the
situation relating to advocates immunity. Of course the Legal
Profession Act that I'm responsible for imposes an obligation on
lawyers to provide consumer services and protects the interest of
consumers in relation to the provision of legal services. Whereas the
consumer law applies to any business or professional activity and
applies to contracts for goods and services.
The Fair Trading Act here in Victoria carves out the role that the - or
the actions, or the activities of the regulators between Consumer
Affairs Victoria and the Legal Services Commissioner because it
expects the consumer regulator to refer a dispute that's covered by a
professional regulator or a professional association regulator, or a
specialist regulator to a what's called a prescribed person or a
prescribed body. In this case that would be to the Legal Services
Commissioner. So as we do with the Office of Migration Agents
Regulatory Authority (MARA) and we work the boundary together so
that when we have combined activities involving conduct breaching
one area of regulation or the other, we attempt to collaborate with
each other. The Fair Trading Act of course expects Consumer Affairs
Victoria to refer matters to the legal regulator.
In fact - as we've done with MARA, we're doing with Consumer Affairs
Victoria. Developing a protocol for exchanging confidential
information and working together on cases that are relevant to both of
us. The commissioner of course can share information with
Consumer Affairs Victoria under each Act - those confidential
exchanges can take place. Especially where there is a systemic
problem for consumers or where a referral has come to the Legal
Page 5 of 46
Services Commissioner but the commissioner can't act for whatever
reason.
The question is whether there'll be closer lawyer scrutiny. I don't think
so. The lawyer dispute will usually go to the Legal Services
Commissioner. There is a debate at the moment about the 7 day/21
day rule relating to providing a bill of costs - a detailed bill of costs.
Under the consumer law the obligation on the practitioner is to do that
in seven days, whereas under the Legal Profession Act at 21 days.
The Fair Trading Act carves that out again, allowing lawyers to provide
a bill within 21 days but it forgot to pick up the incorporated legal
practices which of course are governed by Commonwealth law, not
the Fair Trading Act. Therefore it has left an anomaly that most
people in this room have recognised.
We haven't encountered that problem at this stage, but Consumer
Affairs Victoria is expected, if it chooses, to enforce the seven day rule
on incorporated legal practices. I've got no obligation to enforce the
seven day rule on lawyers. I've only got power to enforce the 21 day
rule. So from my point of view I see it as a minor problem that's easily
surmountable. Especially with sensible collaborative action between
the regulators.
Enforcement of consumer guarantees is a question. How might
clients enforce consumer guarantees under the new law? The
consumer laws creates these guarantees: services to be done with
skill and care, services to be fit for the purpose, services supplied
within a reasonable time. The breaches of those services are hardly
any different to the sorts of breaches that a lawyer can be disciplined
for under the Legal Profession Act. Falling short of the standard of
competence is the definition of unsatisfactory professional conduct.
Or a substantial and consistent failure to meet a standard is the
definition of professional misconduct. So that breaches of those
Page 6 of 46
various statutory guarantees would quite easily be managed by the
legal regulator where that conduct came to our attention.
You've thrown in the question of advocates immunity and you've
asked us at the outset to consider both the civil liability of a lawyer and
their entitlement to advocates immunity, or the liabilities that lawyers
are exposed to by complying or failing to comply with the consumer
laws, as well as their regulatory responsibilities. A very recent
judgement in Victoria is Goddard Elliott v Fritsch. It picks up on the
classic advocates’ immunity case, Giannarelli v Wraith, which people
would be familiar with and is described to have extended it. It
probably hasn't extended it, it's just rearticulated it by saying that the
advocates immunity applies to a person responsible for the
presentation of a case in court.
This case extends it to a solicitor where out of court work leads to
decisions that affect the conduct of a trial. The unique case - in the
unique facts of this case the judge extended - found civil liability
against the law firm, including the solicitor, but applied the advocates
immunity so as to give them a complete defence to the liability action
in a case where they were guilty of negligence in the preparation of a
case, and guilty of negligence in relation to judging the capacity of
their client when they arrived at settling the case. If you want a
fantastic summary of the judgement, go to a podcast of the Law
Report where Linda Haller articulates this case so beautifully. I
couldn't come close to doing something similar.
So the question is: where does the liability of a practitioner fall when
they're breaching either the Australian Consumer Law or the Legal
Profession Act? Well civil liability usually doesn't attach to a lawyer
breaching the Legal Profession Act. But there's no reason why it
couldn't. Usually the lawyers duties are easily articulated in pleading
beyond proving that they failed to meet their obligations under the Act.
Page 7 of 46
But I've got no doubt that - a bit like this current class action involving
people who were infected with HIV where one of the parties sued is
the medical regulator, presumably for its failure to meet its regulatory
responsibilities under the Act.
I can anticipate that it would be very easy to identify conduct by a
practitioner that breaches the Act that finds its way into pleadings in
relation to civil liability. But of course, the advocates immunity only
provides protection for a barrister or solicitor in relation to civil
proceedings. It doesn't provide them with a level of immunity against
the regulator. So that if they've breached the Act and acted
negligently, it might have a defence to their negligence action but that
wouldn't eliminate their potential for being prosecuted and disciplinary
proceedings under the Legal Profession Act. I'll stop there.
Facilitator: Thank you. Opportunity for questions or comments?
Jeannie Paterson: I actually have a question which really - I guess it might be a comment
in what I wanted to talk about. You commented that with the
consumer guarantees probably the breaches are no different from
those that could be disciplined under the Legal Profession Act. One
of the reasons why the consumer guarantees were actually introduced
was there was a general awareness that consumers didn't understand
their legal rights. It was felt that the advantage of these rights here
were that they put the consumers rights in clear language and that
they expressed the remedies in clear language. So I just wondered if
one of the advantages of the consumer guarantees in this legislation
is actually just consumer access - that consumers can recognise what
those obligations are and actually bring an action and seek a remedy
in response to those obligations.
It's quite clear and accessible for them. I'm not sure consumers
who've had a bad experience with a lawyer really…
Page 8 of 46
Michael: Well go straight to the Legal Profession Act and say here's where they
let me down.
Jeannie: Or even understand what that concept of misconduct is.
Michael: I think that's absolutely right Jeannie.
Jeannie: Yes that's right.
Michael: I think that's absolutely right that it would articulate things, and it does
tend to articulate things more clearly from a consumer point of view. It
doesn’t change the consequences for the practitioner. If they've
breached that Act then they've probably breached the Legal
Profession Act and breaches of either can attract disciplinary
proceedings.
Amanda Whiting: My question is about sharing confidential information between
regulatory agencies. I say this as a role of practitioner so it might be a
stupid question but I just wonder if there's an issue of legal
professional privilege in information that's given to the Legal Services
Commissioner as part of an investigation or some kind of work that
you do. What happens with that if it has to be shared with another
agency?
Michael: Yes. Lawyer can't use legal professional privilege to fail to provide the
commissioner in Victoria with information relating to an investigation.
Jeannie: Yes. That's the next step…
Michael: The professional privilege is lost in the next step when the
commissioner who has obtained information that is relevant - let's say
to the Office of Migration Agents Regulatory Authority - chooses to
disclose that confidential information. So the Act provides me with an
authority to disclose confidential information to another regulatory
authority: police, another professional regulatory, another statutory
regulator like Consumer Affairs Victoria, or MARA. Often we are
doing it with police and we're often doing it with the medical
Page 9 of 46
practitioners’ regulator and sometimes with other regulators. So that
it's lost - it hasn’t had the protection of legal profession privilege
coming to me, and has lost it by the time I choose to exchange it for
example, with MARA.
Steve Mark: And the same thing is true in New South Wales.
Facilitator: Good. Thank you. Any further questions? Thank you Michael that
was very interesting. We'll turn next to Steve Mark. He's also a Legal
Services Commissioner but in New South Wales. He's a lawyer by
profession and he's the New South Wales Legal Services
Commissioner. He's also the chairman of the Australian section of the
International Commission of Jurists and was president of the New
South Wales Anti-Discrimination Board from 1988 to 1994. In his
other role he's a director of Midnight Basketball which produces
basketball competitions for at risk street kids. So we might have some
questions about basketball as well. Steve was awarded an honorary
doctorate of laws at Macquarie University in October 2000.
He's going to speak about different objects and purposes of the
Australian Consumer Law and Legal Profession Acts, and of the
regulators themselves. Thank you Steve.
Steve: Thank you for allowing me to be here to speak. There's so much to
say. I couldn't possibly do it in ten minutes so I'm just going to try dot
points. The first dot point is - and most of these are going to be about
difference, not about similarity. I start out with the assumption that
there are lots of similarity and lots of congruence but I need to talk
about difference because that's my role. The first difference is that the
disciplinary system that we - Michael and I- are in charge of in our
various states, is a protective jurisdiction. The whole concept behind
it is fundamentally different than a civil jurisdiction, and that pervades
just about everything that we do.
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So in our jurisdiction what we do is protect individuals from the action
of unscrupulous lawyers by removing them from their role or otherwise
dealing with them. It's after the fact the - in terms of any particular
complaint. So the person who lodged the original complaint does not
understand that and will never understand that. Consumer laws give
consumer rights. The Legal Profession Act does not give consumer
rights, that's not its intention. So we have a completely different
philosophical starting point.
The next thing I want to say is - and this might sound trite but I think
it's really important - the consumer laws deal with consumer rights.
The Legal Profession Act deals with client protection. Clients and
consumers are different beasts. They have different rights, they have
different responsibilities, they have different definitions, they have
different philosophical starting points and ending points. So that the
legislation that we administer is not designed to give consumers
virtually anything. That's not it's point. Its point - the point of the
legislation is actually to protect society from unscrupulous lawyers
who actually breach their ethical duties to such an extent that they
should be struck off, fined, or otherwise dealt with. Again, this is just a
skating over the top of so many areas.
The next point that I want to make is the point about purpose. I'm
very, very focused on purpose in New South Wales. I have to
understand what the purpose of my legislation is. As I've already
stated, the purpose of the legislation, as established by the legislator,
is somewhat different than the purpose that I apply to it, in that our
purpose is not stated in the legislation. When I was president of the
Anti-Discrimination Board, in the preamble to that Act, it said that my
purpose as president of the Anti-discrimination Board was to reduce
or eliminate discrimination. Simple. Whenever that - how to major
that or determine when it's happened or not happened was another
question entirely. But at least it was stated.
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There is no such purpose in the Legal Profession Act. What we had
to determine is what the purpose as we see it is of the Legal
Profession Act. From the very beginning, in my very first speech 19
years ago, I stated what I considered the purpose of the legislation
was. That was not to just prosecute more lawyers, not to be just
purely a prosecutorial body, but to actually attempt to reduce
complaints against lawyers. So we had to have an educational
function, we had to actually work with the profession to actually work
out how we could reduce complaints against lawyers. That also
requires us to promote professionalism.
So my actual statement of purpose is to reduce complaints against
lawyers, promote the rule of law, consumer protection, and increase
professionalism. Those issues do find their way into the Legal
Profession Act slightly in certain areas. From an educational
standpoint it tells me I have an educational role here, there, and
everywhere but it's not stated anywhere in the Act. The proposed
national laws were going to go a little bit further and actually give a
slightly better articulated purpose - if they're ever passed of course.
So the next thing I wanted to talk about is some definitional problems.
Those two purposes are so simplistically stated by me in a very short
period of time could give rise to weeks of discussion. It's really
important that we engage in those weeks of discussion and I hope
that one of the things that comes out of this is a desire to actually do a
hell of a lot more research and a lot more exploration of those issues
than we have time to do tonight. I was having a discussion with Rod
Sims about six weeks ago about the decisions behind the ACCC, or
what they considered their purpose to be. In part of our discussion he
was making the statement that he felt that the ACCC was very good at
civil prosecutions, but absolutely hopeless at criminal prosecution.
They were really bad at dealing with anything to do with crime
because they didn't understand it.
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I thought that was a very honest and very brave statement, and
probably very true. I would say the same thing about us. I mean we
are not criminal prosecutors. We are prosecutors to the Briginshaw
standard not the criminal standard, and there's a big difference. But
what the really interesting thing was is they were defining
unconscionable conduct, which is a term that’s very familiar with
regulators in the legal role, completely different than the way we would
define it. They were using a criminal standard. Now if there are two
bodies that are dealing with the same area of law with such
fundamentally different definitions - approaches to something as
simple as unconscionable conduct, we have problems.
I think that that's going to be one of the major issues here that need to
be explored. It's for one of the reasons that - as Michael said - we
have worked in New South Wales, and I know Victoria is doing that
now and Queensland already has, got an memorandum of
understanding (MOU) with the Department of Fair Trading so that all
complaints against lawyers will be referred to us. Now is that good for
consumers? Possibly not. Because at the end of the day what we
deal with is disciplinary actions, not benefits to consumers. So we
have these different philosophical approaches that are fundamental
and they're not easily reconciled within our present legislation at all.
We have one decision in the District Court which basically says, under
consumer laws, that are found no win no fee as an approach - which
of course all lawyers that do personal injury work know very well - to
be a statement of unconscionable conduct. Because of the fact that if
you don't explain what the ramifications of it are if you settle the
matter, or if you lose, or whatever, it can be unconscionable. Now I
would agree with that. But does that fit within the Legal Profession
Act? Questionable. We have a really interesting thing happening at
the moment.
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I had a complaint recently where - and this happens all the time and
I'm sure with Michael as well and certainly with Queensland - where
we get complaints about costs. Costs is the biggest area of complaint
to our organisation. Indeed there are so many facets to that we could
speak for hours just on that point alone. But the issue about cost is
very interesting when we try to stick to the philosophy of it rather than
the detail. Lawyers have a fiduciary duty. I mean the fiduciary duty
means that costs, if it can ever result in discipline, only results in
discipline because it is a breach of fiduciary duty and therefore
determined to be grossly overcharged.
We don't have that same issue in civil jurisdictions. In civil
jurisdictions it's not about a fiduciary duty, it's about you know stick
your finger in the air and decide whether or not a contract has been
breached, or whether or not a cost is too such a thing. Maybe you've
been a criminal standard gone so high above what the person should
get that it's fault and misleading, or its deceptive. All the terms that
used to be in the Fair Trading Act that have been now absorbed in the
consumer laws. There are laws that are very useful. As a matter of
fact we have actually straight in to that jurisdiction a couple of times,
and run cases in those jurisdictions because sometimes it's much
more beneficial to run our cases under Fair Trading, and false and
misleading and deceptive conduct, than it is under our jurisdiction
which is protected.
But we recently had a matter where a person received a bulk bill, or a
lump sum bill at the end of a hearing. When that normally happens,
clients almost always demand an itemised bill. They feel that it is their
right to demand an itemised bill. I constantly tell them not to do it.
Because if they ask for an itemised bill after they received a lump sum
bill from a lawyer, the costs are going to almost always go up. It's not
in their interest to ask for an itemised bill. Yet we talk about consumer
rights and consumer protection. Because what happens is the lawyer
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will say I gave you a discounted bill. If they go back to their file and if
they're going to send it off to a costs consultant and spend a couple of
thousand dollars getting a bill done, the cost is almost always going to
go up. Then when it goes to assessment, which is the only other thing
that the consumer can do - or client can do - to challenge the bill, to
take it to the assessment process, they go to the assessment process,
the assessment process also demands an itemised bill. So they've
got that first step but then the lawyer has already gotten their case
already prepared. The client, who feels that they have been
overcharged, almost always has no say in the matter. What they're
arguing is not, in my view, in the interest of consumers. So again,
consumer versus client, really interesting philosophical distinction.
Under the Australian Consumer Law there's a really interesting
statement as well. It says that if you are asking for an itemised bill,
you can. But the implication under the consumer law is that if you ask
for an itemised bill it is nothing more than a rationalisation, or a
statement of what was in the lump sum bill.
So there is an assumption that it cannot increase. That is not the
case under a legal bill. I have a brief out to counsel right now to try to
get some sense as to whether or not a bill that is given by a lawyer
could be in breach of the credit laws if it increases on itemisation. We
don't know. Because they always do under our Act, maybe they can't
under the Australian Consumer Law. These are issues that are
always going to be interesting.
Two final points. First. We do a lot of ethical seminars. Almost
inevitably when we're at a College of Law or at law schools giving
ethic lectures, we always talk about the billable hour in terms of ethics.
It's really an interesting discussion. I won't go into it now because that
will take another two hours.
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However, almost inevitably somebody talks about well why are
lawyers different? Why do lawyers have every - if I go to a plumber or
if I get my car fixed and I get an estimate and it goes up, why shouldn't
I be able to treat my service provider the same way as I would go
against a lawyer for unconscionable conduct? Why is a lawyer more
protected than a plumber or whatever? The reason is, again, fiduciary
relationship. We are a profession. As a profession we have a
responsibility. The primary responsibility of the profession is to
provide a service to the community. That's why this concept of gross
overcharging actually ends up being a disciplinary matter and not a
matter of client rights.
It never has been and it never will be under present law. It might be
under consumer credit law, it's not under Legal Profession Act.
Maybe it should. But the issue - the final issue I want to say is that
this is such an area of unknowns. It's one of the reasons we have
sought and achieved an MOU in New South Wales that all complaints
against lawyers will come to me. It's not necessarily going to benefit
every consumer. But for years, the whole concept of cost had been
carved out of the Fair Trading Act anyway. So it's not going to change
anything and quite frankly, there's almost no cases before our Fair
Trading jurisdiction about lawyers anyway.
If you try to do a search for them they just don't exist. Now whether or
not that's a good thing, or a bad thing, or a statement of the problem I
can't say. But what we really need to do is develop guidelines. John
Briton's developed some. We need to go much further than that. We
need to start working out a definitional harmonisation between
regulators. I include the ACCC, ASIC, and all the other regulators.
We need to be together on this and we're not. Regulators hardly ever
even talk to one another, let alone try to harmonise their definition.
Finished.
Page 16 of 46
Facilitator: Thank you Steve. Thank you. That's wonderful. There's plenty for us
to discuss in there, plenty of issues to investigate as well. Any
questions and comments?
Michael McGarvie: Can I make one comment? The Victorian scheme proposes an
obligation on the commissioner here to educate the community and
the profession about the lessons learned from regulation. We have a
statutorily embedded responsibility to educate the consumers and
lawyers. It also embeds a system of mediating consumer disputes
relating to costs. I've imposed a mediation system on conduct
disputes as well even though the Act doesn't provide an opportunity to
mediate conduct complaints.
The outcome produced by the regulator is almost more important than
the principles embedded in the legislation from my point of view. That
is we regard one of our primary obligations to ensure that a consumer
understands the circumstances they found themselves in that led to
the dispute, and has at least explained, and sometimes reversed, a
decision or a problem created by a lawyer in their costing or in their
conduct. I would take this issue with Steve in that I do see the legal
regulators role also delivering enough feedback and enough comfort
to consumers to maintain their confidence in the legal system.
Steve Mark: The same thing happens of course in New South Wales, it has for 20
years. I does in Queensland as well. We mediate thousands of
complaints every year, that's absolutely true. The same - we've
always done the same thing. The issue that I meant I think is not
altered by that whatsoever, simply because what I'm saying is that if
it's a consumer rights issue we mediate disputes probably because
lawyers tend to be and often can be relatively sensible about these
things and know that it's going to cost them more to actually pursue if
we treat is as a complaint than if they going to settle the matter. So
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we settle lots of these matters. But it's not a consumer right issue and
it never has been.
Jeannie: Hi. I come to this - thank you so much, I mean you two are just a
double act bringing out every issue that we could possibly want to
discuss for the next five years. So thank you so much. Now I come to
this conversation as a consumer lawyer, not as somebody who's
involved in the regulation of lawyers. It seems to me that you're quite
right. It is a very different perspective that is brought by consumer law
to these issues, and perhaps with the service regulators in a number
of ways. I'm surprised somewhat as a consumer lawyer by the
statement where the consumer laws about consumer rights because I
would actually say that a lot of this legislation - the Australian
Consumer Law - is actually about giving regulators power to target
rogue traders.
Because the learning in this area is that often consumers will not
actually - it's about giving consumers rights but it's also about
empowering regulators. Because of the imbalance in information,
knowledge, expertise, resources, the learning is that consumers often
won't pursue complaints because they don't have the capacity to do
that. I would've thought that's particularly pertinent in the relationship
of solicitor client. Because if a client comes to a solicitor or a lawyer
seeking legal advice, by definition they don't have expertise in that
area, so if their relationship with the lawyer goes wrong, they actually
probably are unlikely to pursue legal remedies. Hence the role for the
regulator.
As a consumer lawyer I'm surprised by your comments on itemised
bills being against the interests of legal service consumers because
one of the themes that underlies most consumer law is information,
providing good quality information to consumers so they're in the
position to make good decisions. That disclosure - truth in consumer
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transaction is one of the biggest themes and considered consumers
fears. So the fact that to ask for an itemised bill is against the interest
of the consumer perhaps illustrates your point I think about the very
different perspectives taken by regulation of profession, professional
standards, and the consumer perspective which is actually information
is fundamental.
Steve: Well it might be but if you use consumer law to actually seek an
itemised bill - if you're applying under consumer law, you may well be
right. You may end up - depending on how you interpret that law
which is…
Jeannie: Yeah, sure.
Steve: …I'm not going to say I'm the best consumer lawyer in the room
because it may - it suggests that the cost shouldn't go up. But as I've
said, the history of itemised bills in the legal world has always been
that they do.
Jeannie: But if the process is that all complaints against costs are referred to
you, rather than dealt with through Consumer Affairs or its equivalent,
then that issue - it's just the point you're making that that issue is
never going to be dealt in…
Steve: Precisely and that's why I'm saying we need to do a lot more work.
Because on the other hand it is unfair to lawyers to have to apply
different standards to different places if those standards are
completely at odds. Now so why don't we work on harmonising the
standards, which is what we're suggesting. I think that would be a
very, very good idea. I just need to articulate the fact that they're
different. The other thing is that of course we, as legal services
commissioners, can only administer our legislation. We can't
administer anybody else's.
Page 19 of 46
Michael: Can I just add in Victoria I would never talk a person out of seeking an
itemised bill. I think the understanding of how that bill is made up is
terribly important and it's a breach of the Act if a lawyer failed to
provide an itemised bill. That has its own disciplinary consequences
for a practitioner.
Facilitator: Okay. Plenty to talk about there. Another one, yes, thank you.
Andrew: Andrew Conley, member of the Victorian Bar. Speaking only for
myself and also interested because I am a volunteer at the Fitzroy
Legal Service - night service. So I see a lot people who have a lot of
trouble with their solicitors’ costs. That's one reason why I'm here.
You said plumbers and lawyers are different. That's clear. You said
that that was because lawyers owed fiduciary duties to their clients.
Though it seems to me to be - I was confused by the next step though
that seemed to me - I hope I'm being fair here - that somehow that
meant though that lawyers didn’t owe more of an obligation when
they're predicting their costs, or specifying them, or indeed working
out how much they're going to charge once it's all done to their clients
than a plumber would.
One would think that the fiduciary duty would require far greater
attention to fairness and the duties owed than a plumber would. It's
an arms lengths transaction and so forth. Did I misinterpret that?
Steve: No. You're absolutely right and I would totally agree with that
statement. However, the ramifications of failure is what I was talking
about. If you fail as a plumber to bill your client fairly and you
overcharge them dramatically, what are the ramifications of it? You
have potential civil lawsuits et cetera. In the legal jurisdiction what
you have is the chance of either getting your bill assessed or going on
a disciplinary case where you are not going to necessarily, unless we
mediate as we do for the vast majority of these but just treating it as a
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disciplinary matter for this discussion - you're not going to get anything
out of it. You're not going to be compensated by this jurisdiction.
But in a civil jurisdiction you're going to get damages, or you're going
to get the bill reduced, or something like that is going to happen. Not
necessarily going to happen here at all. So the fiduciary relationship
is the only thing that lifts it into a disciplinary matter. That's all I was
trying to say. The issue about - I remember years ago when I was
having work done on a house. I had an electrician come in that did
extremely shoddy work. He had - and everybody has one of these
stories - he'd quoted - and again the difference between quotes and
estimates because in law we do estimates not quotes - he quoted
$3000 let's say and he charged me $9000. The work was appalling.
I went to a really good friend of mine who's a barrister in this area and
I said I want to take this guy apart. This guy is driving me nuts. He
said you know better than that. It will cost you 10 times that to try to
sue him, you're never going to get anything out of it. Just pay. That's
probably really good advice in relation to dealing with that bill. But in a
legal world you have the issue that you can get a bill assessed, we
have an extra step, you can't do that with a plumber. You can do that
but it costs - it may cost. What I'm saying is that they're such different
fields. There are so many different aspects of it you have to look at
that they're really not - there's a lot of overlap but they're certainly not
congruent.
Jeannie: Do we have anyone here from VCAT? Because I think VCAT, just on
your plumber example, if we had that issue I'd be straight into VCAT.
I think that VCAT would deal with that.
Ian Lulham, Deputy President, VCAT Civil Claims List:
Yes - VCAT - without using these words - require the plumber to give
an itemised bill. The other thing you can do in VCAT is as the
consumer, rather than waiting for the plumber to sue you because you
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haven't paid him, you can sue him in VCAT for an order that you don't
owe him the money. Of course a lot of people do that so that they can
be in a cost free jurisdiction rather than being the defendant in a cost
jurisdiction.
Steve: Which is a much better system and I understand that. But, again,
what I was talking about, the distinctions still exist.
Andrew Conley: I don't mean to hijack this in anyway, I'll just put it out there and
someone else may see fit to comment. It's a different situation
though, your plumber, you may be able to afford the $9000 but if you
went into a legal dispute - as a client of mine at Fitzroy did a few
weeks ago - with an estimate of $5000 to $10,000 and then $15,000
down and an outstanding bill for $10,000 sitting there and you still
haven't' gotten to be where you were told you would be. You've got
no money left and the thought of instructing other lawyers brings you
to tears, you're in a very bad situation. It may be outside the scope of
today but it's a great problem if going to the one body that's charged
with really putting it up to the type of lawyers that do that, is fearful for
your sake of doing something like saying “We should get this taxed.
In fact, it's going to cost another few thousand. You should proceed
with disciplinary sanctions but unfortunately you won't get any money
out of that.” That's a problem - at least in my opinion.
Michael McGarvie: Well there can be consequences in these proceedings including a
compensation order being imposed on the lawyer for gross
overcharging. The mediation process in Victoria invariably involves a
production of a bill. VCAT has the power to impose an order on the
practitioner to vary the fee or to pay compensation.
Facilitator: Well we might have an opportunity to come back to that. We're going
to have some time for general discussion but we might just - and
considering our next speaker is from the Consumer Action Law Centre
he's probably bouncing up and down ready to say something. So I'll
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introduce you and then you can take off. Gerard Brody is the director
of policy and campaigns at Consumer Action Law Centre. He's a
qualified lawyer who's worked as a consumer advocate for over eight
years. He's worked in a number of consumer campaigns, including
the fair fees campaign against the bank penalty fees. He's been
involved in a range of law reform activities, including the creation of
the Australian Consumer Law and has been a member of the ACCCs
Consumer Consultative Committee. He previously worked with the
Brotherhood of St Laurence here in Victoria where he led the financial
inclusion program.
He's going to speak on misleading conduct and debt collection. If you
wanted to say anything else on any of the other issues, you're most
welcome.
Gerard Brody: Thank you. I'll just tell a little bit about the centre that I work for.
Consumer Action Law Centre is a community legal centre and
consumer organisation here in Melbourne. We offer a State wide
legal advice service, a small litigation practice, and also a telephone
financial counselling service which is another State wide service. I
guess we're really interested in not just only resolving disputes
between consumers and traders but having more systemic change in
a market place. Hence we have a policy and campaigns function
where we seek to take those issues that come up and seek change
either in law or industry behaviour.
As was mentioned I'm going to talk about misleading and deceptive
conduct in terms of the Australian Consumer Law and particularly in
relation to debt collection. This is the type that most comes into our
office, the matter of complaints about lawyers. It's not complaints
between lawyers and clients. It's complaints from consumers who are
often low income or vulnerable being harassed or contacted by
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lawyers for payment of a debt - who's doing that on behalf of another
client.
So just a bit about the provision in the ACL - obviously was section 52,
it's now section 18 of the Australian Consumer Law. It's probably the
strongest provision in the Australian Consumer Law. It prohibits
misleading and deceptive conduct, as well as conduct that's likely to
mislead and deceive. So it's a pretty broad prohibition. When it
comes to looking at that prohibition, it's the overall impression that
matters. So we've got to consider whether it's likely to lead a
significant number of people into error or has a tendency to deceives
such persons. So as long as it's got that flavour. Things like lying,
false or inaccurate claims, creating a false impression, leading to a
wrong conclusion, or even making an omission. Not saying
something can be misleading and deceptive.
So in the context of lawyers, it's not only in debt collection - I'll talk
more about debt collection but it can obviously - occurs more
traditionally in advertising and promotion. Particularly advertising of
lawyers, like advertising of any other service, it can apply. The one
case that actually is referenced in the guide, though it's looked at from
the Queensland Legal Service Commissioner, is in relation to an
advertising practice of a lawyer. It was the case of Nixon v Slater and
Gordon where Slater and Gordon published and distributed a booklet
which used a photograph of the applicants conducting surgery on its
cover. It was found to be misleading and deceptive because it
seemed to suggest that those particular surgeons were involved in a
medical malpractice claim when of course they weren't.
Obviously the misleading and deceptive conduct can also apply to
retainers or billing practices. But my focus is going to be dealing with
third parties, so in debt collection. It's also worth noting that lawyers
do not need to be directly responsible for misleading and deceptive
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conduct. But they can also be liable for damages when they are a
person involved in a contravention. That's section 236 of the
Australian Consumer Law. That includes when they've aided or
abetted, counselled or procured a contravention, or has been in
anyway directly or indirectly knowingly concerned in the contravention.
So it's pretty broad. I just wanted to compare that before I get to the
detail with the professional conduct rules.
Generally industry specific codes and rules are designed to go a step
above the general consumer law. I think you were making that point
earlier related to fiduciary and that it should be a higher standard
bringing across the generic law. I'd really question that when it comes
to the rules in these circumstances. The current rule 28.2 of the
Victorian professional conduct rules prohibits legal practitioners from
making any statement in communication with another person on
behalf of a client that is calculated to mislead or intimidate the other
person and which grossly exceeds legitimate assertions of the rights
or entitlement of the practitioners clients. I think you'll agree that
second limb would be a significant impediment to making up that
claim compared to the prohibition in the Australian Consumer Law. I'll
come back to that.
I just want to talk particularly about one decision that was recently - a
Federal Court decision that was recently handed down late last year in
the Federal Court. That was the decision of ACCC and Sampson.
The complaint - Sampson, Pippa Sampson, was a partner in a
Melbourne law firm - Goddard Elliot. She acted as a mercantile agent
on behalf of a number of video stores. The complaint was initially
made to the ACCC by the Central Australian Aboriginal Legal Service.
So the debt collection letters went out far and wide.
There was agreed facts of the decision that Goddard Elliot sent
numerous letters and notices to debtors of video stores since at least
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April 2002, including approximately 20,000 letters and notices each
month in the 12 months preceding the ACCC action. The Federal
Court declared that the lawyer had acted in breach of section 52 of the
Trade Practices Act - this was under the old law - in a number of
ways, including sending letters marked urgent notice which
represented that a lawyers video rental client was necessarily entitled
to recover lawyers costs of a certain amount; that if legal action was
taken then this would necessarily result in additional costs associated
with legal proceedings.
Even though obviously the lawyers are the client, the video rental
agency business would have no entitlement to recover legal costs if
they were unsuccessful for example. Even if they were successful, it's
probably unlikely if it was in a small claims jurisdiction that costs would
be ordered. There was other examples of misleading conduct by the
law practice including that they had self-enforced a judgment by
warrant, garnishee order, or attachment of earnings. They also had a
number of notices that they distributed entitled notice to intention to
commence legal proceedings which the court said was misleading
because it was similar in format to a court document but of course
wasn't a court document.
These sort of practices come up often in our service. We get lots of
complaints about these sort of letters from lawyers. Demands for
legal costs is one area that I particularly wanted to focus on. I do
have some documents here, if people are interested, of some
examples. So I can leave them there. But I guess I just wanted to
uncover what does the prohibition of misleading and deceptive
conduct mean for the way in which those letters are expressed. In
some of the letters it seems that the lawyer is seeking payment of
legal costs prior to any legal proceedings where there is probably no
contractual obligation on an unwitting consumer to pay any recovery
costs. I think that's the most clear example of pretty bad behaviour.
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But even where a lawyer believes there's a lawful contractual
entitlement to claim enforcement costs, the wording of the
correspondence really does fail to state the basis of those claims.
Particularly when we talk about our clients, many whom are not
English speaking as a first language or are vulnerable in some other
way they would be very confused by these letters. They're unaware of
the amount that's claimed under contract or otherwise. I guess in my
view that prohibition of misleading and deceptive conduct really
requires lawyers to express the basis for their claim accurately. If an
amount is payable under contract, it really should be described that
way. Many of the letters refer to ‘legal costs’ or ‘our costs’ which really
deprives the consumer the benefit of checking what it is this one
payment is for.
In one example here the firm uses the word - they ‘requested’ legal
costs. There is an argument there that they're not actually demanding
that money, they're just requesting you to pay it. I guess I'd argue that
that's still pretty misleading as an average consumer would not
differentiate between a request and a demand in that situation. I
guess if we compare that back to what I was talking earlier about, the
legal profession conduct rule and the requirement to ‘grossly exceed’
the legitimate assertions of the rights or entitlement of the practitioners
client. I guess there's a real question there whether these letters
would in fact grossly exceed those legitimate assertions. So I think
that's an interesting question.
I just wanted to make one last point around enforcement under the
Australian Consumer Law and Jeannie talked about this before: the
regulators under the Australian Consumer Law (whether it's the ACCC
or the Consumers Affair Regulations in the State) have been given
increased powers to resolve disputes and have a change of business
practices. One of them, which was new in the Australian Consumer
Law that wasn't in the Trade Practices Act prior to that was the
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regulator can claim redress or refunds on behalf of non-party
consumers. So that gives a real new role I think to the regulators and
goes some way into reducing the imbalance between a consumer who
won't necessarily know their rights to take that action, and the
regulator whose role it is then to identify - potentially - those clients
that might be deserving of some redress.
In the case of Pippa Sampson they didn’t use that power because that
was obviously prior to the Australian Consumer Law, I mentioned that
before. But I think that now that that provision is there, it could really
mean that if this sort of case was run again, eligible consumers could
get money back. I think that would be a really important outcome.
But I'll leave it there.
Facilitator: Thank you. Questions, comments? Can I ask you one? From your
point of view do you think that there's a change on the ground for
consumers in reality or whether it's just something that’s in legislation.
You know, legislation comes and goes and lawyers don’t change
those kinds of comments that have been around for a long time. I
mean is there actually a change on the ground?
Gerard: Look, in some areas I think there is. I think the Australian Consumer
Law has worked best where it's changed the behaviour of traders. I
think particularly - I think Jeannie's going talk about the unfair contract
terms prohibitions. What that’s done is effectively required anyone
that writes standard form contracts to read it again and make sure
there's no unfair terms on there. The regulators then come in to play
a role looking and negotiate looking at those standard form contracts
and have change. So I think on that basis there's change out there.
I'm not sure consumers know themselves much more than they used
to. There are efforts to go some way with that, with signs in stores for
example about when you might be entitled to a refund. But I still think
most people don't know their rights around refunds that well.
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Particularly, they're not necessarily going to think that those same
rights would apply to lawyers.
Facilitator: Okay. Good. Any other questions?
Ian Lulham, VCAT: Can I just say one thing that troubles me about part of the consumer
guarantee concept of giving information to consumers? It encourages
certainly lawyers, but I think financial advisors and other professionals
like that as well, in the name of disclosure to rely on ‘weasel words’
and to give their clients and customers 20 pages of documentation. I
don’t think really that ends up helping anybody. When I was
practising it was my job to look at our guides to clients, and I was
pretty guilty of using some good weasel words too. But if you didn’t,
you're just putting your head on the guillotine. I've certainly talked to
people who've been on the receiving ends of those transactions and
they get about 20 pages of information and they're no better off.
Michael: They need separate legal advice to interpret the disclosure.
Facilitator: Let’s introduce our next speaker. Jeannie Paterson is going to speak
next. She's a senior lecturer at Melbourne Law School. She's co-
author of Principles of Contract Law and the author of Unfair Contract
Terms in Australia, as well as a number of articles on consumer
protection and contract law. She is going to speak on unfair contract
terms.
Jeannie: Well as has been suggested I'm coming from a consumer protection
perspective and I would fully agree that disclosure of information isn't
enough to protect consumers. But I think it's the beginning. What the
new legislation does is it provides as what I would see as a three
pronged protection for consumers in respect to their dealings with
people who are providing goods and services - in regards to the
contracts that provide those goods and services. So first of all there's
the consumer guarantees. The consumers guarantees provide
minimum benchmark standards with which goods and services must
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conform. Those minimum benchmark guarantees are mandatory -
they can't be excluded. They're actually now under the legislation.
They - importantly they apply statutory rights. They are no longer
implied term, so they're no longer tied to a particular contract. They're
actually statutory rights which gives them quite different status.
Now, I think it's entirely right the point that Michael made - that the
content of those standards is no different from what's been around for
years, and years, and years, and is in fact a standard sort of in
applying in contracts in goods and services for years. What the
consumer law has actually tried to do is make those standards able to
be understood by consumers so that if consumers do go on to the
Consumer Affairs Victoria website they can see in three easy
sentences what their rights are and the types of remedies they might
seek. So that's the first prong.
The second prong I think that provides protection for consumers in the
contractual and otherwise dealings with providers of goods and
services is the requirement that the contracts they enter into, insofar
as they are standard form contracts - and let's face it, most consumer
contracts are actually standard form contracts. They are not
negotiator contractors. The fact that consumers might - and traders
might tinker with a few terms of those contracts doesn't stop them
being standard form contracts. Most consumer contracts are standard
form contracts and what the Australian Consumer Law does is set it
with a basic standard those terms have to reach. They have to not be
unfair, they have to meet certain standards of fairness.
What fairness means is that terms can't go beyond what is reasonably
necessary for the protection of the legitimate interests in providers of
those services.
Finally, the third prong, is that there is an extensive new provision on
unconscionable conduct. Steve pointed out earlier that
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unconscionable conduct under the Australian Consumer Law is quite
different than the concept of unconscionable conduct elsewhere. For
example that would apply under equity, and that's quite right. It's
actually a shame it's called unconscionable conduct under statute
because it is a different concept. The legislation clearly says now that
the unconscionable conduct under legislation is not the same as
unconscionable conduct in equity and should not be omitted by
equitable concepts – it can apply much more broadly.
My question really, that I don't know the answer to, but I think is an
interesting question is that is it possible that consumers of length
services would it better off proceeding under the Australian Consumer
Law? Because the Australian Consumer Law gives consumers broad
protections, it protects consumer rights, but it also provides for quite
extensive enforcement counsel by regulators to promote good
standards of trade in the industry. The example I've been thinking
about is cost agreements. Solicitors and clients now will enter into a
cost agreement. I'd suggest that often, not always, those cost
agreements are standard form contracts.
If the legal service being provided is a legal service that's not for
business services, it's probably going to be caught by the legislation
which applies to services for personal, domestic, or household use or
consumption. That means that, for example, the cost agreement and
also possibly the very legal retainer are subject to those three
protections that I've talked about. That means that the legal services
have to comply with the consumer guarantees. Well that probably
already existed. But what's also interesting is that those agreements
can't contain unfair contract terms. Now I haven't' been able to survey
a whole lot of costs agreements or legal retainers to work out the
extent to which they contain unfair contract terms.
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This is the point about the weasel words - disclosure might allow a
whole lot of weasel words but unfair contract terms, one of the tests
for whether a term is unfair is whether its disproportionate or not
[unclear], is a set of protection … the provider of the service. But one
of the factors that's to be considered in thinking about that is the
transparency of the agreement. So the mere fact that the agreement
is not transparent, that's not clear and accessible, is a ground for
finding that agreement for finding that agreement is unfair. So that's a
huge protection for consumers.
Now I've looked at one cost agreement that contains the clause that
says you can terminate the retainer at any time, we can terminate on
14 days' notice, but if it's terminated you must pay us for any costs -
for any work that we've done up until the point of termination and any
legal costs we incur subsequent to the termination. Now I can tell you
I suspect that is an unfair term because that goes way beyond
common law contractual rights about what happens on termination.
As you all know, if the contract is terminated because it's the solicitor
in breach, the solicitors or the service providers’ rights of recovery are
much more limited than they can claim payment for any work done
and any other costs incurred.
So it's not clear that there's not unfair contract terms in standard form
agreements on consumer matters between solicitors and clients.
Then come to unconscionable conducts extremely expanded notion.
We don't know the parameters of that notion but we do know, to quote
the New South Wales Court of Appeal in a very recent decision, it
covers conduct that's highly unfair or goes beyond what is reasonable.
Now one example of what may well be unconscionable conduct is
entering into a retainer or a cost agreement with a client where the
solicitor knows that the client doesn't understand that agreement.
Now a cost agreement can set out all the basis on which the client
might be charged.
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It might use words like ‘disbursements’, it might use words like
‘estimate’, but if the client doesn't understand what those concepts
mean, and the solicitor knows that - and the solicitor knows that
because they've sat across the table from them and heard that client
doesn't speak very good English or that the client is highly distressed
and is in such a distressed state that they probably can't understand
what's happening - then that can be unconscionable conduct.
Because the heart of unconscionable conduct is dealing with
someone who's unable to protect their own interests, and you know
that. Well solicitors deal on one on one so they are going to know.
It's been an issue in the financial services market, unconscionable
conduct, because typically there's an intermediary between the client
and the financial service provider.
So the financial service provider may not have knowledge of the
vulnerability of the client but with solicitors they are sitting face to face
with their client. I suggest in many of these circumstances they will
know if the person doesn’t speak English or is otherwise emotionally
distressed. So I think that there's really interesting questions about
the extent to which it might be better to pop down to the Civil Law
VCAT list rather than proceed under the Legal Practice List for clients
who've had unfortunate experiences. That's all I have to say.
Facilitator: Okay, thank you. Questions or comments?
Michael: Can I say when there is a dispute over the reasonableness of a
lawyer’s costs, the people who measure the reasonableness, for
example VCAT or the Costs Court - depending on the amount of the
costs, will look at things like circumstances, advertising, the
complexity, time taken, facts of the case, and although it's not word for
word, it is likely to involve the judger of the facts analysing the fairness
of the process and the context in which the contract was arrived at.
Therefore it might be a more laborious process for sorting out the fair
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from the unfair contract. But I think it does provide a mechanism for
an independent arbiter doing that early exercise.
Jeannie: I should probably clarify. Unfair contract terms rules under this
legislation don't actually apply to the price. So they apply to the terms
but not that core price. So you wouldn't challenge the price as an
unfair term. The question is whether unconscionable conduct is an
easier route into challenging an agreement where there's nothing
wrong with the cost - the costs have all been properly incurred but the
client didn't - and I hear this story again and again from Legal Services
where the problem is not so much with the charging, but the client
didn't understand the basis on which they would be charged.
They didn't understand that if they talked for five minutes to the
solicitor on the phone that would be $60. They didn’t understand that
they would be charged for every page photocopied. They didn't
understand that actually ‘estimate’ means not it will cost around this
much, but it means well it may cost this much but actually it may cost
that much. Which I think is actually a slightly different question. I
don't know because I'm not an expert in your area but I think the focus
is slightly different.
Michael: Certainly price can be rejected, analysed, crunched and destroyed
even though the legal costing process - it's always the same problem.
It's easy to say look I'll charge you this much money for this much unit
of effort, time, activity. It's the devil in the detail that causes the grief.
Jeannie: And I'm sure that - I know that the Legal Services Board - if something
smells in the transaction, it smells. I just wonder if the ACL is a more
direct route sometimes to picking up that smell.
Michael: Well we've been fully in favour of consumer remedies and have
worked with the Consumer Action Legal Centre on the debt recovery,
lawyers, and publishing a guideline, writing to all of them personally
telling them what their obligations are. I'm all for the opportunity that
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consumers of legal services might achieve faster better remedies
through the consumer laws.
Steve: Again, I don't think you'll get any disagreement on any of that. A
couple of points. The first point is we've had unconscionable conduct
for a long time and indeed we use it all the time. We just rarely use
that terminology. I recently went to senior counsel in New South
Wales to try to get a complaint of unconscionable conduct against a
particular firm because of a whole range of overcharging. Because
again, we're a disciplinary unit, not a compensatory one. The difficulty
we often have, and VCAT probably has some of these difficulties too -
we certainly have it big in New South Wales, I hope you don't have it
as big here - and that is that you get what we call our frequent flyers -
the practitioners that are very well known to us that are always doing a
little bit wrong.
Often not enough in any one of those cases to be wrong enough for
us to really get them. We negotiate a lot of complaints, we mediate a
lot of complaints, but I'd like to see them depart from the legal
profession. The only way that I'm going to be able to do that now is to
use unconscionable conduct. I use it under the old Contracts Review
Act.
Jeannie: Well actually yes, the NSW Contracts Review Act is broader again I
think.
Steve: Exactly. Well that's what I use because again, as a regulator of the
profession, I can do that. But again I have to stress, because this is
not based on consumer rights. What you're talking about is a different
thing and they can coexist. I don't think one has to take over from the
other. The issue of coexistence is what's really important. Because
as Michael said, we couldn't - I come from legal service. I couldn't
agree morethat that sort of thing which we've all seen a billion times,
and we as regulators see constantly and our staff get immensely
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frustrated. But our job is to try to shift that whole regime, not get
individual settlements for individual people necessarily.
So when we're talking about what we're trying to do - that's why I
talked a bit about purpose. The concept of purpose is to actually
make the profession understand this. We have an education role to
try to do that and to try to achieve change in the profession to make it
more professional and better for consumers. So it's working together
that we need to do, it's not one or the other. I think that once we get in
the national laws, I’m a big fan of moving to principle base regulation
rather than prescriptive. I love unconscionable conduct. I'd love to
have just that because that gives me so much more leverage to deal
with practitioners but ultimately you're going to have a real problem
with proof.
In all of your matters - in all the matters when you talk about
unconscionable conduct, it is so common to us that you have one
person's word against another. The extraneous evidence in the
consumer jurisdiction, you might have much more ability to get that
evidence in. We don't. So there's, again, congruency here that would
be useful, but for us when we get somebody who says I was bullied
into signing this contract, then the lawyer comes back and brings
forward the interpreter, and brings forward the signed agreement and
everything else, that’s the end of it for us. We can't pursue it any
further. Even though there might be a smell there.
So there are real issues there around proof that are difficult in a
disciplinary term. That's why we try to settle - as Michael said - we try
to resolve so many of these complaints before we get to discipline
because disciplines the last gasp and it doesn't give the consumer
usually anything.
Jeannie: Can I just make a comment there then. It seems then that it's
important for regulators to talk to each other a lot.
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Steve: We do.
Jeannie: Because your comment about the repeat offenders - the Australian
Consumer Law provisions on unconscionable conduct say - actually
specify that engaging in a course of conduct can be unconscionable.
So that repeat offender who you're saying is offending again, and
again, and again, might not be unconscionable conduct in a one off
situation but it might be again, and again, and again. It's quite
possible that it would actually be caught under this legislation.
Steve: If it's one of the things that your legislation covers then it…
Jeannie: And this legislation may not have the ability to discipline a lawyer, but
there is provision to impose pecuniary penalties. Now that's a form of
- it might not be saying you can't practice as a lawyer but if you
impose a pecuniary penalty on someone, that's a pretty big discipline.
This legislation also has the ability to require corrective advertising
and various forms of publicity. So there are other ways of dealing with
it.
Steve: No I understand that but there's also a lot of clashes between them.
Jeannie: Yeah, sure, and that's the need for the conversation.
Steve: Because we don't have harmonisation and that's why it's dangerous.
Until we can get harmonisation these are just philosophical
discussions. The reality is that we need to actually work towards how
we can do these things either together, change our legislation, absorb
different things, but at the moment it's really difficult.
Michael: In Victoria we ramp up the penalty that a practitioner will endure
depending on whether it's a one off or whether it's a consistent failure
to make a standard. So if it's a consistent series of misdemeanours,
then it becomes professional misconduct. Whereas on their own, they
remain unsatisfactory professional conduct. So that there is a trigger
there for identifying that in an individual. There's also an obligation
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under the Legal Profession Act for me to identify systemic problems
relating to the provision of legal services, and deal with them as a
regulator. Either a systemic problem performed by the conduct of an
individual firm or a series of practitioners in one firm, or throughout a
group in the industry such as the debt collection mercantile agent
dilemma that you talked about before Gerard.
Adrian: My name is Adrian Snodgrass. I'm from Fitzroy Legal Service and
Moonee Valley Legal Service. I just had a question for Deputy
President Ian Lulham: How many VCAT cases do we have against
lawyers…Individual cases in the consumer jurisdiction, how many
matters do you see?
Ian Lulham, VCAT: Not many. We do have some lawyers who sue in VCAT for fee
recovery. As with any tradesperson who does that, a lot of them end
up with a counter claim style defence. But it wouldn't be in the
hundreds.
Jeannie: But until recently there was debate about whether VCAT similarly had
jurisdiction over lawyers because of the wording of the Fair Trading
Act. It wasn't clear under the Fair Trading Act in Victoria, though it
was clear in New South Wales, whether lawyers could be caught
under the legislation. It wasn't clear whether lawyers were engaged in
a trade as lawyers. The legislation - the Australian Consumer Law,
which is now replicated in Victoria, picks up wording from the New
South Wales Fair Trading Act. I think Linda's going to speak a bit
more on this. But until recently - you know more about this than me -
there was a real uncertainty about whether Fair Trading Act consumer
matters could be pursued against lawyers.
Male: But since the introduction of the consumer law, you haven’t seen this
picked up?
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Ian Lulham: No. Even if the consumer law is about advising the publics of their
rights, I think there's a lot of the public who have rarely heard of the
law.
Jeannie: Yeah.
Steve Mark: That's right.
Facilitator: Let’s move to our next speaker. Linda Haller is a senior lecturer at
Melbourne Law School. She's published and spoken widely in
Australia and overseas on professional discipline and the civil liability
and regulation of lawyers more generally. She's going to speak about
the Australian Consumer Law and litigation. Thank you Linda.
Linda: Thank you. I'll be quite brief actually. As Michael mentioned I was full
of enthusiasm when we were planning this. I thought it was an open
question as to the relationship between advocates of unity and the
Trade Practices Act, for instance the High Court. A few of the
members of the High Court, way back with Boland v Yates, toyed with
the idea of how did the statute interplay with this common law
principle. It is amazing to me that we don't have more clarity on the
law in that case. I thought well now's the opportunity, the Australian
Consumer Law, maybe it will in some way limit advocates immunity.
Yes, law 101 we learnt how statute trumps common law principles
such as advocates immunity, and yes, advocates immunity does
mean that consumers are denied a redress.
That's largely why the House of Lords abolished advocates immunity.
We still have advocates immunity in Australia and I think everyone
agreed that after the High Court’s decision in D'Orta Ekenaike, if
anything, our High Court has entrenched it much further. It's an
important common law principle in Australia. As I started to do my
research I realised there wasn't perhaps a lot to say on this. Perhaps
I shouldn't give up so quickly but the Australian Consumer Law isn't
trying to change the world. It says quite clearly in section 131C of the
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enabling legislation that the ACL does not intend to change principles
of the law but to add to the options available to protect consumers.
We know in many efforts of legislation - or arguments that legislation
is narrowing common law rights. A good example would be in relation
to legal professional privilege. The High Court in cases such as Baker
v Campbell has said well no, unless the legislation is explicit or unless
it's by necessary implication, we will not as a court read legislation to
be intended to abolish important common law principles. So there's a
nice little irony here that the advocates immunity limits the remedies
available to consumers. Here we have a piece of legislation designed
to protect consumers more, but that same legislation I think would be
interpreted to say that it does nothing in relation to advocates
immunity.
So I think it's business as usual in relation to advocates immunity. But
that's where I stand - what I think is the interpretation at the moment
because the legislation quite explicitly preserves current principles
and doesn't intend to derogate from existing law. Secondly because
there is no explicit reference to this common law principle of
advocates immunity I think the immunity stands. So I suppose I
thought well I don't want to stop speaking after three minutes.
Although I had always said I would speak only for five but I'd just like
to throw it out to those of you who've perhaps studied this area for
longer than I have, and I was thinking well yes, the legislation now is
clear.
The Australian Consumer Law makes it clear that trade or commerce
includes any business or professional activity. But my understanding
in the New South Wales Fair Trading Act that that for some time has
had that made very clear - that it extends to business or professional
activity. Yet my understanding is in New South Wales is that the case
law is still undecided as to the view of that. Whether lawyers can still
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say oh but look at the particular conduct that's being challenged. I
was appearing in court, I was making a submission to His Honour
Justice so and so. That could not possibly be in trade or commerce.
Surely when I'm in court making submissions to the bench, that is not
in trade or commerce.
As against cases that - someone mentioned earlier the Slater and
Gordon situation - that is clearly conduct in trade or commerce. So I
guess I'm just wanting to throw it out there what people's views are.
Can we simply be complacent and say well if we wanted lawyers to be
caught by the consumer legislation then our job has been done
because the definition expressly includes professional activity. Or do
people anticipate that lawyers, particularly when challenged and
allegations are made that they're in breach of the Australian
Consumer Law will want to argue the point about what particular
conduct is it that you're calling me to account for.
Because there's the full range from negotiating on behalf of clients -
yes that might be clearly in trade or commerce - promoting the firm
itself in trade or commerce, or pure advice given to clients compared
to work in court. So I'm just sort of throwing that out there. That's all I
have to say. I'll be interested in your comments on that.
Gerard: Linda my understanding was the definition of the ACL so trade and
commerce then includes business or professional activity.
Linda: Yes.
Gerard: Wouldn't in a common sense that work - lawyers are one of the classic
professions. So it would include a professional activity whatever the
conduct was.
Linda: But all conduct? New South Wales have worked with that definition
and even there there's the broader view and the narrow view. I gather
that the case law is not settled in New South Wales.
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Jeannie: Except Linda there is a fairly strong decision by the New South Wales
Court of Appeal in Kowalczuk v Accom Finance that says yes, it
applies to at least giving of advice. The problem is there's a few
cases before that - as Linda has said - which ummed and ahhed a bit
more. So there's still some grey areas on the outskirts I think.
Linda: What are the views from NSW?
Deborah Radjenovic, MARA : We're very much focused on the migration agents, so as far
as lawyer agents we only look at their conduct in the context of
immigration application assistance work, and the legal aspect of it sits
with the Legal Services Commission. It's not something that I come
across in my role so I'm not in a position to comment on the
arguments.
Steve: I mean I think that the history of this, which is consistent with what
Deborah says, is to try to hive off anything lawyers do and leave it in
one box called lawyer regulation, and try not to muddy those waters. I
think that's been some - it's what the decisions have kind of dealt with.
Whether or not that's right or wrong is another thing entirely but that
seems to be what's happened. I suspect that that will continue.
However there are pressures around the world that are now being
exerted on the legal profession and on all of the service delivery areas
that are so huge. I don't know how long it will last but I'm just not
exactly sure where the first attack will come.
In the UK for example, the real issue has been ostensibly making
legal services available to just anybody by Co Op law and a whole
range of other types of legal processes. But one of the probably
unintended consequences of that is to equate legal service delivery
with nothing but cost. So you only look for the cheapest service, not
the best, and certainly not the one that's going to look after you the
most important way. So there's so many pressures that are now
happening that a lot of what we're talking about here, coming from
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different perspectives, need really to be thought very carefully
through. I mean we really need to make sure that whatever we're
doing about giving consumers rights, which I think everybody in the
room would totally agree is a very important thing to do, has to be
carefully thought through.
Because without some of that thinking some of this overlap that I'm
presently seeing in lots of regulation, which is why we strike MOUs,
just to hold our breath for a while as we try to look around and see
what the consequences might be. This is where we need research to
jump in and a lot of this work needs to be done. Because it's
presently a big gap and a big hole. A lot of these questions I don’t
think have answers. I'd love to be involved in all the discussions
about where they might go.
Jeannie: Great. I can sign you up.
Steve: Please. I'd be happy to. Because we find that it's absolutely essential
to continue to do that.
Jeannie: And you too.
Michael: No I don’t want to be signed up. I'm not a Trade Practices lawyer so
I'm probably putting my neck on the line and I'm sitting opposite senior
counsel so she might contradict me but I'd be astonished if a barrister
in accepting a retainer to be contracted to or retained by a law firm to
do a piece of work could say she was acting in trade or commerce at
the clerking end in the retainer end of the transaction, but wasn't
acting in trade or commerce at the delivery end of the transaction.
Could I just make a couple of points just in addition to that? First point
is that I saw some research recently which showed that since 1980 in
the western world, not in Australia alone but in all of the world,
England, Canada, America et cetera, the number of matters that
actually go to a determination by court have dropped by 80 per cent.
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Second thing I'll mention is most lawyers never do litigation. Most of
our discussion is about litigation. The issue is that a lot of these cost
issues, and particularly consumer pricing issues, tend to end up
talking about litigation which is so difficult. But yet in so many areas of
legal work it's not that difficult. It's much easier to have controls. It's
much easier to have discussions. It's much easier to have different
mechanisms of costing than the billable hour.
There's a whole range of things that we can do. I think that part of this
discussion is picking our target. Because it's really important to
realise that most consumers that go to the lawyers don't end up in
court. Some of them do. Some of them do really badly because of it
but a lot of them have problems around estates, and wills, and
conveyancing, and minor contract issues, and building, and
matrimonial issues, and all those sorts of things that hopefully will
never end up in court. Most lawyers try to keep people out of court
than in. So there's a lot to be said about segmenting the market a
little bit too when we're talking about these issues.
Jeannie: I don’t think that's any different in most trade and commerce though
because most traders actually don’t want to rip off their clients either.
Generally most people in trade or commerce actually value their
reputations and want to do a good job. So I would hate to see …
suggesting that most lawyers are sharks. They're not. Most lawyers
are trying to do a good job. Most lawyers I know do do a lot of pro
bono work. But it's - I guess - I think you're entirely right - but there
are on the fringes people who are clearly not doing a good job and are
exploiting vulnerable people. I don't think that's even in just litigation.
Jeannie: That is an interesting issue because the legislation actually says
including professions where - and I agree with you. I think that is an
interesting question.
Page 44 of 46
Jeannie: Getting it wrong is not negligent. Just as a doctor who has a bad
outcome is not negligent.
Mary Ann Noone, Latrobe University:
I just had a bit of a follow up to what Steve has been saying but also
to probably add another layer of complication. I think we need to
remember that much of those mediations are actually done by lawyers
who are acting as mediators. So there's a whole other potential area
of liability in terms of is that work actually legal work? Are they
performing legal services? As I understand it currently, they are
actually funded to be mediators - their insurance covers them as
mediators. But that clearly is quite a different type of service to
anything else that lawyers have done in the past. There's a whole
issue about the immunity and issues that go with that because as we
know lawyers cannot contract out of liability. But mediators contract
out of liability all the time.
Jeannie: They probably can't under this legislation actually.
Mary Ann: So lawyers who are acting as mediators - who get their party to sign a
mediation agreement where they are contracting out of liability - I
would have thought are breaching the various legal professional
codes.
Facilitator: Well we're getting to the end of our time. Is there anybody else that's
got a burning thing to say because I'm going to ask Linda to speak in
a moment about where to from here which is lots of places by the
sounds of it.
Andrew Conley: Just to play devil's advocate to Linda just for a second - in regards to
ACL section 131C, concurrent operation. Query whether advocates
immunity can exist concurrently with liability under the ACL. Second,
query whether or not the principle of legality - which I gathered you
were referring to - whether or not the lack of any duty of care or at
Page 45 of 46
least ability to be sued as an advocate, fits into the principle of legality
or whether it's a different thing altogether.
Linda: Justice Bell in Goddard Elliot v Fristch just basically said his hands
were tied because of the principle of legality. I would have thought
with Bell J’s background in the consumer legal movement he would
have tried if he could to find some way through the immunity. Thank
you on that point, and that concurrent point – it’s an interesting one.
Michael: Of course the good news is that case was mediated in favour of the
person who got the raw deal through the immunity principle.
Page 46 of 46
Concluding comments:
Linda: Sometimes we come along to these things and it's all very interesting
and then nothing happens so I just suppose I'm interested in where
people feel they would have liked to have more discussion and in
what sort of forum. I would like at least to make sure that we've got
everyone's email addresses and maybe put together some mailing list.
We do have a legal ethic network and we've got the civil justice
research group of course when things are coming up. But did anyone
have any particular issues arising out of the Australian Consumer Law
and its impact on lawyers that you perhaps feel that we haven’t
canvassed tonight? A bit of a blind spot amongst us?
Michael McGarvie: What would probably be good from your point of view is to have a
report back from regulators in six months or a year to let you know
what sort of cases are coming across from Consumer Affairs Victoria
or ACCC or the other consumer regulator, and how they're being dealt
with by the legal regulator.
Linda: But I think certainly on some of these issues, say around costs and
around the mediator, there's some potential topics that we could
explore. So we'll put together some sort of mailing list and keep you
in touch through that.
Facilitator: If you've got any other areas that you think we should have covered,
there's lots more, for another session or a similar kind of session,
there's certainly many things that we could be exploring in this area.
Thank you for coming along. Thank you very much and thank you to
all of the speakers.
End of Transcript
Level 25 307 Queen Street, Brisbane Qld 4000 PO Box 10310 Brisbane, Adelaide Street Qld 4000 T (07) 3406 7737 (Brisbane) or 1300 655 754 F (07 3406 7749 E [email protected]
THE APPLICATION OF THE AUSTRALIAN CONSUMER LAW TO LAWYERS
Regulatory Guide 2-2012
March 2012
W www.lsc.qld.gov.au
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 2
About this guide The Legal Services Commission (LSC) publishes Regulatory Guides to help lawyers and users of legal services better understand a lawyer’s professional obligations in grey areas where they are not always clear.1 You can use this guide to find out about the obligations the Australian Consumer Law places on lawyers and the rights it gives to consumers.2
This guide covers 1. What is the Australian Consumer Law?
2. Does the Australian Consumer Law apply to lawyers?
3. How does the Australian Consumer Law relate to the Legal Profession Act 2007 (Qld)?
4. What provisions of the Australian Consumer Law are relevant to lawyers?
5. Does a breach of the Australian Consumer Law come within the jurisdiction of the Legal Services Commission?
6. Who regulates the Australian Consumer Law as it applies to lawyers?
7. How the Australian Consumer Law applies to lawyers – in summary.
1. WHAT IS THE AUSTRALIAN CONSUMER LAW?
The Australian Consumer Law (ACL) is consumer protection law that applies Australia-wide. The majority of provisions commenced on 1 January 2011. Before this, there were different consumer protection laws in each state and territory,3 and the Commonwealth 4 also had consumer protection laws.
1 Please refer to Regulatory Guides: An Overview for further information about the regulatory guides and what we hope to
achieve by publishing the guides, how we propose to go about developing them and, importantly, their status. The Overview is
published on the Commission’s website at www.lsc.qld.gov.au. We emphasize as we explain in the Overview that ‘the guides will
be persuasive but they are not, nor could they ever be binding. The Commission is responsible for promoting, monitoring and
enforcing appropriate standards of conduct in the provision of legal services, not for setting them. The standards are set by
legislation, by the professional bodies and by the disciplinary bodies and the courts. The guides simply articulate for the benefit
of lawyers and users of legal services alike the factors we will take into account in exercising our responsibilities, most relevantly
our responsibilities to settle consumer disputes including costs disputes between lawyers and their clients and to decide after
investigating a lawyer’s conduct if it is inconsistent with the lawyer’s professional responsibilities and whether to commence
disciplinary proceedings.’
2 We have prepared the guide having regard to the submissions we received in response to the consultation draft of the guide
we published with our E-Newsletter 3 of 2011 on 5 December 2011. The consultation draft and the submissions we received in
response can also be accessed on the Consultations page of our website. We are very grateful to the practitioners and others
who made submissions. The guide is a much better document for their contribution. We are especially grateful to Elizabeth
Shearer for her invaluable assistance in helping prepare this shorter, “plain English” version of a much longer and more detailed
legal advice. The LSC accepts full responsibility however for any errors or ommissions.
The guide addresses how the ACL applies to the provision of legal services. There is a range of very helpful information about
how the ACL applies to the provision of goods and services more generally which can be accessed on the ACL website
(www.consumerlaw.gov.au) or the website of the Queensland Office of Fair Trading (www.fairtrading.qld.gov.au).
3 In Queensland, general consumer protection laws are found in the Fair Trading Act 1989 as amended to incorporate the ACL.
4 The Commonwealth consumer protection laws were found in the Trade Practices Act 1974. This Act has now been renamed
the Competition and Consumer Act 2010. Schedule 2 is known as the Australian Consumer Law.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 3
Many of the familiar consumer protections from the old laws have been retained, for example the law that bans “misleading or deceptive conduct”. There are also new protections, like the law against unfair terms in contracts.
2. DOES THE AUSTRALIAN CONSUMER LAW APPLY TO LAWYERS?
Although there has been some doubt in the past about whether consumer protection laws applied to professions, the ACL is clear that it covers “any business or professional activity”. In our view, this puts it beyond doubt that the ACL applies to lawyers.5 The ACL applies to barristers and solicitors, although some aspects will impact differently because of the different ways in which barristers and solicitors contract to provide services. The ACL applies to all legal practices, whether they are: – Incorporated Legal Practices
– Partnerships or
– Sole Practices. The ACL applies to all stages of providing legal services, including: – advertising, promotion and negotiations about providing legal services
– the client agreement or contract to provide legal services
– the actual provision of the services, and
– billing.
3. HOW DOES THE AUSTRALIAN CONSUMER LAW RELATE TO THE LEGAL PROFESSION ACT 2007 (QLD)?
The ACL is ‘generic’ consumer protection legislation. The Legal Profession Act 2007 (LPA) is specialist consumer protection legislation directed solely to the regulation of lawyers and the provision of legal services and related matters. The ACL complements and sits side by side with the LPA, both governing the conduct of lawyers. The ACL applies as a law of Queensland and as a law of the Commonwealth of Australia. Where remedies are available under the LPA and the ACL it is necessary to think about whether the ACL applies as a law of Queensland or a law of the Commonwealth. We discuss how the ACL and the LPA intersect in more detail under headings 5 and 6, below, but the following table summarises the situation for lawyers operating in Queensland:
5 The definition of “trade or commerce” in section 2 of the Australian Consumer Law has been expanded from that contained in
the Trade Practices Act and explicitly includes “any business or professional activity”. In our view this settles any residual doubt
there may have been about the applicability of the Australian Consumer Law to the activities of lawyers. The Australian
Competition and Consumer Commission clearly believes this to be the case as is evident from its publication Professions and
the Competition and Consumer Act which is published at http://www.accc.gov.au/content/index.phtml/itemId/926503.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 4
LPA applies ACL applies as law of Queensland
ACL applies as law of Commonwealth
Barristers
Yes Yes
Sole practitioners
Yes Yes
Partnerships Yes Yes
Only in limited circumstances 6
Incorporated Legal Practices
Yes Yes Yes
4. WHAT PROVISIONS OF THE AUSTRALIAN CONSUMER LAW ARE RELEVANT TO LAWYERS?
4.1 Consumer guarantees The ACL contains consumer guarantees.7 This means that lawyers guarantee to consumers (that is to say, either individuals who are acquiring the lawyers’ services wholly or predominantly for personal, domestic or household use or consumption8 or businesses that are purchasing services for a value of $40,000 or less) that they will provide legal services: – with due care and skill
– that are fit for the purpose
– within a reasonable time. These guarantees may form the basis of a consumer complaint about a lawyer’s competence and diligence or quality of service.
4.2 Component Pricing Section 48 of the ACL prohibits a person who makes a representation about the price of a good or service from representing a component of the price without also and at the same time prominently specifying the total, single figure price someone must pay to obtain the good or service (to the extent that the single figure price is quantifiable at the time the representation is made). Section 48 is similar (but not identical) to section 53C of the former Trade Practices Act. It does not prohibit component pricing. Rather, it requires someone who advertises a component price of a good or a service (such as the cost of his or her professional services) to clearly and unambiguously spell out the total price someone has to pay to buy the good or service.9 Thus lawyers who provide legal services to which the ACL applies must ensure that their advertising (on websites, for example) and any other representations they make about their costs include their
6 The application of the ACL as a law of the Commonwealth extends beyond corporations to individuals in some limited
circumstances by virtue of section 6 Competition and Consumer Act 2010 (CCA).
7 Sections 60-62 ACL.
8 The term “consumer” is defined at section 3 of the ACL.
9 Section 48(7) provides that the single price is the “minimum quantifiable consideration for the supply of…services at the time of
the representation” and includes (wherever it is quantifiable) “a charge of any description payable to the person making the
representation by another person (other than a charge payable at the option of the other person).”
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 5
single figure ‘all up’ GST inclusive costs including any compulsory fees and charges. More information about the component pricing provisions under the ACL is available at www.consumerlaw.gov.au.
4.3 Misleading and deceptive conduct Section 18 of the ACL is headed "Misleading or deceptive conduct" and says at subsection (1) that "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." The section is the keystone of the ACL. It is similar to section 52 of the former Trade Practices Act but extends its application to include natural persons. It applies generally to lawyers at all stages of the lawyer-client relationship, whether or not the client fits the definition of “consumer”. The prohibition has wide impact, and the term “misleading or deceptive” is given its ordinary meaning. Conduct is misleading or deceptive if it leads, or is capable of leading, a person into error.10 It is irrelevant whether there was an intention to mislead or deceive. Section 18 is not limited to misrepresentations. Other conduct (including silence) may amount to misleading or deceptive conduct.11 The application of section 18 to lawyers is potentially very wide: – advertising or promotion of a lawyer’s services can be misleading or deceptive 12
– it applies not just to dealings between lawyers and their clients, but to dealings between lawyers and other people 13
– a lawyer need not be directly responsible for the misleading or deceptive conduct, but may also be exposed to a claim if he or she was a “person involved in the contravention” 14
– it applies to a lawyer’s pro bono activity because of the extension of the definition of “trade or commerce” to “business or professional activity (whether or not carried on for profit)”.15
The courts have rarely had cause to consider whether conduct by a lawyer amounts to misleading or deceptive conduct but, notably, a solicitor was found in one recent matter to have made misleading or deceptive representations in four debt collection letters and notices.16 There is a wide range of other conduct however that could form that basis of an action under section 18 including:
10
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
11 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357.
12 See Nixon v Slater & Gordon (2000) 175 ALR 15.
13 See Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112. Similarly, a lawyer who endorsed a client’s
representation knowing it to be false would likely be in contravention of s18: see Wheeler Grace & Pierucci Pty Ltd v Wright
(1989) ATPR 40-940 and Heydon v NRMA Ltd (2000) 51 NSWLR 1 at [336].
14 Section 236 ACL. A person “involved in a contravention” includes a person who has “aided, abetted, counselled or procured
the contravention” or “has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention” (s75B
CCA): see Yorke v Lucas (1985) 158 CLR 661.
15 However it is not clear if it applies to government, legal aid, or community legal centre lawyers who, pursuant to those
particular legal practices, never charge clients for their legal services.
16 ACCC v Sampson [2011] FCA 1165. See also Liu v Barakat (unreported, District Court of NSW, Curtis J, 8/11/11); Baker
Johnson Lawyers v Narelle Karen Jorgensen [2002] QDC 205. McGill DCJ noted at [24] in that matter, in reference to the term
“no win - no fee”, that “If the appellant’s true intention was that the retainer be on the terms of the Authority to Act, to describe
that as a retainer on a “no win - no fee” basis was misleading and deceptive …”.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 6
– misrepresentations to a client about the nature or effect of the contract between the lawyer and the client
– misrepresentations by a lawyer about his or her experience or expertise
– misrepresentations about fees payable (in Disclosure Notices or otherwise), and in what circumstances those fees are payable
– misleading advertising about costs
– deliberate or reckless overcharging 17
– charging more than one client for the same work 18
– misrepresentations about a client’s rights in a billing dispute, including the complaint processes.19
4.4 Unconscionable conduct Part 2-2 of the ACL deals with unconscionable conduct. The term “unconscionable conduct” is not defined in the ACL, but the term has been considered in a number of cases. Based on the case law,20 the type of conduct by lawyers that would be caught by this part of the ACL is “something clearly unfair or unreasonable” or that is “irreconcilable with what is right or reasonable”. The relationship between lawyer and client is a fiduciary one, which means that a lawyer has a higher duty to protect a client’s interests than in an ordinary contract for services. A lawyer who acts unconscionably will also likely be in breach of his or her fiduciary duties to the client. There is also an overlap with section 328(2) of the LPA which provides that a costs agreement between a lawyer and a client can be set aside if it is not “fair and reasonable”. The matters set out in s328(2) are similar to those a court would look at when deciding if a fee agreement could be set aside for unconscionable conduct.
4.5 Unfair terms Sections 23 to 28 of the ACL provide consumers with new protections against unfair terms in standard form contracts. Previously the focus was on the process for entering into the contract. The new unfair terms law looks at whether the substance of the contract is unfair. The unfair contract law applies to the contract between the lawyer and a client, including the costs agreement, if: – it is a consumer contract, and
– the contract is a standard form contract. Whether a contract is a consumer contract will depend on the particular circumstances. A consumer contract “is a contract for goods or services… to an individual… wholly or predominantly for personal, domestic or household use or consumption”.21
17
Council of Queensland Law Society v Roche [2004] 2 Qd R 574.
18 Bechara v Legal Services Commissioner [2010] NSWCA 369.
19 See also s29(1)(m) ACL which prohibits the making of a false or misleading representation concerning the existence,
exclusion, or effect or any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2).
20 A useful summary of the nature of the conduct likely to be regarded as unconscionable is found in Hurley v McDonald’s
Australia Ltd (2000) 22 ATPR 41-741.
21 Section 23 ACL
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 7
Our view is that the following legal services provided to an individual client are likely to be regarded as consumer contracts: – personal injury matters
– family law matters
– criminal law matters
– conveyances in relation to the family home
– wills and the administration of estates. This list is not intended to be complete, and contracts for other types of legal services may also be consumer contracts. When a solicitor engages a barrister, this is unlikely to be regarded as a consumer contract. However if an individual client engages a barrister directly for personal matters, then this is likely to be a consumer contract. Having established that there is a consumer contract, the second question is whether it is a standard form contract.22 This will depend on the circumstances. A lawyer might draft a fresh costs agreement for each new client, tailoring the agreement to the specific needs of the client after discussing and negotiating each of the terms of the contract with the client. In that case, the costs agreement is unlikely to be a standard form contract. However, many lawyers use a standard form costs agreement that is only changed by adding the name of the client, the legal services to be provided to and the cost of those services to a template form. Such a costs agreement is likely to be regarded as a standard form contract. If there is a standard consumer contract, the question must then be asked “is this term unfair for the purposes of the ACL?” 23 A contract term is unfair if it:
– causes a significant imbalance in the rights and obligations between the lawyer and the client
– is not reasonably necessary in order to protect the proper interests of the lawyer, and
– would cause detriment (whether financial or otherwise) to the client if it were relied upon. It is unclear how this will operate in practice.24 The precise words and effect of any term will require careful consideration. However, it may be that the unfair contracts laws could be used to challenge terms that:
– allow the lawyer to end the contract without good reason before the work is complete 25
22
Section 27(2) of the ACL sets out matters a court must take into account in deciding whether a particular contract is a
standard form contract for the purposes of Part 2-3.
23 See sections 24-26 ACL
24 It is difficult given the limited number of decided cases under the similar Victorian and UK legislation to predict with any great
certainty how courts will approach the application of these provisions. The ACCC says the following in its “Guide to the Unfair
Contract Terms Law”: “This limb requires that the party advantaged by the term provide evidence to the court to demonstrate
why it is necessary for the contract to include the term. Such evidence might include material relating to the business’s costs
and business structure, the need for the mitigation of the risks or particular industry practices to the extent that such material is
relevant.” In light of the reference to “particular industry practices”, it is our view that a term in a retainer that is an industry
“outlier” in the sense that it is significantly at odds with common practice, will be more at risk of being struck down under Part 2-3.
25 See the recent discussion of termination of retainer in Ireland v Trilby Misso Lawyers [2011] QSC 127.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 8
– allow the lawyer to claim a lien over the client’s file or any money or property the lawyer holds for the client, where that lien is not otherwise justified at law
– allow the lawyer to take a security over the client’s assets or property where that goes beyond what is reasonable 26
– allow the lawyer to change the contract, but do not give the client the same right
– allow the lawyer to issue a lump sum bill with a “reservation of rights” to issue a bill for a higher amount if the client requests an itemised bill.27
This list is not intended to be complete and other terms may potentially be subject to challenge. When considering whether a term is unfair, the court can look at how transparent and easy to understand the terms of the contract are, and can look at the contract as a whole.28 A contract will be less likely to be transparent if it: – uses legal jargon rather than plain English, or
– is poorly organised, so that a client cannot easily understand how the terms relate to each other. The price for the services is not covered by unfair terms.29 However this relates only to the upfront price,30 so other charges like administrative fees or penalty like fees may be subject to a claim that they are unfair. This is separate from any remedy a client may have under the LPA, to set aside a costs agreement that is not “fair and reasonable”.31 Charging excessive legal costs may also amount to unsatisfactory professional conduct or professional misconduct.32
4.6 Undue harassment and coercion Section 50 ACL provides that a person must not use physical force or undue harassment or coercion in relation to the supply of goods or services, or the payment for goods and services. This applies to actions by lawyers to collect outstanding fees.33 It may also have a wider application for clients (such as litigants) who complain about being “forced” – or coerced – to take a step in a dispute (such as settling litigation) upon pressure from their lawyer.
26
Note section 320 LPA that provides that a lawyer may take “reasonable” security for costs.
27 We have published a regulatory guide dealing with this issue on our website at www.lsc.qld.gov.au on the Publications page.
28 A court may have regard to the transparency or otherwise of the term (s24(2)(a)) ACL and the contract as a whole (s24(2)(b)).
Section 24(3) sets out matters that give guidance as to whether the term being considered is transparent.
29 The Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 Explanatory Memorandum notes the following
about s26(2): “Consideration includes any amount or thing provided as consideration for the supply of a … service … The
exclusion of upfront price means that a term concerning the upfront price cannot be challenged on the basis that it is unfair.
Having agreed to provide a particular amount of consideration when the contract was made, which was disclosed at or before
the time the contract was entered into, a person cannot then argue that that consideration is unfair at a later time. The upfront
price is a matter about which the person has a choice and, in many cases, may negotiate The upfront price covers the cash price
payable for a … service … at the time the contract is made. It also covers a future payment or a series of future payments.”
30 The upfront price “does not include any other consideration that is contingent on the occurrence or non-occurrence of a
particular event.” The Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 Explanatory Memorandum
notes that “Terms that require further payments levied as a consequence of something happening or not happening at some
point in the duration of the contract are covered … Such payments are additional to the upfront price, and are not necessary for
the provision of the basic supply, sale or grant under the contract.”
31 LPA section 328.
32 LPA section 420(b). See also Council of the Queensland Law Society v Roche [2004] 2 Qd R 574.
33 The prohibition has received some, though not extensive, judicial attention. See ACCC v Maritime Union of Australia (2001)
114 FCR 472.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 9
4.7 The impact on bills The ACL includes a number of provisions relating to invoices and bills. The effect of section 100 is that a lawyer must provide his or her client with a proof of transaction. A tax invoice will satisfy this requirement. The ACL, like the LPA deals with itemised bills. Both laws require a legal practice to issue an itemised bill if the client requests it. However the time allowed for issuing a bill is different. – Section 332 of the LPA allows for 28 days
– Section 101 of the ACL allows only 7 days.
It is important to note that the LPA applies to all lawyers’ bills. The ACL only applies to bills for clients who fit the definition of “consumer”.34 The inconsistency in relation to consumer bills is partly resolved by section 55 of the Fair Trading Act 1989 (Qld). This confirms that a legal practice has 28 days to provide an itemised bill. However, this applies only to legal practices that are subject to the operation of the ACL as a law of Queensland, and not as a law of the Commonwealth. For legal practices that are subject to the ACL as a law of the Commonwealth, section 55 of the Fair Trading Act has no effect and the inconsistency remains. Under section 109 of the Australian Constitution, laws of the Commonwealth prevail over laws of the States. This means that incorporated law practices, and others covered by the extended operation of the ACL as a law of the Commonwealth, are required to provide an itemised bill to consumers within 7 days of request. The inconsistency in the treatment of incorporated as opposed to unincorporated legal practices in this respect is anomalous and arguably requires rectification. The question arises then of how the LSC proposes to deal with incorporated legal practices which fail to comply with their obligation under the ACL to provide an itemised bill on request within 7 days. It is important to remember in this context that the LSC is responsible for monitoring and enforcing lawyers' obligations under the LPA, not the ACL. Generally they overlap (see headings 5 and 6, below) but in this case they don't. The usual considerations under the LSC's Discipline Applications Guidelines35 apply but it is difficult to imagine the LSC initiating disciplinary proceedings against lawyers in these circumstances. This does not mean however that the agencies responsible for monitoring and enforcing the ACL (such as the Australian Competition and Consumer Commission - the ACCC) will not take enforcement action. That is a matter for them.
5. DOES A BREACH OF THE AUSTRALIAN CONSUMER LAW COME WITHIN THE JURISDICTION OF THE LEGAL SERVICES COMMISSION?
The ACL is ‘generic’ consumer protection legislation that applies to the provision of goods and services generally. The LPA is ‘specialist’ legislation that applies specifically to the provision of legal services. The two pieces of legislation sit side by side and overlap.
The ACL uses different language, and brings a lawyer’s ‘customer service’ obligations into sharper focus, but in our view imposes few if any new or additional professional or service obligations on lawyers. It has never been acceptable, for example, for lawyers to engage in misleading, deceptive or
34 As defined in the ACL, that is, where the amount of the service is less than $40,000 or is for personal, domestic or household
purposes. 35 The Guidelines are published on the Policies and Guidelines page at www.lsc.qld.gov.au
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 10
unconscionable conduct, or to enter into unfair contracts with their clients or to use undue harassment or coercion in recovery of their fees.
It follows that the LSC has jurisdiction to deal with complaints about lawyers which involve alleged contraventions of the ACL, not because the LSC has jurisdiction to deal with complaints under the ACL – it doesn’t – but because the conduct of a lawyer which contravenes the ACL will more often than not also contravene his or her professional or service obligations under the LPA. The very same conduct that gives rise to a complaint under the ACL will typically involve either a disciplinary issue or a ‘consumer dispute’ under the LPA and can be dealt with accordingly.
6. WHO REGULATES THE AUSTRALIAN CONSUMER LAW AS IT APPLIES TO LAWYERS?
The Australian Competition and Consumer Commission (ACCC) and the Queensland Office of Fair Trading (OFT), as marketplace regulators, are responsible for monitoring and enforcing the ACL including receiving and dealing with complaints.36 The LSC is responsible for monitoring and enforcing the professional and service standards of lawyers under the LPA including receiving and dealing with complaints. All of us as regulators have an interest in: – the application of the ACL to the practice of lawyers
– any practical problems faced by lawyers in complying with the ACL
– the extent of compliance by lawyers with the ACL, and
– enforcement of the ACL against lawyers. Importantly, the LSC and the OFT have entered into a memorandum of understanding (MOU) about our respective roles. 37 We have agreed (subject to our respective statutory obligations in relation to privacy and non-disclosure) that: – the OFT will refer any inquiries and complaints about lawyers and the provision of legal services to
the LSC for mediation and / or investigation and enforcement under the LPA as appropriate
– the OFT will share with the LSC any information it obtains about lawyers during OFT investigations and enforcement action
– the LSC will share with the OFT information about any matters which the OFT refers to the LSC for investigation under the LPA and any other matters which arise in the exercise of the LSC’s responsibilities under the LPA which:
o appear to involve a contravention of the ACL and cannot be satisfactorily resolved under the LPA
o appear to raise issues of a ‘test case’ nature about the application of the ACL to lawyers and the provision of legal services, or
o demonstrate systemic conduct by lawyers which appears to contravene the ACL.
36 The Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investment Commission
(ASIC) and the state and territory fair trading agencies entered into a memorandum of understanding (MOU) which sets out how
they work together to administer the ACL: www.consumerlaw.gov.au/content/Content.aspx?doc=the_acl/enforcement.htm
37 The MOU is published on the Commission’s website, under Publications.
Legal Services Commission: Regulatory Guide 2-2012: The Application of the ACL to Lawyers 11
7. HOW THE AUSTRALIAN CONSUMER LAW APPLIES TO LAWYERS - IN SUMMARY
Stage Activity Possible Complaint
Problem Relevance of ACL
1 Pre-contractual negotiations
Advertising
Initial discussions with client
Disclosure of costs
Component pricing
false advertising
false representation re accreditation
false representation of expertise, skill, or experience
estimate of costs inaccurate
Prohibition on misleading or deceptive conduct (s18)
Other specific false or misleading representations (ss29, 34)
Single price provisions (s48)
2 Contract Enter into retainer
Enter into costs agreement
Cancellation fees
Reservation of rights
Terms are onerous or unfair
Costs set out in the agreement are too high
Prohibition on unconscionable conduct (ss20-22)
Unfair terms provisions (Part 2-3)
3 Provision of service
Advice to client
Acting on behalf of client with third parties
Conduct of litigation
Pro bono activity
Too slow
Didn’t do what had been promised
Poor advice
Not skilled
Prohibition on misleading or deceptive conduct, towards client or third parties (s18)
Consumer guarantees (ss60-62)
4 Billing for service
Interim bills
Lump sum bills
Itemised bills
Debt collection activity
Bills padded
Charged at rate higher than agreed
Charged for things not done
Charged for things didn’t want/need done
Misleading or deceptive conduct (s18)
Prohibition against use of physical force, undue harassment or coercion (s50)
Consumer guarantees (ss60-62)
Invoices (ss100, 101)
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