1.1 On 3 March 2000, the Attorney General, the Hon J W Shaw QC, MLC asked the Law Reform Commission:

to review the procedures for dealing with complaints against legal practitioners under Part 10 of Legal Profession Act 1987, taking into account recent case law on the operation of Part 10 and the practical experience of the operation of the statutory provisions.

The Commission’s previous review

1.2 In 1993, the New South Wales Law Reform Commission published the Report Scrutiny of the Legal Profession – Complaints Against Lawyers (Report 70).¹ The Report found that the existing complaints handling system was inadequate. It identified a number of problems including delays, inadequate investigations, a perception that the system lacked independence, and a failure to provide consumer redress or to address ethical issues and professional standards.

1.3 Report 70 recommended the adoption of a more consumer-oriented complaints system. It recommended the introduction of an independent statutory office of Legal Services Ombudsman, responsible for receiving all complaints and monitoring investigations, and a Legal Services Tribunal, responsible for hearing misconduct complaints.

1.4 The Commission’s recommendations were implemented in 1994, although the government decided to call the new office the Legal Services Commissioner (LSC).

Part 10 of the Legal Profession Act 1987 (NSW)

1.5 The current Part 10 of the Legal Profession Act 1987 (NSW), which implemented the recommendations in Report 70, was inserted in 1993 by the Legal Profession Reform Act 1993 (NSW).

1.6 An exposure draft of the bill was circulated for public comment in the first half of 1993.² Some changes were made to the exposure draft before it was introduced to Parliament.

1.7 The Legal Profession Reform Bill 1993 (NSW) was first introduced to Parliament on 16 September 1993. This bill was subsequently withdrawn and a second bill, the Legal Profession Reform Bill (No 2) 1993 (NSW) was introduced on 27 October 1993. This bill was passed with amendments and assented to on 29 November 1993. The Legal Profession Reform Act 1993 (NSW) commenced on 1 July 1994.

Subsequent amendments and reviews

Reports and reviews

1.8 Performance Audit Report. A “special” audit was required by the Legal Profession Act 1987 (NSW)³ into the activities of the LSC, the Bar Council and the Law Society Council (the Councils) that were paid for by the then Statutory Interest Account. At the time of the review in 1997, the Statutory Interest Account held interest from some monies deposited in clients’ trust accounts.⁴ The resulting Performance Audit Report, which was published in June 1997,⁵ made a number of recommendations relating to the management of the various funds derived from interest on clients’ trust funds and the apparent conflicts of interest, particularly those arising from the Law Society’s involvement in the system. Some of the recommendations of the Performance Audit Report were addressed by legislation in 1998.⁶

1.9 National Competition Review. In 1998 the New South Wales Attorney General’s Department conducted a review of the Legal Profession Act 1987 (NSW). The review was undertaken to meet two separate requirements:

• the requirement of the Australian Governments’ Competition Principles Agreement to consider any potentially anti-competitive restrictions in legislation and whether they are in the public interest; and
• the statutory requirement that the amendments made by the Legal Profession Reform Act 1993 (NSW), which include the whole of Part 10 of the Act, be reviewed within four years of their commencement.⁷

The disciplinary scheme does not have an anti-competitive effect because all members of the profession are subject to the scheme. It is possible that the cost of the scheme affects the ability of legal practitioners to compete with non-lawyer service providers within the legal services market. However, the scheme serves the public interest by assuring independence and impartiality, openness and accountability, and external scrutiny and review of the profession. The review of the conduct of practitioners also serves an educative role.⁹

Legislative amendments

1.12 There have been numerous amending Acts dealing with Part 10 of the Legal Profession Act 1987 (NSW). In summary they are:

• Conveyancers Licensing Act 1995 (NSW) brought conveyancers under Part 10 (commenced 1 February 1996).
• Courts Legislation Further Amendment Act 1995 (NSW) allowed fresh evidence to be introduced on appeals from the Legal Services Division of the Administrative Decisions Tribunal (formerly the Legal Services Tribunal) (the Tribunal) (commenced 8 March 1996).
• Legal Profession Amendment Act 1996 (NSW) aimed to simplify and strengthen some of the provisions relating to mediation and the bringing of complaints to the Tribunal (commenced 1 April 1997).
• Legal Profession Amendment (National Practising Certificates) Act 1996 (NSW) made holders of National Practising Certificates subject to Part 10 (commenced 1 July 1997).
• Administrative Decisions Legislation Amendment Act 1997 (NSW) abolished the Legal Services Tribunal and introduced the Legal Services Division of the Administrative Decisions Tribunal (commenced 6 October 1998).
• Public Notaries Act 1997 (NSW) brought notaries under Part 10 (commenced 26 June 1998).
• Courts Legislation Further Amendment Act 1997 (NSW) allowed the Tribunal to make orders for costs (commenced 2 February 1998).
• Legal Profession Amendment (Practice of Foreign Law) Act 1998 (NSW) made locally registered foreign lawyers subject to Part 10 (commenced 1 July 1999).
• Legal Profession Amendment Act 1998 (NSW) implemented changes recommended by the Performance Audit Report including requiring the Councils and the LSC to develop performance criteria (commenced 5 March 1998).
• State Revenue Legislation (Miscellaneous Amendments) Act 1998 (NSW) allowed information gathered in the complaints process to be disclosed to the Chief Commissioner of State Revenue (commenced 2 November 1998).
• Legal Profession Amendment (Complaints and Discipline) Act 2000 (NSW) dealt with problems arising from the High Court’s decision in Barwick v Law Society of NSW¹⁰ (commenced 14 July 2000).

1.13 Two recent major cases that have highlighted problems with Part 10 are Barwick v Law Society of NSW¹¹ and Murray v Legal Services Commissioner.¹²

1.14 In Barwick, the High Court examined the requirement under Part 10 that complaints must be investigated before Tribunal proceedings can be instituted. The Court looked at a situation where the Law Society Council filed informations against a practitioner in the Tribunal which related to allegedly irregular trust account transactions. While pursuing its investigations, the Council discovered further and later acts which were alleged to have constituted additional instances of misconduct. Subsequently, the practitioner who was the subject of the complaints filed statutory declarations by way of evidence in the Tribunal allegedly containing misrepresentations, a further instance of misconduct.

1.15 The Court considered how the procedure for dealing with complaints applies to new allegations against the practitioner which arise during the course of an investigation or a hearing into other complaints. In particular, it considered the status of complaints raised by the Councils about conduct which took place at least three years ago when the LSC had not determined that the complaint could be raised out of time. The Court also criticised the drafting of Part 10, finding it difficult to ascertain the legislative intention and resolve ambiguities.

1.16 In Murray, the Court of Appeal examined the obligation to accord procedural fairness to a practitioner being investigated under Part 10, including the obligation to provide the practitioner with a copy of the complaint and an opportunity to respond to it.

Remedial legislation

1.17 The New South Wales Government introduced remedial legislation in response to the High Court’s decision in Barwick v Law Society of NSW.¹³ This legislation, which commenced operation on 14 July 2000, has two basic aims:

• to overcome some of the problems arising from the High Court’s decision; and
• to make some minor changes to improve the operation of Part 10 pending the review by the New South Wales Law Reform Commission.¹⁴

• Validate decisions already made (and future decisions to be made on informations already filed) by the Tribunal in relation to complaints initiated by a Council in relation to conduct which occurred more than three years ago.¹⁵
• Allow the Councils to initiate and investigate complaints in relation to conduct that occurred more than three years ago so long as they meet certain criteria.¹⁶
• Allow the Tribunal to vary an information to include additional complaints even if they are in relation to conduct that occurred more than three years ago.¹⁷

• allowing a complainant to withdraw a complaint;¹⁸
• enhancing the power of the LSC to refer complaints to the Councils;¹⁹
• allowing the LSC to dismiss a complaint if it is in the public interest to do so;²⁰
• giving the LSC the same powers as the Councils when conducting a review of a Council’s decision²¹ and increasing the range of orders that can be made on review to include mediation orders and reprimands;²² and
• allowing the publication of details of disciplinary action taken against a practitioner.²³

THE COURSE OF THIS REFERENCE

Preliminary consultation

1.21 After receiving the terms of reference and completing some preliminary research, the Commission met with the LSC, Steve Mark, and several of his staff; and the Executive Director of the Bar Association, Philip Selth, and the Professional Affairs Director, Helen Barrett. The Commission also had a preliminary discussion with the Chief Executive Officer of the Law Society, Mark Richardson.

1.22 The Commission also invited submissions from regulatory agencies who administer Part 10 and groups representing legal consumers. The Commission received a number of useful preliminary submissions, which are referred to throughout this Paper and are listed at Appendix B.

1.23 The Victorian Department of Justice is currently reviewing the Legal Practice Act 1996 (Vic), which regulates the legal profession in Victoria, including the complaints handling system. In July 2000, the Executive Director of the Commission, Peter Hennessy, met with Peter Sallmann, Victorian Crown Counsel, and Richard Wright, Associate Director, Victorian Civil Justice Review Project, who are conducting the review. The Executive Director also met with the Victorian Legal Ombudsman and representatives of the Law Institute of Victoria to discuss the regulation of complaints in Victoria.

This Issues Paper

1.24 This Issues Paper consists of six chapters.

• Chapter 1 is an introduction which sets out the Commission’s terms of reference for this review, background to the reference, and the course of the review.
• Chapter 2 outlines how the current system for dealing with complaints against lawyers works.
• Chapter 3 considers broad regulatory and consumer issues.
• Chapter 4 deals with issues relating to the procedure for dealing with complaints under Part 10.
• Chapter 5 examines issues relating to the outcome of investigations into complaints against lawyers.
• Chapter 6 deals with issues relating to proceedings in the Tribunal.

1.25 The Commission is interested to receive information or views on any of the matters raised in this Paper. Chapters 3 to 6 identify a number of issues on which the Commission is keen to receive further submissions. The deadline for receipt of submissions is

15 December 2000.

1. New South Wales Law Reform Commission, Scrutiny of the Legal Profession – Complaints Against Lawyers (Report 70, 1993).

2. Legal Profession Reform Bill 1993 (NSW) (Consultation Draft).

3. Legal Profession Act 1987 (NSW) s 67. This section was repealed in 1998 and is now covered by Legal Profession Act 1987 (NSW) s 69J.

4. The Statutory Interest Account held interest from some monies deposited in the Statutory Deposit Account, while the Solicitors’ Trust Account Funds held interest from monies deposited with non-Statutory Deposit Account trust accounts. The Statutory Interest Account and the Solicitors’ Trust Account Funds have now been combined in the Public Purpose Fund.

5. New South Wales, Audit Office, The Law Society Council, the Bar Council and the Legal Services Commissioner: A Review of Activities Funded by the Statutory Interest Account (Performance Audit Report, 1997).

6. Legal Profession Amendment Act 1998 (NSW).

7. Legal Profession Act 1987 (NSW) Sch 8 Pt 1 cl 1B.

8. New South Wales, Attorney General’s Department, National Competition Policy Review of the Legal Profession Act 1987 (Report, 1998).

9. National Competition Policy Review at 56.

10. [2000] 3 HCA.

11. [2000] 3 HCA.

12. (1999) 46 NSWLR 224.

13. Legal Profession Amendment (Complaints and Discipline) Act 2000 (NSW).

14. New South Wales, Parliamentary Debates (Hansard) Legislative Assembly, 31 May 2000, Second Reading Speech at 6236.

15. See amendments to Legal Profession Act 1987 (NSW) Sch 8.

16. Legal Profession Act 1987 (NSW) s 137(2).

17. Legal Profession Act 1987 (NSW) s 167A(3).

18. But without preventing investigation should the LSC or Councils so decide: Legal Profession Act 1987 (NSW) s 140.

19. Legal Profession Act 1987 (NSW) s 141 and 147A(1A).

20. Legal Profession Act 1987 (NSW) s 155A. This is in addition to the grounds for dismissal in s 139.

21. Legal Profession Act 1987 (NSW) s 159(4).

22. Legal Profession Act 1987 (NSW) s 160(1)(b) and (c3).