THE COMMISSION'S EARLIER WORK ON THE REGULATION OF THE LEGAL PROFESSION

1.1 Since its inception, the Law Reform Commission has had a major role in the monitoring of the laws regulating legal professional practice. Among the very first references to the Commission in March 1966 was one requesting a review of the Legal Practitioners Act 1898-1960, which resulted in our Report No 2 (LRC 2) in December 1966 and an Amendment Act in 1967. The Commission received another major reference on the legal profession in September 1976, which led to the production of seven Discussion Papers, five Background Papers, and the following four Reports:

• General Regulation and Structure (LRC 31, April 1982);
• Complaints, Discipline and Professional Standards (LRC 32, April 1982);
• Advertising and Specialisation (LRC 33, July 1982); and
• Solicitors’ Trust Accounts (LRC 44, December 1984).

1.2 The recommendations contained in these Reports directly led to a completely new legislative scheme regulating the legal profession in this State, the cornerstone being the Legal Profession Act 1987 (“the Act”). In particular, the recommendations which shaped the new system included: the participation of lay persons in the work of the professional Councils and their committees; the involvement of lay persons in the disciplinary system; the expansion of the concerns of the disciplinary system to embrace poor professional work (unsatisfactory professional conduct) which does not amount to professional misconduct; the requirement that Councils offer complainants reasonable assistance to make written complaints; the establishment of a two-tier system of hearings before the Legal Profession Standards Board (for unsatisfactory professional conduct) and the Legal Profession Disciplinary Tribunal (for professional misconduct); and the establishment by statute of an external review mechanism (now called the Legal Profession Conduct Review Panel), to review (upon application) those complaints which have been summarily dismissed by the Councils.

THE CURRENT TERMS OF REFERENCE

1.3 On 12 November 1991, the Commission was given a reference by then Attorney General, the Hon P E J Collins QC MP, under s 10 of the Law Reform Commission Act 1967 (NSW), to inquire into and report upon the following matters:

(i) The Commission should inquire into the means of implementing alternative mechanisms to those presently existing to deal with complaints about the delivery of legal services to the public, such as a complaints unit, a Legal Services Ombudsman, or some other mechanism. In so inquiring the Commission will have regard to the need for accountability external to the legal profession in any such mechanism.

(ii) The Commission should inquire into the means of making the offices of the Director of Public Prosecutions, the Legal Aid Commission, the Crown Solicitor, and other Government Legal Services more open and accountable. In so inquiring, the Commission will have regard for the need for the impartiality and independence of those offices.

(iii) The Commission should consult fully with peak professional bodies of the legal profession in New South Wales together with other relevant community organisations and other interested individuals and take into account any proposal of those bodies to reform and strengthen their mechanisms for investigating and adjudicating complaints.

1.4 The reference to the Commission followed the Memorandum of Understanding signed by then Premier, the Hon N F Greiner MP, on behalf of the Liberal/National Party Government, and the Independent Members of Parliament Mr John Hatton MP, Ms Clover Moore MP, and Dr Peter Macdonald MP. Following Mr Greiner’s resignation as Premier on 24 June 1992, the Memorandum of Understanding was re-signed by the new Premier, the Hon John J Fahey MP. Part 6 of the Memorandum deals with “Rights of Citizens”, and Section C of this Part contains a Statement of Principle that “The Government and the Independent Members agree that a system of external accountability of the legal profession is desirable.” It is then agreed that the matter should be “referred to the NSW Law Reform Commission for prompt report”. The Timetable for Implementation asks the Commission to report by February 1992, with any resultant legislation to be released in the first half of 1992 for enactment in the 1992 Budget Session. Annexure F of the Memorandum contains the terms of reference set out in the preceding paragraph.

1.5 The Commission had some concerns about the terms of reference, principally that the wording of the first term seemed to presuppose the need for implementing alternative mechanisms, and that the deadline for reporting was unrealistic given the breadth and importance of the issues, and the need for a program of research (including empirical and comparative research) and consultation. Following discussions in December 1991 with the Attorney General, and with Mr Hatton on behalf of the Independents, it was agreed to alter the terms of reference to meet the Commission’s concerns.

1.6 On 29 January 1992, the Attorney General wrote to the Commission again, noting that agreement had been reached to amend the timetable set out in Annexure F of the Memorandum of Understanding, requesting the Commission now to report by 28 May 1992. Further, the Attorney amended the first term of reference to now read:

(i) The Commission should inquire into the necessity for implementing alternative mechanisms to those presently existing to deal with complaints about the delivery of legal services to the public, such as a complaints unit, a Legal Service Ombudsman, or some other mechanism. In so inquiring the Commission will have regard to the need for accountability external to the legal profession in any such mechanism. [altered wording indicated in italics]

THE ORGANISATION OF THE CURRENT INQUIRY

1.7 While there is an obvious link, the first and second terms of reference in this inquiry are aimed at different systems. The first term relates to the adequacy of the existing means of handling complaints about lawyers. Under the Act, the governing Councils of the peak professional associations - the New South Wales Bar Association and the Law Society of New South Wales - are given statutory powers (which may be delegated to committees) to receive, investigate, assess, and dismiss complaints, reprimand legal practitioners, and refer matters to the Standards Board and the Disciplinary Tribunal for determination. The Councils also have power over the conduct of legal practitioners through their control of the system of issuing (and suspending, cancelling or placing conditions on) practising certificates. While the regulation of the legal profession is thus largely placed in the hands of the private profession, the disciplinary system also may deal with complaints against lawyers who are employed in the public sector, such as those who work for the Legal Aid Commission or the Director of Public Prosecutions.

1.8 The second term of reference is addressed to the openness and accountability of the major public agencies which provide legal services, such as the Legal Aid Commission, the office of the Director of Public Prosecutions, and the Crown Solicitor’s Office. The issues here do not relate so much to the competence and ethical standards of individual practitioners employed in these offices as they do to the legislative framework and administrative structures which are necessary to ensure a high level of public accountability while at the same time protecting the independence and integrity of those offices.

1.9 For reasons of policy as well as pragmatism, the Commission decided to deal with these topics separately. The second term of the reference will be dealt with in a discussion paper entitled Accountability of Public Legal Services which the Commission hopes to release early in 1993. The Commission will then examine any submissions commenting on the issues raised in the discussion paper and then release its report before the end of 1993.

DISCUSSION PAPER 26

1.10 In May 1992, the Commission released its Discussion Paper No 26: Scrutiny of the Legal Profession, which deals only with the first head of the reference. The Discussion Paper (referred to hereafter as “DP 26”) received considerable media attention, and over 1000 copies were distributed throughout the community.

1.11 In DP 26, the Commission reviewed the current system of handling complaints in New South Wales (and elsewhere), made a number of proposals of wide application for general improvement of the system, and posed three potential options for basic reform: (1) retention of the existing system, in which the legal professional Councils are central, but with some significant refinements; (2) replacement of the present system with one based around an independent Legal Services Complaints Commission, modelled somewhat on the system for dealing with health care complaints in NSW; and (3) replacement of the present system with one based around an independent Legal Services Ombudsman. (DP 26 is discussed in more detail in Chapter 2.) This Report follows upon DP 26.

1.12 As we noted in DP 26, the Commission considers it appropriate to review and reform the law and practice in relation to the handling of complaints against lawyers. Although the Legal Profession Act 1987 only has been in force for five years, and it is not long since the Commission’s earlier inquiry into the legal profession, there are good reasons for the Commission to look at this area again:¹

First, the legal profession has changed considerably in the past decade. The number of lawyers and the lawyer-population ratio have increased greatly in a short time, with the average age and experience of the profession declining accordingly.² The decade also has seen the rise of the “mega-firm” of solicitors, and substantial increases in inter-state and international practice.³ Small firms are coming under economic pressure, with the challenges to the traditional solicitors’ monopoly over conveyancing work and changes to the system for compensating personal injury victims. Increased emphasis is being placed upon the advertising and marketing of legal services, and law firms of all sizes are enjoined to operate in a more “business-like” fashion, despite the traditional distinction between a “service-oriented profession” and other occupations and commercial ventures. Lawyers are now commonly asked to practise outside of the traditional narrow role, serving as tax and commercial advisers, directors, and mediators, among other things.

Secondly, social expectations have changed considerably in the past decade. There is an increased awareness of the rights of consumers, and an extension of these principles into the public sector, with calls for increased openness, fairness and accountability of public institutions and officials. The recent emphasis on “micro-economic reform” has reached the professions, with the attendant concerns about the elimination of restrictive trade practices and the promotion of increased competition within and between markets for professional services.

THE ORGANISATION OF THIS REPORT

1.14 Chapter 2 details the Commission’s research and consultation program for this inquiry. This includes, among other things: a precis of DP 26 and the submissions received in response to that Paper; a report on the Commission’s survey of the complaints files of the Law Society and the Bar Association (for the year 1991); a summary of the comparative research undertaken; the results of the Omnibus Survey (public opinion poll) on handling complaints about lawyers which we commissioned from the Roy Morgan Research Centre; and the proposed survey of the views and levels of satisfaction of complainants and respondent lawyers with the existing system, which the Commission was unable to proceed with owing to the inability of the Commission to gain the cooperation of the Law Society Council.

1.15 In the Chapter 3, the Commission identifies a set of “best practice” principles for handling complaints against lawyers. These principles are then used to measure the soundness of the existing system, and to design a new system. At the end of this Chapter, the Commission provides its reasons for choosing to recommend the establishment of an office of Legal Services Ombudsman as the basis for the proposed reforms.

1.16 In Chapters 4 and 5, the Commission provides its 77 recommendations for reform, together with extensive supporting commentary. Chapter 4 covers the “core recommendations”, covering: the aims of the system; the role and powers of the Legal Services Ombudsman; the rights and position of complainants; the diversion of some complaints for consensual dispute resolution; the continuing role of the professional Councils; the creation of a Legal Services Tribunal; and the mechanism for external review of the complaints handling system.

1.17 Chapter 5 covers matters of education, prevention, and professional standards; sources of funding for the new system; and other related matters, such as confidentiality and privilege, reciprocal (inter-state) recognition and enforcement of disciplinary orders, the handling of disputes over legal fees and costs, the abolition of solicitors’ liens, and the clarification of some statutory provisions.

1.18 For reasons of convenience, a summary of all the collected recommendations is contained in Chapter 6.

1. DP 26, at paras 1.7-1.8.

2. See D Weisbrot Australian Lawyers (1990) Ch 3.

3. See Weisbrot, Ch 7 generally.