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National Competition Policy Review of the Legal Profession Act 1987
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I INTRODUCTION
2.1 Recent reports and studies of the legal profession have considered what kind of restrictions there should be on who can use titles associated with the delivery of legal services, and who can practise as a lawyer.
2.2 Principle 1 of the COAG Working Party Report stated that for competition law to have full effect, regulatory intervention by government should be the minimum necessary to protect the public interest in the administration of justice and consumer protection. Consistent with these objectives, the report recommended that regulation should not go beyond a licensing and admission scheme which allowed for mutual recognition of practising certificates, building on mutual recognition wherever possible.
2.3 Recent reports and studies have also considered the best means of creating a national legal services market, and how to overcome the barriers to entry which are created by the current system of State and Territory based regulation.
2.4 The Trade Practices Commission recommended that the Commonwealth and States undertake co-operative action to develop a more integrated national market for legal services and a more uniform framework for the regulation of entry to and practice in that market[22]. The Access to Justice Action Plan supported the principle of national uniform entry and regulatory standards, and advocated the creation of a National Advisory Council to make recommendations on "measures to achieve uniformity in entry standards, post-admission training, and other regulations applying throughout Australia."[23]
2.5 Principle 4 of the COAG Working Party Report stated that a national scheme should be established which would allow a practising certificate issued in one State or Territory to be accepted in all others without further admission protocol. This matter was considered by the Standing Committee of Attorneys General, and Ministers agreed that model provisions should be drafted for consideration by their Governments, to give effect to the COAG Working Party's recommendation.
II CURRENT SCHEME FOR ADMISSION TO PRACTICE
Requirements for Admission
2.6 The Legal Practitioners Admission Board determines the eligibility of a person for admission under sections 11 and 12 of the Act. The Supreme Court admits legal practitioners under section 4.
2.7 The standard required for entry to the profession is set out in detail in the Legal Practitioners Transitional Admission Rules 1994. The prerequisites for study are completion of the equivalent of at least three years' study, incorporating study in:
2.8 Students must also complete practical training. Different requirements apply for solicitors and barristers. Other States and Territories have substantially similar requirements for admission.
Exemptions
2.9 The Board has a limited power to grant exemptions from practical legal training to a person who is more that 30 years old, who has seven years' experience as a NSW Government employee performing legal services, or 15 years in courts administration, where the person has undertaken to remain in the NSW public service for the first 5 years after admission.
Rights of Interstate Practitioners
2.10 The Legal Profession Act was amended in 1996 to implement the National Practising Certificates Scheme.[25] Part 3B of the Act now allows interstate practitioners who hold practising certificates in States and Territories with corresponding legislation, to practise without having been admitted in New South Wales. It also provides for NSW practitioners to practise in those States and Territories without having been admitted there.
2.11 However, the efficacy of the Scheme is limited because it is based on reciprocity. The scheme applies only where corresponding laws have been passed by both the 'home' jurisdiction and the new jurisdiction in which the practitioner wishes to practise. To date, corresponding laws have been enacted in the Australian Capital Territory and Victoria. While it is anticipated that most jurisdictions will enact corresponding laws during 1998, it is not clear that all jurisdictions will participate in the scheme.
2.12 Prior to the enactment of the National Practising Certificates amendments, NSW practitioners who wished to practise elsewhere had to seek admission using the procedures set out in the Mutual Recognition Act 1993 (Cth). This legislation still applies to NSW practitioners who wish to practice in jurisdictions which have not implemented corresponding legislation under the National Practising Certificates Scheme. In contrast to the National Practising Certificates Scheme, the Mutual Recognition Scheme requires that practitioners be admitted in each jurisdiction in which they wish to practise. This makes inter-state practice under the Mutual Recognition Scheme significantly more complex and expensive than under the National Practising Certificate Scheme.
III EVALUATION
Is licensing of solicitors and barristers necessary?
2.13 The threshold issue to be considered is whether solicitors and barristers should be licensed under a statutory scheme at all. Competition policy requires barriers and compliance costs created by licensing to be justified in the public interest.
Benefits of licensing
2.14 There are several public benefits derived from the compulsory licensing of lawyers, and the common standard which is a prerequisite to licensing.
2.15 As noted above, the legal services market is characterised by diversity. Clients have differing levels of knowledge and expectations of legal services. Large corporations may use lawyers on a daily basis, while individual consumers may use legal services rarely. The transactions in which lawyers are involved are often significant and in the absence of a formal licensing system, vulnerable clients would be exposed to exploitation. In addition, compulsory licensing enables clients to have access to information about the minimum qualifications and skills of lawyers and the disciplinary system ensures that high ethical and professional standards are maintained by all licensed members of the profession.
2.16 The role of a lawyer is distinguished by his or her duty as an officer of the court, whose professional obligations are supervised by the Supreme Court. The system of admission by the Supreme Court rests on the established traditions of lawyers adhering to professional and ethical rules, and the courts permit appearances by admitted lawyers because admission denotes adherence to those rules. In the absence of a statutory admission scheme, the Court would be required to recognise and supervise practitioners by some other means. Lawyers also have established duties to clients and to each other which are not shared by members of other professional groups.[26]
2.17 There are some services which cannot be provided by those without legal qualifications. Litigation and court advocacy, which are bound by technical procedural and evidentiary rules are two examples of such services, and a person who seeks to represent a party and who is not a legal practitioner generally relies on the leave of the court in order to appear. If there were no formal admission clients would have no guarantee that the courts would recognise the right of practitioners to act as advocate on their behalf, unless this issue was dealt with through other statutes or court rules.
2.18 Further, lawyers hold funds on behalf of clients and the comprehensive statutory regulation of trust accounts and other funds money belonging to clients which are held by lawyers ensures that the public is better protected against incompetence and fraud.
2.19 However, many lawyers rarely practise in areas which require the handling of clients' funds. An less onerous registration system might be appropriate for such practitioners. Alternatively, the rules which govern lawyers holding trust accounts and other funds could apply to any person, including non-lawyers, holding funds on behalf of another person, without the need for a comprehensive licensing system which applies to all lawyers.
Restrictions imposed by licensing
2.20 Restrictions flow from the compulsory, universal licensing system of lawyers which may not benefit the public. Compulsory licensing may create a perception that lawyers are best equipped to provide any legal service. Hence, non-lawyer service providers who have special expertise may be excluded from sectors of the legal services market. However, the qualifications and expertise of lawyers are well recognised within the community and it is probable that most clients would continue to seek legal services from a solicitor or barrister even if compulsory licensing did not exist. In addition, membership of the Law Society or the Bar Association is generally only open to qualified practitioners and most practitioners join their respective professional body. The Law Society and Bar Association are widely recognised in the community as representing the branches of the profession. It might be argued that eligibility for membership of such professional organisations is sufficient to protect the public.
2.21 Licensing of lawyers is complemented by a rigorous disciplinary system. The primary purpose of the system is to deal with bad work and professional misconduct by lawyers. The existence of the disciplinary system is often thought to represent a substantial public benefit. However, the need for such a disciplinary system under the licensing scheme should be considered.
2.22 The existence of the system implies that lawyers are subject to higher standards than other service providers, who may be performing similar tasks. This may create anomalies which affect markets, because lawyers must observe professional duties which are not imposed on other service providers, and which may not be relevant to certain categories of services.
2.23 Finally, admission and compulsory registration generate significant compliance costs which are passed on the clients. The cost of admission is $350.00 and an annual practising certificate costs between $255.00 and $1285.00. The funds allocated to the disciplinary system were approximately $5.5m in the year ending 30 June 1997. The disciplinary system is funded form the interest generated from solicitors' trust accounts. In the absence of the disciplinary system, the interest on trust accounts could be paid directly to clients, legal aid or another worthwhile cause.
Alternative approaches: Voluntary Certification and Activity Based Licensing
2.24 Other professions, such as accountancy, have only a voluntary licensing scheme. To be certified, accountants are required by the Australian Society of Certified Practising Accountants to adhere to ethical rules, hold professional indemnity insurance and hold practising certificates issued by the Society. While use of the title 'accountant' is not restricted, only members of the Society of Certified Practising Accountants are able to use certain titles.
2.25 As an alternative to formal admission of legal practitioners to the Supreme Court, licensing of legal practitioners could be achieved through a voluntary system, whereby certified lawyers would be subject to regulation by professional associations. The risk to the public of incompetent services being provided could be minimised by making the professional associations responsible for the functions presently fulfilled by the current system. The voluntary professional associations could encourage the resolution of consumer disputes through appropriate measures, resolve disciplinary matters and conduct consumer education as to the titles and skills of lawyers.
2.26 Another alternative to uniform licensing, is selective licensing of specific areas of practice. Other professions, such as accountants and valuers, are subject to licensing for some categories of work, rather than solely in their professional capacity. While accountants are not subject to comprehensive regulation, licensing schemes apply to certain categories of work which are performed by accountants, in circumstances where consumer protection appears warranted. There appears to be no evidence that consumers are disadvantaged by the lack of government intervention in the regulation of accountants.[27[]]
2.27 The diversity of legal practice is one reason why selective licensing may be appropriate for the regulation of the legal profession. Many lawyers, such as corporate lawyers and Government lawyers, do not deal directly with the public or operate trust accounts. Their clients are their employers, which are large, sophisticated organisations and which have in place their own training and risk management programmes. The need for these lawyers to be licensed in the same way as, for example, suburban practitioners, may be questionable.
2.28 Other lawyers work solely in one area of the law, such as lawyers in large firms, and do not need the range of skills required of general practitioners. The number of lawyers who specialise in this way is increasing. Large firms may also be likely to incorporate a greater degree of training and supervision of practitioners and have clients who are well informed about the nature and standard of legal services.
2.29 Licensing of the legal profession could be restricted to legal practitioners who deal directly with the public, who operate trust accounts or who hold funds on behalf of clients in any other capacity. These licensing requirements could cover non-lawyers who can demonstrate the necessary skills to perform these categories of work. Alternative criteria for selective licensing of the legal profession could be the licensing of lawyers to work in discrete areas, such as commercial law, criminal law or civil law.
2.30 However, replacing the general licensing system for legal practitioners with a series of work based licences or sets of rules may create further problems. Most lawyers would need to hold several different licences, many may need to comply with different requirements, and these would be subject to increased compliance costs. Further, consumers might find that redress for complaints about legal services lacked the uniformity and certainty which is a characteristic of the current scheme.
Professional Standards Act 1994
2.31 The Professional Standards Act 1994 provides for the Professional Standards Council to register schemes developed by occupational groups. Once a scheme has been approved by the Council, it operates to limit the liability of members of the relevant body who adhere to the rules of the scheme. Schemes cover matters such as professional indemnity insurance, risk management, complaints and disciplinary mechanisms, and professional rules.
2.32 The establishment of a scheme may act as a substitute for Government regulation of an occupational group which has comprehensive self regulation of its members. The Institute of Chartered Accountants and the Australian Society of Certified Practising Accountants adhere to a common scheme which has been approved by the Council. The Law Society has also established a scheme with the approval of the Council.
QUESTIONS
A. Does the public benefit of a uniform government licensing scheme of lawyers, outweigh the compliance costs and restrictions on competition which are generated by such licensing?
B. Should the scheme for licensing of lawyers apply only to certain categories of work, as in the case of accountants? Which categories of work should be subject to licensing?
C. Should the scheme for the licensing of lawyers be replaced by activity based schemes, which apply to all participants in the market for legal services, such as schemes to regulate professionals who hold funds on behalf of others, and professionals who represent clients in litigation and court advocacy?
D. Would activity based licensing compromise the professional and ethical standards adhered to by all practitioners?
E. Could statutory licensing be replaced by a scheme based on voluntary compliance, established by professional bodies representing lawyers?
F. Is a disciplinary system which applies solely to lawyers warranted in the public interest?
National Scheme for Licensing
2.33 The Standing Committee of Attorneys General agreed in principle to the implementation of the national practising certificate scheme, based on reciprocity rather than unilateral recognition. This approach was intended to ensure that as far as possible, the scheme remained uniform, and to provide an incentive for all jurisdictions to provide the same rights of entry and practice to all Australian practitioners.
2.34 Nevertheless, as noted above, some jurisdictions may elect not to participate in the scheme. Practitioners in those jurisdictions will continue to face barriers to entry in other jurisdictions because of decisions made by their Governments over which they have no control. These difficulties might be addressed by the removal in New South Wales of the requirement for a corresponding law to be enacted in the practitioner's home jurisdiction. Of course, this would place New South Wales practitioners at a potential disadvantage compared with their interstate colleagues.
2.35 These difficulties would be overcome by the implementation of a national licensing scheme for lawyers, for example administered by a single authority. Such a scheme would require Governments to either agree on a co-operative scheme or refer their powers to the Commonwealth Government. A national scheme would have far reaching implications for the profession which has traditionally been largely self regulated by the Law Society and Bar Association and their counterparts in each jurisdiction. Consideration would need to be given to the role of professional Councils under a national scheme, and whether they would be replaced by national bodies representing lawyers and issuing practising certificates. A national disciplinary system, applying common standards, would need to be developed.
2.36 A national scheme would facilitate the development of a national market for legal services and promote uniformity in admission and practice standards. However, the removal of powers from existing admission bodies and professional bodies would change the culture of the profession and could affect the ability of practitioners to have input into the development of ethical and professional standards. A national body might be regarded as less responsive and more remote, both by practitioners and consumers. However, the advantages of a national body would include consistency, the ability and resources to represent the entire profession in promoting Australian legal services and certainty of cover of all Australian practitioners.
QUESTIONS
A. Should Part 3B of the Act, which establishes a scheme for national practising certificates, be amended so as to provide for the automatic recognition of practitioners who are eligible to practise in other jurisdictions, or should the conferral of rights of practice be contingent on the passage of corresponding laws as at present?
B. Should a scheme for a single, national regulator of lawyers, receive further consideration? What would be the advantages of such a scheme?
Academic training
2.37 As noted above, the uniform scheme for the admission and licensing of lawyers requires consideration in he context of the specialisation and diversification of the legal services market. A specific aspect of the scheme is the academic subjects which have been set as prerequisites.
2.38 The group of subjects listed in Rule 94 of the Legal Practitioners Transitional Admission Rules as prerequisites to admission has been agreed by the Consultative Committee of State and Territory Law Admitting Authorities as prerequisites to admission. The Consultative Committee comprises members of the judiciary and representatives of admission boards in each jurisdiction.
2.39 Knowledge of the subjects set out in Rule 94 is essential to many transactions which affect consumers, such as conveyancing, probate and litigation.
2.40 However, many practitioners may rarely use the knowledge obtained in these 'core' legal subjects and instead apply legal skills to a range of other areas of legal work. In addition, academic training is of little use without practical experience and a practitioner will often have insufficient skills to take instructions in any area outside his or her normal areas of practice.
2.41 It might be argued that the object of legal training is the acquisition of skills, rather than detailed knowledge alone. Legal skills give practitioners the ability to acquire greater knowledge.
2.42 If, as discussed above, uniform licensing were to be replaced by activity based licensing, there would be no need for common standards. Instead of requiring all practitioners to complete the core subjects, an alternative approach might be to place restrictions on the categories of work which may be accepted by practitioners, based on the subjects they have studied. However, such restrictions would have implications for the fidelity scheme and insurance cover offered to practitioners and could affect the quality of legal services offered to clients, who might be unaware of restrictions placed on the right of a practitioner to practise.
QUESTIONS
A. Are the subjects set as prerequisites to admission appropriate, having regard to the diverse nature of legal practice?
B. Given that the current system of admission permits a legal practitioners to accept instructions in any area of law, should restrictions be placed on the types of matters undertaken by legal practitioners who have not completed formal study in certain areas of practice?
Practical Training
2.43 The current scheme for the practical training of practitioners, before admission, is based on the view that practical training is required to protect the public from incompetent practitioners. Practical legal training represents a significant expense for students which is ultimately passed on to consumers of legal services, and the diversity of legal practice calls into question the need for all practitioners to complete practical training in all areas relevant to private practice.
2.44 Formal practical training might not be essential for practitioners who plan to work in large firms, in corporations, or in Government, because of the supervision and professional development which such organisations can offer. One alternative for graduates employed by such organisations could be introduction of a system of articles of clerkship, to ensure that graduates attain a sufficient standard for admission.
2.45 Restricted practising certificates could ensure that such practitioners completed additional training if they proposed to take instructions directly from the public.
Existing exemptions
2.46 The existing exemption for Government employees appears to have been applied in order to facilitate the admission to practise of staff of court houses, whose practical experience was regarded as being equivalent to the training which was offered to other graduates.
2.47 However, many part time law students now work within the legal services market and there appears to be little reason for the limited exemption to apply to Government employees, but not to other employees. Similar skills and experience can be obtained in the private sector and other Government employment. The justification for the exemption is unclear.
QUESTIONS
A. Should all categories of practitioners be required to complete the same level of practical training before admission?
B. Should limited exemptions be available to practitioners proposing to work for Government, corporations, or firms which have their own training arrangements in place?
C. Is the limited exemption from practical legal training which applies to some public sector employees in the public interest?
D. Should exemptions be given on the basis of experience, rather than employer?
Footnotes
[22] Access to Justice Advisory Committee, Access to Justice - an Action Plan; Final Report, Commonwealth 1994, p.126 - see TPC Study of the Professions - Legal; Final Report, March 1994, pp.78-79
[23] p.123
[24] Rule 94. Subject prerequisites in other states are substantially similar: Victoria: Legal Practice Act 1996, s 332 and Rules of the Council of Legal Education 1993, Rule 10; Western Australia: Legal Practitioners Act 1893, s 15; Queensland: Legal Practitioners Act 1995, s 58(1)(c), per Solicitors' Board approval; Tasmania: Legal Profession Act 1993, s 23, per Board of Legal Education Rules; Northern Territory: Legal Practitioners Act 1974, s 11, per Admission Board approval; ACT: Legal Practitioners Act 1970, s 11
[25] The Legal Profession Amendment (National Practising Certificates) Act 1996.
[26] This issue was canvassed by the Law Society's Professional Regulation Task Force early in 1997. The task force recommended that licensing be retained: Report of Professional Regulation Task Force, May 1997, at 14-18.
[27] It is noted that tax agents, company auditors and liquidators are required to hold licences under the Income Tax Assessment Act 1936 (Commonwealth) and the Corporations Law.
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