legislation and policy

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National Competition Policy Review of the Legal Profession Act 1987

Summary of the Issues Paper


This summary of the issues paper has been prepared by the New South Wales Attorney General’s Department for discussion and consultation purposes and does not represent the views of the New South Wales Government. This review is required to be undertaken by law and as part of the obligations of the Government under the Competition Principles Agreement. The Agreement was endorsed by the Council of Australian Governments in April 1995.

The review is being conducted by the Attorney General’s Department. A reference group has been appointed by the Attorney General to advise on the review. The Reference Group is chaired by Mr Laurie Glanfield, Director General of the Attorney General’s Department and consists of representatives of the Cabinet Office, the Insurance Council, the Australian Consumers’ Association, the Law Society, the Bar Association, the courts, and the Legal Services Commissioner.


The issues paper takes the form of chapters canvassing the main issues of importance for competition policy. Copies of the issues paper are available from the Legislation and Policy Division of the Attorney General’s Department on 9228 8028 or on the Department’s website at www.lawlink.nsw.gov.au. Submissions are sought from any person having an interest in the profession and its regulation, or the legal services market, including consumers, corporate clients, and members of other occupational groups. Many of the matters discussed in the issues paper may appear to be of greatest relevance to solicitors in private practice and to barristers, but the scheme covers the whole profession, and submissions are also sought from government and corporate lawyers, academics and non-practising lawyers.

Submissions should be made to Mr Laurie Glanfield, Director General, Attorney General’s Department, Level 19, Goodsell Building, Chifley Square, Sydney NSW 2001. Questions or comments about the paper can be directed to Catherine Morgan on 9228 8077 or by email at catherine_morgan@agd.nsw.gov.au. The closing date for submissions has been extended to 18 September 1998.

I. The review of the Legal Profession Act 1987 shall be conducted in accordance with the principles for legislation reviews set out in the Competition Principles Agreement. The guiding principle of the review is that legislation should not restrict competition unless it can be demonstrated that:

A. the benefits of the restriction to the community as a whole outweigh the costs; and

B. the objectives of the legislation can only be achieved by restricting competition.

II. Without limiting the scope of the review, the review is to:

A. clarify the objectives of the legislation, their continuing appropriateness, and whether the Act remains appropriate for securing those objectives;

B. identify the nature of the restrictive effects on competition;

C. analyse the likely effect of any identified restriction on competition on the economy generally;

D. assess and balance the costs and benefits of the restrictions identified; and

E. consider alternative means for achieving the same result, including non-legislative approaches.

III. When considering the matters in (2), the review should also:

A. identify any issues of market failure which need to be, or are being addressed by the legislation, and

B. consider whether the effects of the legislation contravene the competitive conduct rules in Part IV of the Trade Practices Act 1974 (Cth) and the NSW Competition Code.

IV. The review is to consider the functions of the Legal Services Commissioner, the Legal Profession Advisory Council, the Attorney General’s Department and costs assessors.

V. The review shall consider and take account of relevant regulatory schemes in other Australian jurisdictions, and any recent reforms or reform proposals, including those relating to competition policy in those jurisdictions.

VI. The review shall consult with and take submissions from the Law Society, Bar Association, other organisations representing members of the legal profession, the Legal Services Commissioner, the judiciary, the Legal Profession Advisory Council, consumers, representatives of business and the insurance industry, and other interested parties.



The Legal Profession Act 1987 introduced a comprehensive scheme for the regulation of the legal profession.

As a signatory to the Competition Principles Agreement, endorsed by the Council of Australian Governments in April 1995, the New South Wales Government is required to undertake a review of the Legal Profession Act 1987. The Competition Principles Agreement requires that legislation must not restrict competition unless it can be demonstrated that the benefits of the restrictions to the community outweigh the costs, and that the objectives of the legislation can only be achieved by restricting competition.

The Competition Principles Agreement has far reaching consequences for the legal profession because of amendments to the Trade Practices Act 1974 (Commonwealth), and complementary State and Territory legislation, enacted in 1995. For the first time, these amendments extended the prohibition on corporations engaging in anti-competitive practices, to corporations which trade within state boundaries. These changes mean that the many members of the legal profession, who were previously unaffected by the prohibitions, are now subject to provisions modelled on Part IV of the Competition Code, which proscribes anti-competitive conduct.

The Legal Profession Act 1987 was substantially amended by the Legal Profession Reform Act 1993, which introduced reforms to legal practice, costs and the complaints system. The 1993 Act aimed to foster competition within the profession and make the profession more accountable.

In addition to the review required to be carried out of the Legal Profession Act 1987, a review of the amendments made to the Act by the Legal Profession Reform Act 1993 is required by clause 1B of Schedule 8 of the Legal Profession Act 1987.

The Government has resolved that these two reviews are to be conducted together, and terms of reference have been prepared which incorporate the requirements of the Competition Principles Agreement and clause 1B. This review must be tabled later in 1998.

The review will assess whether changes to regulation of the legal profession implemented by the Legal Profession Act, the Legal Profession Reform Act and other amending Acts, fulfil the obligations required by the Competition Principles Agreement.

The issues are complex because the legal services market differs in significant ways from other kinds of markets. The additional requirements for ethical rules, the unpredictable nature of legal outcomes and the possibilities of market failure due to specialisation of some legal services mean that anti-competitive regulation may be justified in some circumstances.

The review must consider not only the legislation in itself, but whether the objectives of the Legal Profession Act continue to be relevant. The 1987 Act clearly envisages the legal profession as a discrete area of professional activity, rather than as market players, integrated into other businesses. The object of the 1987 Act was that the legal profession should regulate itself in the public interest. By contrast, the 1993 Act introduced a far greater measure of independent scrutiny and aimed to create a more competitive marked for legal services. The review will consider the continuing relevance of the objectives of the regulatory in the context of competition policy. \



Under the current regulatory scheme, practising barristers and solicitors must first be admitted by the Supreme Court, on the recommendation of the Legal Practitioners’ Admission Board. Once admitted, legal practitioners are subject to a rigorous disciplinary system.

Arguments for maintaining a statutory licensing scheme contend that there are distinctive duties required of the legal profession that are best enforced through the supervision of the Courts. It is also argued that the current supervisory role of the Courts and the Legal Practitioners’ Admission Board should be maintained because of:

  • the special ethical and professional rules incumbent upon legal professionals as officers of the court;
  • the necessity for special technical skills in court; and
  • the responsibilities of legal professionals who are responsible for holding funds on behalf of clients.

Arguments against maintaining the current licensing scheme include:

  • that licensing may unnecessarily exclude non-lawyer services providers who have special expertise in some areas of the legal services market;
  • that the disciplinary system deals largely with disputes about services or costs, rather than disciplinary matters, and that clients of lawyers should not be required to fund such a system. There are more appropriate ways to resolve such disputes;
  • regulation could be limited to certain categories of legal work in circumstances where consumer protection seems necessary, such as when legal practitioners are responsible for holding clients’ funds;
  • compliance costs; and
  • alternative models of non-government professional regulation exist, notably the Professional Standards Council, established under the Professional Standards Act of 1994.


Does the public benefit obtained by a Government licensing scheme of lawyers, outweigh the compliance costs and restrictions on competition which are generated by such licensing?

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?

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?

Could statutory licensing be replaced by a scheme based on voluntary compliance, established by professional bodies representing lawyers?

Is the disciplinary system which applies solely to lawyers warranted in the public interest?

A National Licensing Scheme?

Currently, inter-state practitioners in NSW are governed by either the national practising certificates scheme, which is only applicable if the state in which the legal practitioner was admitted has corresponding legislation, or by the Mutual Recognition Scheme which requires the legal practitioner to pay significant costs to be admitted in NSW. Part 3B of the Legal Profession Act gives effect to the national practising certificates scheme in New South Wales. There are potential problems with these schemes.

However, the alternative approach of implementing a national licensing scheme would have far reaching implications for the role of the Law Society Council and the Bar Council (the professional Councils), possibly requiring the development of a national disciplinary system. A national scheme would facilitate the development of a uniform national market for legal services, but could also become remote from the needs of both practitioners and consumers, reducing their ability to have input into the development of ethical and professional standards.


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?

Should a scheme for a single, national regulator of lawyers, receive further consideration? What would be the advantages of such a scheme?

Academic Training


Are the subjects set as prerequisites to admission appropriate, having regard to the diverse nature of legal practice?

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

Should all categories of practitioners be required to complete the same level of practical training before admission? Should limited exemptions be available to practitioners proposing to work for Government, corporations, or large firms which have their own training arrangements in place?

Is the limited exemption from practical legal training which applies to some public sector employees in the public interest? Should exemptions be given on the basis of experience, rather than employer?




Use of titles

The titles ‘barrister’ or ‘solicitor and barrister’ can only be used by lawyers who hold the relevant practising certificates. The Act also contains offences for persons who hold themselves out to be barristers or solicitors and barristers, who are not qualified to act in that capacity. Advantages of reserving the use of titles to practitioners who hold practising certificates are that solicitors and barristers are subject to supervision by the Law Society and Bar Association, and are widely recognised as having particular skills, as adhering to strict professional and ethical rules and as being covered by both professional indemnity insurance and the fidelity fund.

However, the reservation of titles may have disadvantages, including limiting marketing opportunities for other service providers. The reservation of titles alone does not promote consumer awareness of legal services.

Even if titles were not regulated by the Legal Profession Act, it is likely that a person who falsely held himself or herself out as holding a practising certificate or being a qualified lawyer would be guilty of false, misleading or deceptive conduct under the Trade Practices Act 1974 (Cth).


Should the Act reserve the use of titles to qualified practitioners who hold practising certificates? Do the public benefits of restrictions on the use of titles outweigh the barriers they create?

Should the reservation of the titles ‘barrister’ ‘solicitor’ and ‘legal practitioner’ be retained?

Lawyers’ monopoly on certain categories of work

Restrictions on the entry of non-lawyers into the legal services market set out in section 48E of the Legal Profession Act may offend against some section 45(2)(b)(ii) and other sections of the Trade Practices Act. The Trade Practices Commission recommended that different categories of legal work should be independently reviewed to assess whether a monopoly was in the public interest. A Committee established by the Law Society recommended that if the statutory provisions creating a monopoly over provision of legal services were dismantled, consumer recognition of the difference between lawyers and other service providers could be promoted through education.

However, it is possible that the maintenance of a regulatory regime for solicitors and barristers, while dismantling their monopoly over the provision of legal services, could have an anti-competitive effect if the compliance costs of mandatory licensing, insurance and fidelity requirements are too high.

Dismantling the monopoly over the provision of legal services raises additional questions about how to ensure adequate protection of consumers and about the kinds and costs of restrictions which should be placed on non-lawyer providers of legal services.


Is there a need for a statutory monopoly on the provision of legal services?

What services should be covered by a monopoly?

What restrictions, if any should be placed on other providers of ‘legal’ services?

Should the general restrictions on the performance of legal work be replaced with schemes applying to different categories of work, based on the nature and complexity of the tasks, rather than its categorisation as ‘legal’ work?

What categories of work would be suitable for such schemes?



The 1993 Act removed many of the distinctions between solicitors and barristers. Division 1A of the Act provides for both solicitors and barristers to act as advocates, for joint advocacy, and removes any rules preventing attendance by solicitors and barristers on each other. The Barristers’ Rules now provide for direct client access.

However, significant differences still exist between the restrictions placed on barristers and solicitors in the provision of legal services. Barristers and solicitors are required to have separate practising certificates. Barristers must practise as sole practitioners and are subject to limitations on the kinds of work they may accept, which are set out in the Barristers’ Rules.

These remaining restrictions may have an anti-competitive effect. However, there are also significant advantages to the continued division of the profession. These include:

  • the cab-rank rule for barristers ensures that all clients can have access to the specialist skills of an advocate;
  • restrictions on the work of barristers in jurisdictions where barristers are not required to complete the formal practical training of solicitors may protect consumers of legal services; and
  • the use of two separate practitioners in a matter, where the practitioners do not have common business interests, ensures outside scrutiny of the conduct of a client’s case.


What are the benefits to the public of the issue of separate practising certificates for barristers and solicitors? Do these benefits outweigh the competitive disadvantages of the restrictions, both to consumers and practitioners?

Is there a need for a separate Bar, offering specialist advocacy services?

Is there any public benefit in legislative provisions supporting the existence of a separate Bar, or could a voluntary Bar serve a similar purpose?

What are the benefits to the public of restrictions in the Bar Rules on the practice of barristers? Do these rules unreasonably restrict the ability of barristers to compete with solicitors? Conversely, do the remaining restrictions on the use of titles by barristers and solicitors respectively restrict the ability of the two branches of the profession to compete with each other?



In NSW the Law Society and the Bar Association exercise both regulatory and representational functions. The Law Society Council and the Bar Council may make practice rules which are binding on the profession, and a breach of the rules may amount to professional misconduct or unsatisfactory professional conduct by the practitioner. However, the rules are subject to review by the Legal Profession Advisory Council and may be declared inoperative by the Attorney General if the Council reports that the rules impose restrictive or anti-competitive practices which are not in the public interest.

The regulatory functions of the Law Society and the Bar Association may be scrutinised by the Supreme Court. This system ensures uniformity and consistency within the profession, but may have anti-competitive effects because:

  • it prevents solicitors and barristers from exercising choice in professional association
  • professionals are required to submit to the rules of the respective Councils even if they choose not to belong to the Law Society or the Bar Association.

An alternative system was introduced in Victoria in 1996 which allows the registration of alternative representative bodies. The Victorian scheme establishes one statutory body and allows for any number of independent professional associations. The professional associations may issue practising certificates, make rules and investigate complaints against their members. The professional associations must be registered by the Legal Practice Board, which also scrutinises their rules and ensures they have in place proper complaints handling processes. However, no other bodies have sought registration in Victoria to date.


Is there an appropriate balance between self regulation and Government intervention in the regulatory scheme set out in the Legal Profession Act?

Is it appropriate for the Law Society Council and the Bar Council to have the power to make rules which bind the profession, and for those powers to be recognised in the Act?

Does the system where the Law Society and the Bar Association exercise regulatory, as well as representative functions, for solicitors and barristers, restrict the choice of practitioners and have an anti-competitive effect?

What are the benefits to the public of the conferral of exclusive statutory rights to regulate practice on the Law Society and the Bar Association?



The Act provides that a barrister or solicitor may hold himself or herself out as a specialist, but only if the barrister or solicitor has appropriate expertise or experience or is accredited under an accreditation scheme conducted by the Law Society or the Bar Association.

Accreditation may enhance the ability of consumers to choose legal services, by giving them access to information about the relative merits of practitioners. Conversely, accreditation may distort markets by increasing the costs of services and excluding practitioners who are not accredited from providing services, even if they have the expertise to do so. In this case, it would have an anti-competitive effect.

It is not clear whether accreditation schemes have had an anti-competitive effect on the market for legal services.


Have the specialist accreditation schemes affected the market for legal services?

Does the public benefit achieved by informing consumers about quality services outweigh any anti-competitive effect on other practitioners?

Are the existing accreditation schemes sufficiently rigourous to ensure that accredited practitioners can offer highly specialised services? Should the Act expressly permit other organisations, such as universities, to offer accreditation schemes?



The Council was established in 1987 to provide external scrutiny of the Law Society Council and the Bar Council, principally in their rule making functions. The Council is established by section 58 and consists of 11 members. Three members are solicitors, two members are barristers and five members are lay persons: section 58.


Has the Council discharged its statutory role?

Is the statutory role of the Legal Profession Advisory Council adequate to ensure that it provides appropriate independent scrutiny of the profession?

Does the membership of the Council ensure public confidence in the independent scrutiny of matters affecting the legal profession by the Council?



The only restrictions on general advertising by solicitors and barristers are currently those set out in the Trade Practices Act 1974 (Commonwealth), which apply to false. misleading or deceptive conduct by any person. Some exceptions apply to lawyers who advertise services under the Workers Compensation Act 1987 and regulations under the Act.


Is there any evidence that the removal of restrictions on advertising, other than those proscribing false, misleading and deceptive conduct, have harmed the public?

Has the removal of advertising restrictions been of benefit? Has competition been engendered by the removal of restrictions?

Are there arguments in favour of the reintroduction of controls on advertising by solicitors? What matters would be addressed by any controls?

How can the reintroduction of controls be reconciled with the application of competition policy to the profession?



Complaints against lawyers are received by the Legal Services Commissioner. The Commissioner may then refer complaints for investigation to the Law Society Council, in the case of solicitors, or the Bar Council, in the case of barristers, or investigate complaints himself. The Commissioner has a limited power to mediate in the case of small complaints, if the practitioner and client agree and if the amount in issue is less than $2500. The Councils and the Commissioner are also empowered to refer matters for mediation if conduct issues arise.

Following an investigation, the Commissioner or the relevant Council may refer a complaint to the Council if they have formed the view that there is a reasonable likelihood of a finding being made by the Legal services Tribunal of unsatisfactory professional conduct or professional misconduct.

The Legal Services Commissioner has the power to review a finding by the Councils following their investigation. The Commissioner has altered the decisions of the Councils in a very small number of matters.

The Tribunal holds a hearing to determine whether the standard set out in the Act has been met. A hearing into a question of unsatisfactory professional conduct generally takes place in the absence of the public which hearing into complaints of professional misconduct are public.

Neither ‘professional misconduct’ or unsatisfactory professional conduct’ are defined in detail in the Act. Many complaints do not concern a case of professional misconduct or unsatisfactory professional conduct by the practitioner but instead arise from consumer disputes, about fees or communication. However, the Tribunal can only deal with consumer disputes when it is hearing a conduct complaint. Following recent changes, a separate specialist stream for handling consumer disputes between clients and lawyers has been established in Victoria.


Does the disciplinary scheme for addressing complaints about lawyers hinder competition in the profession? Do the costs imposed on the profession and clients by the existence of the complaints and disciplinary system outweigh the benefits to consumers? Does the existence of disciplinary sanctions enhance the standards of practice?

Does the composition of the Tribunal remain appropriate? Should the Tribunal apply evidentiary rules in all cases, or is the distinction currently drawn between hearings into unsatisfactory professional conduct, and professional misconduct appropriate?

Should the discretion of the Tribunal to conduct closed hearings and to restrict publication of its decisions be circumscribed, so as to ensure that most hearings are conducted in public and decisions are published?

Should provision be made for the Tribunal to conduct hearings using single members in some circumstances?

Is the standard required for a finding of unsatisfactory professional conduct, or professional misconduct, appropriate? Should the standard be based on the standards of conduct expected by the profession, or on that of a ‘reasonable person’?

Is further codification of the standard for professional misconduct and unsatisfactory professional conduct required?

Should examples of conduct which constitutes professional misconduct or unsatisfactory professional conduct be included in the Act, to assist the Tribunal, the investigatory bodies and the public, or are the common law definitions adequate?

Is the current system of a single stream for resolving disputes and conduct issues adequate? Should consumer disputes be dealt with by a separate scheme for complaints initiation, investigation and resolution, within the disciplinary system, as in Victoria?

Is the limited jurisdiction of the Legal Services Tribunal to make compensation orders appropriate?

Should the Legal Services Tribunal have jurisdiction to deal with small costs disputes and applications for compensation by clients of legal practitioners?

Is the composition of the Tribunal appropriate? Should practising solicitors or barristers sit on the Tribunal, given its jurisdiction over other practitioners?

Is the review power providing appropriate scrutiny of decisions of the Councils?



The Act permits solicitors to enter into partnerships with other professionals (multi-disciplinary partnerships), subject to restrictions in the Solicitors’ Rules, and to incorporate, subject to restrictions. Both multi-disciplinary partnerships and solicitor-corporations must be controlled by solicitors. The Act does not restrict the power of barristers to form partnerships or to incorporate but the Barristers’ Rules prevent barristers from practising in partnership with any other person.

Questions have been raised as to whether the restrictions on the business associations of solicitors and barristers are anti-competitive and can be justified in the public interest. However, a relaxation of the current restrictions could create difficulties for insurers and consideration would need to be given to matters such as conflicts of interest, legal professional privilege and client confidentiality.


Are prohibitions on barristers practising with other professionals warranted? Do they promote, or hamper, the efficient and competitive provision of advocacy services?

Should solicitors or barristers be permitted to become members of multi-disciplinary partnerships? What restrictions should be placed on such partnerships?

Should solicitors or barristers be permitted to form incorporated practices under the Corporations Law? Should the objects and membership of such practices be restricted? Should such practices be required to have a majority of directors who hold practising certificates?

How can compliance with the ethical and professional rules of solicitors and barristers be reconciled with participation by members of the profession in multi disciplinary partnerships and companies?



Solicitors and barristers are required to hold a professional indemnity insurance policy which has been approved by the Attorney General. Solicitors are also required to contribute to the Fidelity Fund. The purpose of the Fidelity Fund is to compensate a person who suffers a loss as a result of a failure to account or a dishonest default. Some practitioners, such a government lawyers, do not need to comply with these requirements.

Solicitors are the only category of professionals required to hold both categories of cover. The cost of insurance and fidelity cover is passed on to clients and may be regarded as inhibiting competition between lawyers and comparable service providers. However, insurance and Fidelity Fund cover protect the public from incompetent or dishonest practitioners and provide an obvious public benefit.

Currently only one insurer has been approved as a provider of professional indemnity cover for solicitors and barristers. If other insurers were to enter the market, the cost of insurance could fall and practitioners could choose between insurers. However, issues such as risk weighting and the provision of insurance cover for lawyers cover who had ceased to practise would need to be addressed.


Are the advantages of the insurance scheme and Fidelity Fund operated by the Law Society outweighed by the benefits to the public and the profession of deregulation?

Would a deregulated insurance market offer adequate protection to the public?

If a competitive market is established, should insurers be free to adopt risk weighting and to refuse cover?; Or:

Should there be limits on the price differentials between policies and an obligation on insurers to accept any proposal?

Should prudential standards be set for insurance companies offering professional indemnity insurance for lawyers, or should licensing by the Insurance and Superannuation Commission be sufficient?

Are there grounds for limiting the number of insurers permitted to enter the market?



The reforms to legal costs in 1993 were prompted by the perception that scales of costs had become base fees and stifled competition. In addition, consumers found it difficult to shop around for legal services because of the difficulty of establishing prices for comparable services.

The 1993 reforms introduced Part 11 of the Legal Profession Act. Part 11 establishes a new scheme for legal costs. The Act now requires practitioners to make comprehensive disclosures, creates some exceptions to disclosure, provides for costs agreements and conditional costs agreements. In addition, the Act creates a scheme for the independent assessment of costs, provides for mediation where the amount in dispute is less than $2500 and retains scales of costs for some categories of work

There are some concerns as to whether the reforms have produced a more competitive market. Problems may include non-compliance with disclosure requirements due to widespread ignorance of the law, disclosure of an hourly rate only and failure of consumers to compare prices.

One possible strategy to encourage competitive practices amongst both lawyers and consumers within the existing costs framework, is the publication of comparative fee information. However, there may be a danger of such fee information operating as a quasi-fee scale, thus creating an anti-competitive effect.

Further problems include:

  • the incidence of lawyers charging contingency fees for cases where success is almost assured
  • the lack of any restriction on lawyers changing their fee estimate, even in circumstances where the client would be unfairly prejudiced


Has the system for costs disclosure fostered the development of a market for legal services? Do consumers have sufficient information to shop around for legal services? Are consumers in a position to judge the quality of a practitioners?

Has the removal of scales for most categories of legal work enhanced competition within the legal profession?

Why is the rate of compliance with costs disclosure low?

What additional information could be provided to consumers to assist them in choosing appropriate legal services?

How could comparative price information be obtained?

What is the role of specialist accreditation scheme in overcoming market failure?

Should any restrictions be placed on the use of conditional fees involving an uplift?

Should any restrictions be placed on the ability of a practitioner to revise their original estimate of the total fee in a matter, or their method of charging?

Costs Assessment

The Act creates a scheme for the independent assessment of costs. Determinations of costs by independent costs assessors may be used to resolve disputes about costs, or as a means of ensuring that only fair and reasonable costs are passed on to a third party. There is a limited right of appeal on a point of law from determinations of costs assessors.

There are significant limitations to the costs assessment scheme:

  • While the Act gives guidance to assessors about the matters to be taken into account, it does not provide for assessors to use comparative information to determine what is fair and reasonable; and

  • a practitioner who receives a bill of costs from another practitioner has only 30 days to make an application for assessment.

Costs Assessment and Third Parties

Third parties who have agreed to pay costs as part of contractual arrangements may not apply for costs assessments. This may contribute to market failure in classes of cases where plaintiffs are generally successful, as plaintiffs will have little incentive to contain costs, and defendants will be liable for costs even though they are not a party to disclosure.

One strategy suggested to combat the problem of third party costs is to require disclosure to third parties (such as insurers and mortgagors). However, the strategy is problematic, as it may also allow the more powerful party to intimidate the waker party and could interfere with the lawyer client relationship.

Another strategy to control third party costs is the reintroduction of fees scales for third party matters. However, the problems with fee scales generally, also apply to fee scales for third party matters. Fee scales may operate to reduce competition and may frequently be ineffective if consumers are not aware of them. It may be possible to develop scales which reflect market conditions, if suitable benchmarks for market prices in third party matters can be identified.

The Victorian scheme creates a general power in an independent body, the Legal Costs Committee, to set fees for certain categories of matters. If such a scheme were to be introduced in NSW, a public interest test should be applied to fixed costs.

Right of Appeal

Appeal from costs assessments is limited to questions of law. The lack of guidance on the meaning of the provisions governing assessment could be remedied by expanding the capacity to appeal costs assessor’s determinations. However, this would increase the adversarial nature, complexity and cost of the assessment process.


Since April 1997, disputes involving less than $2500 have been referred for mediation by the Legal Services Commissioner. Mediation is cheaper than assessment under the costs assessments scheme and may be an appropriate way to resolve disputes involving amounts larger than $2500.

Other Strategies

Other possible strategies for reducing the cost of resolving costs disputes and increasing competition include:

abolishing the costs indemnity rule altogether

encouragement of legal insurance schemes

wider use of ADR


Is the costs assessment scheme an effective means of reviewing the fees charged by legal practitioners? Could improvements be made to the scheme? Should there be any change to the provisions governing access to the scheme?

Is the standard applied by assessors to calculating costs appropriate? Should assessors have access to, and be guided by, benchmarks for fees in some, or all, categories of matters?

Is there any justification for the re-introduction of scales of fees in any matters?

Should there be any change to the limited right of appeal from an assessment which currently applies?

Does the assessment scheme meet the needs of consumers and practitioners in small matters? Is the mediation of these matters preferable? Should the Act give some guidance to mediators in the mediation process?

What is the role of procedural reform in cost containment? Should the costs indemnity rule be revised? Would the use of alternative dispute resolution contain costs?

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The information contained on this page is not legal advice. If you have a legal problem you should talk to a lawyer before making a decision about what to do. The information on this page is written for people resident in , or affected by, the laws of New South Wales, Australia only.
most recently updated 26 April 1999