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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

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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?

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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.

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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

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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

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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.

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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…

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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

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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.

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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.

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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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law-civiljustice@unimelb.edu.au

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.

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law-civiljustice@unimelb.edu.au

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

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law-civiljustice@unimelb.edu.au

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.

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law-civiljustice@unimelb.edu.au

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 lsc@lsc.qld.gov.au

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)