THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
REGULATION OF THE LEGAL
PROFESSIONS –
THE AUSTRALIAN EXPERIENCE
WITH PARTICULAR FOCUS ON
NEW SOUTH WALES
Regulatory Reform for a 21st Legal Profession
Dublin
6 July 2012
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
THE NEW SOUTH WALES OFFICE OF THE LEGAL
SERVICES COMMISSIONER (OLSC)

Established in 1994, the OLSC receives all complaints about legal
practitioners in New South Wales (NSW)

Acts as a co-regulator with the Law Society of NSW and the NSW
Bar Association

Purpose – to reduce complaints against legal practitioners within a
context of client protection and support for the rule of law and to
increase professionalism

OLSC is an independent statutory authority
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
RELEVANT FACTS

Approximately 25,973 legal practitioners in New South Wales

Approximately 18,000 legal practitioners in private practice, 2,900
in government and 4,880 corporate practice

OLSC comprises 30 staff with a budget of $AUD4million

2010-2011 – received 2,561 written complaints (1,843 consumer
disputes, 718 investigations)

2010-2011 – received 8,128 calls from the public on our Inquiry
Line
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
ALTERNATIVE BUSINESS STRUCTURES (ABS)

Historically, legal practitioners in NSW only permitted to practice in a partnership
structure

1990 - legislation enacted allowing legal practitioners to form solicitor-corporations
= LLPs in USA

1994 – legislation enacted allowing multidisciplinary practices (MDPs)

MDP requirement – legal practitioners had to retain 51% of the net income of the
partnership. (51% rule)

1999 – 51% rule abolished – anti-competitive

2001 - legislation was enacted allowing legal services providers to incorporate as
companies under the Australian Securities & Investments Commission

Legislation permitted legal practices to incorporate, share receipts and provide
legal services with other legal and non-legal service providers
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
INCORPORATED LEGAL PRACTICES – State of Play

There are currently 1,258 incorporated legal practices (ILPs) in New South
Wales

ILPs represent approximately 30% of legal practices in New South Wales

The majority of ILPs are situated in suburban Sydney

Approximately 65% of ILPs are sole practitioners

Approximately 30% of ILPs are mid size practices with between 2-7
partners

There are several larger national firms operating as ILPs
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
LEGAL-PRACTITIONER DIRECTOR
• Must be an Australian legal practitioner with an
unrestricted practising certificate
• Additional obligations over and above traditional
professional obligations
• Must implement and maintain “appropriate management
systems”
• Must report professional misconduct of any director or
legal practitioner in an ILP
• Must identify and report legal and non-legal services of
practice
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
APPROPRIATE MANAGEMENT SYSTEMS
•
Appropriate management systems (AMS) are not defined in
legislation
•
OLSC together with the profession identified 10 objectives of
sound legal practice
•
ILPs must convince the OLSC that they have a management
system which addresses the 10 objectives
•
ILPs use a self-assessment process to prove compliance
•
ILPs required to complete a self-assessment document setting out
their system with OLSC assistance if required
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
TEN AREAS TO BE ADDRESSED TO DEMONSTRATE
COMPLIANCE WITH “APPROPRIATE MANAGEMENT SYSTEMS”
1.
Negligence - (providing for competent work practices)
2.
Communication (providing for effective, timely and courteous communication)
3.
Delay (providing for timely review, delivery and follow up of legal services)
4.
Liens/file transfers (providing for timely resolution of document/file transfers)
5.
Cost disclosure/billing practices/termination of retainer (providing for shared understanding and
appropriate documentation on commencement and termination of retainer along with appropriate billing
practices during the retainer)
6.
Conflict of interests (providing for timely identification and resolution of “conflict of interests”, including when
acting for both parties or acting against previous clients as well as potential conflicts which may arise in
relationships with debt collectors and mercantile agencies, or conducting another business, referral fees and
commissions etc)
7.
Records management (minimising the likelihood of loss or destruction of correspondence and documents
through appropriate document retention, filing, archiving etc and providing for compliance with requirements
regarding registers of files, safe custody, financial interests)
8.
Undertakings (providing for undertakings to be given, monitoring of compliance and timely compliance with
notices, orders, rulings, directions or other requirements of regulatory authorities such as the OLSC, courts,
costs assessors)
9.
Supervision of practice and staff (providing for compliance with statutory obligations covering licence and
practising certificate conditions, employment of persons and providing for proper quality assurance of work
outputs and performance of legal, paralegal and non-legal staff involved in the delivery of legal services)
10.
Trust account regulations (providing for compliance with Part 3.1 Division 2 of the Legal Profession Act and
proper accounting procedures)
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
SELF-ASSESSMENT DOCUMENT
Objective
Key concepts to
consider when
addressing the Objective
Examples of possible
evidence or systems most
likely to lead to compliance
Competent work
practices to avoid
NEGLIGENCE
Fee earners practise only
in areas where they have
appropriate competence
and expertise.
A written statement setting out
the types of matters in which
the practice will accept
instructions and that
instructions will not be
accepted in any other types of
matters.
All fee earners have a
good grasp of issues
involved in running a
practice and serving
clients.
Written records of attendance
at CLE programs indicating
some attendance at programs
concerning practice
management, staff
management and risk
management.
Action to be taken by
ILP
(if needed)
Overall rating for
Objective
(Please circle one
rating)
NC PC C FC FC
Plus
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
SELF-ASSESSMENT DOCUMENT Cont’d
Objective
Key concepts to
consider when
addressing the Objective
Examples of possible
evidence or systems
most likely to lead to
compliance
Competent work
practices to avoid
NEGLIGENCE
(Continued)
The legal practitioner
directors meet on a regular
basis to review the
performance of the
practice or, in the case of
sole practitioner practices,
meetings are held regularly
with staff.
Minutes/notes recording
the decisions taken at
meetings and the actions
taken.
Legal practitioner director/s
regularly consider and
review workloads,
supervision, methods of
file review, and
communication with
clients.
Written records including
file registers, number of
files assigned to each fee
earner, dates and methods
of file review.
Action to be taken by ILP
(if needed)
Overall rating for
Objective
(Please circle one rating)
NC PC C FC FC Plus
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
BENEFITS OF THE ILP REGULATORY REGIME

2008 research study by the OLSC and Dr Christine Parker,
University of Melbourne

Analysed self-assessment forms of 631 ILPs before and after
incorporation

Study found that the complaint rate of ILPs have reduced by two
thirds after going through the self-assessment process

Majority of ILPs (62% assessed themselves to be in compliance on
all ten objectives after initial assessment

Demonstrates that the ILP regulatory regime is a success
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
PUBLIC OWNERSHIP OF LAW FIRMS

Since 2001 there have been two law firms that have publicly listed
on the Australian Stock Exchange

In 2007 Slater & Gordon, a personal injury law firm was the first to
list

OLSC worked together with Slater & Gordon prior to listing to deal
with regulatory challenges

Addressed tension between a legal-practitioner directors
professional obligations and obligations to shareholders in
constituent documents
THE OFFICE OF THE LEGAL SERVICES COMMISSIONER
COMPETING DUTIES
 Slater & Gordon’s prospectus, constituent documents
and shareholder agreements specify that the duty to the
court is the primary duty, the duty to clients is the
second duty and the duty to shareholders is third:
“The constitution states that where an inconsistency or conflict arises
between the duties of the court will prevail over all the duties and
the company's duty to its clients will prevail over the duty to
shareholders.”