Northern Territory Report National Competition Policy Legislation Review 6 July 2002 Legal Practitioners Act Legal Practitioners Complaints Committee Rules Legal Practitioners Regulations Legal Practitioners Rules Legal Practitioners (Professional Indemnity Insurance) Regulations Law Society Northern Territory Rules of Professional Conduct and Practice Law Society Public Purposes Trust Act This Report has been prepared by the Northern TerritoryNCP Review Team for the Legal Practitioners Act and a. sociat. d legislatio,n. Any views or propositions in this Report s e should not be taken as representlhg the view of the Northern Territory Qepartmenlof JuStice or the view of any arm of the Northern Territory Government. TABLE OF CONTENTS 1 1.1 2 OVERVIEW ................................................................................................................................................ 1 THE PURPOSE OF THIS REPORT .................................................................................................................. 1 SUMMARY OF FINDINGS ....................................................................................................................... 1 2.1 FINDINGS: THE OBJECTIVES OF THE LEGAL PRACTmONERS ACT [SEE PART 8] ......................................... 1 2.2 FINDINGS: REsERVATIONOFWORK{SEEPART9J ....................................................................................... 1 2.3 FINDINGS: RESTRICTIONS ON BARRISTERS {SEE PART 10J .......................................................................... 2 2.4 FINOINGS: RESTRICTIONS ON THE USE OF TITLES {SEE PART 11 J ................................................................ 2 2.5 FINDINGS: BUSINESS PRACTICES {SEE PART 12J ......................................................................................... 2 2.6 FINOINGS: TRAINING REQUIREMENTS {SEE PART 13J ................................................................................. 3 2.7 FINDINGS: LIMITING THE NUMBER OF ARTICLED CLERKS [SEE PART 14J .................................................... 3 2.8 FINDINGS: ApPOINTMENT OF QUEENS COUNSEL {SEE PART 15J ................................................................. 3 2.9 FINDINGS: PROFESSIONAL CONDUCT RULES [SEE PART 16J ........................................................................ 4 2.10 FINDINGS: TRUST MONIES {SEE PART 17J .............................................................................................. 4 2.11 FINDINGS: AUDIT [SEE PART 18J ........................................................................................................... 4 2.12 FINDINGS: FIDELITY FUND {SEE PART 19J ............................................................................................. 4 2.13 FINOINGS: COMPLAINTS HANDLING/DISCIPLINE [SEE PART 20J .............................................................. 5 2.14 FINDINGS: ADVERTISING {SEE PART 21 J ................................................................................................ 5 2.15 FINDINGS: CONTROLS OVER COSTS {SEE PART22J ................................................................................ 5 2.16 FINDINGS: INTERSTATE LEGAL PRACTmONERS [SEE PART 23 J .............................................................. 5 2.17 FINDINGS: FOREIGN LAWYERS {SEE PART24J ....................................................................................... 5 2.18 FINDINGS: SELF REGULATION - ROLE OF THE LAW SOCIETY NORTHERN TERRITORY {SEE PART 25J .... 5 2.19 FINDINGS: TRADE PRACTICES ACT 1974 [SEE PART26J ....................................................................... 6 THE REFERENCE ..................................................................................................................................... 3.1 FORMAL TERMS OF REFERENCE ................................................................................................................ 3.2 LEGISLATIVE PROVISIONS COVERED BY THIS REPORT................................................................................ 3.3 LEGISLATIVE PROVISIONS NOT COVERED BY THIS REVIEW ........................................................................ 7 7 7 8 3 4 PROCESS FOR THIS REVIEW ............................................................................................................... 9 4.1 REVIEWERS ............................................................................................................................................... 9 4.2 REVIEW TEAM'S WORK ............................................................................................................................. 9 4.3 ISSUES PAPER AND CONSULTATION ........................................................................................................... 9 4.4 OUTCOMES OF THE CONSULTATION PROCESS .......................................................................................... 10 4.5 METHODOLOGY FOLLOWED IN MAKING THE FINOINGS ............................................................................. 10 4.6 RELEVANCE OF NATIONAL DEVELOPMENTS ............................................................................................ 10 4.6.1 4.6.2 4.6.3 4.7 5 5.1 Model Law..................................................................................................................................... 10 Some possible principles for model national laws ........................................................................ 11 Interrelationship between NCP Report and national profession project ...................................... 12 RELEVANCE OF OTHER NCP IsSUES PAPERS AND REPORTS .................................................................... 12 COMPETITION POLICY LEGISLATION REVIEWS - BACKGROUND ....................................... 13 COMPETITION POLiCy .............................................................................................................................. 13 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.1.6 5.1.7 5.2 5.3 National Competition Policy Agreements ..................................................................................... Competition Principles Agreement ............................................................................................... Conduct Code Agreement ............................................................................................................. Agreement to Implement the National Competition Policy and Related Reforms......................... Legislative Reform under NCP...................................................................................................... Rationalefor Competition Policy Reforms ................................................................................... Principles which underlie a Competition Policy Review .............................................................. 13 13 13 13 13 13 14 RATIONALE FOR REGULATION ................................................................................................................. 14 OTHER REVIEWS ...................................................................................................................................... 15 5.3.1 COAG Principles for the Regulation of the Legal Profession ....................................................... 15 5.3.2 5.3.3 5.3.4 5.3.5 5.3.6 5.4 Law Council of Australia .............................................................................................................. National Competition Council ...................................................................................................... Trade Practices Commission [Australian Competition and Consumer Commission] .................. Victorian Law Reform Commission .............................................................................................. Access to Justice committee .......................................................................................................... 18 18 20 20 20 OTHER NATIONAL COMPETmON PRINCIPLES REVIEWS OF LAWS RELATING TO LEGAL PRACTmONERS ... 20 5.4.1 5.4.2 5.5 National Competition Policy Reviews elsewhere in Australia ...................................................... 20 Overview of Other NCP Reviews .................................................................................................. 22 5.5.1 ANTI-COMPETITIVE PROVISIONS IN THE LEGAL PRACTlflONERS ACT ........................................................ 23 Tests as to whether provisions are anti-competitive ..................................................................... 23 Report· National Competition Policy Review· Legal Profession NT 5.5.2 5.6 5.7 6 6.1 Identification of the anti-competitive provisions contained in the Legal Practitioners Act .......... 23 POTENTIALLY ANTI-COMPETmVE PROVISIONS - ISSUES AND QUESTIONS ............................................... 24 SUBMISSIONS ARISING FROM THE ISSUES PAPER ...................................................................................... 24 THE LEGAL PROFESSION ................................................................................................................... 2S WHICH ACTlvmES OF LEGAL PRACTITIONERS ARE REGULATED? ............................................................. 25 6.1.1 6.1.2 6.1.3 6.1.4 6.1.5 6.2 Professional activities of legal practitioners ................................................................................. 25 Areas of work reserved for legal practitioners.............................................................................. 25 Areas of work shared with other professions and occupations ..................................................... 25 Changes in the activities of legal practitioners ............................................................................. 26 Does the legal services market possess special features? ............................................................. 27 The clientele for legal services ...................................................................................................... 28 Participants in the legal services market ...................................................................................... 29 29 30 31 31 THE MARKET FOR LEGAL SERVICES .......................................................................................................... 28 6.2.1 6.2.2 6.3 6.4 6.5 6.6 6.7 7 DEFlNmON OF "MARKET" ....................................................................................................................... THE SIZE AND STRUcruRE OF THE LEGAL PROFESSION IN THE NORTHERN TERRITORy ............................ LEGAL SERVICES MARKET - ISSUES AND QUESTIONS .............................................................................. SUBMISSIONS CONCERNING THIS ANALYSIS OF THE MARKET ................................................................... 6.6.1 Law Society Northern Territory .................................................................................................... 31 33 33 33 33 3S 35 35 35 FINDINGS CONCERNING THE MARKET ...................................................................................................... 32 DEVELOPMENT OF THE REGULATION OF LA WYERS· HISTORICAL OVERVIEW ........... 7.1 EARLIEST REGULATION ............................................................................................................................ 7.2 REGULATION IN THE PERIOD 1863 -1973 ................................................................................................. 7.3 REGULATION IN THE PERIOD 1974-2002 .................................................................................................. OBJECTIVES OF THE LEGAL PRACTITIONERS ACT .................................................................. NEED TO ASSESS THE OBJECTIVES ........................................................................................................... OBJECTIVES STATED AT THE TIME OF ENACTMENT OF THE LEGAL PRACTmONERS ACT ........................ OBJECTIVES OF SUCH LEGISLATION ELSEWHERE ...................................................................................... 8 8.1 8.2 8.3 8.3.1 8.3.2 8.3.3 8.3.4 8.3.5 8.3.6 8.3. 7 8.3.8 8.3.9 8.4 8.5 8.6 8.7 Objectives identified for Queellsland ............................................................................................ 35 South Australian NCP Issues Paper objectives ............................................................................. 36 Australian Capital Territory objectives......................................................................................... 36 New South Wales NCP Report objectives ..................................................................................... 36 Tasmania - NCP Issues Paper objectives...................................................................................... 37 Western Australia - NCP Draft Report objectives......................................................................... 37 Victoria .......................................................................................................................................... 37 Britain - 1989 objectives ............................................................................................................... 38 Objectives identified by the Australian Competition and Consumer Commission ........................ 38 39 39 41 41 GENERAL OBJECTIVES OF OCCUPATIONAL REGULATION ......................................................................... CURRENT OBJECTIVES FOR THE NORTHERN TERRITORY LEGISLATION .................................................... OBJECTS OF THE LEGISLATION -ISSUES AND QUESTIONS .......................................................................... SUBMISSIONS CONCERNING THE OBJECTIVES OF THE LEGISLATION .......................................................... 8.7.1 8.7.2 8.7.3 8.7.4 9 Law Society Northern Territory .................................................................................................... 41 Other Submissions Concemillg Objectives ................................................................................... 42 Assessment of the objectives .......................................................................................................... 42 Findings concerning objectives..................................................................................................... 43 44 44 44 45 45 THE RESERVATION OF LEGAL WORK TO LEGAL PRACTITIONERS .................................... 9.1 ISSUE ....................................................................................................................................................... 9.2 CURRENT POsmON .................................................................................................................................. 9.3 THE RESERVATION OF LEGAL WORK TO LEGAL PRACTITIONERS - QUESTIONS ..................................... 9.4 SUBMISSIONS AND OTHER COMMENTS .................................................................................................... 9.4.1 9.4.2 9.4.3 9.4.4 9.4.5 9.5 Law Society Northern Territory .................................................................................................... 45 The Australian Competition Consumer Commission .................................................................... 46 National Competition Council ...................................................................................................... 47 Law Council of Australia .............................................................................................................. 47 Others ............................................................................................................................................ 48 Potential Disadvantages ............................................................................................................... 48 Potential Advantages .................................................................................................................... 49 DISCUSSION - RESERVATION OFWORK FOR LEGAL PRACTmONERS ........................................................ 48 9.5.1 9.5.2 9.6 9.7 ASSESSMENT CONCERNING RESER VATIONS ............................................................................................. 49 FINDINGS (INCLUDING ALTERNATIVES) CONCERNING LIMITATIONS ON NON-LAWYERS .......................... 50 NORTHERN TERRITORY NCP REPORT Report - National Competition Policy Review - Legal Profession NT 10 RESTRICTIONS ON THE WORK OF 'BARRISTERS' ..................................................................... 51 10.1 10.2 10.3 ISSUE .................................................................................................................................................. 51 CURRENT POSITION ............................................................................................................................. 51 SUBMISSIONS AND OTHER COMMENTS ...............................................................•................................ 51 10.3.1 10.3.2 10.4 Law Society Nonhern Territory .................................................................................................... 51 Other submissions ......................................................................................................................... 51 Disadvantages ............................................................................................................................... 51 Advantages .................................................................................................................................... 51 Assessment concerning barristers ................................................................................................. 52 DISCUSSION ........................................................................................................................................ 51 10.4.1 10.4.2 10.4.3 10.5 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 52 11 RESTRICTIONS ON THE USE OF TITLES SUCH AS "LEGAL PRACTITIONER", "SOLICITOR" AND "BARRISTER" - ISSUES AND QUESTIONS ........................................................... 53 11.1 11.2 11.3 11.4 ISSUE .................................................................................................................................................. 53 CURRENT POSITION ............................................................................................................................. 53 RESTRICTIONS ON USE OF TITLES - QUESTIONS ................................................................................ 53 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 53 11.4.1 11.4.2 11.5 Law Society Nonhern Territory .................................................................................................... 53 Others - Local legal practitioner.................................................................................................. 54 Potential Disadvantages ............................................................................................................... 54 Potential Advantages .................................................................................................................... 54 Assessment concerning use of titles............................................................................................... 54 DISCUSSION ........................................................................................................................................ 54 11.5.1 11.5.2 11.5.3 11.6 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 55 12 CONTROLS OVER BUSINESS ARRANGEMENTS ........................................................................... 56 12.1 12.2 12.3 ISSUE .........................................................................................................•........................................ 56 SEPARATE REPORT CONCERNING THE LEGAL PRACTITIONERS (INCORPORATION) ACT ....................... 56 ADDITIONAL FINDINGS CONCERNING B USINESS PRACTICES .................•.............................................. 56 13 TRAINING REQUIREMENTS FOR LEGAL PRACTITIONERS ..................................................... 57 13.1 13.2 13.3 ISSUE ...............•..................................................................................•............................................... 57 CURRENT POSITION ............................................................................................•............................... 57 ACADEMIC TRAINING AND PRACTICAL TRAINING - QUESTIONS .......................................................... 59 13.3.1 13.3.2 13.4 Potential Disadvantages ............................................................................................................... 60 Potential Advantages .................................................................................................................... 61 Law Society Nonhern Territory .................................................................................................... Australian Law Reform Commission ............................................................................................. Law Admissions Consultative Committee ..................................................................................... Assessment..................................................................................................................................... SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 61 13.4.1 13.4.2 13.4.3 13.4.4 13.5 61 62 63 63 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 64 14 LIMITATIONS ON THE NUMBER OF ARTICLED CLERKS WHO MAY BE EMPLOYED ..... 66 14.1 14.2 14.3 14.4 ISSUE ...................................................................................................•.............................................. 66 CURRENT POSITION ............................................................................................................................ 66 LIMITATION ON THE NUMBER OF ARTICLED CLERKS THAT MAY BE EMPLOYED- QUESTIONS ............... 66 SUBMISSIONS AND OTHER COMMENTS .........................................................................•....••................ 66 14.4.1 14.4.2 14.5 Law Society Nonhern Territory .................................................................................................... 66 Others ............................................................................................................................................ 67 Potential Disadvantages ............................................................................................................... 67 Potential Advantages .................................................................................................................... 67 Assessment..................................................................................................................................... 67 DISCUSSION ........................................................................................................................................ 67 14.5.1 14.5.2 14.5.3 14.6 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 68 15 APPOINTMENT OF A PERSON AS A QUEENS COUNSEL ............................................................ 69 15.1 15.2 15.3 15.4 ISSUE .................................................................................................................................................. 69 CURRENT POSITION ............................................................................................................................ 69 ApPOINTMENT OF QUEENS COUNSEL - QUESTIONS ............................................................................ 69 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 69 15.4.1 15.4.2 Law Society Nonhem Territory .................................................................................................... 69 Ward Keller. Lawyers.................................................................................................................... 70 NORTHERN TERRITORY NCP REPORT iii Report· National Competition Policy Review· Legal Profession NT 15.5 15.6 DISCUSSION/AsSESSMENT .................................................................................................................. 70 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 70 16 PROFESSIONAL CONDUCT RULES ................................................................................................... 71 16.1 16.2 ISSUE .................................................................................................................................................. 71 CURRENT POSITION ............................................................................................................................ 71 /6.2./ /6.2.2 16.3 16.4 The New Legislative Provisions .................................................................................................... 7/ The Current Rules of Professional Conduct.................................................................................. 7/ RULES OF PROFESSIONAL CONDUCT -QUESTIONS ............................................................................... 73 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 74 /6.4./ /6.4.2 16.5 16.6 Law Society Northern Territory .................................................................................................... 74 Other submissions - local legal practitioner ................................................................................ 74 DISCUSSION ........................................................................................................................................ 74 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 74 17 REQUIREMENTS FOR DEALING WITH TRUST MONIES ............................................................ 7S 17.1 17.2 17.3 17.4 ISSUE .................................................................................................................................................. 75 CURRENT PROVISIONS ........................................................................................................................ 75 REQUIREMENTS FOR DEALING WITH TRUST MONIES -QUESTIONS ........................................................ 76 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 76 /7.4./ /7.4.2 17.5 Law Society Northern Territory .................................................................................................... 76 Others ............................................................................................................................................ 77 Potential Disadvantages ............................................................................................................... 77 Potential Advantages .................................................................................................................... 78 Analysis ......................................................................................................................................... 78 DISCUSSION ........................................................................................................................................ 77 /7.5./ /7.5.2 /7.5.3 17.6 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 78 18 AUDIT REQUIREMENTS ....................................................................................................................... 80 18.1 18.2 18.3 18.4 ISSUE .................................................................................................................................................. 80 CURRENT POSITION ............................................................................................................................ 80 AUDIT REQUIREMENTS - QUESTIONS ................................................................................................. 80 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 80 /8.4./ /8.4.2 18.5 18.6 18.7 18.8 18.9 Law Society Northern Territory .................................................................................................... 80 Others ............................................................................................................................................ 80 DISCUSSION ........................................................................................................................................ 81 POTENTIAL DISADVANTAGES .............................................................................................................. 81 POTENTIAL ADVANTAGES ................................................................................................................... 81 ANALYSIS ............................................................................................................................................ 81 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 83 19 FIDELITY FUND ...................................................................................................................................... 84 19.1 19.2 19.3 19.4 ISSUE .................................................................................................................................................. 84 CURRENT POSITION ............................................................................................................................. 84 FIDELITY FUND- QUESTIONS ............................................................................................................. 84 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 85 19.4./ /9.4.2 19.5 19.6 Law Society Northern Territory .................................................................................................... 85 Others ............................................................................................................................................ 85 DISCUSSION ........................................................................................................................................ 85 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 86 20 COMPLAINTS AND DISCIPLINARY SYSTEM ................................................................................. 87 20.1 20.2 20.3 20.4 ISSUE .................................................................................................................................................. 87 CURRENT POSITION ............................................................................................................................ 87 COMPLAINT HANDLING AND DISCIPLINARY MECHANISMS - QUESTIONS .............................................. 88 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 89 20.4./ 20.4.2 20.5 Law Society Northern Territory .................................................................................................... 89 Others ............................................................................................................................................ 9/ Potential Disadvantages ............................................................................................................... 92 Potential Advantages .................................................................................................................... 92 Findings (including alternatives} .................................................................................................. 92 DISCUSSION ........................................................................................................................................ 91 20.5.1 20.5.2 20.5.3 21 ADVERTISING RESTRICTIONS .......................................................................................................... 93 NORTHERN TERRITORY NCP REPORT iv Report - National Competition Policy Review - Legal Profession NT 21.1 21.2 21.3 21.4 ISSUE .................................................................................................................................................. 93 CURRENT POSITION ............................................................................................................................. 93 ADVERTISING - QUESTIONS ................................................................................................................. 93 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 94 21.4.1 21.4.2 21.4.3 21.5 21.6 Law Society Nonhem Territory .................................................................................................... 94 Others............................................................................................................................................ 94 New Development.......................................................................................................................... 95 ASSESSMENT ...................................................................................................................................... 96 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................... 96 22 COSTS THAT MAY BE CHARGED BY LEGAL PRACTmONERS - LEGAL PRACTITIONERS ACT 97 22.1 22.2 22.3 22.4 22.5 22.6 22.7 ISSUE .................................................................................................................................................. 97 CURRENT POSITION ............................................................................................................................ 97 CONTROLS OVER FEES PAID TO LEGAL PRACTITIONERS -QUESTIONS .................................................. 97 COURT COSTS' SCALES ....................................................................................................................... 98 SUBMISSIONS AND OTHER COMMENTS ................................................................................................ 98 22.5.1 Law Society Northern Territory .................................................................................................... 98 OTHERS ............................................................................................................................................ 100 DISCUSSION ...................................................................................................................................... 101 22.7.1 22.7.2 22.8 Potential Disadvantages ............................................................................................................. 102 Potential Advantages .................................................................................................................. 102 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................. 102 23 PROVISIONS CONCERNING INTERSTATE PRACTITIONERS ................................................. 103 23.1 23.2 23.3 IsSUE ................................................................................................................................................ 103 PROVISIONS CONCERNING INTERSTATE PRACTITIONERS - QUESTIONS ............................................. 103 SUBMISSIONS AND OTHER COMMENTS .............................................................................................. 104 23.3.1 23.3.2 23.4 23.5 Law Society Nonhern Territory .................................................................................................. 104 Others.......................................................................................................................................... 104 DISCUSSION ...................................................................................................................................... 104 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................. 104 24 FOREIGN LA W ...................................................................................................................................... 105 24.1 24.2 ISSUE ................................................................................................................................................ 105 SUBMISSIONS AND OTHER COMMENTS .............................................................................................. 105 24.2.1 24.2.2 24.3 24.4 Law Society Northern Territory .................................................................................................. 105 Others .......................................................................................................................................... 105 DISCUSSION ...................................................................................................................................... 105 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................. 105 25 LAW SOCIETY NORTHERN TERRITORY: STATUTORY RECOGNITION AND POWERS. 106 25.1 25.2 25.3 25.4 ISSUE ................................................................................................................................................ 106 STATUTORY RECOGNITION OF THE LAW SOCIETY NORTHERN TERRITORY - QUESTIONS ................. 106 CURRENT POSITION .......................................................................................................................... 106 SUBMISSIONS AND OTHER COMMENTS .............................................................................................. 108 25.4.1 25.4.2 25.4.3 25.5 Law Society Nonhem Territory .................................................................................................. 108 Others .......................................................................................................................................... 109 New Development in April 2002 NSW ........................................................................................ 109 Objective ..................................................................................................................................... 109 Potential Disadvantages ............................................................................................................. 109 Potential Advantages .................................................................................................................. 110 DISCUSSION ...................................................................................................................................... 109 25.5.1 25.5.2 25.5.3 25.6 25.7 DISCUSSION ...................................................................................................................................... 110 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................. 111 26 TRADE PRACTICES ACT 1974 (COMMONWEALTH) .................................................................. 112 26.1 26.2 26.3 26.4 ISSUE ................................................................................................................................................ 112 CURRENT POSITION .......................................................................................................................... 112 TRADE PRACTICES - QUESTIONS ........................................................................................................ 112 SUBMISSIONS AND OTHER COMMENTS .............................................................................................. 112 26.4.1 26.4.2 26.5 Law Society Nonhem Territory .................................................................................................. 112 Others.......................................................................................................................................... 113 DISCUSSION ...................................................................................................................................... 113 NORTHERN TERRITORY NCP REPORT v Report· National Competition Policy Review· Legal Profession NT 26.6 27 28 FlNolNGS (INCLUDING ALTERNATIVES) ............................................................................................. 114 PUBLIC BENEFIT TEST UNDER THE COMPETITION PRINCIPLES AGREEMENT ............ 115 27.1 CLAUSE 1(3) OF THE COMPETITION PRINCIPLES AGREEMENT ........................................................... liS COSTS AND BENEFITS OF LEGISLATION ..................................................................................... 116 28.1.1 General Costs of Regulation ....................................................................................................... 116 28.1.2 General benefits of regulation ..................................................................................................... 117 DESCRIPTION OF ALTERNATIVE REGULATORY MODELS ................................................... 118 29. I SUBMISSIONS AND COMMENTS .......................................................................................................... 119 29.1.1 Law Society Northe m Territory .................................................................................................. 119 29.2 DISCUSSION.... .............................................. .......... ....... ............. ........... ................ ........ ................... 119 29.3 FINDINGS (INCLUDING ALTERNATIVES) ............................................................................................. 119 MARKET FAILURE .............................................................................................................................. 120 30.1 QUESTIONS ....................................................................................................................................... 120 30.2 SUBMISSIONS AND COMMENTS .......................................................................................................... 120 30.3 DISCUSSION ...................................................................................................................................... 120 APPENDIX 1- TABLES SETTING OUT ANTI·COMPETITIVE PROVISIONS ......................... 121 29 30 31 32 APPENDIX 2- HISTORY OF THE REGULATION OF LEGAL PRACTmONERS IN THE NORTHERN TERRITORy............................................................................................................................. 141 32.1 REGULATION FROM THE TIME OF THE NORTHERN TERRITORY BECOMING PART OF SOUTH AUSTRALIA. 141 32.2 REGULATION FROM THE TIME OF THE NORTHERN TERRITORY BECOMING ACOMMONWEALTH TERRITOR Y ..................................................................................................................................................... 141 32.3 REGULATION FOLLOWING NORTHERN TERRITORY SELF-GOVERNMENT ........................................... 143 33 APPENDIX 3 - LAW COUNCIL POLICY DOCUMENTS ............................................................... 146 33.1 POLICY STATEMENT ON THE RESERVATION OF LEGAL WORK FOR LAWYERS AW COUNCIL OF AUSTRALIA ......................................................................................................................... 147 33.2 LAW COUNCIL PROPOSAL ON THE RESERVATION OF LEGAL WORK - MODEL LEGISLATIVE SCHEME ............................................................................................................................. 148 33.2.1 Reserved Legal Services .............................................................................................................. 148 33.2.2 Provision of Legal Services by Non-Lawyers Subject to Consumer Protection and Transparency Safeguards ................................................................................................................................................. 148 33.2.3 Holding out as a Qualified Lawyer ............................................................................................. 150 33.2.4 Local Exemptions ........................................................................................................................ 150 33.2.5 Penalty ........................................................................................................................................ 152 33.3 LAW COUNCIL PROPOSAL ON THE RESERVATION OF LEGAL WORK MODEL LEGISLATIVE SCHEME PRINCIPLES FOR REGULATORY DEFINITION OF ADEQUACY OF EDUCATIONAL QUALIFICATIONS AND EXPERlENCE ....................................................................... 153 33.4 LAW COUNCIL OF AUSTRALIA - POLICY STATEMENT ON RESERVATION OF LEGAL WORK FOR LAWYERS - EXPLANATORY MEMORANDUM ............................................................... ISS 33.4.1 Introduction ................................................................................................................................. 155 33.4.2 Reservation of Legal Work: Methodology and underlying principles adopted by the Law Council 156 33.4.3 Paragraph I of Policy Statement ................................................................................................ 157 33.4.4 Paragraph 2 of Policy Statement ................................................................................................ 157 33.4.5 Paragraph 4 of the Policy Statement .......................................................................................... 159 33.4.6 Paragraph 5 of the Policy Statement .......................................................................................... 160 33.4.7 Paragraph 6 of the Policy Statement .......................................................................................... 160 33.4.8 Paragraph 7 of the Policy Statement .......................................................................................... 161 33.4.9 Paragraph 8 of the Policy Statement .......................................................................................... 161 33.4.10 Paragraph 9 of the Policy Statement...................................................................................... 161 BIBLIOGRAPHY - OTHER NCP REVIEWS ..................................................................................... 162 34 NORTHERN TERRITORY NCP REPORT vi 1 1.1 OVERVIEW THE PURPOSE OF THIS REPORT This Report identifies the issues conceming the provisions contained in the Legal Practitioners Act and associated legislation that may be anti-competitive in terms of the National Competition Principles Agreement entered into by the Northem Territory Govemment. It contains background and recommendations for the purposes of the Northern Territory Government meeting its legislative review obligations under the Competition Principles Agreement. 1 This Report does not deal with professional indemnity insurance. The National Competition Council has advised that NCP issues relating to insurance, including legal practitioner's professional insurance, indemnity will be considered in 20032. This delay has been permitted so to permit resolution of general insurance issues. The Northern Territory will resolve the professional indemnity insurance issue in conjunction with the processes currently under way concerning model national laws dealing with indemnity insurance'. 2 2.1 SUMMARY OF FINDINGS FINDINGS: THE OBJECTIVES OF THE LEGAL PRACTITIONERS ACT [SEE PART 8] The Review Team found the objectives of the Legal Practitioners Act to be as follows: 1. To encourage delivery of fair, efficient and effective legal services. 2. To provide a support mechanism for the effective and efficient self-regulation of the legal profession. 3. To provide a professional approach to the resolution of legal issues. 4. To provide for a competent legal profession and to provide consumer protection by providing that only legal practitioners can provide certain legal services. 5. To provide that only appropriately qualified and trained people can use the name 'legal practitioner'. 6. To provide for a competitive legal profession. 7. To, in respect of mandatory indemnity insurance, maximise the possibility for clients that legal practitioners are in a position to meet the financial obligations to clients arising from their own negligence, breaches of contract and certain defalcations of employees. The Review Team considers these objectives remain valid. 2.2 FINDINGS: RESERVATION OF WORK [SEE PART 9] The findings are: 1. 2. Sections 22, 131 and 132 contain anti-competitive provisions. The anti-competitive provisions imposed by sections 22, 131 and 132 are justified. 3. The areas of work that can be reserved for legal practitioners should accord with areas of work that are generally reserved on a national basis. These appear to be: (a) appearances in Court and matters incidental to that right, such as: 1 See Part 5 of this Report. 2lenerdated 27 June 2002, Graeme Samuels, Presidenl National CompeUtion Council to Hon Clare Martin, MLA, Chief Minister of the Northern Territory. 3 Under the auspices of the Slanding Committee 01 Attomeys-General- see Part 4.6.1 Report· National Competition Policy Review· Legal Profession NT (i) advice on prospects in proposed or pending litigation; (ii) advice on the legal aspects of contentious matters before litigation is proposed; (iii) preparation and conduct of proceedings; and (iv) legal professional privilege. (b) (except for the work of conveyancers pursuant to the licensing scheme in the Agents Licensing Ac~ the drawing, filling up or preparation of an instrument or other document for fee or reward that: (i) is a will or other testamentary instrument, but noting that legislation should recognise other more specialised qualifications that would permit non lawyers to draw up wills for reward; (ii) creates, regulates or affects rights between parties (or purports to do so); or (iii) affects real or personal property on behalf of another person (with the above to operate subject to the work of conveyancers pursuant to the licensing scheme in the Agents Licensing Acn. (c) probate work being: (i) taking instructions for grant of probate or letters of administration; or (ii) drawing up and preparing papers on which to found or oppose a grant of probate or letters of administration. 4. No other altematives were identified to the provisions regarding the reservation of work. 2.3 FINDINGS: RESTRICTIONS ON BARRISTERS [SEE PART 10J The findings are: 1. Section 16 contains anti-competitive provisions. 2. Section 16 cannot be justified to the extent that it contains an absolute prohibition on barristers acting independently of one another. Accordingly, section 16 should be repealed. 3. Altemative: The extent of the application of the other provisions of the Act to barristers should be determined having regard to the actual functions of the barrister. 4. It is appropriate that legal practitioners who intend to practise as barristers be subject to regulatory provisions suitable for that kind of sole practice 2.4 FINDINGS: RESTRICTIONS ON THE USE OF TITLES [SEE PART 11J The findings are: 1. Reservation of titles is anti-competitive. 2. Reservation of titles provides a net public benefit. 3. There is no altemative to the reservation of the use of titles. 2.5 FINDINGS: BUSINESS PRACTICES [SEE PART 12J The findings, in respect of the multi-disciplinary practices, are: 1. That there should not be any significant differential between firms/natural persons (on the one hand) in conducting multi-disciplinary practices and corporate bodies (on the other hand). NORTHERN TERRITORY NCP REPORT 2 Report· National Competition Policy Review· Legal Profession NT 2. That the types of business that may be conducted by multi-disciplinary practices are subject to the regulations. 3. That there be appropriate management systems for ensuring that legal professional obligations prevail over other business obligations with responsibility being placed with a nominated legal practitioner. 2.6 FINDINGS: TRAINING REQUIREMENTS [SEE PART 13] The findings are: 1. The training requirements for legal practitioners are anti-competitive. 2. The framework contained in the Act regarding training requirements for legal practitioners has a net public benefit. 3. There are no alternatives to this framework. 4. The requirement that legal practitioners hold practising certificates (local or interstate) is anticompetitive. 5. The requirement that legal practitioners hold such practising certificates has net positive value. 6. The differential (in section 25 of the Legal Practitioners AcQ (dealing with post admission experience) should be standardised at either 2 years or whatever national standard may be agreed between State and Territory Attorneys-General. 7. There is no practical alternative to the need for practising certificates (or something equivalent). 2.7 FINDINGS: LIMITING THE NUMBER OF ARTICLED CLERKS [SEE PART 14] The findings are: 1. Limiting the number of articled clerks that may be employed is anti-competitive. 2. The framework for this limitation is for the net public benefit. 3. Corporate legal practitioners should, through the legal practitioner in control of the professional side of the corporate practice, have the capacity, subject to the Legal Practitioners Rules, to employ more than two articled clerks. 4. There is no alternative for the Northern Territory (such as a practical legal training course). 2.8 FINDINGS: ApPOINTMENT OF QUEENS COUNSEL [SEE PART 15] The findings are: 1. The appointment of individuals as Queens Counsel is anti-competitive. 2. A framework that permits merit based appointments is in the public interest. 3. There is a better alternative. It is to remove the provisions concerning Queens Counsel from the Legal Practitioners Act and thus permit the profession (with the Supreme Court) to develop its own merit based scheme for recognition of especially skilled legal practitioners. It would be a matter of detail as to whether any new appointees would be called "Queens Counsel" or "Senior Counsel". NORTitERN TERRITORY NCP REPORT 3 Report - National Competition Policy Review - Legal Profession NT 2.9 FINDINGS: PROFESSIONAL CONDUCT RULES [SEE PART 16J The findings are: 1. The professional conduct rules contain no minor or substantial anti-competitive provisions. 2.10 FINDINGS: TRUST MONIES [SEE PART 17J The findings are: 1. There is a need to ensure that client's monies are held in a regulated trust account. 2. All trust monies should remain in the legal practitioners trust account (and thus, there should be a dropping of the requirement that a portion of the trust monies be deposited with a statutory body). 3. That legal practitioners be obliged to advise clients whose money is likely to be held for more than the prescribed time that, at the cost of the client, the legal practitioner will arrange for the monies to be held by the legal practitioner as stakeholder with the income to be paid to the client or clients. 4. Monies held in such a stakeholder account are not to be protected by the Fidelity Fund. 5. There is a need for a single body responsible for entering into agreements with financial institutions concerning the payment of notional interest on such trust monies. 6. This single body should be the Law Society Northern Territory. 7. The interest from the trust accounts should be disbursed to the Fidelity Fund and the Public Purpose Trust in accordance with a formula to be contained in the Legal Practitioners Act or in Regulations under that Act. B. Implementation of these changes should be delayed pending the outcomes of the national legal profession project. 2.11 FINDINGS: AUDIT [SEE PART 1BJ The findings are: 1. The audit requirements are anti-competitive. 2. The audit requirements can be justified as being for the public benefit. 3. The audit requirements could be made more efficient by: (a) the audits being independent of the legal practitioner; and (b) the audits being targeted. 2.12 FINDINGS: FIDELITY FUND [SEE PART 19J The findings are: 1. The requirement to maintain a Fidelity Fund is anti-competitive (including the obligations to contribute to the Fund). 2. The requirement is justified as being in the public good. 3. There is no non legislative alternative to such a Fidelity Fund. NORTHERN TERRITORY NCP REPORT 4 Report - National Competition Policy Review - Legal Profession NT 2.13 FINDINGS: COMPLAINTS HANDLING/DISCIPLINE [SEE PART 20] The findings are: 1. The imposition of a disciplinary system is anti-competitive. 2. The framework can be justified as being for the public benefit. 3. There is no alternative framework. 4. There is room to improve the framework with the main issues to be considered to include: (a) the institution of a gatekeeper/designated scheme for the purposes of having an authoritative process for investigating/classifying initial complaints; (b) a simpler mechanism for determining which complaints need to be deaij with by the professional body and which should go into the more formal (government) disciplinary system; and (c) greater accountability - such as publication of outcomes of both complaints (eg. what happened to them) and of disciplinary decisions (eg. what are the findings against legal practitioners). 5. The Government, in conjunction with the Law Society Northern Territory and the national reform agenda, should identify best practice concerning the disciplining of legal practitioners. 2.14 FINDINGS: ADVERTISING [SEEPART21] The findings are: 1. There are no anti-competitive advertising controls in the Northern Territory. 2. The imposition of new controls is outside the scope of this Review. 2.15 FINDINGS: CONTROLS OVER COSTS [SEE PART 22] The findings are: 1. Controls over fees are anti-competitive. 2. The controls over fees can be justified as being in the public good. 3. The controls over fees to be conducted for work outside of the courts and tribunals would not appear to be justifiable. 2.16 FINDINGS: INTERSTATE LEGAL PRACTITIONERS [SEE PART 23] The findings made in respect of legal practitioners also apply to interstate legal practitioners. 2.17 FINDINGS: FOREIGN LAWYERS [SEE PART 24] The findings made in respect of legal practitioners also apply to foreign lawyers. 2.18 FINDINGS: SELF REGULATION - ROLE OF THE LAW SOCIETY NORTHERN TERRITORY [SEE PART 25] The findings are: 1. There is no need to alter the Legal Practitioners Act in respect of the statutory powers and functions of the Law Society Northern Territory. 2. The amendment of the Legal Practitioners Act so that the Law Society Northern Territory is obliged NORTHERN TERRITORY NCP REPORT 5 Report· National Competition Policy Review· Legal Profession NT to provide an annual report to Parliament in respect of its statutory powers and functions and its expenditure of monies raised by virtue of the operation of the Legal Practitioners Act. 3. That the Law Society Northern Territory be deemed to be a body incorporated under the Associations Incorporation Act. 2.19 FINDINGS: TRADE PRACTICES ACT 1974 [SEE PART 26J None of the provisions covered by this Report offend the Trade Practices Act 1974 or are authorised by any exemption under section 51 of that Act. ~ ThaI is, authorised as referred to In secbon 51 01 the Trade Prat:OOes Act 1974 NORTHERN TERRITORY NCP REPORT 6 Report - National Competition Policy Review - Legal Profession NT 3 THE REFERENCE FORMAL TERMS OF REFERENCE 3.1 The Chief Executive Officer of the former Northern Territory Attorney-General's DepartmentS specified the following as being the terms of reference: 1. The review of the Legal Practitioners Act and the Legal Practitioners (Incorporation) Acf6 shall be conducted in accordance with the principles for legislation review set out in the Competition Principles Agreement. The underlying principle for such a review is that legislation should not restrict competition unless it can be demonstrated that: (a) the benefits of the restriction to the community as a whole outweigh the costs; and (b) the objective of the legislation can only be achieved by restricting competition. 2. Without limiting the scope of the review, the review is to: (a) clarify the objectives of the legislation, their continuing appropriateness and whether the Legal Practitioners Act remains appropriate for securing those objectives; (b) identify the nature of the restrictive effects on competition; (c) analyse the likely effect of any identified restriction on the economy generally; (d) assess and balance the costs and benefits of the restrictions identified; and (e) consider alternative means for achieving the same results, including non-legislative approaches. 3. When considering the matters referred to in clause 2 of these terms of reference, the review should also: (a) identify any issues of market failure which need to be, or are being addressed by the legislation; and (b) consider whether the effects of the legislation contravene the competitive conduct rules in Part IV of the Trade Practices Act 1974 and the Northern Territory Competition Code. 4. The review shall consider and take account of relevant regulatory schemes in other Australian jurisdictions and any recent reforms or reform proposals, including those relating to competition policy in those jurisdictions. 5. The review shall consult with, and take submissions from, those organisations currently involved with the legal profession, other Territory and Commonwealth Government organisations, other State and Territory regulatory and competition review authorities, and affected members of the profession and their organisations. This Report has been provided by a Review Team (see Part 4). 3.2 LEGISLATIVE PROVISIONS COVERED BY THIS REPORT The Report covers Regulations and Rules made under the Legal Practitioners Act. A separate report has made finalised concerning the Legal Practitioners (Incorporation) Act. Subject to that point, a reference in this report to the Legal Practitioners Act will be taken to include a reference to regulations The Northern Territory Attorney-General's Department merged in November 2001 with the Department of Correctional Services. Office of Courts Administration and other Justice related agencies 10 become the Department 01 Justice. The responsible Minister is the Minister for Justice and AttorneyGeneral. 6In the resl 01 this document general references to the Legal Practitioners Act should be read as including a reference to the various rules 8I1d regulations made under the Legal Practitioners Act. However the Legal Practitione15 (Incorporation) Acthas been subjected to a separate review. 5 NORTHERN TERRITORY NCP REPORT 7 Report - National Competition Policy Review - Legal Profession NT and rules that have legal force because of e~her of these Acts. These regulations and rules include: • • • The Legal Practitioners Complaints Committee Rules (which are made by the Judges and which deal with the practices and procedures of the Complaints Committee); Legal Practitioners Regulations (which deal with admission fees, certain exemptions and with the functions of certain classes of legal practitioners); Law Society Public Purposes Act, • • Legal Practitioners Rules (which are made by the Judges and deal with admission requirements); and Professional Conduct Rules (which are made by the Law Society Northern regulatory oversight from the Attorney-General). LEGISLATIVE PROVISIONS NOT COVERED BY THIS REVIEW Terr~ory but subject to 3.3 However, this Report does not cover various Acts and other legislative instruments which either give or take away from legal practitioners rights concerning representation in Courts and Tribunals. Accordingly, this review will not cover provisions such as: • Section 75 of the Supreme Court Act or Rule 1.15 of the Local Court Rules. These two provisions give legal practitioners the right of representation before the Courts of the Northem Territory. Other persons may only represent persons in Court with the approval of the Court. There are similar provisions in Commonwealth legislation concerning representation in the Federal Courts operating in the Northern Territory; Section 7 of the Agents Licensing Act (dealing with membership of the Agents Licensing Board). These kinds of sections mean that only legal practitioners can be appointed to certain positions; Section 148 of the Residential Tenancies Act which limits representation before the Commissioner of Tenancies by a legal practitioner within the meaning of the Legal Practitioners Act, an articled cieri< or a person who holds or has held legal qualifications under the law of the Territory or another place, except with the agreement of the other party to the tenancy agreement to which the proceeding relates and subject to the Commissioner being of the opinion that neither party will be disadvantaged by permitting such representation; and Section 149 of the Residential Tenancies Act which limits the rights of persons other than legal practitioners, employees, real estate agents and translators to be paid for providing representation before the Commissioner of Tenancies. • • • NORTHERN TERRITORY NCP REPORT 8 Report - National Competition Policy Review - Legal Profession NT 4 4.1 PROCESS FOR THIS REVIEW REVIEWERS In accordance with the national understanding concerning the conduct of such reviews, all members of the Review Team were chosen because they could bring an appropriate degree of independence of view to the process. The current members of the Review Team are: Robert Bradshaw - Northern Territory Department of Justice; Margaret Rischbieth, Registrar - Supreme Court; Prue Phillips-Brown - Chief Minister's Department; Donald Hudson - Department of Business, Industries & Resource Development?; and Craig Graham - Northern Territory Treasury. One of the essential characteristics of an NCP review is that there be an appropriate degree of independence between the review process and the activity that is the subject of the regulation. Accordingly, review teams dealing with occupational or professional regulation should not, as a general rule, include individuals chosen to represent the profession or occupation that is the subject of the review. On this basis, members of the private legal professionS are not part of the Review Team. The profession's involvement in the review and the professional expertise for the Review came from the consultation part of the process. As will be seen, the Law Society Northern Territory made a 50 page submission to the issues paper released in October 2000. It must to be noted that the provisions in the Act cover a wide range of matters in respect of which there are many possible options. The Review Team's report states, in respect of the various findings, the majority position reached by the Review Team. However, there were some occasions where team members had a strong dissenting view or views (for example, regarding the issue of whether the Law Society Northern Territory should be able to tie membership into insurance obligations). Dissenting views have not been identified though arguments for such views have, as far as is possible, been incorporated into the discussion. 4.2 REVIEW TEAM'S WORK The review process under the Competition Principles Agreement involves: 1. Clarification of the Legislature's objectives for the legislation; 2. Identification of restrictions on competition; 3. Ascertaining the effects of the restrictions; and 4. Assessment of the costs and the benefits of the restrictions. 4.3 ISSUES PAPER AND CONSULTATION An Issues Paper was released in September 2000. It provided background and raised possible issues for comment. The Issues Paper was referred to each Northern Territory legal business, each Northern B II can, Mr Tooy Clark, of the former Department of Industries and Business however, be noted Ihallwa of the members (Bradshaw and Rlschbelh) are lawyers from the Government sector. The other members are economists or COflsumer/business experts. 7 Replacing, NORTHERN TERRITORY NCP REPORT 9 Report· National Competition Policy Review· Legal Profession NT Territory, other state and Territory regulatory Government Departments, Territory and national professional organisations, and national regulatory authorities such as the NCC and the ACCC. Comments were sought in relation to any issue concerning the regulation of legal practitioners. Commentators were asked not to limit themselves to any issues specifically raised in the Issues Paper but were asked to be mindful of the terms of reference. 4.4 OUTCOMES OF THE CONSULTATION PROCESS These outcomes are set out in the body of the report - in respect of each of the issues. 4.5 METHODOLOGY FOLLOWED IN MAKING THE FINDINGS The following parts of this Report outline the findings concerning the various issues that exist in the regulation of legal practitioners. The assessment method has involved consideration of the following questions: 1. Does the model facilitate effective competition between players in the sector? 2. Does the model allow for the entry of new players, and alternative or para professionals where appropriate? 3. Does the model protect consumer welfare? 4. Does the model place consumers in a position to make informed choices about the type of services they require, and the person best placed to provide them? 5. Is the model likely to generate consumer confidence in the services provided by the legal profession? 6. Will the model maintain and support the integrity and viability of the legal profession?9 4.6 4.6.1 RELEVANCE OF NATIONAL DEVELOPMENTS Model Law By the time of the writing of this Report, significant national developments were taking place. These include a determination by the Standing Committee of Attorneys-General (SCAG) and the Law Council of Australia to develop model laws in relation to the regulation of legal practitioners on a national basis. The areas to be covered include: 1. Admission of legal practitioners; 2. Practice, including the issuing of practising certificates, the separate regulation of solicitors and barristers and the making of practice rules; 3. The reservation of legal work and the titles of legal practitioners; 4. Trust accounts; 5. Insurance; 6. Fidelity cover; 7. Complaints and discipline; and 8. Costs, costs disclosure and the review of legal costs. II These questions were suggested in Submission to the issues paper on the Legal Practitioners Act and associated legislation, regulations and rufes, AeCe. November2000. page 5 NORTHERN TERRITORY NCP REPORT 10 Report· National Competition Policy Review· Legal Profession NT Responsibility for preparing discussion papers on each of these areas was shared between the State and Territory jurisdictions and the Commonwealth. Papers were prepared in April 2002 and circulated to the Law Council of Australia for comment. The Law Council has established its own working groups which are operating in parallel with the SCAG officers working group, critically examining papers prepared by officers, in consultation with its constituent bodies. The Law Council's working groups are, as at May 2002, in the process of reporting to a reference group which, in tum, is responsible to the Law Council of Australia. By way of background the Law Council's core policy documents are set out in Appendix 3. 4.6.2 Some possible principles for model nationallaws1o In order to achieve a uniform approach to the regulation of the legal profession, it may not be necessary to abandon a state and territory based system of regulation. Similarly, it may not always be necessary that functions be periormed by corresponding bodies in each jurisdiction. Often, the important issue is that standards and procedures be broadly uniform, to promote the interests of national practice and protect the public. The corollary of such uniformity is that mutual recognition of action taken by regulatory bodies operates seamlessly, leading to greater efficiencies for the legal profession and regulators and enhancing the protection of the public. However, there may be some areas where joint regulation may be necessary to achieve national cohesion in the regulation of the particular area. The model laws themselves will provide a basis for States and Territories to amend relevant legislation. The extent to which the aims of the project require uniformity as distinct from consistency or joint/common regulation will vary from issue to issue. This is reflected in the approaches adopted in the discussion papers. The range of approaches towards national recognition are raised in the discussion papers include: • • • • Common regulation through a single regulatory mechanism (an option for some areas, ego professional indemnity); Uniformity in substance (eg. standards for admission to practice); Mutual recognition across jurisdictions (eg. national practising certificates); and Consistency in principles with differing mechanisms (eg. regulation of costs). The project does not seek to impose uniformity just for the sake of uniformity, but to address those areas where the current fragmentation of regulation is dysfunctional. Another factor is that matters such as admission to the legal profession fall within the inherent jurisdiction of the Supreme Courts of the States and Territories. In adopting a national framework, this principle must still be respected and necessary local variations accommodated. Nevertheless, there is still substantial scope for achieving uniformity and/or consistency in the regulation of the legal profession. Officers have also considered the application of local legal profession laws to interstate legal practitioners. Since a key goal of the project is the support of national practice, it is essential for the scheme to include clear rules about which laws apply to practitioners practising in more than one state or territory. Under the interstate practising certificate scheme, the general approach is that the law of the place of practice applies. This can lead to duplication and additional compliance costs. For 10 This material is closely based on Introductory malerial provided by Government officers to Ihe law Council, AprillMay 2002 NORTHERN TERRITORY NCP REPORT 11 Report· National Competition Policy Review· Legal Profession NT example, a practitioner who comes from the Northem Territory to NSW and who deals in trust funds will have to open a new trust account govemed by NSW laws. He or she will be subject to NSW arrangements for costs disclosure and complaints and discipline. There appears to be scope within a national uniform scheme to minimise the need for practitioners to duplicate administrative tasks and compliance. Officers consider that the issues surrounding the choice of laws which apply to practitioners, clients and transactions are especially complex and recognise that these matters will require separate, detailed consideration in the course of settling substantive proposals for model laws, and in the course of drafting. This paper notes preliminary questions identified by officers. Other areas of regulation require harmonisation, but textual uniformity is less important. Local differences will matter less, either because the procedures are invoked rarely by any individual practitioner or because variations in process may not affect the outcome. Another principle that has informed the development of papers is that in seeking uniformity, the "lowest common denominator" approach is avoided. The intention is to promote best practice. 4.6.3 Interrelationship between NCP Report and national profession project The Northern Territory Department of Justice is participating in the development of these model laws. Any such laws will take into account NCP principles. Given these developments, there seems to be little point in the Northern Territory focusing on either the fine details of reform or on taking an overly firm position on the mechanics for achieving a particular end. Accordingly, this report will, as a general rule, focus on the larger picture and on some issues of particular relevance to the Northern Territory. 4.7 RELEVANCE OF OTHER NCP ISSUES PAPERS AND REPORTS Each State and Territory is obliged to conduct an NCP review of its legal practitioners' legislation. The National Competition Council has suggested that it is permissible to rely on the outcomes of other NCP reports where the legislation and the market are broadly equivalent of the place of the report are similar to those in the Northern Territory. The legal profession of the Northern Territory operates in a market and under legislation that is sufficiently similar to that of the rest of Australia that it is relatively safe to rely on conclusions in such reports. In the main, those reports contain qualitative rather than quantitative findings. This Northern Territory report is similar. However, the WA Department of Justice released, for comment, during April 2002, a report that contains some quantitative analysis of a number of matters. This report will adopt most of those quantitative findings. NORTHERN TERRITORY NCP REPORT 12 Report - National Competition Policy Review - Legal Profession NT 5 5.1 5.1.1 COMPETITION POLICY LEGISLATION REVIEWS - BACKGROUND COMPETITION POLICY National Competition Policy Agreements On 11 April 1995, the Northem Territory Government, with the Commonwealth, State and Australian Capital Territory Governments agreed to adopt the National Competition Policy (NCP) and signed three specific agreements relating to the implementation of the policy. These agreements are set out in the following three paragraphs: 5.1.2 Competition Principles Agreement The Competition Principles Agreement - this agreement, amongst other things, imposes on all governments (the Commonwealth, the six States and the two self-goveming Territories) an obligation to review and, if necessary, reform all legislation, which restricts competition for which they are responsible. 5.1.3 Conduct Code Agreement The Conduct Code Agreement - this agreement creates various controls for the purpose of ensuring that, as a general rule, government businesses are subject to the same competition rules as privately owned businesses. Effectively, govemment agencies, corporations, professional bodies and natural persons shall be subject to Part IV of the Trade Practices Act 1974 or its equivalent in place under State or Territory law. 11 5.1.4 Agreement to Implement the National Competition Policy and Related Reforms The Agreement to implement the NCP and Related Reforms provides a timetable for reform and for the making of payments by the Commonwealth to the States and the Territories, in respect of appropriate progress in the making of the national competition reforms. 5.1.5 Legislative Reform under NCP Under clause 5(1) of the Competition Principles Agreement, the guiding principle is that: 'Legislation should not restrict competition unless it can be demonstrated that: (a) the benefits of the restriction to the community as a whole outweigh the costs; and (b) the objectives of the legislation can only be obtained by restricting competition.' 5.1.6 Rationale for Competition Policy Reforms 12 The underlying rationale for the NCP is that of ensuring that markets are free to operate without any unnecessary regulatory restrictions. It is also about improving the efficiency of the public sector. NCP is based on the idea that greater competition will increase the incentive for producers: (a) to use their resources more efficiently (thus achieving greater productivity); (b) to increase their efforts to constrain costs and thus be in a position to reduce prices; and (c) to be in a better position to be more responsive to user's demands. Compe/itlon Refo"" (Northem Territory) Act 1995. material under this heading is a precis of a discussion conlained in National Competition Policy· Review of the Security and Investigation Agents Act 1995, Issues Paper Marcil 1999, South Australian Office of Consumer and Business Affairs, pages 1-2, 4. 11 IZ The NORTHERN TERRITORY NCP REPORT 13 Report· National Competition Policy Review· Legal Profession NT However, increasing competition is put forward as a mechanism for the improvement of the general standard of living. It is not an end in itself. Increased competition is only to be adopted in so far as it increases public benefit overal1,13 This NCP review aims to assess how the current regulation of the legal profession affects the provision of legal services in the marketplace. The review will consider whether current restrictions on legal practice and on the entry of non-legal practitioners into the legal services market unnecessarily restrict competition or whether there are sufficient public policy reasons for retaining restrictions. Principles which underlie a Competition Policy Review The following have been widely identified 14 as principles, which underlie a Competition Policy Review: • • • There must be a presumption against statutory intervention and the onus of proof should be on the proponent of intervention; The direct costs of regulation should be bome by the immediate beneficiaries of the regulation; and Co-regulation, self-regulation and codes of conduct are all valuable regulatory mechanisms but are subject to capture. There are regulations with minimal statutory support that are very targeted and cost effective. The provision of information is important. Ordinary market mechanisms should generally not be inhibited, subject to active enforcement of the ordinary fair trading and other law. RATIONALE FOR REGULATION15 5.1.7 5.2 The main rationale for government invention in markets is: • • To ensure that public goods are supplied (eg. some railways, defence forces); To prevent externalities - this is where costs and benefits accrue to or spill over to third parties to a transaction (eg. the activities of lawyers acting for parties may adversely affect the courts and the public). The main form of intervention is that of enactment of general laws which create offences, impose taxes or impose minimum standards; To prevent abuse of market power. The main form of intervention is the enactment of general laws (such as the Trade Practices Act 1974); To limit information asymmetry. This is where one party knows more than the other party. Consumers and clients deal with the service provider in ignorance of the quality of the service that is being provided. Occupational regulation can aim to have the result of providing objective information; To reduce transaction costs. Consumers/clients incur costs in locating services, changing between service providers, reaching agreement on price, ensuring compliance with the agreement. If the costs are too large clients/consumers may, because of the costs, desist from making sufficient inquiries in order to reach the correct decision; and To achieve other social objectives. This basically relates to the failure of service providers. The intervention is designed to prevent financial loss, prevent substandard work, protection 01 health and safety and the prevention of criminal activity. • • • • 13 See Guidelines for the Review of Professional Regulation, page 12. 1m Victorian Departmenl of Premier and Cabinet Competition Poli'Y Taskforce, (1996) Guidelines for Review 01 Legislation restTictions on Competition, page 2. 15 The following summary is taken from Victorian Department of Justice, FreehiUs Regulatory Group, June 1999, Issues Paper National Competition Pofiq Review of Private Agents Legislation. NORTHERN TERRITORY NCP REPORT 14 Report - National Competition Policy Review - Legal Profession NT 5.3 5.3.1 OTHER REVIEWS COAG Principles for the Regulation of the Legal Profession On 25 February 1994, the Council of Australian Governments (COAG) requested the Working Group on Micro-economic Reform to report on detailed proposals for the reform of the legal profession with the view to removing constraints on the development of a national market in legal services and developing other efficiency enhancing reforms. Subsequently, the COAG working group developed a series of principles and actions in respect of each of the principles. The principles (and actions) are set out below. COAG Legal Profession Reform Principle 1: For competition law to have full effect, States and Territories agree that regulatory intervention should be kept to the minimum necessary to protect the public interest in the administration of justice and consumer protection. The proposed actions in respect of Principle 1 are as follows: (a) Consistent with the legislation review principles contained in the National Competition Principles Agreement which requires that restrictions on competition should be both essential to achieving the objectives of the legislation and must yield a net benefit to the community, member Governments agree that legislation regulating the legal profession should not go beyond: • • • • • • • • • A licensing and admission scheme (which allows for national recognition of practising certificates, building on mutual recognition where possible); A disciplinary and complaints mechanism independently-monitored within the State or Territory; Standards for an appropriate level and type of professional indemnity insurance; Requirements for compulsory Fidelity Funds and trust accounts; The protection of consumers from persons misrepresenting themselves as qualified legal practitioners; Requirements for disclosure of fees and costs and facility for independent assessment of costs (including party-party costs); Fee arrangements (including contingency fees); Business structures (so as to allow, for example, multi-disciplinary practices); and Ethical conduct rules (where self-regulation provides insufficient safeguards). (b) Member Governments agree that they will not sanction in legislation/professional association rules which: • • • • • Prevent barristers from appearing in court with solicitors (that is, in place of junior counsel); Prevent direct access to barristers by clients or attendance of barristers at solicitors' offices; Mandate or give exclusive status to particular specialist accreditation schemes; Require barristers to operate as sole practitioners; and Require barristers to operate from approved chambers andlor with approved clerks. NORTHERN TERRITORY NCP REPORT 15 Report - National Competition Policy Review - Legal Profession NT COAG Legal Profession Reform Principle 2: Licensing arrangements for lawyers who require separate practising certificates for barristers and for solicitors should be eliminated. I Member16 governments agree to take appropriate action to implement this principle. COAG Legal Profession Reform Principle 3: Lawyers should have the freedom to inform their clients and to attract business by means of advertising and promotion and related forms of information disclosure, subject only to rules that prevent false, misleading or deceptive representations and conduct. I Member governments agree to take appropriate action to implement this principle. COAG Legal Profession Reform Principle 4: A national scheme should be established which allows a practising certificate issued in one State or Territory to be accepted in all others without further admission protocol. COAG agrees to request the Standing Committee of Attorneys-General to identify the legislative changes necessary to establish a national practising certificate scheme and to ensure that appropriate arrangements exist for complaints and discipline, professional indemnity insurance, Fidelity Funds, trust accounts and similar consumer protection. COAG Legal Profession Reform Principle 5: COAG supports moves to market-based measures for establishing the price of legal services. Fee scales, where adopted, should not be used to set prices in the market. Full disclosure and voluntary fee agreements are important elements of reform in this area. These reforms should be introduced in conjunction with the removal of restrictions on advertising. COAG supports those contingency fee arrangements that will increase access to the justice system, including conditional uplift fees. Plain English fee arrangements are also strongly supported, along with independent review of fee agreements and outcomes. The Standing Committee of Attorneys-General should identify the legislative changes necessary to give effect to this principle in order to clarify options. COAG Legal Profession Reform Principle 6: COAG supports the general principles developed by the NSW Law Reform Commission so as to establish harmonised, fair and efficiently administered complaints systems. I Member governments agree to take appropriate action to implement this principle. 161t appears that NSW make plain Its opposition to this. NORTHERN TERRITORY NCP REPORT 16 Report - National Competition Policy Review - Legal Profession NT COAG Legal Profession Reform Principle 7: The determination of the exact boundaries of legal profession work requires far more detailed consideration than has been so far undertaken. COAG agrees to refer this matter to the Legal Profession Working Group for further evaluation by its first 1996 meeting. The onus of inquiry should be the minimisation of restrictions on competition between legal service providers, including non-lawyers, while recognising the need to inform consumers about the quality and value of the various service options and to impose a complaints disciplinary system where remedies are available without prohibitive cost to consumers. Most importantly, the inquiry should ask whether the current reservation of legal work benefits consumers and whether such benefits outweigh the costs. COAG Legal Profession Reform Principle 8: COAG agrees that flexible business arrangements are an important feature of a more responsive legal service market. In particular, combined practices such as multi-disciplinary partnerships may reduce transaction costs, particularly in the corporate sector where commercial requirements include a sophisticated mix of professional skills. However, some States have concerns in relation to the question of limited liability, given the costs that this might impose on consumers, and in regard to other consumer risks relating to multi-disciplinary partnerships. COAG agrees to refer this matter for further evaluation, requesting a report from the Legal Profession Working Group. COAG Legal Profession Reform Principle 9: Rules requiring lawyers to obtain indemnity insurance only from insurers specified by the law societies should be reviewed to establish whether they are in the public interest. I The Legal Profession Working Group should report on its further inquiry into this matter. COAG Legal Profession Reform Principle 10: All States and Territories agree to cease official selection and endorsement of Queen's Counsel and all rules, including those relating to charges and fee scales, which distinguish Queen's Counsel from junior barristers and other advocates should be removed. I Those States which continue to appoint Queen's Counsel will review their position on this issue.17 It should be noted that there are various doubts and queries as to the current status of these principles and actions arising from them. However, it would appear that the principles are playing a significant role as to the directions being taken in various State and Territory NCP reviews concerning the Acts that regulate the legal profession. 17 Soulh Australia did not consider !hat this was a matter for COAG. NORTHERN TERRITORY NCP REPORT 17 Report - National Competition Policy Review - Legal Profession NT 5.3.2 Law Council of Australia The Law Council of Australia is constituted by the State and Territory legal professional organisations. With the support of Hs constituent bodies it has developed a "blueprint" for the development of a national legal profession. This 'blueprint" is based on the following fundamental principles: 1B "1. NCP principles apply to the legal profession; 2. 3. Lawyers admitted in any State or Territory of Australia are able to practise law throughout Australia; Existing constraints which prevent a lawyer's right to practise without restriction throughout Australia are removed in order to facilitate the development of a national market in legal services; Recognition that the independence of the legal profession is dependent upon the profession's right to self regulation; legislation; 4. 5. The system of regulation of the legal profession is implemented by uniform State and Territory 6. The self regulation of the legal profession is subject to an external and transparent process of accountability to ensure that the rules of the professional bodies are not inconsistent with national competition policy principles; the legal profession and the development of a uniform standard of client care; and 7. The protection of consumers of legal services through comprehensive education and training of B. Proper information is available for consumers of legal services as to quality and cost of legal services." 5.3.3 National Competition Council The National Competition Council has issued a brief paper dealing with the reform of the legal profession. 19 This paper appears to support the following propositions: • • • • • • • One of the biggest restrictions on legal businesses relates to ownership; Lack of competition in respect of indemnity insurance may be preventing the development of tailored and more widely available insurance; It is incongruous to deny consumers advertising information; There are inherent dangers to allowing professions to make their own rules;20 Independence (of the profession) must be balanced with transparency and accountability. Involvement in self regulatory bodies by persons from outside the profession appears desirable; Such bodies include registration and disciplinary bodies. Rules and processes should be public and be made with consumer debate and input; and Opening the market to alternate non-lawyer providers can significantly reduce costs and result in services becoming more widely available in the community. However if required, providers can still be regulated and can still have formal training and registration requirements for practice in that particular field. 18 As advised to the Attorney-General for the Northem Territory on 17 December 199B by the 19 August 2000, Webpage www.ncc.gov.au/ 20 No~ng, however, that the specifically recognised the need for Judicial Independence Nee President of the law Council. Nee NORTHERN TERRITORY NCP REPORT 1B Report - National Competition Policy Review - Legal Profession NT The Nee, in its August 2000 paper dealing with the reform of the legal profession21 it suggested that the lack of competition in respect of indemnity insurance may be preventing the development of tailored and more widely available insurance. In its final draft assessment for 2000/2001 the Nee observed as follows: "Legal professional bodies generally argue that mandatory professional indemnity insurance has two benefits. First, it minimises information problems regarding compensation for loss. Second, it creates a sustainable insurance market by creating a pool of mixed risk, where low-risk solicitors cross-subsidise the riskier performers. The argument is that compulsion is required to enable creation of a sufficiently large pool of insured practitioners to operate effectively. The counter to this argument is that insurance schemes generally operate to remove their worst risks by increasing premiums significantly or by refusing to insure high risk operators. The central public interest question is whether positive outcomes such as improved public confidence in the legal profession and the effective operation of insurance schemes outweigh any anti-competitive effects from excluding uninsured lawyers from practising. Reviews have generally found that compulsory professional indemnity insurance is in the public interest. A key question is whether it is in public interest to require solicitors to obtain professional indemnity insurance from a single professional body on the terms and conditions set by that body. This lack of competition prevents insurers from competing for clients and denies lawyers the chance to obtain insurance that better suits their individual needs. For example, competition may facilitate the development of policies that reflect the riskiness of the type of work practitioners undertake. Those who conduct lower risk work may be able to pay a lower premium than those who conduct the higher risk work. Available evidence gives some support to the case for allowing solicitors to choose their insurer.22 The New South Wales NCP review of the Legal Profession Act 1987 noted two examples. 23 In its submission to that review, Wills Corroun Professional Services Limited indicated based on its experience as the agent of insurers entering the ACT market, that competition led to broader cover, cheaper premiums and a higher level of service. The New South Wales Bar Association noted that the insurance market for barristers had already been deregulated: there are two providers of insurance to barristers and there is price competition. In defence of the monopoly arrangement, professional bodies argue that allowing choice of insurance provider will result in the better risks leaving to obtain more suitable arrangements elsewhere, ultimately leaving an unsustainable arrangement comprising only the poorer risks and a reduced premium pool for meeting claims. This may lead to the original pool having to reduce its liabilities, screening out the worst risks by not insuring them. Such high-risk practitioners would probably then be unable to practise, because they would have difficulty finding alternative insurance. Such an outcome is relatively common in other insurance markets. The ability to exclude very poor risks allows insurers to operate insurance arrangements by maintaining a commercially viable balance of risks. There may also be some benefit to the community from excluding lawyers with poor records from practising, given that such exclusion could reduce the likelihood of future negligence or error." 24 21 August 2000, NeG Webpage www.ncc.gov.ali 22 Barristers are genereDy able to choose between at least two insur813 23 NCP Review, NSW Aliorney Generars Departmen~ 1998 242001 NCP (final draft) Assessment, JuIy200t. National Competition Council, pages 17.3 and 11.4 NORTHERN TERRITORY NCP REPORT 19 Report - National Competition Policy Review - Legal Profession NT 5.3.4 Trade Practices Commissionj25 Commission [Australian Competition and Consumer A number of inquiries have taken place concerning the legal services market and the role of regulators in recent years. The Trade Practices Commission issued its Report following an exhaustive, national study of the profession in March 1994. A number of its recommendations had been implemented in NSW by the Legal Profession Reform Act. Other more radical proposals by the Commission included proposals to open up legal work to other service providers,26jhe removal of separate practising certificates for solicitors and barristers,27 the removal of many restrictions on the business structures of lawyers2B, and the introduction of competition in the provision of professional indemnity insurance. 29 5.3.5 Victorian Law Reform Commission In the early 1990s, the Victorian Law Reform Commission conducted a study of the profession:JO and made similar recommendations to those later adopted by the Trade Practices Commission. Many of the recommendations were implemented in the Legal Practice Act 1996 (Vic). 5.3.6 Access to Justice committee In 1994, the Access to Justice Advisory Committee, chaired by Ronald Sackville ac, advocated a national reform of the legal profession. It proposed that the Trade Practices Act 1974 should be applied to the legal profession. The proposed reforms were designed to ensure the minimum restriction of competition 'consistent with protecting consumers and the public interest'.31 The Committee proposed a number of substantive changes, including the creation of independent regulatory bodies, allowing nonlawyers to practise in specific areas of the law, removal of the distinction between barristers and solicitors, removal of restrictions on lawyers' business arrangements and advertising and the imposition of mandatory costs agreements between lawyers and clients at the commencement of a matter. 5.4 OTHER NATIONAL COMPETITION PRINCIPLES REVIEWS OF LAWS RELATING TO LEGAL PRACTITIONERS The Competition Policy Agreement obligates States and Territories to identify anti-competitive legislative provisions and to then conduct a review. The proposed interstate reviews for the purposes of the Competition Policy Agreement and the summary status of them are as set out in the following table: 32 5.4.1 Staterrerritory NSW National Competition Policy Reviews elsewhere in Australia Legislation Legal Practitioners Act 1987. QUrrent pos~ion Review conducted by the NSW Attorney-General's Department Report completed November 1998. Tabled in Parliament in 1998. Various legislative changes have been made with the latest being contained in the Legal Profession Amendment (National Competition Policy Review) Act 2002. " See para 1.43 National CompeU/ion Policy Review 01 file Legal Prolession Act 1987, NSW Attorney General's Department Report, November 199B. 26 Trade Practices Commission. Study 01 the Professions· Legal; Final Report, Commonwealth of Australia, March 1994, page 79. 27 ibid., page 107. "ibid., pp.133-134. "ibid., pp.204-206. 30 Access 10 the law: Restrictions on Legal Practice. Victorian Law Reform Commission Report No 47 (1992); Access 10 the law: Accountability of the legal Professloo Victorian Law Reform Commission Report No 48 (1992). 31 Access 10 Justice Advisory Committee, Access 10 Justice; an Action Plan, Commonwealth of Australia, 1994, page 123. 32lnlormation taken from Legislation Review Compendium 3rd Edition, December 1999, National Competition Council. NORTliERN TERRITORY NCP REPORT 20 Report - National Competition Policy Review - Legal Profession NT SlatefTerritory Le!lislation Current POS~iOR Recommended in favour of allowing compemion in professional indemnity insurance. A deregulated marKet (for indemnity insurance) would provide adequate protection to the public provided that adequate standards were developed dealing with minimum terms and standards (eg. concerning run-off cover and the validity of claims despite lack of appropriate disclosure by a legal practitioner to the insurer). In a competitive market, insurers would have the right to adopt risk weighting with certain obligations of insurers to 'share" the business of "high risk" professionals. Parts of premiums would be paid to the professional associations with those associations having the duty to provide risk and practice management training. The NSW Government has not responded to the recommendations concerning indemnity insurance Review was conducted in 1996. The decision in favour of competitive arrangements for indemnity insurance was reversed in 1996 by the Legal Practitioners (Amendment) Act 1996. The decision in favour of competitive arrangements for indemnity insurance was reversed in 1996 by the Legal Practitioners (Amendment) Act 1998. Another review (recommending retention of the monopoly) was released in November 2000. Queensland Legal Practitioners Act 1995. Victoria Legal Practice Act 1997. It is understood that the NCP report was finalised in May 2002. However, the report has not been released. Western Australia Legal Practitioners Act 1893 Review being conducted by a Review Team of senior and Rules. officials with the support of the WA Justice Department Issues Paper released in June 2000. The draft report was released in April 2002 Legal Practitioners Act 1981. South Australia Review being conducted by the SA AttomeyGeneral's Department. NCP Issues Paper released in 1999. Report was finalised in 2000. However, the SA Government's response has been published. The SA Government announced some minor changes and a former Bill has lapsed following the 2002 election. The Government decided to retain unlimited personal liability for legal practitioners and to make no changes regarding indemnity insurance "provided that premiums remain competitive" NORTHERN TERRITORY HCP REPORT 21 Report - National Competition Policy Review - Legal Profession NT StatelTerrilory Tasmania Legislation Legal Profession Act 1983. Current position Review being conducted by the Tasmanian Justice Department. NCP Discussion Paper released in July 2000. Review being conducted by the Tasmanian Justice Department. NCP Discussion Paper released in July 2000. Regulatory impact statement released in April 2001. Legal practitioners are currently compelled to contribute to a mutual indemnity fund and participate in a single master policy. Under the legislation, insurance is required to be arranged by the Law Society on behalf of the whole profession, with a single insurer. The conclusion of the Tasmania Review Body was that the current requirement to the insurer only through the Law Society scheme is an intermediate restriction on competition and that the costs outweigh the benefits. Individual lawyers should be able to make a choice between insuring with the Law Society scheme, or to take out their own insurance, which can be tailored to meet the needs of their particular practice. This would require minimum standards for policies, run off and indemnity. Australian Capital Territory Legal Practitioners Act 1970. Review being conducted by the Australian Capital Territory Department of Justice and Community Services. NCP Issues Paper on part of the review has been released by the Department. Current position is not known. However, it is understood that a consultancy may be being let for the remaining parts of the review. 5.4.2 Overview of Other NCP Reviews Most of the NCP Reviews of the legal profession are reaching the point of finalisation. As far is known they have: • • upheld the need to regulate the legal profession in relation to entry requirements and supervision; and recommended only minor changes. In respect of those minor changes, most of them are of little relevance to the Northern Territory. The only completed review to have been implemented is the review conducted for the NSW legislation. Those of some relevance to the NCP and the issues being considered in the Northern Territory in this Report include: • The need for exposure/public scrutiny in respect of the making of professional rules for solicitors and barristers. A change along these lines was implemented in the Northern Territory by the Legal Practitioners Amendment Act 2001; The need to split the single fee for practising certificates so that part of it relates to licensing • NORTHERN TERRITORY NCP REPORT 22 Report - National Competition Policy Review - Legal Profession NT functions carried out by the professional association with the other part relating to the membership activities of the professional association. Payment of the first fee would be compulsory. Payment of the second fee would be optional; • • The re-introduction of controls on advertising would not be warranted; The disciplinary system for addressing complaints is not anti-competitive because all members of the profession are subject to the scheme. However, it is possible that the costs of the scheme effect the ability of legal practitioners to compete with non-lawyer service providers within the legal services market; Solicitors should be able to be members of multi-disciplinary partnerships with there being no need for a majority of the partners to be solicitors; There is no reason in principle that the Fidelity Fund should not be replaced by fidelity insurance; A deregulated market (for indemnity insurance) would provide adequate protection to the public provided that adequate standards were developed dealing with minimum terms and standards (eg. concerning run-off cover and the validity of claims despite lack of appropriate disclosure by a legal practitioner to the insurer). In a competitive market insurers would have the right to adopt risk weighting with certain obligations of insurers to "share" the business of "high risk" professionals. Parts of premiums would be paid to the professional associations with those associations having the duty to provide risk and practice management training; and There may be some grounds for the re-introduction of costs scales where costs are passed on to third parties. ANTI-COMPETITIVE PROVISIONS IN THE LEGAL PRACTITIONERS ACT • • • • 5.5 5.5.1 Tests as to whether provisions are anti-competitive The Competition Principles Agreement sets out the general principle that legislation needs to be reviewed if it is anti-competitive. The National Competition Council has identified that legislation may limit competition if it: 1. Governs the entry or exit of firms or individuals into or out of markets:J3; 2. Controls prices or production levels; 3. Restricts the quality, level or location of goods and services available34; Restricts advertising and promotional opportunities; Is likely to confer significant costs on business35; or Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition. Identification of the anti-competitive provisions contained in the Legal Practitioners Act 4. 5. Restricts price or type of input used in the production process; 6. 7. 5.5.2 The tables36 set out in Appendix 1 contain a description of the possibly anti-competitive restrictions in the Legal Practitioners Act and a summary and brief assessment of their impacts and significance. :tJ This indudes resbictions on the types of business structure, form or ownership and size of a business. a. This would Indude resbicting certain forms of conduct and provisions thai inhibit innovation and differentiation of products and services. 35 This would indude costs thai are greater in the Northern Territory than on competitors outside of the Northern Territory and also include unjuslffiable adminislrative burdens. NORTHERN TERRITORY NCP REPORT 23 Report - National Competition Policy Review - Legal Profession NT In preparing these table the following proposition has been heeded: 'The NCP review process involves assessing only those provisions which materially restrict competition and not those which impose only insubstantial costs on participants. 37 ' The tables in Appendix 1 contain an assessment as to whether the restriction is "trivial', 'minor' or "significant". This is background information to those parts of this Report that contain information dealing with the provisions of the Legal Practitioners Act that may restrict competition and issues that have raised in respect of those parts. Some of these issues include alternatives to the current provisions of the Legal Practitioners Act. 5.6 POTENTIAllY ANTI-COMPETITIVE PROVISIONS - ISSUES AND QUESTIONS The Issues Paper posed the following questions: 1. Are there any other legislative provisions other than those listed in the tables in Appendix 1 that may be anti-competitive in terms of the 7 tests enunciated by the National Competition Council? 2. Do you agree with the classifications in the tables contained in Appendix 1 as to whether the restrictions identified are "trivia/", "minor" or ''significanf. 5.7 SUBMISSIONS ARISING FROM THE ISSUES PAPER No further issues were identified by commentators. No significant disagreement was evident concerning the classification of the restrictions. However, the Law Society Public Purpose Trust Act was identified as an Act that should be part of this Report. It has the effect of imposing obligations on financial institutions in which respect of the way in which they handle legal practitioners trust accounts. 38 The table is set out In a lorm recommended by the Northern Territory Treasury. 37 Freehills Regulatory Group Issues Paper for the Department of Justice (Vic) on the NCP Review of Private Agents legisla~on, at page 11. NORTHERN TERRITORY NCP REPORT 24 Report - National Competition Policy Review - Legal Profession NT 6 6.1 6.1.1 THE LEGAL PROFESSION WHICH ACTIVITIES OF LEGAL PRACTITIONERS ARE REGULATEO?38 Professional activities of legal practitioners The members of the legal profession carry out a wide range of disparate activities. The main professional activities appear, in no order of significance, to be as follows: • • • • • • • • To provide advice as to legal rights and responsibilities; To provide advice as to the prospects of success in civil litigation or in criminal proceedings; To prepare documents setting out legal rights and obligations (eg. agreements, policies and legislation) ; To prepare the documentation necessary for court, tribunal and other proceedings; To provide personnel for the courts and the tribunals (ie judges, magistrates, tribunal members, registrars, etc.); To provide a service to the courts (in the capacity of 'officers of the court'); To represent persons before Courts and Tribunals; and To represent persons conducting business or seeking approvals. Areas of work reserved for legal practitioners 6.1.2 However, not all of these areas of professional work are reserved for the legal profession. The areas for which there are such general reservations in the Northem Territory are as follows: • • • • Preparation of instruments creating or regulating rights or relating to property or legal proceedings; Legal representation before Courts and Tribunals; Preparation of documents used in Courts and Tribunals; and Preparation of agreements relating to property and testamentary dispositions. There is doubt as to whether there is a prohibition on non-lawyers who do or who hold themselves out as being able to provide advice as to the interpretation of the law. 39 6.1.3 Areas of work shared with other professions and occupations It can also be noted that for certain other services, legal practitioners share the market with other regulated professions and occupations. For example, conveyancing is shared with licensed conveyancing agents. The provision of many kinds of services is shared between legal practitioners and non-lawyers in many markets. Such persons do so either as employees under the supervision of lawyers or in competition with lawyers. The areas of possible relevance to the Northern Territory now or in the future include: • • Taxation and company structures advice by accountants; Conveyancing by conveyancing agents; "The foflowing paragraphs are taken from Itle 1998 NSW Review. 39 There is no such prohibition. However, provisions such as section 1358(3) (which prohibits foreign lawyers from providing certain advice on Australian law) appear to assume that the provision of advice on the law is a lunction limned to being performed by legal practitioners. NORTHERN TERRITORY NCP REPORT 25 Report - National Competition Policy Review - Legal Profession NT • • • • • The preparation of wills and other documents conceming succession to property by trustee companies and the Public Trustee; Advocacy services that are provided routinely in many tribunals such as the Administrative Appeals Tribunal, small claims courts and residential tenancies tribunal; Advocacy in the industrial sphere; The prosecution of summary offences in the Magistrates Court by unqualified police prosecutors; The role that non-lawyers often play in preparing matters for court hearings. In some government legal offices non-lawyers may interview clients and witnesses to prepare briefs in relation to court proceedings; The provision by non-lawyers of advice and related information by telephone in the Legal Aid Commission; Migration advice by migration agents; The preparation of superannuation documents and trust deeds; The preparation of bankers' security documents; The work of patent attorneys; The sale of will kits; The sale of shelf companies and superannuation trust deeds; Amendments to insurance policies and advising in relation to the interpretation of insurance policies by insurance brokers; Advice on the Corporations Law and Securities Law, tendered by merchant bankers and financial advisers; Litigation support services offered by accounting firms; and Employment relations legal advice by outplacement consultants. Changes in the activities of legal practitioners • • • • • • • • • • • 6.1.4 However, changes are occurring. Those that have been noted40 include: • That in some areas legal practitioners are excluded from providing legal services. Legal representation is restricted in some Tribunals and legal practitioners cannot provide migration advice unless they are registered migration agents under the Commonwealth Migration Act 1958; That, at the same time as more legal work traditionally done by lawyers is handled either by nonlawyers or consumers themselves, lawyers are moving into fields in which legal skill is not the primary consideration. Large and medium-sized firms are increasingly providing advice and other services in relation to corporate work with financial, economic, industry and trade aspects. In these fields lawyers are competing with non-lawyers such as accountants, financial and trade advisers, management consultants and others. Legal practitioners are becoming more involved in alternative dispute resolution procedures such as mediation and conciliation. Once again, in this area legal practitioners are competing with non-lawyers; Legal practitioners practise in a range of different modes and provide services targeted at different markets. Changes to the profession, which have been documented in the United Kingdom, appear • • .co See South Australian Issues Paper, NORlliERN TERRITORY NCP REPORT 26 Report - National Competition Policy Review - Legal Profession NT to be taking place in Australia. Firms are differentiated by market sector, activities and client type.41 Australia-wide, firms having more than 100 partners represent less than 1% of the total number of practices, but employ 21% of employees and produce 30% of the total income of the profession.42 Corporate clients are the source of 36% of the income of the profession. While 95% of practices employ fewer than 20 persons, they represent only 54% of total employment and 46% of total income. 43 A similar point to this was made in the NSW Report; and • While the majority of legal practitioners are employed in firms there is a significant number of legal practitioners employed by corporations to act as their "in house" legal advisers. The Govemment is a significant employer of legal practitioners who perform legal services for the Government. Similarly legal aid and community legal centres are also significant employers of lawyers. Currently, legal firms in the Northern Territory do not share the same range of business size as reported for Australia as a whole. In time this diversity is likely to occur. However even at present there are, within the Northern Territory's legal profession, divergent views about the nature of the regulation that is required having regard to the differing legal businesses or practices that exist. 6.1.5 Does the legal services market possess special features? The NSW NCP Report noted that legal services comprise a specialised market that differs in significant ways from other kinds of markets. This means that there is a consequent need to consider whether there are certain characteristics of the legal services market warranting special restrictions on services, for the public interest. Characteristics of the legal services market which may be difficult to reconcile with deregulation of the profession include matters set out below: • Legal practitioners are bound by statute based professional and ethical rules of a kind that usually do not apply to other service providers.44 Most importantly, they are considered to be officers of the Court. This duty overrides their duty to their client if a conflict between the two duties arises; and Legal practitioners also have duties to each other, and in the case of barristers, have been bound by the cab·rank rule,45 which requires them to accept any brief, subject to some exceptions. However, the current Rules of Professional Conduct and Practice46 do not contain this provision. It would appear that the Rule no longer has any statutory base and thus the issue is irrelevant for this Report. • "Gerard Hanlon, 'A Profession in Transition?· Lawyers. Mar1 See. for example. clause [40). Schedule (proposed Division 9A (sections 171LA·171LF). NSW legal Profession Arnendmenl (Nalional Compelilion Policy Review) Bill 2002 which conlains delailed provisions concerning the publication of disciplinary maHers NORTHERN TERRrrORY Nep REPORT 92 Report - National Competition Policy Review - Legal Profession NT 21 21.1 ADVERTISING RESTRICTIONS ISSUE At the time of the release of the Issues Paper, there were rules in place that restricted the advertising of services by legal practitioners161 • Part B.23 of the Issues Paper dealt with advertising-control issues. However, these Rules have now been reviewed. However, pressure currently exist for the imposition of new Rules based on the NSW Legal Profession Amendment (Advertising) Regulation 2002. 21.2 CURRENT POSITION In the Northern Territory there are no specific advertising prohibitions. Elsewhere in Australia there are legislative provisions that give a special status to persons who have completed accreditation schemes. 162 History suggests that restrictions on advertising and self-promotion can go too far. For example, in 1973 the Law Society issued the following ethics ruling: "[T]hat no practitioner permit himself to be described as such by or through any media when at the same time his name or photograph was used. In any published item a practitioner may use his name without statement of his profession or may be anonymous and stated to be a member of the profession. An obligation rests upon the practitioner to ensure that the media concerned complies with this ruling. n 163 The National Model Conduct Rules do not contain any restrictions on the use of advertising. This is also the case with the Northern Territory Rules. It should be noted that the National Competition Council has commented on the advertising controls applying to legal practitioners in the Northern Territory. However, as mentioned above, the provisions on which the NCC may have made its comments no longer apply. 21,3 ADVERTISING - QUESTIONS The issues paper sought comments on the following: 1. Should there be the possibility of rules of professional conduct that protect consumers by ensuring that legal practitioners can only claim specialist accreditation if the accreditation is approved by the relevant professional organisation or should the control of such claims be left to general statutes such as the Consumer Affairs and Fair Trading Act? 161 Rule 3.1 altha law Society's Professional Conduct Rules provides that: "A practitioner may advertise in COMection with the practitioners practice if the advertising: (a) (b) (c) Is not false; is not misleading or deceptive or likely to mislead or deceive;•.. and does not use the words 'specialist or 'expert' or 8 direct derivation of those words," Aule 3.2 goes on to provide 13 complia!1ce rules about the advertising of fees. Some of them are prescriptive, for example, whether additional amounts will be charged for disbursements. Others spell oul consequences. For example. the fees apply to all dienls (whether or not they saw the advertisement) and the lees must stand for so long as the advertisement is currenl AdditionaOy legal practitioners must be able to substantiate claims of "average fees', ~ee discoonts' and 'fee comparisons' tn respect of advertising of specialisations (as restricted by Au~ 3.1 (e), Aute 3.4 slates: 'A practitioner may advertise in connection with Ihe practitioner's practice lhat Ihe practitioner is an accredited specialist in a particular Held of practice provided Ihat the practitioner so described has passed an accredited specialist accreditation course approved and authorised by the Council from time to time and Ihat the practitioner has mainlained such accreditation as required by the appropriate body," 163 Bartlara James, Twenty Years On A history of !he N. T. Law Society (1969·1988) And A Glance al Pm-Society LegBlLifo in /tie Nol1h, 16" page. NORTHERN TERRITORY NCP REPORT 93 Report· National Competition Policy Review· Legal Profession NT 2. Is it appropriate to support principle 3 of the COAG Working Party report • namely that lawyers should have the freedom to inform their clients by means of advertising and promotion and related forms of information disclosure, subject only to rules which prevent false, misleading or deceptive representations and conduct? 3. Is it appropriate that controls over advertising be outside of the ambit of the Legal Practitioners Act?164 4. Is it justifiable that legal practitioners have an onus of having to justify claims in advertisements conceming fees? 21.4 21.4.1 SUBMISSIONS AND OTHER COMMENTS Law Society Northern Territory The Law Society Northem Territory has stated its position is that advertising by lawyers should not be restricted other than by trade practices law. If a legal practitioner within the Northem Territory made an assertion about a special accreditation to which the legal practitioner was not entitled he or she would be liable to the sanction of the Consumer Affairs and Fair Trading Act.1s5 21.4.2 Others The Insurance Council of Australia has stated that: "The Insurance Council Of Australia (ICA) does not object to any organisation correctly advertising its products or services and, in this respect, regards advertising by lawyers as a normal business or commercial activity. However, as the respondent to most of the 'claims' generated by such advertising and as the payers of the majority of legal fees incurred, licensed insurers have concems for: • • • The fairness and accuracy of any advertising; The impact of such advertising on the climate of expectation generated in the public at large; and The incentive to proceed with unmeritorious cases is of little substance. This could create a commercial imperative to dispose of cases for relatively small settlements rather than mount a full defence. Whilst any single instance of this is not a major concern, the cumUlative effect has been seen to be costly to insurers and impacts on the premiums paid by the insured. Insurers' main concems relate to advertising which uses the catch phrase "no win, no pay" or versions of that statement. These are almost exclusively associated with personal injury claims especially motor vehicle accidents. Insurers believe the statement is simplistic to the extent of being potentially misleading. In this regard we reproduce an extract from comments by Mr Steve Mark, the Legal Services Commissioner for New South Wales in the Autumn 1998 Journal of National & International Law Reform: • "An advertisement that says "no win, no pay" can mean very different things to members of the public and to lawyers. A lawyer will read such an advertisement with knowledge of the complicated ". Th~ ~ Ihe approach Ihal is being laken elsewhere. The NSW Legal Profession Refonn Act 1991 inserted SeoIion 38J inlo Ihe Act. which provided !hal a solicitor or barrister could advertise in any way they saw fit, subJect only to Ihe limitations set oul in the TfBde Practices Act 1974 and the Fair Trading Act 1987, or any similar legislatioo. The removal of restrictions on advertising was consistent with the recommendations of the Law Aelann Commission and Is also consistenl wiIh Ihe approach adopied by Ihe Trade Pra_. Comm~ion.(241 165 See Law Society Northern Territory Submission, 25 October 2000, pages 37-38 NORTHERN TERRITORY NCP REPORT 94 Report· National Competition Policy Review· Legal Profession NT costs rules, involving concepts such as party/party and solicitor/client costs. Without an explanation, a client is entitled to believe that unless they win, they will not get a bill. How far does a practitioner have to go to explain exactly what a client might be up for, even if they do win? Clients may have to pay at least some of their own costs, or disbursements in, for instance, a personal injury matter. If the case is lost, they may have to pay the other side's costs. It is indeed a balancing act for the lawyer enticing a client to explain in simple language the prospects of success and the foreseeable costs, without on the one hand promoting litigation with all its attendant costs to the community or, on the other hand, driving the potential client out the door. On the subject of that first meeting, what about those solicitors who offer the first consultation free? What happens when the allotted half hour of free time is up and the client is still explaining their problem? Does the solicitor stop the client to let them know that the free time has expired and that they will now be charged for the solicitor's services? This may destroy any atmosphere of trust and empathy which has been established. In the same vein, we also receive complaints from clients who attended a free first consultation and, upon deciding not to proceed with that practitioner, receive a bill based on the practitioner's argument that the first appointment would only be free where there was a second fully charged appointment. While we can often resolve these disputes through the complaint handling process, the real solution lies in good communication with the client from the beginning of the interview". With the "first consultation free" type of advertising, insurers believe this actively discourages potential clients from consulting other practitioners, or even finding out about their fee structures, because once inside the solicitor's office, having described the nature of their claim, it is very difficult for a client to go elsewhere, and perhaps it is just too much trouble. It would be of benefit to introduce controls making it compulsory for solicitors to include their fee structure in the advertisement. Quotes or fees should be specific and relate to the particular service performed. They should be expressed as being either inclusive or exclusive of disbursements and the individual disbursements specified. Offers of conditional fees must disclose whether the client will have to pay court costs or other expenses including the other party's fees in the even of an unsuccessful outcome. This would engender competition policy amongst the profession, which is the reason for initial removal of restrictions on advertising. Since the removal of restrictions on general advertising by solicitors and barristers, the general public has been subjected to a barrage of radio, newspaper and even "shop-a-docket" advertising l66 • 21.4.3 New Development The NSW Legal Profession Amendment (Advertising) Regulation 167 amends the NSW Legal Profession Regulation 1994 so that Barristers and solicitors cannot advertise person injury services except by means of a statement: • • containing only the name and contact details of the barrister or solicitor together with information as to any area of practice or speciality of the barrister or solicitor; and that is published only by means such as printed publications and electronic databases and directories that are accessible on the Internet (ie. television and radio advertising is not possible). The regulation prohibits the public exhibition of such a statement or the display of the document on any printed document sent or left around a hospital. 166 161 The DalYf G cameron (Group Manager WA & NT}.lnsurancs Council of Aus/ralia 12 October 2000 Regulation operates with effect Irom 1 Apn12002 NORTHERN TERRITORY NCP REPORT 95 Report· National Competition Policy Review· Legal Profession NT For the purposes of the regulation, a person advertised a person injury service if he or she published a statement that may reasonably be thought to be intended or likely to encourage or induce a person to make a claim for compensation or damages in respect of a personal injury to use the services of a barrister or solicitor in connection with the making if such a claim. A breach of the regulation is professional misconduct. The NSW Premier in announcing the regulation said that its purpose was to reduce: • • lawyers engaged in ambulance chasing; and excessive litigation (and thus, reduction of the costs of insurance)16B. These changes appear to have the strong support of the NSW Legal Profession 169. 21.5 ASSESSMENT There are no anti-competitive provisions conceming advertising. The new NSW provisions and the comments of the ICA are of relevance to future developments. However, they are largely irrelevant for this Report. It is not a function of an NCP review to come up with new anti-competitive provisions. 21.6 FINDINGS (INCLUDING ALTERNATIVES) The findings are: 1. There are no anti-competitive advertising controls. 2. The imposition of new controls is outside the scope of this Review. 168 News Release 27 February 2002, Premier of NSW 16' Press Release 27 February 2002. Ms Kim Cull. Preslden~ Law SocIety of New South Wales NORTHERN TERRITORY NCP REPORT 96 Report - National Competition Policy Review - Legal Profession NT 22 22.1 COSTS THAT MAY BE CHARGED PRACTITIONERS ACT BY LEGAL PRACTITIONERS - LEGAL ISSUE The legal prolession is subject to fee controls in ways not faced by any other profession or occupation in the Northem Territory. Parts 8.25 and 8.26 of the Issues Paper described the controls that exist conceming the lees charged by legal practitioners. 22.2 CURRENT POSITION Section 129 of the Legal Practitioners Act provides that a legal practitioner may enter into an agreement with a client conceming professional work done or to be done. There must be a note or memorandum in respect of such an agreement. Section 130 of the Legal Practitioners Act provides that the Supreme Court may direct that the amount payable under an agreement be reduced or may declare that the agreement is not binding. Such a power can be made ~ the Court is satisfied that the agreement is "not fair and reasonable'. Where there is no agreement under section 129, sections 119-128 of the Legal Practitioners Act apply. Section 128 provides that a legal practitioner cannot commence legal proceedings for the recovery of costs or disbursements conceming work of a professional nature unless he or she has delivered a statement that accords with the requirements set out in Section 119. The client may insist on being provided with an itemised bill of costs. Recovery proceedings can be commenced after the expiry of one month from delivery. Section 120 of the Legal Practitioners Act provides that a person who has been delivered an itemised bill of costs may seek a taxation of those costs by the Master of the Supreme Court. Effectively the Master can review the costs. Section 123 of the Legal Practitioners Act sets out that in assessing what is the proper sum in respect of which no charge is provided for in a scale of costs prescribed in or under an Act: "... allow such sum as is just and reasonable having regard to all the circumstances of the case, .. the Master shall take into account the amount, if any, from time to time recommended by the Law Society as the appropriate charge for the doing of that act. • Section 124 of the Legal Practitioners Act provides that the legal practitioner is liable for the costs of the taxation if the amount due, in taxation, is reduced by a 1/6th part or more. If it is less than 1/6th the client pays the costs of taxation. The Supreme Court has the power to review the taxation decisions made by the Master. 22.3 CONTROLS OVER FEES PAID TO LEGAL PRACTITIONERS -QUESTIONS The issues paper sought comments on the following: 1. Does the regulation of legal fees restrict competition? In what ways? How significant is any such restriction in terms of its impact on the economy? 2. What are the public benefits and the costs to the community of any such restriction? Is there any evidence available as to the existence of these benefits and costs? 3. How do the benefits (if any) compare with the costs (if any) of any such restriction? Is there evidence available as to the relative magnitude of these benefits and costs? Which effects might be decisive in determining whether each such restriction is in the public interest? NORTHERN TERRITORY NCP REPORT 97 Report - National Competition Policy Review - Legal Profession NT 4. Do costs disclosure rules lead to the development of a more competitive market for legal services?170 That is, has the system for costs disclosure, as put in place in jurisdictions such as New South Wales, fostered the development of a market for legal services? Do consumers have sufficient information to shop around for legal services? Are consumers in a position to judge the quality of practitioners? 5. Would the publication by an independent body of comparative price information be an alternative to the current after the event controls over fees?171 6. Is it correct that legal costs have risen significantly in New South Wales since the abolition of scales and that these increases can be attributed to the lack of incentive of plaintiffs to instruct lawyers to contain costs. 172 7. Is it correct that the existence of the right of a client to seek a review of fees by the Master of the Supreme Court means that legal practitioners must take a responsible or professional approach in calculating fees? B. Does this relatively straightforward mechanism for solving disputes over legal costs serve the economic interests of legal practitioners as a whole because the results are predictable? 22.4 COURT COSTS' SCALES Order 63 of the Supreme Court Rules, sets out rules for the calculation of fees for services provided as part of IHigation. The Rules are structured so that there is an administrative process by which the Chief Justice can amend the operation of them. Part 3B of the Local Court Rules provides for costs in Local Court matters. The costs are related to those calculated in accordance with the Supreme Court Rules. For matters involving disputes of $50,000 or less, costs are specified in tenns of percentages of those calculated under the Supreme Court Scale. Thus, for example, it is BO% for claims between $10,001 and $50,000 and 50% for claims of $10,000 or less. The Law Society's Professional Conduct Rules provide that a practitioner may, in any matters other than criminal and matrimonial matters, agree that in the event of the action being unsuccessful, the practitioner either will not charge the client or will charge only the disbursements or some defined amount or proportion of the disbursements. In the event that the action is successful the practHioner is entitled to charge a solicitor-client fee which constitutes up to double the fees to which the practitioner would otherwise be entitled if those fees were charged according to the schedule of fees in the Rules of the Supreme Court. A practitioner can only enter into a contingency fee agreement where, in his or her professional judgment, the client's claim has some prospect of success but the risk of the claim failing and of the client having to meet his or her own costs is significant. 173 22.5 22.5.1 SUBMISSIONS AND OTHER COMMENTS Law Society Northern Territory The Law Society Northern Territory states that His important to recognise that legal practitioners render 170 The NSW Report noled that this objective may nol be achieved because consumers have Insufficient information to shop around lor solicitors The NSW NCP Report noted that there are severallhreshold issues to be addressed if comparative fee inlonnalion is to be collected and published. They include the identification of the agency responsible lor col1ecting Information; whether the information should simply consist oltha fees charged by practitiOllBrs or whether the material would be independenUy scrutinised to ensure lhal the fees were reasonable; and how a 'reasonable fee' could be calculated. Comparative fee information could become little more than a scale fee if it wern universally used by practitioners 10 set fees, and could have an anli-competitive effect. The publication of comparative tables 01 fees might not overcome difficulties laced by consumers seeking high quality services, who may have limited knowledge of Ihe nature of Ihe legal services Ihey require and cannot make qualitative comparisons. Further, inlormation about dlarge out rates is treated by many firms as a commercial secret 172 The NSW report noles this as a claim made by insurers. 173 Rule 8.10. I7l NORTHERN TERRITORY NCP REPORT 98 Report - National Competition Policy Review - Legal Profession NT bills rendered by reference to work performed by two different and distinct areas. Firstly, for work performed in defending or initiating litigation. Secondly, for performing work in relation to commercial matters. The subject matter of a bill is irrelevant to the method of its calculation. The Courts developed costs for litigious matters because of ,the view that such a system provided a more equitable and effective means of compensating a successful litigant than making an award for general damages attributable to costs at the conclusion of the hearing. Court costs are therefore essentially designed for litigation matters and do not readily translate to commercial and non-litigious matters. The Law Society Northem Territory states that its position is that Part X of the Legal Practitioners Act should have no application to non-litigious legal work and in there application to such work are anticompetitive and not in the public interest. The charges levied by legal practitioners for commercial and non-litigious work should be govemed by the market. The Law Society Northem Territory further notes: • that a cost scale is appropriate for unsophisticated litigants unwillingly drawn into litigation to redress wrongs inflicted on them. However, more sophisticated clients do not require the protection of court scales; and that it is difficult for a legal practitioner to provided to a client at the outset of litigation an accurate estimate of the quantum of costs likely to be incurred. In such cases cost rules are appropriate as they amount to a default charging system. That is, in the event that there is no solicitor/client agreement the cost scale appropriate to the matter applies. This benefits a consumer of legal services in a litigious matter in that it tends to limit the amount that can be charged by a legal practitioner to an amount that is within the boundaries of the de facto approval by the Court. • The Law Society Northem Territory states that commercial matters of all types are more easily capable [ of being reduced to estimates of anticipated costs than litigious matters. Consumers such as banks and insurance companies do not rely on cost scales but instead contract with lawyers at particular rates which mayor may not be based upon the scales, but nonetheless are the result of market forces and not the scales. Because of their size and business acumen they are to bargain with various providers for the best price for the provision of legal services be it for the preparation of a simple document of a complex financial transaction. The smaller consumer of commercial non litigious legal service is in a similar position. Such a person is in a position to bargain with legal service provides for the provision of services by obtaining quotes for the provision of say simple documents from several providers. This has been the experience of the deregulation of the conveyancing market where consumers have driven down the price of individual transactions by searching out the best rate for a completed package from a provider. This simply cannot occur with litigious legal work. The Law Society Northern Territory advises that it has introduced a clienVlawyer agreement that promotes the establishment of a written basis for client costing. This is the benefit of the consumer. The Law Society Northem Territory has expressed the following view: .... [I]t is inappropriate for the fees charged by lawyers for non-litigious work (commonly called commercial work) to be regulated by Part X174 of the Legal Practitioners Act because: (a) if lawyers are to compete in an open market then there should be no limitation upon the fees m This Part pennits Bills to be taxed and for unfair costs agreements to be put aside. NORTHERN TERRITORY NCP REPORT 99 Report - National Competition Policy Review - Legal Profession NT charged by commercial lawyers for non-litigious work. Their charges should be governed by the market; and (b) the Supreme Court Scale is essentially designed for litigation matters and does not properly contemplate the practice of commercial or non-litigious law."175 The former Trade Practices Commission recommended that fee scales should be replaced with the introduction of statutory information disclosure requirements, together with periodic surveys showing the range of fees being charged for various services in different locations to provide more relevant information on legal fees to clients and taxation officers. 176 The Western Australia NCP Issues Paper177 noted that the central issues when considering the costs and benefits of controls over legal practitioners fees is whether the removal of the controls would stimulate greater price competition and consumer choice or whether the cost for legal fees would increase generating supemormal profits for legal practitioners at the expense of consumers. The Westem Australia NCP also noted 17B that: • the use by legal practitioners of prescribed procedures as a pre-requisite for the recovery of fees and the use of fee scales where fees are not otherwise agreed may reduce the transaction costs incurred by both clients and legal practitioners in resolving potential disputes about fees; and prescribing procedures for the recovery of fees may increase the administration costs for legal practices which may be passed on to clients. OTHERS • 22.6 22.6. 1. 1Queensland Green Paper on the Legal Profession The Queensland Green Paper summarised submissions on this issue as follows: 'Some practitioners were of the view that the client agreement had not been in long enough to be evaluated. Others criticised the requirements as being overly prescriptive and client unfriendly. Practitioners experience uncertainty where the client agreement is not retumed. Practitioners have submitted that the threshold for such agreements needs to be increased. Clients complain that the agreements are difficult to understand and that any benefit of the estimate of the costs is removed by clauses reserving the right of the pracmioner to not be bound by the estimate. Clients complain that low fees are promised but a higher bill is delivered to just below the threshold amount for a client agreement. Clients are seeking a reliable estimate of costs, which identify the work the solicitor is undertaking, divided according to the variations stages with timeliness for each stage. One respondent has suggested that the cost of delays should not be met by the client unless attributable to the client. When presenting a bill, they suggest that solicitor should not reserve the right to increase the bill if the client requires the bill in taxable form. Submissions were divided on whether the current cost assessment regime should continue. A number of submissions sought a return to the taxing Officer scheme. A number of submissions favoured the Victorian tribunal system for determining cost disputes. Other supposed it as being too costly for the '" Steve Southwood. Preslden, Law Society Nol1hem TeJTilory. Bu/Is#n to the Managing Partner Deregulating the Prolsssion, January 1999. page 169. m Page 47. 178 Page 48. 176 NORTHERN TERRITORY NCP REPORT 100 Report - National Competition Policy Review - Legal Profession NT relatively small number of costs disputes previously determined by taxing officers and currently being considered by cost assessors. The views in public submissions on (scale of costs) issue were diverse as follows: • • • • • • • that scales should be abolished; that scales are a useful guide provided that they are kept up to date; that scales have a role in deterring unscrupulous overcharging; that scales erode the rights of the successful litigant; that scales support exorbitant charging rates by practitioners relative to other professions; that lawyers seeking remuneration above the scale is a matter of greed; and that client liability for above scale costs ensure the client has an active interest in the case and encourages the settlement of actions.'179 Costs - Scales A. Legal practitioners are already competing in an open market for some non-litigious services. It is inappropriate and unfair that the fees charged by lawyers for this work be subject to Part X of the Legal Practitioners Act. In our view Part X serves a useful purpose in litigious matters where it affords litigants and intending litigants a measure of protection against their exposure to costs. Once again, these controls are appropriate only if participation in litigious work is restricted to legal practitioners. B. Disclosure Costs disclosure rules can be useful but any proposal to introduce them in the Northern Territory should be considered carefully. In many legal matters it is impossible to give a genuine precise estimate of costs. Compliance with costs disclosure rules is being achieved elsewhere by providing "ball park" estimates which do not advance the intended purpose of the rules. In our view disclosure should be limited to informing the client of(a) (b) (c) the rate of charge; the amount incurred to date; and an estimate of future costs onlv if it can be made with reasonable precision 180. ICA strongly supports the current system of contingency fee agreements and would oppose contingency fees as they substantially increase the cost of litigation 181. 22.7 DISCUSSION The legislation aims to protect consumers of legal services from paying too high a price for legal services. 179 Queensland Government Green Paper Legal Profession Refotm June Ii' Ward Kel~r. Lawyers 24 October 2000 lBI 1999, page 29 Daryl G Cameron (Group Manager WA & NT), Insurance Council of Australia 12 October 2000 NORTHERN TERRITORY NCP REPORT 101 Report - National Competition Policy Review - Legal Profession NT 22.7.1 • • Potential Disadvantages The regulation of legal fees inhibits price competition and reduces incentives for suppliers to cut costs, resulting in higher costs to consumers. The regulation of legal fees could result in sub-optimal allocation of resources as between practitioners and any non-practitioners with whom they compete in relation to particular legal services. The regulation of legal fees provides a disincentive for legal practitioners to enter into speculative fee arrangements with clients, other than through a special fund administered by the Law Society, which reduces the incentive and could impede competition to provide pro bono work on a no win/no fee basis, and this in tum reduces access to the legal system for some groups of society. Potential Advantages • 22.7.2 • The regulation of legal fees provides consumers with pricing information prior to engaging a legal practitioner, which together with the method of Court "laxation" that allows the revision of fees charged, reduces the risk of consumers paying excessive fees. FINDINGS (INCLUDING ALTERNATIVES) 22.8 1. Controls over fees are anti-competitive. 2. The controls over fees for litigation can be justified as being in the public good. 3. The controls over fees to be conducted for work outside of the courts and tribunals would not appear to be justffiable. NORTHERN TERRITORY NCP REPORT 102 Report - National Competition Policy Review - Legal Profession NT 23 23.1 PROVISIONS CONCERNING INTERSTATE PRACTITIONERS ISSUE The South Australian NCP Issues Paper noted that systems of admission and enrolment may inhibit the movement of legal practitioners between jurisdictions if legal practitioners admitted in another jurisdiction are unable to practise in another. Such a restriction reduces the pool of legal practitioners within the Northem Territory and thereby reduces the level of competition between legal practitioners. The admission and practising certificate regime established under the Act, does not, however, restrict the movement of legal practnioners between jurisdictions in Australia due to the operation of the system of mutual recognition established under the Commonwealth Mutual Recognition Act 1992. Mutual recognition enables legal practitioners admitted and entitled to practise in another jurisdiction in Australia to practise in the Northern Terrnory. A legal practitioner registered pursuant to the mutual recognition regime is subject to the same laws regarding practice as other legal practitioners admitted and holding practising certificates in the Northern Territory except in regard to the laws requiring attainment or possession of some qualification or experience relating to fitness to practise (see section 17 of the Mutual Recognition AcQ. The scheme of the legislation is that a legal practitioner who satisfies the requirements for admission interstate will be registered in the Northern Territory Australia without undertaking further training. Similar rules apply in respect of New Zealand legal practitioners l82 • The Legal Practitioners Act was amended in 2000 to implement the national practising certificate scheme developed by the Standing Committee of Attorneys-General, whereby a practising certificate issued in one State or Territory would be automatically recognised in another State or Territory. This reflected the recommendation of the COAG Report, and also the views of the legal profession, expressed in the Law Council's 1994 resolution. The efficacy of the scheme is limited because it is based on reciprocity. The scheme applies only between those States and Territories that have enacted corresponding legislation. To date corresponding laws have been enacted in NSW, Victoria, South Australia, Tasmania and the ACT. It is not clear that all jurisdictions will participate in the scheme. Practitioners in those jurisdictions that do not participate in the scheme will continue to face barriers to practising in the Northern Territory. These difficulties might be addressed by the removal in the Northern Territory of the requirements of a corresponding law to be enacted in each Australian jurisdiction. This may place Northern Territory practitioners at a competitive disadvantage compared with their interstate colleagues. 23.2 PROVISIONS CONCERNING INTERSTATE PRACTITIONERS - QUESTIONS The Issues Paper sought comments on the following: 1. Do the notification requirements imposed on interstate practitioners restrict competition? In what ways? How significant is any such restriction in terms of its impact of the economy? 2. What are the public benefits and what are the costs to the community of any such restriction? Is there evidence available as to the existence of these benefits and costs? 3. How do the benefits (if any) compare with the costs (if any) of any such restriction Is there evidence available as to the relative magnitude of these benefits and costs? Which effects might be decisive in determining whether each such restriction is in the public interest? 4. If any such restriction does provide net public benefit, could those benefits be achieved by other 182 Trans-Tasman Mutual Recognffion Act 1997 NORTMERN TERRITORY NCP REPORT 103 Report - National Competition Policy Review - Legal Profession NT less restrictive or less costly means? 5. Does the requirement for corresponding laws to exist before an interstate practising certificate is recognised in the Northern Territory constitute a restriction of competition? In what way? 23.3 23.3.1 SUBMISSIONS AND OTHER COMMENTS Law Society Northern Territory The Law Society Northem Territory supports the rights of Hs members and the rights of members of the other Australian law associations to practise nationally - ideally where one practising certificate granted by one jurisdiction is recognise everywhere in Australia without further requirements. The Law Society Northern Territory also notes there is an issue, in respect of the travelling practising certificate scheme in the Northern Territory, as when an interstate legal practitioner is taken to have established a practice in the Northern Territory. The Law Society Northem Territory states that the notification requirements in the Legal Practitioners Act conceming interstate legal practitioners are minimal and that the impact is far outweighed by the benefit of having a uniform and comprehensive consumer protection and insurance. 183 23.3.2 Others 23.3.2.1 Queensfand Green Paper on the Legal Profession The Queensland Green Paper summarised submissions on this issue as follows: 'Submissions were generally supportive of facilitating national practice through participation in the national practising regime. A number of respondents expressed the desire for one national licensing authority. Until then, it was submitted barriers to national practice would add costs and restrict competition. It was also submitted that local practitioners should be permitted to share income with persons qualified to practise law in other jurisdictions to facilitate national integrated practices. It was suggested that the current national practising certificate legislation could be improved through protocols in the areas of complaints, trust account inspections, appointments of receivers to the interstate practice and exchange of information between jurisdictions. '184 23.4 DISCUSSION There would not appear to be any issues that are additional to those that exist concerning other legal practitioners. 23.5 FINDINGS (INCLUDING ALTERNATIVES) The findings made in respect of legal practitioners also apply to interstate legal practitioners. 183 See Law Society Northern Terntory Submission, 25 October 2000, 1~ page 46 Queensland Government Green Paper Legal Profession Reform June 1999, page 30 NORTHERN TERRITORY NCP REPORT 104 Report· National Competition Policy Review· Legal Profession NT 24 24.1 FOREIGN LAW ISSUE Part XII of the Legal Practitioners Act imposes on persons who practice foreign law in the Northem Territory much the same controls as exist in respect of practitioners of local law. Part XII was enacted in 1999 as part of a national scheme dealing with foreign lawyers. For the purposes of this review it is assumed that the general issues (and outcomes) as exist in respect of local lawyers also exist in respect of foreign lawyers. Accordingly, the specific provisions will not be separately examined. They are, however, listed in the tables in Appendix 1. 24.2 24.2.1 SUBMISSIONS AND OTHER COMMENTS Law Society Northern Territory No comment made. 24.2.2 Others No other comments. 24.3 DISCUSSION There would not appear to be any issues that are additional to those that exist conceming other legal practitioners. 24.4 FINDINGS (INCLUDING ALTERNATIVES) The findings made in respect of legal practHioners also apply to foreign lawyers. NORTHERN TERRITORY NCP REPORT 105 Report - National Competition Policy Review - Legal Profession NT 25 25.1 LAW SOCIETY NORTHERN TERRITORY: STATUTORY RECOGNITION AND POWERS ISSUE The Law Society Northern Territory is incorporated by statute. In much the same way as its peers in other jurisdictions it is given various statutory powers and responsibilities concerning the whole of the profession. However, it also performs membership roles in respect of those members of the legal profession who choose to join the Law Society. There are other organisations that represent parts of the legal profession. These organisations receive little or no recognition or support under the Act. Part 8.34 of the Issues paper dealt with the status of the Law Society under the Legal Practitioners Act. 25.2 STATUTORY RECOGNITION OF THE LAw SOCIETY NORTHERN TERRITORY - QUESTIONS The Issues Paper sought comments on the following: 1. Does the statutory recognition of, and statutory powers given to, the Law Society Northern Territory restrict competition? In what ways? How significant is any such restriction in terms of its impact of the economy? 2. What are the public benefits and what are the costs to the community of any such restriction? Is there evidence available as to the existence of these benefits and costs? 3. How do the benefits (if any) compare with the costs (if any) of any such restriction? Is there evidence available as to the relative magnitude of these benefits and costs? Which effects might be decisive in determining whether each such restriction is in the public interest? 4. If any such restriction does provide net public benefit, could those benefits be achieved by other less restrictive or less costly means? 25.3 CURRENT POSITION The regulation of the legal profession in the Northern Territory relies heavily on the Law Society Northern Territory, the Supreme Court and individual members. There is minimal executive govemment or Departmental involvement in the day to day regulation. The Law Society Northem Territory is constituted by statute. Its constitution is approved by the Attorney-General. Aside from various reporting obligations the Law Society is subjected to minimal extemal regulation. The Law Society is largely funded by practising fees paid to the Law Society Northern Territory by all legal practitioners regardless of whether they are members of the Law Society Northern Territory. Additionally, it can be noted that the Attomey-General may give directions that certain complaints be investigated, may withhold approval from certain matters being referred to the Legal Practitioners Complaints Committee and may disapprove the Rules of Professional Conduct. l85 The Law Society Northem Territory is established by the Legal Practitioners Act despite the fact that its membership potentially comprises all the members of the profession. Under the Legal Practitioners Act it is given various statutory powers and functions. It is also provided with revenue. No other professional organisation has any statutory powers or any revenue under the Act. This contrasts with the position in other parts of Australia where recognition is given to the possibility and the actuality that other professional organisations may have statutory roles. The leading example in many jurisdictions is the Bar Association in respect of persons who specialise as barristers. 1&5 This right came inlo exislence on Itle commencemenl of Ihe Lega' PractitionslS Amendment Act 2000 (111 012000). NORTHERN TERRITORY NCP REPORT 106 Report - National Competition Policy Review - Legal Profession NT Finally, self regulation by professional bodies which also act as representative associations may lead to anti-competitive practices and limit the remedies of consumers and other market participants who are adversely affected. Additionally, the Law Society carries out two functions that may be incompatible. They are: • • to represent the economic interests of its members; and to act as regulator, on behalf of the government and the people of the Northern Territory, in respect of all legal practitioners. The NSW NCP Report noted that: • • • the current system (in NSW) may inhibit debate within the profession about ethical matters, business practices and appropriate restrictions on practice; the current system may impair the ability of practitioners to diversify their services because of the existence of a single set of rules governing all solicitors and all barristers; it might be argued that the public would benefit from a separation of the representative and regulatory functions of the professional organisation and that practising certificates should be issued by a Government body, rather than by the members of the profession. Such a scheme might ensure greater transparency in the issuing of practising certificates and the making of rules; and it might be in the public interest, and that of the profession, to permit the registration of alternative bodies, as in Victoria, and enable those bodies to establish their own systems for regulation and governance, supervised by a statutory body. • The NSW NCP stated that: • • • • the traditional model for regulation of the legal profession was self regulation; within the self regulation model, formal regulatory power over the profession was conferred by Government on the professional associations; regulatory powers exercised by the professional associations included the determination of entry standards and regulation of lawyers professional conduct; the self regulation of the legal profession was traditionally regarded as integral to professional practice because it ensured the independence of the profession from Government intervention in its affairs and ensured that members of the profession were judged by their peers; the existing system promotes uniformity and consistency within the profession and clients can rely on adherence to the same rules by all solicitors and all barristers. The current system may also promote ethical practices and mutuality among members of the profession because of the commonality of profession membership. In addition, members of the profession may be best placed to make and enforce practice rules and set conditions for practice; and perhaps because of the accountability mechanisms, there appears to be little evidence that widespread concerns are held about the current system (where the professional association performs both regulatory and non-regulatory functions. • • The COAG Working Party report did not canvass the role of self regulation in legal profession regulation, or the extent to which self regulation should be given legislative backing. NORTHERN TERRITORY NCP REPORT 107 Report - National Competition Policy Review - Legal Profession NT The Law Council of Australia adopts the view that: "........ the independence of the legal profession is dependent upon the profession's right to self regulation. " Self regulation suggests the absence of legislation. However, in most jurisdictions, self regulation includes legislation which mandates the controls that the professional associations might have over the whole of the legal profession. This means, for most jurisdictions, the best characterisation of the regulation is one of co-regulation by the profession associations, that Executive Government and the Judicial arm of government. For example, the NSW NCP report states: "... rnhat the model which has been adopted in the Legal Profession Act is that of co-regulation. The role of the Law Society and the Bar Association as the regulators of the profession has been largely preserved. The Act provides a legislative mandate to the role of the professional bodies in matters such as rule making and the administration of the disciplinary system on one hand and scrutiny of the exercise of their powers on the other. The professional bodies have both representative and regulatory roles. However, the Act sets standards to be applied by the professional councils and provides for external scrutiny of their actions." There are a number of problems with this regulatory scheme as it exists in the Northern Territory. These include: • • the absence of any provisions for the scrutiny of the statutory roles of the Law Society' such as complaints handling processes. There is no requirement for the publication of an annual report; and the fact that the statutory functions possessed by the Law Society may stop solicitors and barristers from exercising choice in professional association. They are required to submit to the rules of the Law Society even if they choose not to belong to the Law Society. SUBMISSIONS AND OTHER COMMENTS 25.4 25.4.1 Law Society Northern Territory The Law Society Northern Territory states: • • statutory recognition of the Law Society Northern Territory is a direct and simple mechanism for the regulation of the legal profession; and the requirement that all legal practitioners in the Northern Territory are members of the Law Society Northern Territory promotes a uniformity and consistency within the profession that ensures that members of the pubic can rely on adherence to the same rules and standards of practice whether the legal practitioner chooses to practice sole as a solicitor, solely as a barrister, or carries on a hybrid practice incorporating the functions of both barrister and solicitor. The Law Society Northern Territory also advanced the following reasons in support of the view that should only be one profession based regulatory authority: • Given the size of the legal profession in the Northern Territory it is in the interest of the members of the profession and in the public interest that the legal profession is regulated and controlled by a single body to which all matters relating to the legal deregulation and maintenance of the legal NORTHERN TERRITORY NCP REPORT lOB Report· National Competition Policy Review· Legal Profession NT profession in the Northem Territory can be referred. It is therefore a matter of efficiency, convenience, and economic good sense that the Northem Territory legal profession be administered by a single piece of legislation; and • The legal profession in the Northem Territory is not a split profession with the result that the administration of the legal profession in the Northern Territory is appropriately confined to a single piece of legislation. Others 25.4.2 25.4.2.1 Queensland Green Paper on the Legal Profession The Queensland Green Paper summarised submissions on this issue as follows: 'Some responded support the Queensland Law Society continuing its role as regulator. Others saw that its role as inconsistent with its role of representing the interests of its members and that an independent body is required. There were a number of submissions from consumers expressing dissatisfaction with the Queensland law Society's handling of their complaints and claims ... There were concerns that the New South Wales and Victorian regulatory models would be too costly.'l86 We feel that the Law Society is not an appropriate body to act as a regulator of profeSSional conduct. The small population of the legal profession in the Notthem Territory results in a high degree of contact between the members of the Committee of the Law Society and the profession as a whole. This contact can give rise to unsatisfactory perceptions about the complaints handling process. In our view, this function should be discharged by a statutory committee composed of both legal practitioners and non-legal practitioners. The statutory committee should preserve confidentiality while a complaint is under investigation but adverse findings should be publicised periodically1B7. 25.4.3 New Development in April 2002 NSW The NSW Legal Profession Amendment (National Competition Policy Review) Bill 2002 provides for: (a) the determination of practising fees so that they pay for regulatory functions (effectively separating regulatory and membership functions in terms of fees determination) (see proposed sections 29A and 29B); and (b) independent (Government directed) audits and budgets concerning the monies raised by practiSing fees (see proposed sections 290 and 29E). 25.5 25_5.1 DISCUSSION Objective To provide efficiency in the administration of consumer protection, by empowering a sole profeSSional organisation with the responsibilities of carrying out a number of administrative and probity duties. 25.5.2 • Potential Disadvantages l88 Inhibits the ability of other professional organisations, which do not possess the same powers as the Law Society, to attract members. 187 Queensland Government Green Paper Legal Profession Refotm June 1999, page 5 Want Keller, Lawyers 24 October 2000 188 OraH WA NC? Legislalive Review (April 2002) 188 NORTHERN TERRITORY NC? REPORT 109 Report - National Competition Policy Review - Legal Profession NT • The Law Society may discriminate against non-members when exercising its statutory powers on indemnity insurance matters, thus imposing a competitive disadvantage to non-members. Potential Advantages 189 25.5.3 Minimises insurance costs (premiums and administration levies) to legal practitioners. 25.6 DISCUSSION In theory, the statutory entrenchment of the Law Society's powers and functions is anti-competitive because the consequence is that it is virtually impossible for any other body to achieve the same kind of standing. The Victorian Legal Practice Act 1997 contains an attempt to neutralise the application of the legislation as regards professional bodies. In that Act, there is a generic recognition of RPA's (being Regulated Professional Associations). The Law Institute and the Bar Association are then recognised as RPAs. However, the main outcome appears to be the creation of legislation that containing a complicated structure and obscure terminology. It seems simpler to accept the basic proposition that the Law Society is the only professional body in a position in the Northern Territory to perform the functions that the Act wishes to allocate to the profession. If, in future times, the Bar Association or some other local or national body might achieve the support of the profession the Act can be amended so as to identify the functions of such a body. The other issue to address is that of the status of the Law Society. Until 1974, the Law Society Northem Territory was an association incorporated under the Associations Incorporation Ordinance. On the commencement of the Legal Practitioners Ordinance 1974 the Law Society Northem Territory ceased to be an association. The Law Society Northem Territory became a statutory body. However, it is not, in practice, subject to the various rules that apply to other statutory and regulatory bodies by virtue of specific legislative provisions or by general laws such as the Financial Management Act. There are no statutory controls on the Law Society. In essence, in respect extemal supervision, the Law Society is effectively subject to the personal supervision of the Attorney-General. For example, the Law Society Northem Territory cannot change its constitution without the approval of the AttomeyGeneral. However, the supervisory scheme is weak. There are no formal accountability provisions nor is there any power for any extemal person to investigate the financial affairs of the Law Society Northern Territory. Given that the Law Society Northern Territory is a body with significant statutory powers handling large amounts of money raised by virtue of statutory law it would seem appropriate that the Legal Practitioners Act be amended so that an accountability framework is established in respect of it. Such a framework should include: 1. A requirement to produce an annual report in respect of its statutory functions and the expenditure of monies obtained because of the Legal Practitioners Act. 2. The identification of an external supervisor. The main choices appear to be the Attorney-General or the Registrar of Associations. The latter seems more appropriate. This is the model adopted in respect of the Real Estate Institute of the Northern Territory {which is currently recognised in various ways by the Agents Licensing Ac~. 189 Draft WA NCP Leg~lalive Review (ApnI2002) NORTHERN TERRITORY NCP REPORT 110 Report - National Competition Policy Review - Legal Profession NT 25.7 FINDINGS (INCLUDING ALTERNATIVES) The findings are: 1. There is no need to alter the Legal Practitioners Act in respect of the statutory powers and functions of the Law Society Northern Territory. 2. The amendment of the Legal Practitioners Act so that the Law Society Northern Territory is obliged to provide a budget to the Attorney-General, an audit to the Attorney-General and an annual report to Parliament in respect of its statutory powers and functions and its expenditure of monies raised by virtue of the operation of the Legal Practitioners Act. 3. That the Law Society Northern Territory be deemed to be a body incorporated under the Associations Incorporation Act. NORTHERN TERRITORY NCP REPORT 111 Report - National Competition Policy Review - Legal Profession NT 26 26.1 TRADE PRACTICES ACT 1974 (COMMONWEALTH) ISSUE Much of the impetus for questioning the possible anti-competitive effect of provisions of legislation such as the Legal Practitioners Act stemmed from views of the former Trade Practices Commission l90 concerning the anti-competitive effect of the legislation. Part 9 of the Issues Paper raises the prospect that some provisions in or under the Legal Practitioners Act may offend against the spirit of the Trade Practices Act 1974. 26.2 CURRENT POSITION Part IV of the Trade Practices Act 1974, in its application to the Northern Territory, prohibits a person from engaging in certain anti-competitive practices. The Northern Territory Competition Code is in substantially the same terms as Part IV of the Trade Practices Act 1974. Part IV of the Trade Practices Act 1974 includes the following provisions: • • • Section 45: This prohibits the enforcement of exclusionary provisions, whether or not they are anticompetitive, and arrangements which have the effect of substantially lessening competition; Section 45A: This deems horizontal price fixing to be anti-competITive, subject to some exceptions; and Section 458: This proscribes covenants that have the effect of substantially lessening competition. In the case of price fixing covenants, these prohibitions are absolute. Part IV does not apply to activities which are expressly authorised by Northern Territory statutes. A provision can only provide such an authorisation IT it states that it is an authorisation for the purposes of section 51 of the Trade Practices Act 1974. 26.3 TRADE PRACTICES - QUESTIONS 1. Are there any arrangements under the Legal Practitioners Act that may breach Part IV of the Trade Practices Act 1974 and, if so, what are they? 2. What are the public benefits and what are the costs to the community of any such arrangement? Is there evidence available as to the existence of these benefits and costs? 3. How do the benefits (if any) compare with the costs (if any) of any such arrangement? Is there evidence available as to the relative magnitude of these benefits and costs? Which effects might be decisive in determining whether each such arrangement is in the public interest? 4. If any such arrangement does provide net public benefit, could those benefits be achieved by means that are less anti-competitive? 26.4 26.4.1 SUBMISSIONS AND OTHER COMMENTS Law Society Northern Territory The Law Society Northern Territory states that the Trade Practices Act 1974 does not provide sufficient regulation of the legal profession. It is still necessary to have appropriate professional conduct rules and a self regulating profession if consumers are to be adequately protected. 190 Now the Australian Competition and Consumer Commission NORTHERN TERRITORY NCP REPORT 112 Report· National Competition Policy Review· Legal Profession NT 26.4.2 Others "The legal market in the Northem Territory has a different character than elsewhere in Australia. Isolation generally is a factor. In addition, there is a special commercial difference in that legal practitioners do not generally act as mortgage brokers in the Northern Territory. Travelling practising certificates facilitate competition and reduce the local character of the market. The same process facilitates the dominance of large interstate firms in the Australia-wide market (including the Northem Territory). This occurs because of (a) the connections which the interstate firms have with large entities doing business in the Northern Territory but based interstate and (b) the larger size of the interstate firms enabling them to more easily absorb the cost of entering a new market. It is vital to the reasonable commercial and social expectations of citizens of the Northern Territory that a Northern Territory-based profession be preserved utilising local knowledge and dedicated to the development and observance of Northern Territory laws and appropriate standards of conduct of legal practitioners practising in the Northern Territory. Due weight should be given to these objectives in any legislation seeking to promote competition. By and large, the existing regime serves consumers well. Legislators should recognise this and be cautious about introducing changes unless significant advantages can be demonstratecJ1 91 .' 26.5 DISCUSSION This issue was raised with the view to ascertaining whether the Legal Practitioners Act protects any practices that might otherwise be unlawful. There was no serious suggestion that the Trade Practices Act 1974 could either form the basis of regulation. Nor was it seriously considered that the Trade Practices Act 1974 should not apply to legal practitioners192. The only potential problem identified relates to indemnity insurance. This dealt with in Part 21. There appears to be some possibility that the Act and the Regulations purport to permit arrangements that may be in breach of Part IV of the Trade Practices Act 1974. However, in the absence of the wording contemplated by section 51 of the Trade Practices Act 1974 neither the Act nor the Regulations will operate so as to save the arrangements from Part IV. To the extent that the current arrangements (whereby all legal practitioners are obliged to use the insurer chosen by the Law Society Northern Territory) are potentially in breach of Part IV this is an issue that is only resolvable in the long run by the Law Society Northern Territory obtaining a relevant authorisation under the Trade Practices Act 1974. However, from the point of view of the Northern Territory profession, it seems appropriate that the Law Society, in respect of its members, have the right to bargain on their behalf and that members be bound to use the insurer that has entered into the bargain with the Law Society Northern Territory. Individual legal practitioners can opt out of the scheme by dropping their membership of the Law Society. It can be noted that all legal practitioners who have practising certificates are entitled by virtue of the practising certificate, to membership of the Law Society. Most legal practitioners have taken up this entitlement. However, the Law Society Northern Territory does not have 100% coverage. 191 Want Keller, LawyelS 24 October 2000 192 Noting that the Trade Practices Act 1974 has always applied to legal practitioners in the Northem Territory. Unlike the position in the Australian Slales. NORTHERN TERRITORY NCP REPORT 113 Report· National Competition Policy Review· Legal Profession NT 26.6 FINDINGS (INCLUDING ALTERNATIVES) The finding is that there is nothing in the Act that purports to authorise a breach of Part IV of the Trade Practices Act 1974. NORTHERN TERRITORY NCP REPORT 114 Report· National Competition Policy Review· Legal Profession NT 27 PUBLIC BENEFIT TEST UNDER THE COMPETITION PRINCIPLES AGREEMENT The public benefit test identifies the nature and incidence of the costs and benefits to the community of restricting competition. If the net effects from deregulation are negative, there is a net public benefit for retaining the existing arrangements. The costs and the benefits will be identified following consideration of the responses to the Issues Paper. It is most likely that it will not be possible to quantify in monetary terms the value of these costs and benefits. It is noted that other competition policy reviews for the legal profession in other jurisdictions and similar occupations in and outside the Northern Territory have not attempted such quantification. 27.1 CLAUSE 1(3) OF THE COMPETITION PRINCIPLES AGREEMENT Additionally, as a tool in the application of clause 5(2) of the Competition Principles Agreement, clause 1(3) of that agreement provides as follows: "Without limiting the matters that may be taken into account, where this Agreement calls: (a) for the benefits of a particular policy or course of action to be balanced against the costs of the policy or course of action; or (b) for the merits or appropriateness of a particular policy or course of action to be determined; or (c) for an assessment of the most effective means of achieving a policy objective; the following matters shall, where relevant, be taken into account: (d) government legislation and policies relating to ecologically sustainable development; (e) social welfare and equity consideration, including community service obligations; (f) government legislation and policies relating to matters such as occupational health and safety, industrial relations and access and equity; (g) economic and regional development, including employment and investment growth; (h) the interest of consumers generally or of a class of consumers; (i) the competitiveness of Australian businesses; and Ul the efficient allocation of resources.' NORTHERN TERRITORY NCP REPORT 115 Report - National Competition Policy Review - Legal Profession NT 28 COSTS AND BENEFITS OF LEGISLATION The NSW NCP Report193 noted that the threshold issue to be considered is whether solicitors and barristers should be licensed under a statutory scheme at all. The NSW Report went on to note, in respect of the compulsory licensing of lawyers, and the common standard which is a prerequisite to licensing, that: • The transactions in which lawyers are involved are often significant and in the absence of a formal licensing system, vulnerable clients would be exposed to exploitation. In addition, compulsory licensing enables clients to have access to infonmation about the minimum qualifications and skills of lawyers and the disciplinary system ensures that high ethical and professional standards are maintained by all licensed members of the profession; The role of a lawyer is distinguished by his or her duty as an officer of the court, whose professional obligations are supervised by the Supreme Court. The system of admission by the Supreme Court rests on the established traditions of lawyers adhering to professional and ethical rules, and the courts penmit appearances by admitted lawyers because admission denotes adherence to those rules. In the absence of a statutory admission scheme, the Court would be required to recognise and supervise practitioners by some other means. Lawyers also have established duties to clients and to each-other which are not shared by members of other professional groups; There are some services that cannot be provided by those without legal qualifications. Litigation and court advocacy, which are bound by technical procedural and evidentiary rules, are two examples of such services, and a person who seeks to represent a party and who is not a legal practitioner generally relies on the leave of the court in order to appear. If there were no formal admission clients would have no guarantee that the courts would recognise the right of practitioners to act as advocate on their behalf, unless this issue was dealt with through other statutes or court rules;194 and Further, lawyers hold funds on behalf of clients and the comprehensive statutory regulation of trust accounts and other funds money belonging to clients which are held by lawyers ensures that the public is better protected against incompetence and fraud. • • • However, the NSW NCP report also noted: "... many lawyers rarely practise in areas which require the handling of clients' funds. A less onerous registration system might be appropriate for such practitioners. Altematively, the rules which govern lawyers holding trust accounts and other funds could apply to any person, including non-lawyers, holding funds on behalf of another person, without the need for a comprehensive licensing system which applies to all lawyers. n Potential advantages 28.1.1 General Costs of Regulation Regulation must be assessed for the costs it imposes by way of costs associated with administration compliance and enforcement and costs associated with detrimental effects of regulation on competition and hence on economic efficiency.195 Additionally, there are the costs of a maintaining practising certificate (including the professional indemnity insurance premium). These costs could impact on National Competition Polic; Review of the Legal Profession Act 1987, NSW Attorney General's Department Report, November 1998. However, nole that Ihere are reports that the Australian Taxation Office is seeking thaI some of its expert officers have the right 10 represent, in oourts, the Commonwealth in respect 01 laxation matters. '" FreehUl, Regulalory GrouP. Issue, Paper for !he Oepartmenl of Justice (Vic) on !he NCP Review of Privale Agenls legislalion. al page 12. 1!r3 1!M NORTliERN TERRITORY NCP REPORT 116 Report· National Competition Policy Review· Legal Profession NT competition H they are sufficient to dissuade participation in the market for legal services or are substantial and passed on to consumers as an element of the price charged for legal services. In respect of occupational regulation the costs consist of: • • • • • Entry costs for persons who want to enter the occupational group; Compliance costs for those who are regulated; Costs to the public particularly in the form of the higher cost of services; Costs for govemment arising from the administration of the regulatory system 196; and Economic costs in terms of distortions on competition. Restrictions on admission andlor practice could affect the ratio of the supply of practitioners to the demand for practitioners. Variations in this ratio could have an effect on the price of legal services. Competition policy reviews are only concemed with the provisions that materially restrict competition and not those who impose only insubstantial costs on participants. 197 The Freehills Regulatory Group,l98 identnied the following impacts that flow from occupational regulation: • • • • • • Point of entry controls which restrict supply· may be a resultant increase in the price of services; Inhibition of innovation through lack of service differentiation or lack of technological advancement; Conduct prescriptions may limit the way service providers compete in terms of price, service, technology andlor quality; Prescriptions on standards and conduct may impede the ability of the occupation to respond to changes in the industry; Prescribed training standards may impede the ability of training providers to respond to the changing needs of industry; Functional separation on an industry which limits the functions that can be performed by lesser trained persons. This can be a competitive restriction which leads to an increase in the cost of the service; and Lack of consistency and transparency in the administration of an Act may result in restrictions on competition - ego where an Act gives the regulator large discretions. General benefits of regulation • 28.1.2 Benefits of occupational regulation may consist of: • • • • • • Benefit for the group in having a better image; Benefit for the group by improving their competitive posilion conceming the others who are not regulated with some elements of monopoly; Benefit to the public by reducing risks to health and safety; Reducing financial risks for members of the public; Reducing risks resulting from lack of information; and Reducing risks of dishonest or inappropriate behaviour. 199 '" Freehil~ Regulalory Group, Issues Peper for lIle Department 01 Justice (V~) on lIle Nep Review of Privale Agenls Legislation, at page 12. '" Freehi~ Regulalory Group, Issuas Paper lor Ihe Department 01 Justice (V~) 00 Ihe Nep Review of Privale Agenls Legislation, at page 11. '" Freehil~ Regula10ry Group. Issues Paper lor Ihe Dopartmenl of Justice (V~) 00 Ihe Nep Review 01 Privale Agenls Legislation, at page 11. NOATHERN TERRITORY Nep REPORT 117 Report - National Competition Policy Review - Legal Profession NT 29 DESCRIPTION OF ALTERNATIVE REGULATORY MODELS Even if the regulatory (licensing) restrictions in the Legal Practitioners Act can be justified in the public interest as producing a net public benefit, there is an expectation that they will be removed if the policy objectives could be achieved by other less intrusive means. There are various other general regulatory options that may be available. They include: 1. Self-regulation - This involves the affected occupation formulating rules and codes of conduct, with industry being responsible for enforcement. Such rules and codes of conduct would not be dependent on statute; 2. Quasi-regulation - This involves government supported or endorsed codes of practice. Such codes are possible under Sections 238-243 of the Consumer Affairs and Fair Trading Act. In essence, under those provisions, industry has a code of practice endorsed by Government. Breaches of the Code can be dealt with by injunction-like action taken by the Commissioner of Consumer Affairs. Other codes may not have the same legislative support. Such a code will exist under the Legal Practitioners Act in respect of the Law Society's professional rules of conduct; 3. Co-regulation - Effectively this is a regulatory system whereby legislatively based controls are given to industry organisations (w~h some degree of government andlor client/consumer participation). In many ways the Legal Practitioners Act reflects the co-regulatory model; and 4. Explicit Government rule based regulation/negative licensing - This involves the legislation containing prescriptive rules w~h the breaches of the rules constituting offences that can be subject to prosecution in the courts. These rules can include rules that might be that the practitioners have to notify a government agency or industry association of the fact that they are practising the occupation. Equally a rule could be that a person may not practise unless he or she has a particular qualification. One of the penalties for breach could be disqualification. Additionally, specific alternate models are being developed in relation to certain professions and occupations. They aim to replace in whole or in part some of the rationale for the detailed regulatory provisions contained in legislation such as the Legal Practitioners Act. One such scheme is that set up under the professional standards legislation in place in Western Australia and New South Wales. The New South Wales Professional Standards Act 1994 provides for the Professional Standards Council to register schemes developed by occupational groups. Once a scheme has been approved by the Council, it operates to limit the liability of members of the relevant body who adhere to the rules of the scheme. Schemes cover matters such as professional indemnity insurance, risk management, complaints and disciplinary mechanisms, and professional rules. The establishment of a scheme may act as a substitute for Government regulation of an occupational group that has comprehensive self-regulation of its members. The Institute of Chartered Accountants and the Australian Society of Certified Practising Accountants adhere to a common scheme that has been approved by the Council. The New South Wales Law Society has also established a scheme with the approval of the Council. 199 Freehil~ Regulatory Group. Issues Paper for Ihe Departmenl of Justice (Vic) on Ihe NCP Review 01 Private Agenls Legislalion. page 13. Victorian Regulation Review Unit and Law Reform Commission, 1988, Prindples of Occupational Regulation. NORTHERN TERRITORY NCP REPORT 118 Report· National Competition Policy Review· Legal Profession NT 29.1 29.1.1 SUBMISSIONS AND COMMENTS Law Society Northern Territory The Law Society Northern Territory stated: 'Due to the limited resources available to the Law Society Northern Territory and the period of time that it had available to it to respond to (the issues paper) ... it has been unable to conduct any surveys to establish the impact upon the economy of the Northern Territory of the requirement that in order to practice as a legal practitioner a person is required to comply with the provisions of the Legal Practitioners Act; For similar reasons it says: 'the Law Society is unable to provide evidence of the relative magnitude of benefits as against the costs of the administration of the legal profession by the operation of the Legal Practitioners Act. However, the sole purpose of the Legal Practitioners Act is to ensure a regulated profession meets particular standards of practice and is able to discharge its responsibilities in the course of the administration of justice while being accountable to members of the public ... The costs of regulation are bome almost entirely by the profession itself and access to the system of complaints by any member of the public is fee of charge. Consequently as the Legal Practitioners Act is designed to protect the members of the public and to promote the administration of justice coupled with the fact that the cost of administration of justice is almost entirely borne by the profession itself the net result is that the statutory recognition of, and statutory powers given to, the Law Society provide a net public benefit. "200 29.2 DISCUSSION No additional discussion. 29.3 FINDINGS (INCLUDING ALTERNATIVES) No additional findings. ,., See law Sociely Northem Territory Submission. 25 October 2000. page 49·50 NORTHERN TERRITORY NCP REPORT 119 Report· National Competition Policy Review· Legal Profession NT 30 MARKET FAILURE The Review is required by its terms of reference to identify any issues of market failure which need to be, or are being addressed by the legislation. Concerns have been expressed that the market may not deliver indemnity insurance coverage to all legal practitioners unless the right to cover some legal practitioners is linked to an obligation to cover all of them. There would be patent problems if there were to be such a failure whilst, at the same time, there is a retention of the requirement that all private legal practitioners must have indemnity insurance. Effectively, the absence of insurance might force a practitioner out of business. On the basis that the objective of the legislation is that consumers be able to deal with legal practitioners safe in the knowledge that they have indemnity insurance any legislative scheme would be defective to the extent that ~ failed to provide for universal coverage. The only apparent tool for achieving this is that any insurance company providing indemnity insurance in the Northern Territory be obliged to provide it to all practitioners at a price commensurate to the risk. A failure to do this would be an offence. In the event of dispute about the price there would need to be recourse to some independent third party. There is some doubt whether, over time, this position is sustainable. It is one that is heavily dependent on the regulatory system ensuring that only competent legal practitioners have practising certificates. The Tasmanian Regulatory Impact Statement contained the view that that the market would tend to operate imperfectly in this field, mainly because it would not provide for universality of cover. 201 30.1 QUESTIONS Are there any market failures that are remedied by the legislation? 30.2 SUBMISSIONS AND COMMENTS No submissions were made. 30.3 DISCUSSION No market failures have been identified other than those discussed in respect of the particular restrictions identified in the paper, 201 [Tasmania] NaUonaI Competition PoIi:y LegisIa~on Review Legal Profession Act 1993 regulalDfy ImpaclSlatement- April 2001, page 59 [part 6.91 NORTHERN TERRITORY NCP REPORT 120 Report - National Competition Policy Review - Legal Profession NT 31 APPENDIX 1 - TABLES SETTING OUT ANTI-COMPETITIVE PROVISIONS These tenns, "trivial", "minor" and "substantial" are taken to have the following meanings: Term Trivial MeaninQ A trivial restriction is one that may look as if it could have some impact on competition but, for all practical purposes, appears to have no actual impact. Such trivial restrictions will not be analysed in detail. A minor restriction is one that may have some actual minor impact on competition. Such restrictions will be analysed. A substantial restriction is one that may have a major impact on competition. Even if the actual impact appears minimal such restrictions will, nonetheless, be subjected to analysis Minor Significant S 7 provides for the the Law Society, gives certain people a statutory right of membership and provides that changes of the constitution must be approved by the Attorney-General. to some finns over other by, for example, shielding some activities from pressures of competition. This method of establishing the Law Society effectively creates a professional representative association as a statutory body wnh some of the controls and benefits ordinarily applicable to government agencies but without the extemal accountability mechanisms in place for govemment agencies - that is, it is assumed that the Financial Management Act does not apply. Other accountability Acts, such as the Corporations Act 2001 and the Associations Incorporation Act do not apply. That are some doubts as to whether this is an NCP issue. However, similar points have been addressed in the WA NCP review of the WA Legal Practitioners Act 1893 and in the Northern Territory Agents Licensing Act (concerning the statutory privileges given to the REINT) NORTHERN TERRITORY NCP REPORT 121 Report - National Competition Policy Review - Legal Profession NT S.B creates the Legal Practitioners Admission Board. The Board is comprised of the Master of the Court and 6 lawyers appointed by the Chief Justice. The function of the Board, as contained in S 13, is to provide advice to the Supreme Court as to whether a person seeking to become a legal practitioner is of good fame and character, a fit and proper person to practise, has completed the academic requirements and has complied with the practical requirements. Governs the entry or exit of firms or individuals into or out of markets. Is likely to confer significant costs on business. Trivial The query is as whether the Board should comprise only of legal practitioners - with 6 of the 7 being appointed by the Chief Justice. Unlike other licensing schemes there are no consumer representatives and there are no appointees of executive government. It should, however be noted that the Board has a limited role in determining applications made under the Mutual Recognition Act 1992 and the Trans Tasman Mutual Recognition Act 1997. It should be noted that the Board merely advises the Court as to whether or not a person should be admitted see S13 of the Legal Practitioners Act. Significant The Judges supervise lawyers because they rely on lawyers in the courts to behave in certain ways. This supervisory role is based in history. It is not obvious why the Judges should make rules that govern lawyers in fields that have only the most minimal of connection with the Courts. S 11 (1) gives the Judges of the Supreme Court the power to make rules that govern qualifications etc. for admission to practise and for articles of clerkship. S 11 (1 A) and (1 B) provide that the Judges of the Supreme Court can make rules in relation to and incidental to persons seeking admission under the Mutual Recognition Act 1992 or the TransTasman Mutual Recognition Act 1997. Governs the entry or exit of firms or individuals into or out of markets. Restricts the quality, level or location of goods and services available. Is likely to confer significant costs on business. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition. S 13 sets out the powers and functions of the Admissions Board. These are discussed in the commentary on S B. - Minor It is not plain as to why the power to make the admission decision should not rest with the Board rather than with the Supreme Court. However, the symbolism of admission by the Court may be significant in giving legal NORTHERN TERRITORY NCP REPORT 122 Report· National Competition Policy Review· Legal Profession NT practitioners an understanding that they are part of a profession. Significant The fees are paid to the Law Society Northern Territory notwithstanding that the licensing process is largely funded by Government. Minor Most occupations whose entry processes are up to some form of public scrutiny would permit members of the general public to object to the entry of a person into the occupation. Minor This is connected to section gOA which, when read with Section 85, means that Counsel are not obliged to contribute to the Fidelity Fund. S 14A provides for the fees that are payable on admission. The fees are set by the Administrator by way of regulation with the fees being paid to the Law Society. S 15 gives the Law Society Northern Territory a right to object to a person's admission. Is likely to confer significant costs on business. Governs the entry or exit of firms or individuals into or out of markets. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition. S 16 makes it a criminal offence for a Governs the entry or exit of person whose name is entered on the firms or individuals into or out Roll as ·Counsel' to otherwise than of markets. as an independent barrister. The maximum penalty is 50 penalty units Restricts the quality, level or (current $5,000202). location of goods and services available. Restricts price or type of input used in the production process. Is likely to confer significant costs on business. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. S 18 provides that a legal practitioner is an officer of the Court and is subject to the inherent jurisdiction of the Court. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition. S 19 orovides that subiect to the Act Is likelv to confer sianificant Significant This places legal practitioners in some parts of the profession under supervisory controls not faced by members of other professions carrying out the same tasks (eg the provision of taxation advice by accountants). Minor 202 This will be $5500 following the enactment and commencement ollhe Penalties Amendment Bill 2002. NORTHERN TERRITORY NCP REPORT 123 Report· National Competition Policy Review· Legal Profession NT a person whose name is on the Roll as a barrister or solicitor, as a barrister or as a solicitor and has a right of audience in any court of the Territory. costs on business. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition. This gives legal practitioners an advantage over all others who may wish to represent someone in Court. For other persons they could, regardless of qualifications, only perform this function with the consent of the Court. However, this provision merely backs up provisions contained in rules of court Minor This may be anti-competitive because it gives some legal pracmioners, in some parts of the legal profession, status over other legal practitioners in circumstances where the honour given is not necessarily based on merit. S 20 provides for the appointment of Queen's Counsel. A fee is paid to the Northern Territory. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. Effectively, it is a Government supported mechanism for providing a merit 'qualification'. S 22(1) provides that a person must Governs the entry or exit of Significant not practise in the Territory as a legal firms or individuals into or out This section needs to be read practitioner unless he or she holds an of markets. with section 25 (which sets appropriate practising certificate. out the basis upon which Restricts the quality, level or practising certificates are location of goods and services issued). Practical training is available. training or experience required after completion of Restricts price or type of input an academic course in law. It used in the production process. is a prerequisite for admission and the issue of a provides advantages to some practising certificate of one kind or another. firms over other by, for example, shielding some A person must, in the vast activities from pressures of majority of cases, complete a competition. course of practical training prior to being admitted as a Is likely to confer significant legal practitioner. Such costs on business. training can be on the job (as an articled clerk) or by way of completing a course at one or other of Australia's practical legal training colleges. There is no such college in the Northern Territory. Most NORTHERN TERRITORY NCP REPORT 124 Report - National Competition Policy Review - Legal Profession NT Northem Territory trained lawyers who obtain their inttial admission in the Northem Termory complete articles. This clause is part of an elaborate mechanism for ensuring that regulatory fees are paid and that there is compliance with various regulatory requirements (eg payment of indemnity insurance). Significant This can adversely affect communtty or special purpose legal aid organisations. S 22(38). This subsection, when read Govems the entry or extt of wtth section 23(1) means that a firms or individuals into or out person cannot practise as a legal of markets. practitioner when working for another person unless that person performs Restricts the quality, level or prescribed functions. location of goods and services available. Restricts price or type of input used in the production process. Provides advantages to some firms over others by, for example, shielding some activtties from pressures of competition. Restricts the quality, level or location of goods and services available. Restricts price or type of input used in the production process. Is likely to confer significant costs on business. Provides advantages to some firms over others by, for example, shielding some activtties from pressures of competition. See discussion of S 23. S 22(4) provides that a legal practitioner cannot recover fees unless he or she has an appropriate practising certificate. Significant S 23 provides that applications for practising certificate are made to the Law Society. S 24 provides for the issue of practising certificates by the Law See discussion of S 23. Govems the entry or exit of firms or individuals into or out Minor Effectively an occupational NOATHERN TERRITORY NCP REPORT 125 Report - National Competition Policy Review - Legal Profession NT Society. of. Is likely to confer significant costs on business. body controls who mayor not practise the profession of the law in the Northern Territory. However, the impact appears very minor because the rules for the issue of a practising certificate are very precise and prescriptive. This issue (namely the fact that the industry body issues the practising certificates) will not be taken any further. The real issue is the basis on which the certificates are issued. S 25 limits the circumstances in which the Law Society can issue practising certificates. These restrictions relate to the need to have practised for certain periods of time during the period leading up to the application for the practising certificate. Governs the entry or exit of firms or individuals into or out of markets. Significant Effectively this section means that a person must maintain consistency of apparent employment as a legal practitioner. The assumption that the fact of practise indicates a maintaining of professional qualifications may not be soundly based. Significant It is not clear, in the legislation, how this requirement is related to the academic requirements, (S 11) and the practice requirements (S 25). Significant S 26 provides that a person cannot be issued an unrestricted practising certificate unless the Law Society is satisfied that he or she has an adequate knowledge of accounts and legal ethics. Governs the entry or exit of firms or individuals into or out of markets. Is likely to confer significant costs on business. S 27 provides various grounds on Is likely to confer significant which the Law Society may refuse to costs on business. issue or may refuse to grant or my cancel a practising certificate. These include that the applicant is in gaol or has been found guilty of certain offences (eg. Crimes and offences involving dishonesty), bankruptcy, failure to comply with Act or rules and regulations under the Act. One of the grounds is a broad discretionary Qround (see S 27(1)(k)). Restricts the quality, level or S 27A prohibits the issue of a practising certificate if the applicant location of goods and services cannot produce evidence of having available. any indemnity insurance that may be Significant This may be a significant problem. Effectively, the Government is setting the NORTHERN TERRITORY NCP REPORT 126 Report· National Competition Policy Review· Legal Profession NT required by the Regulations made under the Act. Restricts price or type of input used in the production process. Is likely to confer significant costs on business. terms for insurance. There is no requirement that those terms be set having regard to the level of risk that may be faced by any particular legal practitioner. In fact the converse occurs. All legal practitioners within a particular class pay the same insurance premium. Minor The fees are prescribed. The basis for the calculation of the fees is not set out in the Act or the Regulations. The other rules that govern the setting of the "fees" are common law rules conceming what is a "fee". In brief the "fee" must not be a tax • it must be relatable to the services that are provided. In this case it is noted that in 1999 these practising fees constituted most of the income 01 the Law Society Northem Terrnory. This funded all of the activities of the Law Society Northem Terrnory not just those that may be characterised as "regulatory". Minor This is a normal attribute of a licensing scheme. The need, however, for the two notices miaht be auestionable. This issue will be taken up in the discussion of Sections 32, 90B and 101 A. S 32 provides for fees to be paid for practising certificates. The fees are payable to the Law Society Northem Territory. Is likely to confer significant costs on business. S 33A provides a requirement to advise both the Law Society Northem Territory and the Master of the Supreme Court of changes of address, and emolovment. S 34 provides a prohibition on Law Society issuing a practising certificate unless the applicant has compiled with the requirement to pay application fees (S 32), Fidelity Fund contribution (S 90B) and any relevant levv. S 35B provides a requirement to pay indemnity insurance (needs to be read in conjunction with the Legal Practitioners (ProfessionallndemnHy Insurance) Regulations. Similarly for interstate leaal oractitioners (S 134Ll, Is likely to confer significant costs on business. N/A Is likely to confer significant costs on business. Restricts the quality, level or location of goods and services available. Significant NORTHERN TERRITORY NCP REPORT 127 Report - National Competition Policy Review - Legal Profession NT foreign registered legal practitioners (S 135W). S 43-45A are provisions dealing with professional misconduct. S. 44 sets out general principles of behaviour. S. 45A provides for the making of further prescriptive rules by the Law Society. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. Controls prices or production levels. Restricts the quality, level or location of goods and services available. Restricts advertising and promotional opportunities. Restricts price or type of input used in the production process. Is likely to confer significant costs on business. Significant It might be thought that the imposition onto the legal profession of rules that ought to be left to the client and the service provider to sort out between themselves should be subject to ordinary laws. Thus, for example, the Consumer and Fair Trading Act might regulate "excessive charging" or the Courts might have responsibility for regulating the behaviour of legal practitioners in or in respect of court proceedings. Arguably, members of the legal professional are under greater disciplinary control than others (eg accountants) who compete in certain areas of advice. Significant. The disciplinary process involves can complaints, the Law Society, the Supreme Court, the Legal Practitioners Complaints Committee, the Attomey-General. Any of three bodies (Law Society, the Supreme Court, the Legal Practitioners Complaints Committee) may hold inquiries and impose penalties. The processes may involve costs in terms of money and time to the profession, the community and clients that outweigh the value of the benefits. S 46-52A provide for disciplinary processes. Is likely to confer significant costs on business. NORTHERN TERRITORY NCP REPORT 128 Report - National Competition Policy Review - Legal Profession NT S 54 provides joint and several liability of partners in relation to obligations concerning trust account records, audit and deposits with the Trust Committee. Is likely to confer significant costs on business. Significant However, it may be that this issue is outside the scope of the review - excepting to the extent that the policy reason for the section is the same as that relating to the limitations on ownership and control of legal practise companiessee discussion of the Legal Practitioners (Incorporation) Act. [cf Partnership Ac~. S 55-60 provide requirements concerning the opening and operation of trust accounts. Similarly for foreign registered legal practitioners (S 135X). S 63-65 requirements concerning records (trust monies). S 66-67-78 provides the requirement for annual audits. s.68 sets out the qualifications of auditors of legal practitioners trust accounts Is likely to confer significant costs on business. Significant Is likely to confer significant costs on business. Is likely to confer significant costs on business. Is likely to confer significant costs on business Significant Significant Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition S 69 provide a requirement to comply Is likely to confer significant wHh the requirements of auditors costs on business. »> S.70,71 and 72 Duties on the auditor Is likely to confer significant to provides reports in prescribed form costs on business. to legal practitioners and to the Master. There is also a requirement to provide interim reports if nappears that there has been some kind of deficiency or loss. S.75 Trust monies examiners Is likely to confer significant appointed by the costs on business. Supreme Court - including the payments of the costs incurred by the examiner. S 79-84 provide for the requirement Is likely to confer significant to deposit portion of trust mon ies with costs on business. the Leaal Practitioners' Trust Significant Significant Other regulatory schemes have developed more NORTHERN TERRITORY NCP REPORT 129 Report - National Competition Policy Review - Legal Profession NT Committee. Establishment by the Trust Committee of an account to hold these monies S.84A -provides that the income obtained by the Trust Committee is paid to the Fidelity Fund (which covers defalcations). The Trust Committee may, with the approval of the Attorney-General, pay half of the investment income for legal aid or the promotion of legal education and research. S. 86 - 88 provide for the establishment of a Fidelity Fund Committee that administers the Fidelity Fund (referred to in section 89) S 89 provides for the establishment Is likely to confer significant of Fidelity Fund (separate fund to the costs on business. account in which trust monies' deposits are held). S 89A provides that the Fidelity Fund Is likely to confer significant Committee may allocate monies from costs on business. the Fidelity Fund for the purposes of legal aid schemes and to assist and promote legal education and legal research. In any event no further allocations can be made (the final date for the making of such payments was 12 January 1996). efficient ways of achieving the objectives of these provisions. Significant S 90A and 90B provide for an obligation to annually contribute to the Fidelity Fund (if an amount is fixed by the Fidelity Fund Committee). Barristers, including interstate barristers, are not obliged to contribute to the Fund. See S 85 (definition of 'legal practitioner'). S.91 - 100 provide for payments of compensation from the Fidelity Fund following declarations by legal Is likely to confer significant costs on business. Significant It does not seem fair that one section of the profession (namely persons other than Counsel and government lawyers) should be liable to make contributions to legal aid (though in fact the contributions from the pockets of individual legal practitioners are very minor). Most of the Fund's income is derived from interest on client's monies. Significant Claims against the Fund can only be made in respect of pecuniary losses arising from defalcations in trust monies. This narrow basis of claim is presumably the reason why barristers are not required to contribute. NORTHERN TERRITORY NCP REPORT 130 Report· National Competition Policy Review· Legal Profession NT jJractitioners S 101 and 101A provide for the obligation to pay levies (up to $1500) if the Fund is unable to meet liabilities. S.101 C - 101 N provides for the appointment of managers by the Law Society Northem Territory. S 102·118 the Court may appoint receivers of a practice. Is likely to confer significant costs on business. Minor Is likely to confer significant costs on business. S 119 provides a prohibition on instituting proceedings to recover costs and disbursements unless an appropriately itemised account has been rendered. S 120 - 130 provide for the right of clients to seek to have bills of costs reviewed (taxed) by the Master of the Supreme Court (except where there is an agreement (S 129) which agreement has not been set aside for being not fair or not reasonable (S 130). In determining what are fair and reasonable costs for an act, the Master of the Supreme Court can take into account "the amount, if any, recommended by the Law Society as the appropriate charge for doing that act" (S 123(2)). Is likely to confer significant costs on business. Significant These costs may be incurred Ha receiver is appointed in circumstances where, for other kinds of businesses, a receiver might not be appointed. SignHicant Is likely to confer significant costs on business. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. Controls prices or production levels. Restricts the quality, level or location of goods and services available. Restricts advertising and promotional opportunities. SignHicant Disadvantages some lawyers who are competing with others (eg accountants) in providing certain advice services. S 131 provides a prohibition on non lawyers from holding out as being a lawyer. Govems the entry or exit of firms or individuals into or out of markets. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets Signmcant NORTHERN TERRrrORY NCP REPORT 131 Report - National Competition Policy Review - Legal Profession NT S 132-133 provides restrictions on non lawyers preparing wills, probate documents and agreements regulating property rights (but operates subject to licensed conveyancing agents - Agents Licensing AcQ. Governs the entry or exit of firms or individuals into or out of markets. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. See S 22. Significant S 134F imposes on interstate legal practitioners the same rules concerning practising certificates as apply to local legal practitioners - see S 22. S 134G provides that interstate legal practitioners may practise law in the Northern Territory on the same terms and conditions as the interstate legal practitioners may practise in the jurisdiction in which he or she has a practising certificate. Additionally, interstate legal practitioners who are "barristers" are subject to the same restriction contained in S 16. S 134J provides the requirements that must be met by interstate legal practitioners who practise in the Northern Territory. See S 22. The same restrictions apply as apply to Northern Territory local legal practitioners. The discussions of those restrictions will be taken to apply to interstate legal practitioners. Minor This is minor in the sense that the section simply applies to interstate legal practitioners the same rules as apply to legal practitioners. Is likely to confer significant costs on business. S 134K imposes on interstate legal practitioners the obligation to advise the Law Society of changes in particulars. S 134L imposes on interstate legal Is likely to confer significant costs on business. Minor The section imposes notification requirements. The requirements are minimal compared to the alternate requirements for obtaining a right to practice. However, it could be argued that the notification requirements could be reduced if the right to practice in the Northern Territory was a consequence of simply having an appropriate interstate practising certificate or some kind of national accreditation. Minor. Is likely to confer significant Significant NORTHERN TERRITORY NCP REPORT 132 Report - National Competition Policy Review - Legal Profession NT practitioners the need to have appropriate indemnity insurance. S 134M imposes on interstate legal practitioners the need to comply with the trust moneys and Fidelity Fund provisions. costs on business. This issue will be covered in the discussion of Sections 35A·35B. Significant This issue will be covered in the discussion of Sections 53-75. Such a discussion will need to consider whether there is any unnecessary duplication between the Northern Territory and the interstate Acts. Significant Is likely to confer significant costs on business. S 134N imposes on local legal practitioners the duty to have indemnity insurance in respect of activities for Northem Territory clients in places outside of the Northem Territory. S 134Q·134V provide for the application of local and interstate disciplinary processes concerning legal practitioners who are practising the profession of the law under cover of an interstate practising certificate. S 135C -135F restriction on non Northem Territory legal practitioners practiSing foreign law unless registered by the Law Society. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Significant Governs the entry or exit of firms or individuals into or out of markets. Restricts the quality, level or location of goods and services available. Restricts price or type of input used in the production process. Is likely to confer significant costs on business. Significant Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. Is likely to confer significant S 135E and S 135J place an obligation on foreign lawyers to pay a costs on business. registration fee and an annual fee. S 135G power of the Law Society to Is likely to confer significant impose conditions on the registration costs on business. Minor Significant NORTHERN TERRITORY NCP REPORT 133 Report· National Competition Policy Review· Legal Profession NT of persons practising foreign law. S 135K imposes an obligation on foreign lawyers to advise the Law Society of changes in particulars. S 135L provides the circumstances where the registration of a foreign lawyer may be cancelled. S 135N defines the scope of practice of foreign lawyers. S 135P prescribes the legal form under which a foreign lawyer can carry on business. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Restricts the quality, level or location of goods and services available. Governs the entry or exit of firms or individuals into or out of markets. Is likely to confer significant costs on business. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. Restricts the quality, level or location of goods and services available. Is likely to confer significant costs on business. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Restricts advertising and promotional opportunities. Is likely to confer significant costs on business. Minor Significant Significant Significant S 135Q imposes on foreign lawyers the same professional conduct rules as apply to legal practitioners. Significant S 135R imposes applies the disciplinary procedures to foreign lawyers. S 135S and S 135T impose controls concerning the use of letter head and designations. Significant Minor S 135U imposes controls on advertising. The Law Society may impose restrictions and the foreign Significant NORTHERN TERRITORY NCP REPORT 134 Report - National Competition Policy Review - Legal Profession NT lawyer must also comply with whatever restrictions are imposed in the foreign country whose law they are practising. Restricts advertising and promotional opportunities. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. S 13SV restriction on domestic lawyer Governs the entry or exit of practising domestic law if employed firms or individuals into or out by a registered foreign lawyer. of markets. Restricts the quality, level or location of goods and services available. Is likely to confer significant costs on business. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. S 13SW imposes onto foreign lawyers the requirement to hold indemnity insurance. S 136 imposes a restriction on sharing profits with non lawyers (unless family). Is likely to confer significant costs on business. Significant See discussion in relation to Sections 3SA-3SB. Governs the entry or exit of firms or individuals into or out of markets. Provides advantages to some firms over others by, for example, shielding some activities from pressures of competition of firms or individuals into or out of markets. Governs the entry or exit of firms or individuals into or out of markets. Restricts price or type of input used in the production process. Significant S 137 places a prohibition on employing former legal practitioners (except with the consent of the Master of the Supreme Court). Significant NORTHERN TERRITORY NCP REPORT 135 Report - National Competition Policy Review - Legal Profession NT S 137A places an imposition on legal practitioners to produce evidence to Courts and Tribunals that they have a right to practice. S 140A places an imposition on the Law Society of a duty to maintain a register of legal practitioners and foreign lawyers. Description of the restriction Is likely to confer significant costs on business. Minor Is likely to confer significant costs on business. Minor Competition or economic effects Severity of the restriction and prellmlPary comment Law Society Public Purposes Trust Act S. 3(1) provides that the Law Society Northern Territory may enter into arrangements with financial institutions whereby the financial institutions pay to the Law Society amounts equivalent to the interest that would have been paid on trust monies held by legal practitioners. Provides advantages to some firms over other by, for example, shielding some activities from pressures of competition. Minor. Is likely to confer significant costs on business S. 3(2) provides that the interest paid to the Law Society Northern Territory is to be held in trust in accordance with the Deed of Trust set out in the schedule to the Law Society Public Purposes Trust Act Legal Practitioners Rules costs on persons to take oath or affirmation prior to being admitted to practice and to also sign the roll. Persons admitted under the mutual recognition principles may take the oath in the of admission. R 7 sets out the requirements for admission. Effectively, a court action has to be commenced. R 8 sets out that applications for admission are considered and determined the Court. business. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Significant Significant NORTHERN TERRITORY NCP REPORT 136 Report - National Competition Policy Review - Legal Profession NT R 10 sets out the academic for admission of Australian practitioners. R 11 sets out the practical requirements for admission. R 12 sets out the academic and practical requirements for persons from New Zealand seeking admission. R 16-19 sets out the academic and practical requirements for persons from places other than Australia or New Zealand. Such a person must satisfy the Court that they have sufficient command of the English language to practise as a legal practitioner of the Supreme Court. R 20 provides that the Admissions Board must report to the Supreme Court on applications for admission. A copy of such a report must be provided to the applicant for admission. R 21 provides that the Law Society may object to the admission of a person and that it may be heard by the Supreme Court in the hearing of the application. R 22 provides for the entry into articles of clerkship. Rules 23-30 set out various prescriptions conceming articles. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Is likely to confer significant costs on business. Significant Significant Significant Is likely to confer significant costs on business. Trivial Is likely to confer significant costs on business. Trivial Is likely to confer significant costs on business. Trivial Is likely to confer significant costs on business. Significant Legal Practitioners Regulations Regulation 2 sets the prescribed fee for the purposes of section 20(3) of the Legal Practitioners Act as $500. (fee relates to a person's appointment as a Queens r:nllln<,,1 Regulation 2A sets out the functions that can be performed n"r