Aussie Rules for Lawyers

I recently migrated to Sydney, Australia with my Australian-born wife and our three children. Australia’s remote location seems to allow a freedom to experiment without the pressure to conform to U.S. or European norms that one experiences in a country like Canada. Or perhaps Australia is simply, as a friend calls it, a “nation of iconoclasts”. In any event, I have observed over the years that regulatory change related to the legal profession in the common law world begins in Australia and then moves around the globe, first to the UK, and finally to North America. As a newly arrived Canadian, I am by no means an expert on the Australian legal system. However, here are some of the features that I’ve observed so far.

Diploma in Law. It is possible (though not common) to become a lawyer in Australia without ever obtaining a university degree. The Legal Profession Admission Board offers the diploma in law path to people with various qualifications, including those who hold a college diploma, who have worked as a legal secretary or paralegal for at least three years, and who have worked as a registered nurse or police officer. These mature students typically attend evening or weekend classes while working full-time and take four years or more to obtain the diploma. The trade-off for improved access to a legal education is a high attrition rate.

Incorporated legal practices. New South Wales allows incorporated legal practices (“ILPs”) and has done so since 1991. Responsibility for managing the legal services of the ILP falls with an employee called the legal practitioner director. Unlike in Canada, there are no requirements that shareholders be lawyers or their family members. This is important because outside equity investment is often necessary to raise the money required for large capital expenditures. Two law firms, Slater & Gordon and Integrated Legal Holdings, have listed publicly. University of Melbourne academic Dr. Christine Parker has written extensively about incorporated legal practices. 

Multi-disciplinary practices. Lawyers are permitted to enter into multi-disciplinary practices with non-lawyers and these business arrangements can take the form of partnerships (MDPs) or corporations (ILPs).

“Co-regulatory” model. In New South Wales, lawyers are no longer self-governing and they share power using a co-regulatory model. An independent statutory authority called the Legal Services Commissioner oversees the Council of the Law Society (solicitors) and the Council of the Bar Association (barristers). The Legal Services Commissioner receives complaints and shares the power to investigate complaints with the Council of the Law Society and the Council of the Bar Association. 

You can see the influence of a consumer protection approach in the cost disclosure requirements. Lawyers must make written disclosure of a wide range of matters relating to the cost of legal services shortly after being retained, such as the basis on which legal costs are calculated and a range of estimates of total legal costs. There is compulsory mediation of consumer disputes when required by the Legal Services Commissioner. 

National regulation. The Council of Australian Governments (“COAG”) is an intergovernmental forum that exists to implement national policy reforms. COAG is working toward achieving national regulation of the legal profession to facilitate a national legal services market. This involves implementing the co-regulatory model at the federal level. A National Legal Services Board will oversee admissions and licensing and will set the national rules. A National Legal Services Ombudsman will regulate the profession, together with disciplinary tribunals and Supreme Courts. There will be a single practising certificate for the entire country. Of course, this is easier to achieve when you don’t have two different legal traditions (civil law and common law) to contend with. 

Unauthorized practice of law. There are prohibitions on engaging in legal practice when not entitled to do so, but these appear to have significant exceptions. For example, licensed conveyancers, who are not lawyers, do residential conveyancing in several states. Unlike in the U.S., there don’t appear to be any concerns that software providing situation-specific legal guidance will be held to be engaged in the unauthorized practice of law.

Barriers to Innovation. As proof that no country is without its quirks, New South Wales prohibits contingency fee arrangements and bans most advertising related to personal injury legal services. Finally, the trust accounting obligations are simply too onerous for a lawyer who wants to experiment with small scale transactions; for example, by setting up a simple virtual law practice and charging clients in advance by credit card. Canadian and American regulators provide exemptions from trust accounting requirements in these situations because the amounts involved are so small.

Results. Australia’s experience demonstrates that legal professional rules that act as a drag on innovation are not set in stone: they can be changed. Perhaps no country has moved as far in this direction as Australia.

At the same time, not all marriages of law and entrepreneurship will be successful. eCommLegal Pty Ltd., the Commonwealth Bank’s online law firm, was established to provide estate planning to its customers. It closed up shop in 2008.

Nonetheless, if you had the ambition to roll out a business model with national scope, combining legal and non-legal services, relying heavily on technology, and employing lawyers who are qualified in multiple jurisdictions, Australia would be a good place to start.