Steve Mark and Tahlia Gordon, Directors, Creative Consequences

We faced a lot of criticism. But we didn’t let that stop us. There always will be resistance to change.

Steve Mark was the Commissioner for the Office of the Legal Services Commissioner for New South Wales, from 1994 to 2013. Tahlia Gordon was the Research & Projects Manager for the Office of the Legal Services Commissioner for New South Wales, from 2004 to 2013. Today both are Directors of Creative Consequences, an advisory and consultancy firm providing high level policy assistance, advice and implementation to professions and industry groups in the areas of regulatory design and assessment, ethical advisory and infrastructure and complaints handling.

A number of critical issues emerge when we look back over our time at the Office of the Legal Services Commissioner. Firstly, we have learnt much about the role of regulation and indeed, the role of a regulator.

A good regulator must have a stated “purpose.” Most regulators generally have “compliance” as their stated purpose. We do not believe that is a good purpose – at least, it is not good enough. The Office of the Legal Services Commissioner’s stated purpose is “to reduce complaints against lawyers, within a context of consumer protection and protection of the rule of law.” This purpose was developed by Steve when he established the Office in 1994. We chose the reduction of complaints as our indicator because that is easy to measure and research.

A good regulator is “proactive,” rather than “reactive” alone. Most legal regulators simply react to complaints rather than instituting measures to reduce them. At the Office of the Legal Services Commissioner educating lawyers was the central regulatory approach. The Office implemented a range of measures to educate lawyers, particularly for those lawyers against whom a complaint was lodged. The result of this approach is that lawyers are not just disciplined for their misconduct and forgotten.

A good regulator bases regulation upon “principles” and not just “proscription.” Lawyers understand proscription well. It is their bailiwick, and they will work out how to get around any rules or regulations imposed upon them. Principles, on the other hand, are harder to evade. Requiring a lawyer to explain why they have not acted with integrity is much more difficult than asking them to address a breach of a specific detailed conduct rule.

A good regulator provides “benefits” to the regulated. Without that, the relationship is only adversarial, it is only based upon discipline, and the regulator will always be looked upon with fear and loathing and inspire only push-back and avoidance. A good regulator creates a partnership with the regulated, in order to achieve the best thing for the client. For example, what are the benefits of a reduction in complaints? Reduction in professional liability insurance premiums, reduced staff stress, better relationships with clients, higher profits, …

Secondly, we have watched the regulatory framework change remarkably since 1994 and learned that regulation is not static – that there will always be change.

The enactment of legislation in 2001 permitting law firms to incorporate and list on the Australian Stock Exchange was a watershed moment for the legal profession. Non-lawyer ownership of law firms had always been an anathema to the legal profession until now, at least in Australia. A large number of firms have incorporated as a result. Today in Australia 30% of law firms are incorporated legal practices.

Law firms that have incorporated have coped remarkably well with the obligations imposed on them as a result of their incorporation. They have successfully developed their own management systems either on their own or with the assistance of the Office of the Legal Services Commissioner.

The 2001 legislation permitting law firms to incorporate not only changed law firm structure. It also changed the method of regulation. As a result of the 2001 legislation entity regulation has emerged as an additional regulatory model and sits alongside individual-based regulation. Entity regulation today allows Australia to focus on the conduct of law firms as entities in addition to individual lawyers. This means that everyone in a law firm must comply with the professional conduct rules and regulation, irrespective of whether that person is a lawyer or non-lawyer. The introduction of entity regulation today means that we have shifted from regulating “lawyers” to regulating “legal work.”

At the beginning, we faced a lot of criticism. But we didn’t let that stop us. There always will be resistance to change. What matters is how you handle it, and if you have the courage to turn it into something positive. It was the resistance that taught us that we needed to more strongly emphasize the benefits to the profession.

Thirdly, we have followed and learnt from regulatory change in other jurisdictions around the world. In 2001 Australia was the only jurisdiction in the world to allow firms to incorporate and publicly list. That situation changed in 2007 when the English amended their Legal Services Act to allow law firms greater flexibility in their ownership structure.

Fourth, we have studied the effect of legislation liberalizing law firm structures on access to justice and have been enlightened with what we found. In a recent research project we looked at two Australian firms and two English firms, and we found evidence that suggests that non-lawyer ownership and the provision of external capital do increase access to justice. We have published the results of our research. They can be accessed here, and we can explain some of it below:

A perfect example is Slater & Gordon. Slater & Gordon is a large national predominantly personal injury law firm. In 2007 they listed on the Australian Stock Exchange and as a result of listing they have been able to assist small regional and rural firms who are struggling and that otherwise would have closed. Keeping those firms open increases access to justice particularly for Australia’s rural and regional communities. Slater & Gordon, in acquiring these firms implement their own case management systems and administrative resources, allowing the lawyers within those firms to work more efficiently, and handle a larger number of cases.

Some say that those large firms will lower their prices at first in order to drive other firms out of town, and then raise their prices again. Others say that these firms will produce shoddy work. But the reality is that the most important thing for these large firms is their brand, their reputation. So those are the last things that they will do. They have to keep low not only their costs but also the number of complaints made against them. That is access to justice.

Finally, these firms understand that legal issues are usually just one element of a multifaceted problem. So, they hire social workers to help their clients in a holistic manner. For clients, this is what access to justice really is.

Access to justice is also about offering clients a wider variety of services and choices. That is what many ABSs in the UK are doing. Think of the companies that offer legal products and services online, where all you need to do is read and click to buy something at a fixed price. The consumer can do this at times and in places that are convenient to for them, rather than take time off work in order to travel to an intimidating lawyer’s office, without any idea how much it will cost. That is access to justice.

Our experience in regulating law firms in Australia over the last 20 years has been invaluable. It has allowed us to work with other jurisdictions around the world to assist them in developing entity regulation.

This story is supplemental material for Modernizing Legal Services in Common Law Countries: Will the US Be Left Behind? To learn more about the book, please click here.

To download a pdf of this and the other stories, please click below.


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