5.49 The resolution of many consumer or conduct complaints by the Councils and the LSC may involve practitioners agreeing to take specific steps, such as transferring a file or lodging court documents.53 In this context, the undertakings entered into are designed to resolve a particular consumer dispute and require the agreement of the practitioner in question. Such agreements usually result from some form of mediation (formal or informal) either between the practitioner and the LSC or Councils, or between the practitioner and the complainant. There is said to be, at present, no effective mechanism for the enforcement of such agreements.54 In IP 18 the Commission asked whether the LSC and Councils should be given the power to enter enforceable undertakings with practitioners in relation to complaints (Issue 27).
5.50 An example of such a power can be found in s 87B of the Trade Practices Act 1974 (Cth) which provides that the Australian Competition and Consumer Commission (ACCC) may accept a written undertaking in connection with its functions. The undertaking
53. OLSC, Preliminary Submission at 16-17.
54. OLSC, Preliminary Submission at 16-17. Although the Law Society does have some power to attach conditions, with consent, to a practising certificate (presumably with respect to conduct issues):
Law Society of NSW, Submission at 15.
may only be varied or withdrawn with the consent of the ACCC.
If the ACCC considers that the terms of an undertaking have been breached, it can apply for a court order requiring compliance or ordering compensation.
5.51 It is well established that legal practitioners who fail to carry out undertakings to other practitioners in the course of their legal work may be proceeded against in a number of ways:55
by disciplinary proceedings for professional misconduct;
by use of the summary jurisdiction of the Supreme Court to compel practitioners to comply with undertakings; and
by the jurisdiction of the courts to enforce legally binding obligations, for example, those arising under contract law or statute.
5.52 There appears to be no reason why the obligations owed to other practitioners with respect to undertakings should not also be owed to the relevant Council or the LSC, at least so far as questions of professional conduct are concerned. The Commission accordingly recommends that what it considers to be implicit should be made explicit by providing that failure to carry out an undertaking to a Council or the LSC may amount to professional misconduct or unsatisfactory professional conduct. The availability of disciplinary proceedings for misconduct should prove sufficient to ensure the enforcement of undertakings given by practitioners and will render unnecessary the enactment of a power similar to that found in s 87B of the Trade Practices Act 1974 (Cth).
Recommendation 20
That express provision should be made that the failure to carry out an undertaking to a Council or the Legal Services Commissioner may amount to professional misconduct or unsatisfactory professional conduct.
55. Wade v Licardy (1993) 33 NSWLR 1 at 6. See also Re a Solicitor (1992) 110 FLR 9 at 20 (failure to honour an undertaking to another practitioner may amount to professional misconduct).
Powers of the LSC and Councils after an investigation
Compensation
5.53 The power to award compensation is a way of resolving individual consumer disputes where the consumer has suffered some monetary loss. While compensation orders may be made as part of the mediation of consumer disputes,56 or by the Tribunal,57 the LSC and Councils do not currently have any enforceable power to order practitioners to pay compensation to complainants.
5.54 Other options for a complainant seeking compensation are to bring civil proceedings against the practitioner, either in a court or in the Fair Trading Tribunal (Consumer Claims Division), or to apply to the Fidelity Fund.58 These options, however, may not be favoured by many lay complainants given the cost and complexity involved.59
5.55 In IP 18 the Commission asked whether the LSC should be given power to order practitioners to pay compensation to complainants (Issue 28). The Commission also considered possible restrictions on the exercise of that power, for example, by setting a statutory maximum amount of compensation.
5.56 Some submissions supported giving the LSC the power to order compensation for reasons that included:
some complainants do not have the resources to pursue compensation through other channels;60
complainants have sometimes already lost faith in the legal system and are therefore averse to the idea of having to hire another lawyer to take further legal action to recover
56. The mediation of consumer disputes is dealt with in the Legal Profession Act 1987 (NSW) Pt 10 Div 4.
57. Legal Profession Act 1987 (NSW) s 171D. On the adequacy of the Tribunal’s compensation power, see IP 18 at para 6.22-6.27.
58. Established under Part 7 of the Legal Profession Act 1987 (NSW).
59. See Mr Gunay, Submission.
60. Mr Gunay, Submission; F Combe, Submission at 10; OLSC, Submission at 34.
damages;61
some complainants may seek a relatively small amount in compensation compared to the time and expense involved in pursuing it through traditional channels;62
5.57 Other submissions did not support the LSC having the power to award compensation and raised a number of issues including:
employed solicitors may not personally be civilly liable and should therefore not be liable to pay compensation;63
questions of compensation in individual cases should be kept separate from issues of conduct (which relate to the protection of the public and maintenance of professional standards);64
there are opportunities for compensation in other forums;65 and
the power to order compensation is like the exercise of judicial power66 and, therefore, is not appropriate for an investigatory body like the LSC.
Some of these submissions, however, did not distinguish between compensation as a means of resolving a consumer dispute and compensation as a means of resolving a conduct issue.
61. OLSC, Submission at 34.
62. OLSC, Submission at 35.
63. Legal Aid Commission, Submission at 4.
64. Law Society of NSW, Submission at 15.
65. Law Society of NSW, Submission at 15.
66. Victorian Legal Ombudsman, Submission at 46.
Powers of the LSC and Councils after an investigation
5.58 The Law Society supported the LSC having power to order compensation but only in relation to matters that were purely consumer matters and then only once mediation had been completed. The Society also submitted that any agreement as to payment arising from a mediation could be registered under the Local Courts (Civil Claims) Act 1970 (NSW).67
5.59 The Bar Association proposed that compensation (up to a prescribed sum) should only be awarded in consumer disputes by an arbitrator appointed following the failure of a mediation conducted by the LSC. The arbitrator would, on their proposal, be appointed to determine all consumer issues in dispute between the parties68 in circumstances where mediation had not resolved a dispute.69
5.60 On the other hand, the OLSC proposed that the LSC should have power to award compensation in consumer disputes.70 The OLSC also proposed that a limit should be imposed on the granting of compensation, namely $25,000, the current jurisdictional limit for the Consumer Claims Division of the Fair Trading Tribunal, that an order for compensation should be registered with a local court, and that the LSC’s jurisdiction to award compensation be subject to an appeal to the Tribunal.71
5.61 The Commission does not consider it desirable to impede or complicate the LSC or Council’s investigative role by requiring them to consider compensation in individual cases.72 Under the current structure, compensation as a consumer issue is more appropriately dealt with in other ways. It may, for example, be agreed upon following either formal or informal mediation of a consumer
67. Law Society of NSW, Submission at 8, 16. See Local Courts (Civil Claims) Act 1970 (NSW) s 21O concerning agreements arising from mediation; and s 71 concerning arbitration awards.
68. NSW Bar Association, Submission at 47.
69. The proposal for formal arbitration after a failed mediation is rejected at para 5.42.
70. If its proposals concerning negligence are not adopted: OLSC, Submission at 34.
71. OLSC, Submission at 35
72. The Commission reaches a similar conclusion with respect to the disciplinary role of the Tribunal at para 6.97.
dispute or it may be taken up in an appropriate alternative forum – either the Fair Trading Tribunal (Consumer Claims Division) or one of the courts.
5.62 There may, however, be a bar to the consideration of some matters before the Fair Trading Tribunal. Section 7(5) of the Consumer Claims Act 1998 (NSW) provides that:
A matter arising in relation to the fairness or reasonableness of the costs charge by a barrister or solicitor for an item of business transacted by the barrister or solicitor is not within the jurisdiction of the Tribunal.
This provision was originally introduced into the Consumer Claims Tribunals Act 1987 (NSW)73 as part of the costs assessment regime introduced by the Legal Profession Reform Act 1993 (NSW).74 On the assumption that matters requiring costs assessment will ultimately be dealt with under the costs assessment regime, there would seem to be nothing to prevent all other consumer aspects of complaints against lawyers being brought before the Fair Trading Tribunal where appropriate. However, the Commission considers that the position could usefully be clarified to make it clear that the exception in s 7(5) of the Consumer Claims Act 1998 (NSW) applies only to matters that can be referred to costs assessment under Part 11 of the Legal Profession Act 1987 (NSW).
Recommendation 21
That it be made clear in legislation that the exception in s 7(5) of the Consumer Claims Act 1998 (NSW) applies only to matters that can be referred to costs assessment under Part 11 of the Legal Profession Act 1987 (NSW).
73. Consumer Claims Tribunals Act 1987 (NSW) s 10(5). The Consumer Claims Tribunals Act 1987 (NSW) was repealed by the Consumer Claims Act 1998 (NSW).
74. See Legal Profession Reform Act 1993 (NSW) Sch 6.
Powers of the LSC and Councils after an investigation