Peter Carter, Carter Capner Lawyers, Brisbane
8th National Annual APLA Conference
Coolum, October 2003
Thank you for attending this afternoon. I would firstly like to express my gratitude to APLA and the conference chairs for inviting me to speak. Having seen the extremely high quality of presentations at this conference yesterday and today, it really is an honour to have been included on the program.
According to Yasiah Ross in his book Ethics in Law: Lawyer responsibility and Accountability in Australia, Ethics derives from two Greek words, ethikos which means ‘practice and custom’ and ethos which refers to ‘character’. To conform to the customs and character of the community meant that you were acting ethically.
In the past, ethical codes had far more authoritative impact on our behaviour than they do today.
“Ethics” is usually used as a term to describe proper professional conduct. More correctly, it is one part of the subject of professional conduct.
Professional conduct contains the following elements:
- legal duties
- professional etiquette
- ethical duties
The term ‘Ethics’ when used it its strict sense describes the appropriate management of the “moral hazard” that practitioners face in managing potential conflicts among the different duties (for which there are no strict legal duties) they hold to their client, to the court, to colleagues, to the community and to their employer or themselves. When such a conflict arises it produces a moral hazard to the practitioner and an ethical dilemma.
“No one denies that lawyers are entitled to make a living, or that the need for economic survival can create real difficulties in balancing professional self-interest and public responsibilities. This is, however, no reason for jettisoning the latter. Some lawyers who use the ‘business defence’ seem to assume that businesses have responsibilities to no one but themselves. This disregards the extent to which successful businesses are expected to adopt extensive responsibilities for their customers and employees, and perhaps (but not invariably), wider social responsibilities as well.”
There are five sets of duties in professional conduct.
- The client
- The Court
- The law firm
- The public
In the exercise of all of them, there are potential conflicts and moral hazards.
When there is any conflict among any duty, a lawyer’s duty to the court comes first and any obligation to the lawyer him or herself or to the law firm comes last.
Contemporary Ethical Study
I won’t be talking about any of the mainstream professional conduct rules that are well covered in state law society and bar association rules and guides. These include, conflicts of interest, confidentiality and undertakings. What I would like to explore are underlying and evolving ethical dilemmas with which contemporary practitioners may face. I believe an understanding of the subject on this level demands us to face issues as they arise and better equips us to resolve them.
Prevailing issues in contemporary ethical study in all the major common law jurisdictions for the last two decades appear to be the collision between lawyers operating as businesses on the one hand and their traditional role as professionals. This is true of the United Kingdom, USA, Canada, Australian and New Zealand.
This ‘tension’ is likely to increase. The Law Council of Australia has published a paper, 2010: A Discussion Paper of Challenges for the Legal Profession. The paper forecasts growth in fields of practice such as e-commerce, intellectual property, cyber law and other sophisticated commercial areas. The demand in profitability of transactional legal services is forecast to decline. Such services, the report suggests will be provided by lawyers and non-lawyers often by way of standardised electronic forms.
The economic pressures on professionals will increase and with other factors, such as fragmentation of interest within the profession, will lead to a substantial change in the conduct of professions. Of course this is true of all professions.
The medical profession is also reacting to economic pressures, although medical indemnity problems they face are largely as a result of their own prior sins and mistakes.
However the entire medical profession is unashamedly putting members’ own personal interests ahead of those of the patient or the client. There appears to be no debate even among doctors of the ethical position of so acting. Rather their energy is directed at confabulation and distortion to disguise what I suggest is at the very least an ethical dilemma that needs to be aired.
Lawyers, because of the intellectual nature of their calling, are arguably better placed to deal with these changes in an appropriate ethical manner.
The tension between the business and professional roles of lawyers has certainly resulted in ethical dilemmas and problems, some of which have been widely discussed but others have not.
One example of a change in professional practice arising from the adoption of contemporary commercial modalities is the modern form of client agreement used in personal injury litigation in most Australian States.
Compare the difference between the traditional retainer and that now used in most personal injury situations.
In the traditional role, the lawyer is retained by the client to follow the client’s instructions. These are rendered periodically. The contract is usually an entire contract and requires the lawyer to complete the job without being able to terminate the retainer except in ‘just’ circumstances. Contingent or speculative fee arrangements do not feature in the traditional retainer and indeed were considered unethical in some jurisdictions such as the United States and Australia and illegal in others such as the United Kingdom. They have of course since been made illegal also in Australia.
By way of aside, the classification of such fee arrangements are unethical despite their obvious pro-consumer advantages is considered by some (Luban) as ‘mainly a reflection of the disdain with which high status lawyers regarded the methods used by low status lawyers to get access to clients and the courts’.
In the 1980s and 90s the requirement to pay fees in advance as per the traditional legal relationship and other features thereof were seen as an impediment to the public’s access to justice. There are various court decisions and law society rulings which clarified which was probably the correct legal and ethical position all along, namely that agreeing not to accept a fee in the event of unsuccessful litigation, was appropriate and acceptable. No win-No fee arrangements were then considered traditionally as an effective way of providing the coveted access to justice. This is evidenced by the fact that government reduced legal aid for these type of services because of the availability of contingent type legal services.
So in this instance, the contemporisation of business methods by lawyers has been positive for the general public, access to justice has been achieved at no cost to the State. At least that is what we thought. It appears however that access to justice became too effective and organisations whose interests weren’t served by allowing the empowerment of the ordinary people have retaliated.
Access to justice is not the only benefit that such kind of representation provides. It also:-
- Promotes efficiency for the legal system in that the lawyer under such arrangements is unlikely to accept a case that he or she is likely to lose;
- The client is freely able to compare the terms between one lawyer and another (although pricing is not always transparent and certainly not as transparent as it would be under a true contingent fee system provided the lawyer is remunerated a percentage of the verdict).
Incidentally, the evil often touted by opponents of the public empowerment through consumerist lawyer representation that lawyers will conspire with clients to cheat the outcome is generally considered by most commentators these days to be a nonsense. Pay-as-you-go lawyers are equally liable to conspire with clients as those operating on a risk sharing basis.
There are however ethical issues that relate to the entry into client agreements in the contemporary setting.
The necessity that a lawyer enter into a written agreement with the client (mandated in all Australian jurisdictions as far as I know) has allowed lawyers to contract with their client on terms that they see appropriate.
This poses ethical dilemmas:
- What terms should the lawyer consider offering a particular client?
- What trade offs are reasonable for the client to expect given that the lawyer assuming the risk in the case succeeding, only charging a professional fee if the client’s case is successful?
- Are such terms justified because the lawyer is thereby providing the client with the keys to the court house?
- Exactly what provisions are reasonable?
Most typical Client Agreements that contain provisions that deal with the following The client has defined obligations:
- Higher fee because of risk sharing by lawyer
- must give instructions, not to mislead, to be cooperative, submit to medical or other examinations and to pay disbursements as the case proceeds.
- lawyer can terminate the agreement where the client fails to discharge his or her obligations under it and can then require the client to pay
- If the client terminates the agreement before the case is completed then basic costs will become payable to the solicitor.
- The lawyer can also end the agreement or convert it from a risk sharing arrangement to a pay-as-you-go retainer if the client rejects advice on the likelihood of success or on accepting a settlement.
This taken from standard conditional fee agreement in UK where uplift of up to 100% permitted but in practice uplift does not exceed 25% of the clients net proceeds.
As can be seen form these terms, the client will face a considerable costs penalty if he or she terminate the agreement or disagrees with the solicitors. The definition of being uncooperative or misleading the solicitor could be a cause of dispute in which the client will be at a considerable disadvantage in predicting the outcome.
In any event such type of fee arrangements are considered in all Australian jurisdictions to be reasonable although there is as far as I know in no State, a standardised form of agreement as there is in the United Kingdom.
In my view however it is reasonable to require the client to follow the lawyers’ reasonable advice and to allow termination or a change to the basis of the retainer if he or she does not.
Is it ethical for a lawyer to contract limit the type of service that will be provided because it is on a no win-no fee basis? Can the lawyer ethically say: because you are not a pay-as-you-go client you will get ‘coach class’ service? Third rate service?
Clients are able to easily compare terms of service among different law firms although fee structures are not always transparent and the service supply is not homogenous.
Fees must of course also be reasonable. Fees are not dealt with in the Law council model rules.
Courts have viewed client agreements, particularly in so far as they relate to costs, with great jealousy because of the lawyer’s opportunity to exercise influence over the client.
A costs agreement will only be upheld where it is both fair and reasonable. Fairness relates to the circumstances at the point of entry into the agreement, whereas reasonableness relates to the substantive terms of the agreement.
Fairness refers to the mode of obtaining the agreement. The solicitor must not “take advantage of the relationship between his client and himself or receive any benefit from an agreement into which the client has been induced to enter by reason of his relance upon the solicitor”.
The lawyer must take all reasonable steps to explain the agreement and its impact on the client and ensure that the client understands it.
The cases refer to the desirability that the clients receive independent advice, even though in itself the presence of absence of such advice is not decisive.
Failure by the practitioner to explain differences between scale and agreement costs, and their effect on what can be recovered under a costs order, is pertinent to the issue of fairness.
Courts have listed the following material circumstances which may influence a client in deciding whether or not to enter a costs agreement and which therefore should be expressly disclosed to the client:
- The fact that remuneration is governed by statutory scales which limit the amount of solicitors’ and counsel’s fees which could be recovered, irrespective of the amount of time devoted by the solicitors to the proceedings;
- The fact that the scales limit both the costs which the client could recover from opposing party to the proceedings and the costs recoverable from the client by the client’s solicitors;
- The principles underlying the charging of fees under the scales and also the basis of the proposed charging under the contemplated agreement;
- Estimates of the approximate amount of the solicitors’ and counsel’s fees which could be recovered on taxation under those scales and the approximate amount recoverable under those scales from the opposing party if the client were to be successful;
- An estimate of the amount payable under the proposed agreement if litigation provides successful and costs are recovered from the opposition, and also the amount payable if unsuccessful; and
- If the practitioner is unable to give the above estimates, whether here is a real risk of the costs under the prosed agreement being significantly more than the appropriate scale.
An agreement is unreasonable if its terms or effects are unreasonable to the client. Reasonableness is to be determined at the time of entering into the agreement, on an objective basis and with regard to all the circumstances of the case.
The failure to stipulate a rate of charging prima facie carries the badge of unreasonableness.
Costs agreements which contain clauses conferring considerable unilateral discretion in the lawyer as to the charges which can be made are likely to be found unreasonable. The charging of a simple flat rate irrespective of experience or seniority, or the nature of work, is indicative of unreasonableness.
If the agreement reflects a prevailing market price, and no unusual benefit is conferred upon the solicitor, the agreement will be prima facie reasonable. Factored into this determination is the seniority and expertise of the practitioner and the nature and extent of work involved, including its novelty, difficulty and complexity.
Need For Compliance Partner
The pace of regulation of the legal profession shows no sign of abatement. The time spent to comply in terms of costs agreements, “important notices to client” etc are very significant and one wonders how some firms are able to cope. However, compliance is not a not an optional thing. One person in a firm should be appointed for compliance person or compliance partner. Practitioners should seek assistance of their state law society whenever they have difficulties meeting compliance obligations in a timely manner.
Community Activism And Pro-Bono Work
Lawyers should not be in it just for the business. Ethical duty “to the public” is a real duty. There are many ways to perform the public benefit role. To some practitioners, this may be the conduct of pro bono cases. To others it will be activism against unjust legislation. To others this will be participation in the affairs of local community organisations. To all – it includes speaking up about injustices wherever they occur. If lawyers don’t speak up about injustices, who will?
Lawyers need incentives and facilitation to act in one way or another to perform the public benefit role. Each persons public protection role should be encouraged (not necessarily using the stick of mandation, or a practice levy) but possibly by offering assistance. In the case of firms engaged in activism against unjust laws this could be in the way of a support network to assist personally and professionally to bear the abuse and disparagement that is sure to be hurled against them.
“Carrots” such as continuing ethics points, practising certificate fee waivers, or waivers of the excess on any indemnity claims in respect of perfoemance of the public protection role should be considered.
The appreciation of the public protection role may well come more easily to some lawyers than to others. We cannot assume that all lawyers share these values. Therefore, “public ethics” may need to be taught and of course will need to be enforced.
Law students need to learn not just about appropriate behaviour, how to deal with undertakings, conflicts of interest, professional courtesies, etc. They also need to know what is expected of them in this profession in their public role.
Students and others coming into the profession also need to know what is entailed in assuming a role as the last line of defence for the public, as guardian of democracy and as a warrior against bigotry.
They must be forewarned that these roles will rarely be popular. They need to be forewarned so they are given an opportunity to decide whether they are really prepared to accept the huge responsibility that these roles entail.
They need to know that the public protection role is largely thankless – that government and business do their best to denigrate the profession and disparage practitioners. These interests have a lot to gain from weakening the (sometimes only) voice of the voiceless. Civil Liabilty Laws and censorship of lawyer websites etc are an excellent example of these forces at work. Students therefore need to be prepared for the enormity of the opposition that will be levelled against them in their public protection role.
Certainly if I knew what was in store, I would have been unlikely to accepted this calling given the availability of other opportunities that are certainly more lucrative and do not carry the extent of overall responsibility to the public (as guardians of democracy etc) that being a lawyer requires.
What about you?
Thank you for listening to me this afternoon. I trust you will enjoy the rest of the conference.