The regulatory framework-an overview
We will regulate the provision of legal services by an ILP in part at least in exactly the same way we regulate the provision of legal services by any other law firm - by responding to complaints about the conduct of legal practitioners who provide legal services on behalf of the firm and, if we suspect all is not as it should be, by initiating ‘own motion’ investigations even in the absence of a complaint.
Crucially, however, the Legal Profession Act 2007 (the Act) requires an ILP to have at least one legal practitioner director and imposes obligations on legal practitioner directors over and above their ordinary professional obligations as lawyers. There are others (go to ILP investigations to see a comprehensive list), but their key additional obligations are set out at sections 117-118. They are to:
- ‘keep and implement appropriate management systems to enable the provision of legal services by the practice under the professional obligations of Australian legal practitioners and other obligations imposed under the Act’ and
- if it ought be reasonably apparent that those standards might be or have been breached, to take all reasonable action to ensure that the standards are not breached or, if they have been breached, to take ‘appropriate remedial action’ (section 117).
The word ‘enable’ is fundamental. Clearly the Act imposes an obligation on legal practitioner directors to ensure that their firms develop policies and procedures that promote compliance with ethical standards but the obligation extends well beyond that. A firm’s policies and procedures describe its intentions, or in the worst case scenario perhaps only what its leaders say their intentions are, and may bear little if any resemblance to what actually happens in practice. Policies and procedures can be as honoured in the breach as the observance.
A firm’s management systems include its stated policies and procedures but also and just as importantly the myriad other factors that shape what actually happens – the unwritten rules and ways of doing things, the values, customs, practices, management behaviours and patterns of incentives and disincentives explicitly stated or otherwise that motivate and sustain the firm’s lawyers to conduct themselves ethically or, alternatively, that leave them to their own ethical devices or worse, by actually encouraging them to conduct themselves unethically.
A legal practitioner director’s obligation to keep and implement appropriate management systems is in effect therefore an obligation to ensure that the firm has what some commentators call an ‘ethical infrastructure’ - a workplace culture that supports and encourages the firm’s employees to do the right thing and discourages and deters them from doing the wrong thing and, allowing for the fact that even the best systems might be less than completely successful in that regard, that maximizes the likelihood any wrongdoing will be detected and dealt with, including with appropriate remedial action.
Crucially, legal practitioner directors who fail to take ‘all reasonable steps’ to meet their obligations in this regard can face disciplinary action – their failure to keep and implement appropriate management systems can amount to unsatisfactory professional conduct or professional misconduct.
The Act establishes the Legal Services Commission (LSC) and the Queensland Law Society (the QLS) as ‘relevant regulatory authorities’ and, crucially, empowers us at section 130 to conduct an audit (a ‘compliance audit’) of an ILP about:
- ‘the compliance of the practice, and of its officers and employees, with the requirements of [the Act] or a regulation, the legal profession rules or the administration rules so far as they apply to incorporated legal practices’; and
- ‘the management of the provision of legal services by the incorporated legal practice, including the supervision of the officers and employees providing the services.’
The Act is silent about how we should go about a compliance audit but empowers us to conduct an audit ‘whether or not a complaint has been made’ and gives us significant powers. It gives us all the same powers and more in conducting an audit than we have in relation to complaints and investigation matters - powers to require reasonable help and cooperation, to require the production of documents and information, to enter places including if needs be by warrant, to examine books, to seize evidence, to examine persons and to hold hearings.
We have agreed with the QLS that:
- the LSC will accept the primary regulatory responsibility, by undertaking compliance audits; and
- the QLS will accept a responsibility more in keeping with its membership services role, by supporting incorporated legal practices and law firms that are considering incorporation to comply with their obligation to keep and implement appropriate management systems - by advising and assisting them before, during and after they start to provide legal services how best to design and implement the kinds of management systems and arrangements that best suit their particular practice.