Category Archives: Legal

Like a wounded bull

Stephen Warne has drawn my attention to an interesting article in Justinian, a subscription only journal for lawyers. In the article, the author draws a comparison between pirate ships and law firms:

US economics professor Peter Leeson…recently wrote a paper on The Law and Economics of Pirate Organization.

Pirates created highly successful criminal organisations, and Leeson says that:

“Contrary to most people’s images of pirate crews, they were quite large. Based on figures from 37 pirate ships between 1716 and 1726, it appears the average crew had about 80 members … crews of 150-200 were not uncommon…

“Unlike the swash-buckling psychopaths of fiction, historical pirates displayed sophisticated organization and coordination… They successfully cooperated with hundreds of other rogues. Amidst ubiquitous potential for conflict, they rarely fought, stole from, or deceived one another.”

Leeson also observes that pirates considered theft aboard their ships especially heinous, and he quotes an observer who said, “great robbers as they are to all besides, [pirates] are precisely just among themselves”.

Modern law firms invite comparisons with these pirate organisations, with law firms appearing to have improved the business model.

Modern lawyer piracy is not constrained by the law either, but for different reasons.

Lawyer/pirates control the wording of the law. They make sure it can’t easily reach out to them.

On top of that they are in charge of decisions to prosecute. Better still, unlike ordinary pirates, lawyers CAN rely on the judicial institutions to help them.

The judiciary is full of “successful” former lawyer pirates, who find it difficult to criticise others for doing what they themselves used to do.

There is a lot of camaraderie and “collegiality” in the legal profession, but perhaps the best devices of the lot are “disciplinary tribunals” actually dominated by current or former lawyer pirates, which contain a smattering of “lay” people to support claims of independence from the profession.

When lawyers are caught committing lawyering crimes, they can be shunted off to friendly tribunals instead of the ordinary criminal courts.

Last month NSW lawyer Leon Nikolaidis was sentenced to two years jail for criminal fraud, having been found guilty by a jury in an ordinary criminal court.

Unusually, this jailing of a lawyer was not for a trust account defalcation. NSW Legal Services Commissioner Steve Mark…said it was one of the few occasions when a solicitor had been convicted of criminal fraud within a legal practice. He said:

“There is a perception that a lawyer acting in a professional capacity attracts conduct charges, but not criminal charges… Even serious misconduct issues almost never lead to criminal prosecutions.”

There is one big exception. As with those old time pirates, thieving off other lawyers is regarded as particularly heinous.

Theft by lawyers from trust accounts is a bit like thieving off other lawyers, since it frequently results in claims against fidelity funds which the other lawyers have to keep topped up from their own pockets.

This fits in precisely with a discussion Stephen and I were having in the comments section of a previous post, wherein we noted that the ethical breach which is seen as particularly heinous by the profession is the trust defalcation. Our theory was in part that such breaches are easy to prosecute, dealing with numbers rather than thorny questions of ethics, and the prophylactic nature of the fiduciary obligation ensures that any defalcation will be a clear breach. But this article provides another explanation for the prevalence of trust defalcations as an ethical breach: essentially, lawyers who defalcate from trust funds steal from other lawyers, and therefore are treated particularly harshly.

Whereas lawyers stealing from clients…well, who is to judge? Other lawyers.

Services are a hard thing to give a monetary value. And the situation gets particularly thorny when one represents a client, and the client loses. Strangely enough, the client doesn’t feel like paying the bill any more, even though the lawyer may have done the best possible job in the circumstances.

I think a lot of the problems with billing arise from six minute billable units, which were the subject of my second post on this blog, so obviously they’ve been a bugbear of mine for a while. I was trying to explain the concept to some non-lawyer acquaintances who were simply agog at the notion. “What, you charge for every six minutes you spend on a file? Doesn’t that rack up awfully quickly?” said the non-lawyers. Well, yes. And that’s the idea. But further to that, one’s promotion within a law firm depends on the number of billable units one racks up.

So six minute units provide an incentive to:

(a) be inefficient;

(b) be a workaholic and work insane hours to get ahead; and/or

(c) lie about how long something took you.

Unfortunately for me, both (a) and (c) are totally against my world-view. And once I had a family, I had no desire to keep on being a workaholic. So I quit being a solicitor.

I’m sure there are a lot of lawyers who are less scrupulous than I with regard to fudging the figures. They figure everyone does it, and if they just massage it up a little bit, who’s going to notice? The satirical book Hell has Harbour Views features lawyers who routinely bill 27 hours a day (even if they’ve stayed up all night, it has to be false, think about it). I couldn’t laugh too hard at this – too close to the bone.

The difficulty is in judging when a bill is too large. Little increases are hard to pick up. Of course, as I noted in my earlier post, the Legal Practice regime in Victoria seeks to ensure solicitors go into an immense deal of detail in their bills. And it requires solicitors to offer an effective invite on the face of the bill for the client to complain or sue. This doesn’t really fix the problem. A poor old client has to get involved in further litigation. Why not try to stop the incentives to overbill by abolishing six minute billable units?

Obviously, there’s a need for something to change. As I said in another very early post, I think legal services are beyond the range of many ordinary people. And this may lead to the high volume of litigants in person in the court system, who believe that they are better off running their own case. In some instances, they may be right: I’ve seen some terrible lawyers out there.

If the legal profession wants respect in the community, it has to look at legal ethics as more than just trust defalcation. Good legal ethics also means charging clients a fair price, and doing a good job. I believe that if we deemphasise billable hours, this would improve morale and efficiency in law firms, and take away the incentive to “fudge the figures”.

Any comments welcome.


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