Costs under a void costs agreement

The case of Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) [2007] VSCA 280 deals with the question of legal costs under a costs agreement which was void by operation of statute, but in the event, the client was estopped from alleging that the agreement was void. 

Equuscorp retained Wilmoth Field Warne as its solicitors. The agreement was a form of contingent fee agreement.  It provided that Wilmoth Field Warne would be remunerated at two different rates: a ‘normal rate’ of $400 per hour and a ‘discount rate’ of $66 per hour. Wilmoth Field Warne were to render monthly bills showing professional costs at both rates. Interim bills would be paid at the discount rate, but upon a “successful result” (ie, settlement or judgment and recovery from the judgment debtor) Wilmoth Field Warne would be paid the difference between the two rates.

A little less than a year after entering into the agreement, Equuscorp and Wilmoth Field Warne had a falling out. Equuscorp purported to terminate the agreement and demanded the return of its files. It alleged it had paid costs it owed under the agreement. By counterclaim, Wilmoth Field Warne alleged there were still costs outstanding and it was entitled to retain the files pursuant to a solicitor’s lien.

The legal action was protracted. Various questions were tried between December 2003 and March 2004, and judgment was handed down in the first trial in June 2004.  A second trial occurred in October 2005. Some six weeks after the conclusion of this second trial, and before judgment was delivered, Equuscorp applied for leave to re-open its case. It sought leave to amend its pleadings, alleging that that the agreement contravened s. 98(3) of the Legal Practice Act 1996.  That provision prohibited costs agreements under which a client was liable to pay a premium in the event of a successful outcome other than 25% or less of the costs otherwise payable.  (The current similar but not identical equivalent provision is s. 3.4.28(4) of the Legal Profession Act, 2004.) The trial judge allowed Equuscorp to amend.  A third trial occurred early in 2006. The trial judge held that the agreement was void because of s 102 (the equivalent of today’s s. 3.4.31). The question was then whether Wilmoth Field Warne was entitled to recover any of its costs, notwithstanding the fact that the costs agreement was void.As a restitution lawyer, the first thing which came into my head was the decision of Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221. In that case, a builder entered into an oral contract with a homeowner.  The builder did not realise oral contracts were void under s 45 of the Builders Licensing Act 1971 (NSW). He completed the work, but when he came to demand payment, the homeowner, Mrs Paul, said that she did not have to pay because the contract was void. Nevertheless, the builder successfully sued Mrs Paul for unjust enrichment, claiming quantum meruit for the value of the work done. The High Court agreed that Mrs Paul would be unjustly enriched if she were allowed to keep the value of the builder’s services without paying for them.

However, unfortunately for Wilmoth Field Warne, this argument was not available to them. Section 102 provided that a legal practitioner who has entered into a contract which infringed s. 98(3) ‘is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related,’ and this provision took precedence over s 93 which did allow for fair and reasonable compensation to be paid in the absence of a valid costs agreement.  In other words, though parliament had contemplated that, as a minimum, lawyers should be remunerated on a ‘fair and reasonable’ basis even in the case of a void costs agreement, it had taken away that protection in the case of certain cases of voidness, occasioned by conduct which it presumably considered to be egregious.

Wilmoth Field Warne was forced to argue that Equuscorp was estopped from denying the validity of the costs agreement. Estoppel applies where a person has created a representation or an assumption on which the other person has relied to his or her detriment, such that it would be unconscionable (unfair) for the first person to resile from that assumption or representation. So let’s say I ask you to build a supermarket, and say that I’ll lease it from you when you finish building. We don’t actually conclude the terms of the contract, but you go ahead and build 70% of the supermarket. I know that you are building the supermarket. Shortly before it is completed, I turn around and say “Actually, I don’t want that supermarket any more, see you later.”

The landmark case of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 was a case where this very scenario was played out. The High Court held that Waltons Stores was estopped from denying the assumption that it had created (ie, that the Mahers would be able to lease out the supermarket to it). The Mahers had relied on the assumption to their detriment (by building 70% of a supermarket premises to Waltons Stores’ knowledge).

However, not just any commercial transaction will give rise to estoppel. It has been made clear that corporations on an even playing field (with equal resources and bargaining power) will not be able to argue estoppel, particularly when what has occurred is more in the nature of a “cat and mouse game” played in a commercial negotiation. So in Austotel Pty Ltd v Franklins Self-Service Ltd (1989) 16 NSWLR 582 (another supermarket lease case), Kirby P said at 585–6 :

We are not dealing here with ordinary individuals invoking the protection of equity from the unconscionable operation of a rigid rule of the common law. Nor are we dealing with parties which were unequal in bargaining power. Nor were the parties lacking in advice either of a legal character or of technical expertise. The court has before it two groupings of substantial commercial enterprises, well resourced and advised, dealing in a commercial transaction having a great value. …

At least in circumstances such as the present, courts should be careful to conserve relief so that they do not, in commercial matters, substitute lawyerly conscience for the hardheaded decisions of business people …

The wellsprings of the conduct of commercial people are self-evidently important for the efficient operation of the economy. Their actions typically depend on self-interest and profit making not conscience or fairness. In particular circumstances protection from unconscionable conduct will be entirely appropriate. But courts should in my view, be wary lest they distort the relationships of substantial, well-advised corporations in commercial transactions by subjecting them to the overly tender consciences of judges.

As it turns out, the relative bargaining power of the parties and the commercial context of the dispute were important in the present case. Wilmoth Field Warne argued that estoppel applied to prevent Equuscorp from denying the validity of the costs agreement. The Victorian Court of Appeal accepted that argument (overturning the decision of the trial judge). Buchanan, Ashley and Neave JJA said at [75] – [77]:

In our view there is no doubt that WFW has suffered detriment as the result of its reliance on the parties’ common assumption that the agreement was valid. Prior to the termination of the agreement WFW provided extensive legal services to Equus because it assumed that the parties’ legal relationship was regulated by the agreement. WFW acted for Equus in a number of proceedings and Equus paid WFW for its legal services at the ‘discount rate’ set out in the agreement. After Equus sought to terminate the agreement the parties fought two trials to their conclusion on the assumption that the parties’ relationship was governed by the agreement. In addition to its legal costs, WFW experienced the stress and anxiety associated with the conduct of that litigation and is now faced with the prospect that its efforts in defending the action will have been entirely pointless. In Verwayen Deane and Dawson JJ accepted that the stress and anxiety occasioned by litigation may amount to detriment for the purposes of estoppel and this proposition also seems to have been assumed by Mason CJ.

WFW must also show that it would be unconscionable for Equus to contend that the agreement was void because of s 102 of the Act. His Honour considered that this requirement was not satisfied because:

[i]t is not suggested that [Equus] contributed in any way to the assumption of WFW that the deed of costs was not void. It has not been established that it knew of the statute but, nevertheless, permitted the agreement to be implemented and indeed litigated. The fact that the consequence of the point Equus now takes is that it has had the benefit of WFW’s legal work without payment is a result of the decision of Parliament to visit this draconian punishment upon the legal practitioner.

In our view it was unnecessary to show that Equus contributed to WFW’s assumption. As we have already said…it may be unconscionable for a party to seek to depart from an assumption which provided the basis for their relationship with the other party, even if that assumption was not based on a representation made by the party sought to be estopped. In our view it would be unconscionable for Equus to now assert that the agreement is void.

It was important that Equuscorp was a well-resourced commercial party and that there was no inequality of bargaining power between Equuscorp and Wilmoth Field Warne. Both the Court of Appeal and the trial judge noted that the costs agreement had been negotiated by the then managing director of Equuscorp, an experienced businessman and litigant. The Court of Appeal inferred that the policy behind the provisions of the Legal Practice Act which had been contravened in this instance was to prevent vulnerable and powerless clients from being exposed to excessive costs. It was material that the agreement did not expose Equuscorp to excessive costs, but indeed in some respects, it operated against the interests of Wilmoth Field Warne. Therefore, the Court of Appeal found that because the policy of the Act was not contravened by the particular agreement, the terms of the Legal Practice Act did not operate to exclude estoppel.

In my opinion, this appeal was correctly decided.  Although the costs agreement between Wilmoth Field Warne and Equuscorp technically breached those provisions, in fact it did not expose Equuscorp to excessive costs. In addition, very importantly, the parties had been litigating for four years on the basis of the assumption that the costs agreement was valid before Equuscorp actually raised the argument that the agreement was void. In those very particular circumstances, it seems fair that Equuscorp be estopped from denying the validity of the agreement. Whether or not estoppel will operate to prevent the operation of a particular statute will depend on the particular circumstances of the case, and whether the policy of the statute would be subverted if estoppel was allowed to operate.

Postscript: I was inspired to write on this case after reading about it on Stephen Warne’s blog here and a subsequent discussion over coffee with Stephen. My gut feeling (without reading the case) was that estoppel was inappropriate in the context of void costs agreements, but interestingly, once I read the case in full, I changed my mind.

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.

Judging books by their covers…

How much should one conform in order to get a job? A few years back now, I was asked by my alma mater to give a talk to young law students who had failed to get articles. I discussed my own experience, and outlined other options that are out there. After the talk, I mingled with students. One bloke came up to me. He had multiple piercings and very multicoloured hair in a kind of long mohawk. He told me that he had been unable to get articles at a firm, and that he suspected it had something to do with his appearance. I confirmed that this was very likely the cause of his jobless status. I thought of him when I read this post at Law.com.

I had some sympathy for the guy. On one occasion, while I was still a student, I dyed my hair purple as a dare. Of course, two days later, I got an interview with a very large law firm for a summer clerkship. I had to scrub and scrub and scrub to get that purple out before the interview. Oh well, purple didn’t look too good over strawberry blonde hair anyway.

I must also confess that I have multiple earrings and a tattoo. I used to take the earrings out for job interviews. Once I was in a job, no one ever said anything about the multiple earrings, even though I have worked at some conservative places. I suppose the earrings are tasteful. My Dad didn’t even realise I had quite so many for ages. The tattoo is small and on my lower back, so it is unlikely to be seen, except once when I bent over to pick up a box and my boss-at-the-time literally screamed when he saw it. I thought there was a spider on my shirt – but no, he’d just seen the tattoo. He didn’t mind (as long as I kept it hidden) but he was shocked because he “hadn’t thought I was a tattoo kind of girl.” I’m not sure what a “tattoo kind of girl” is, but it doesn’t sound good.

The only “dress code infringement” for which I’ve ever been told off at work was for wearing red shoes, which I thought was a bit tough. They were nice shoes, not tasteless ones. And they matched the top under my dark, conservative suit. I love red shoes. They cheer me up.

I knew one female lawyer who often wore low-cut tops. Appearances can be deceiving. She was very hardworking, as well as a devout Christian. But I noticed that some of the guys didn’t always take her seriously. She complained to me of this, and I gently suggested that perhaps she should dress more conservatively. “But I look very stylish!” she said. Which she did. Anyway, after one of our colleagues got slapped for mistaking the low-cut tops as an invitation, I think news got around. Further, once she had established the quality of her work, her reputation as a serious woman was entrenched.

There is a bit of a double standard in the law. It gives me the irrits that people will jump up and down about girl wearing a pair of nice red shoes and then brief a male barrister who dresses like a hobo. Torn and stained clothes and jabot, wig askew, smelly bar jacket. Yuk. With some of those guys, slobby seems to be a badge of honour. It’s a macho thing: I’m so awesome that I don’t have to worry about what I wear. My words speak for me. I once saw a barrister appear in the Supreme Court with a giant tear in the seat of his pants. You could see his skin and underwear underneath (although I didn’t look too closely; I was very embarrassed). Perhaps he had torn the trousers on the way in to court, and had no other option? I should give him the benefit of the doubt, I suppose. But surely he’d put a piece of paper down his pants to cover up? Maybe no one told him. I certainly didn’t dare (I was very young at the time).

(I could tell the story about the time I ripped my skirt almost up to the hip when running to Practice Court and had to just keep on going, rip and all, but I think I’ll leave that to another day. But if it happens to you, the best thing to do is pretend it hasn’t happened and to put the fact out of your mind that you are exposing yourself to half the legal fraternity. As far as I am aware, no one noticed…at least, no one said anything…)

On the one hand, I think it’s good for lawyers to have some individuality. No one wants to have to deal with a boring automaton. Lawyers are human too. On the other hand, I can see that Mr Mohawk-and-Piercings was pushing the envelope a bit far. He looked extremely unusual, even in a laid-back university context. I suggested to him that perhaps he could tone it down a bit if he was really set on getting a job as a lawyer, and told him that firms had been prepared to accept my small oddities. But he wasn’t prepared to tone himself down. Last thing I heard, I don’t believe he ever got a job as a lawyer.

I guess the important thing is to look like you can be trusted to do a good job. If a client is going to freak out when they see you, or fail to take you seriously, that’s not good. Nevertheless, a little bit of individuality isn’t a bad thing. I don’t think firms should be too narrow-minded. They might find they miss out on some great employees.

Quis custodiet ipsos custodes?

The above Latin phrase means as “Who guards the guardians?” It has been a problem in civil societies for a long time.

The legal establishment is no exception. Who judges our judges, if at all? And how should judgment be accomplished?

As Peter Black has noted, there was an article in Crikey on Tuesday which suggested that an Australian version of the US site The Robing Room should be set up:

[W]hat’s the quality of the justice like in…courts and tribunals? Which are the most courteous and compassionate of judicial officers? Who takes too long to hand down judgments? And where do individual judges, magistrates and tribunal members stand when it comes to impartiality?

These are all reasonable questions to ask, yet try getting answers to them. You won’t. Our courts are relatively unaccountable to those who use their services. There is no league table of judges, for example. But why shouldn’t there be? …

It’s time to establish a ratings system for Australian courts, along the lines of the American website, The Robing Room. The Robing Room allows lawyers and litigants from across America to rate judges according to a series of criteria such as temperament; scholarship; industriousness; ability to handle complex litigation; punctuality; evenhandedness in civil and criminal litigation and so on.

It’s a useful tool for lawyers and litigants. In Australia, if you haven’t appeared before a judge or a magistrate previously, you are forced to ring around your colleagues to find out what he or she “is like.” How much easier it would be to simply log on to an Australian Robing Room and get some relatively impartial and empirical information, along side some colour about the individual, yourself.

Of course, there’s already an informal Australian Robing Room in cafes, solicitor’s offices, barristers chambers and in courtroom antechambers, as stories are swapped about judges’ eccentricities, foibles and qualities. All that information and intelligence should be brought together on one easily accessible site. …

It’s an interesting idea. The problem is that, statistically speaking, you would have to obtain an awful lot of votes before you got a fair picture of a judge’s reputation.

Our system is adversarial – usually, someone has to win and someone has to lose. That means one party is always going to be unhappy, at least to a degree. When I looked at The Robing Room site, the few profiles which I checked out had only one vote each. You’re just going off one person’s impression, and that person might have a totally off-the-wall opinion about a judge. The difference with consulting a colleague about a particular judge is that hopefully you would consult a trustworthy colleague. But who is to say whether the people who vote are trustworthy?

First, is there a way of preventing the same person from voting over and over? I presume so. But how can this be regulated fairly? You might have a very good experience in one trial before a particular judge, and a less positive experience in a later trial. You should be able to cast a vote in relation to both trials, surely? What if someone gets heaps of different people to vote on their behalf to skew the results for a judge?

Secondly, there’s that old business saying that a satisfied customer tells 1 or 2 people, but a dissatisfied customer tells at least 10 other people. I think that there’s a degree of truth in this. Just as a matter of human nature, I would think that dissatisfied litigants are more likely to comment on a website than satisfied litigants (although I would be interested to hear if anyone has any research or knowledge about this).

Finally, I think the experience of going to an all girls school and watching elections for “student positions” made me cynical for life. What if a judge’s score came down to who was a better “self-promoter” rather than who was the better judge?

As Peter  outlined in a further post, a US website purporting to grade attorneys suffers from a lack of credibility. Experienced and well-regarded attorneys have been graded badly, disbarred attorneys have been graded well. It illustrates the point starkly.

Of course, every lawyer knows that particular judges have a “reputation” in the legal community. Some judges are known to be slow in writing judgments, some are known to be incompetent in particular areas, some are known to be intemperate, some are known to be kind, some are harsh but fair. There’s a variety, just like any other profession.

I think it is important to have some kind of feedback system so that a litigant, solicitor or barrister who feels he or she has been treated unfairly can raise it with somebody in government (perhaps with the Legal Ombudsman). But I just don’t think that a website with grades is the way to go.

If I were trying to work out what a judge was like to appear before, I’d still rather contact a trusted colleague.

(Via Freedom to Differ)

Corporatisation of law firms

Jim Belshaw has written a great counterpoint post to the post I wrote about Slater & Gordon’s move to list on the stock exchange.

Put shortly, Jim’s contentions are that the move to corporatise law firms comes about to remedy fundamental inefficiencies in the way in which partnerships operate:

• Senior partners are also senior managers. As Jim points out, partners are not necessarily good managers, and one does not become a partner because of one’s management prowess.
• Partners have a jumble of roles: managers, owners and professional advisers. Jim proposes that it is necessary to separate equity returns from payment for work. Then the definition of roles and the remuneration to be attached to those roles could then be dealt with using conventional job analysis and remuneration principles
• Abolition of goodwill. Firms no longer treat the brand name, intellectual property and staff of a firm as something valuable. They focus on short-term cash-maximisation rather than long-term growth.
• Acquisitions. Listed firms can offer shares in a company without the problems that can be involved in slotting new partners into a partnership structure. Staff shareholding schemes can be used to reward staff for growth (as is occurring at Slater & Gordon).
• Risk management. Corporate structures can quarantine risk (whereas a failure of one part of a partnership can threaten the whole). If firms can quarantine risk, they will be able to expand into new areas and different disciplines more easily.

I found this very interesting, as I had not looked at the issue in this way. Being a litigator, my first thoughts were of course about how everything could go wrong…

Do have a read of Jim’s post and his more recent post on the topic.

Career choices…

Eitan Erez is a candidate for the Israel Bar Association. Check out this report in Israeli newspaper Ha’aretz:

When Erez, 52, was certified as an attorney 26 years ago, only 7,000 lawyers were registered with the Israel Bar Association. After the upcoming certification ceremony, it will have 38,000 members.

“Do you now what an honor it once was to be a lawyer? Do you know how proud my parents were when I became a lawyer? Today a lawyer is worth less than a taxi driver. Lawyers work as house painters, plumbers and plasterers. A lawyer who works as a plumber takes on traffic cases once every 10 days, when he goes to represent people for NIS 300-NIS 400. That’s what we’ve come to. The rates are too cheap, it’s impossible to work for such fees, and lawyers who work for such fees cannot buy books, computers, equipment. They can’t keep up-to-date, attend continuing education courses. That’s why there are more claims of professional negligence afterward.”

I found this article via Adrian the Cabbie’s website, Cablog. He thinks he’s a cabbie in the wrong city (or possibly) the wrong country.

He recently drove a lawyer in his cab, and to earn the same amount of money as the hourly rate of this lawyer, he’d have to drive for 38 hours. Must have been a QC. The fees those guys charge are absolutely crazy – $2000 an hour. I can’t even imagine that kind of money. However, the perception that all lawyers are rolling in money is not correct. Lawyers who don’t work for big firms often don’t earn any more than “normal people”. This is especially so of lawyers who work for small firms, regional firms, Legal Aid, government, the Department of Public Prosecutions and the like. Another point is that junior lawyers don’t actually get the money they charge out at. I might have been charged out at, say, $200 an hour, but I wouldn’t actually get that money in my pocket. A lot of it would go to the firm.

I reckon I’d earn about the same amount as a cabbie these days. Maybe a little less. Should I become a cabbie instead?

Pros:

• I like people
• I like talking
• I like political, philosophical and religious discussions, and wouldn’t mind if someone tried to engage me in one
• I have a reasonably good knowledge of Melbourne and surrounds

Cons:

• As I have explained before, I find driving very stressful and frustrating at times
• I hate shift work
• I wouldn’t know what to do if violent people got into my cab
• There’s that same billable hours problem that lawyers have – how much you earn depends on how much time you spend in the car – hard with a young family!

So, I think I’ll stick with the law lecturing gig for the moment.  😉  Much more my cup of tea.

Seriously, however, there are a couple of interesting points raised by the Ha’aretz article. First, Erez raises the issue of increasing numbers of graduates. Things are similar here. At the entry stage, the market is absolutely flooded with young law graduates seeking articles, such that it’s very difficult to get a place. However, there is a massive shortage of lawyers at a second- third- and fourth-year level. I thought that I might find it difficult to get position as a junior solicitor after a number of years at the court. They were rather stuck as to how to categorise me given that I hadn’t been rising up through a law firm, but it wasn’t at all difficult to find a job! The question is whether you wanted to keep on going in that job…there’s a reason why there is such a dearth of young solicitors (see my posts on the law and depression here, here and here). Lack of morale is a serious issue which has finally come to the notice of the firms, I think, after recent publicity.

Another serious issue raised by Erez is the low public opinion of lawyers. I must confess that some of us are our own worst enemies in this regard. Some lawyers behave arrogantly and unpleasantly towards others: colleagues, litigants, opponents, random cute furry animals, anyone who crosses their path. Some use the law to bully and intimidate (like that Judge with the US$65M claim for a pair of lost pants). Some lawyers think that being a lawyer means the law doesn’t apply to them or gives them carte blanche to get around the law (like the recent notorious case of the lawyer with a dangerous strain of TB who illegally left the USA to go on his honeymoon). Then there’s the whole perception that we get guilty people “off”, described in a post (which coincidentally starts out with a conversation with a cab driver). And then there’s a perception that we argue for decisions which are against common sense (like the recent decision which held that a stationary driver on a hands free phone breached the law). Again there’s a crazy overlap between the law and cabbies… Maybe someone’s trying to give me a message??

I don’t think I’ll be putting down my law text books yet to drive a cab. But Erez’s comments do provide food for thought.

(Via Cablog)

Becoming a Lawyer – Part II

I have posted on the topic of legal education a long time ago. I note that the topic has come up again in the US, with Indiana Law School now introducing a professional element in first year.

The American Bar Association’s MacCrate report sums up the problem in words that can equally well be applied to Australian legal training:

It has long been apparent that American law schools cannot reasonably be expected to shoulder the task of converting even very able students into full-fledged lawyers licensed to handle legal matters. Thus, a gap develops between the expectation and the reality, resulting in complaints and recriminations from legal educators and practicing lawyers. The lament of the practicing bar is a steady refrain: “They can’t draft a contract, they can’t write, they’ve never seen a summons, the professors have never been inside a courtroom.” Law schools offer the traditional responses: “We teach them how to think, we’re not trade schools, we’re centers of scholarship and learning, practice is best taught by practitioners.”

Too often these responses are thoughtless reactions to unfair criticism, and reflect an unwillingness of the academy and the practicing bar fully to understand the cultures, needs, aspirations, value systems, and accomplishments of each community. The community of over 6,000 full-time law professors does not consist of ivory-tower scholars removed from the problems of the profession and concerned only with their academic pursuits. Conversely, lawyers are not oblivious to the contributions of law schools to the quality of the profession or to a broad-based legal education system that extends beyond technical skills and the knowledge of certain substantive areas of law.

As someone who has practiced as a solicitor and as an academic, I am alive to the constant tension in legal education. I found that I was woefully underprepared when it came to practicing as a lawyer. I was expected to know how to draft a contract, how to run litigation and the like, but I had never been taught these things at university.

Is this the law school’s fault? One of the best ways of learning practical skills is by doing. I don’t think it is a university’s place to turn out a perfectly formed lawyer. Either you learn on the job, and firms have to put up with people being unable to be perfect lawyers straight away, or you set up a proper training course. I understand that the Legal Education Review undertaken last year in Victoria suggests certain mandatory training requirements (as outlined in my post here). When I see firms saying they want universities to turn out more practically oriented law students, I see laziness as the motivator. Firms want someone who can just slot into the job with no problems and no further training. And if universities have already softened students up to the realities of the law firm, then there will be no need to actually have to manage young lawyers either.

On the other hand, I have some sympathy with the view that law students come out of law school unprepared for practice. As I have outlined above, I had no idea what I was doing. I felt somewhat resentful that I had studied hard for five years and still didn’t have a clue about how to practice as a lawyer. I think it would have been good to get a little more of an idea about the practicalities.

When teaching, I always try to link in what I am teaching to real-life scenarios I have faced (eg, lodging a caveat, claiming a constructive trust over a property for a client, representing a creditor in a winding up, acting for an equitable mortgagee). I am lucky that I had a fair amount of time in practice before I became an academic. I think that legal concepts make a lot more sense if you link them to real life situations where they could be used. I am really glad that I had some years in practice before I became an academic.

I hope that if a new Traineeship programme is introduced in Victoria, as suggested by the Legal Education Review, it will help to provide standardised training for young lawyers. Universities should help provide some idea of what practice is like, but they should also be places where students can explore different ideas and subjects and look at questions like legal philosophy. It would be a great pity if law school became just another vocational course.

Listing a law firm on the stock exchange

I saw in The Australian today that law firm and personal injury specialist Slater & Gordon had incorporated and listed on the Australian Stock Exchange.

Most law firms are partnerships. The partners fall into two groups. Equity partners own part of the firm itself. They have a say in the way in which the firm is run, and who receives promotions and who gets a salary rise. They are entitled to a hefty share of the firm’s profits. This is in contrast to salaried partners, who receive the rank of “partner”, and a salary reflecting that achievement, but they do not gain a share of the profits of the firm. Salaried partners want to become equity partners, because, as this US article indicates, it is much more profitable.

I presume that upon incorporation, the partners of a firm become majority shareholders instead. As majority shareholders, they will still have a say in the way in which the firm is run, but they will be paid dividends as shareholders.

The advantage of floating a law firm on the stock exchange is that it will allow a firm to raise funds by issuing more shares. Apparently, in the case of Slater & Gordon, the money raised from the float will be used to purchase other small personal injury firms, and expand business into other states. Former equity partners and some employee solicitors will also do very well from the deal.

Is it a good idea? Well, I certainly don’t claim to be a stock market expert. But as far as I can see, there are two interesting and controversial points raised by the listing of Slater & Gordon.

1. Slater & Gordon is a firm which has a reputation for bringing class actions on behalf of “little guys” against large corporations. Now it will be listed alongside many of those corporations. Somehow that just seems ironic to me.
2. In law firms, there is a tension between (a) making a profit from one’s client and (b) doing the most efficient job possible for the client. As I have explained in one of my very first posts, because solicitors bill by six minute units, one doesn’t want to be too quick and efficient, otherwise you won’t be able to charge the client much. It seems to me that by adding shareholders to the mix, the firm will be pulled in three ways instead of two – (a) profiting from one’s client, (b) doing the most efficient job possible for one’s client and (c) keeping one’s shareholders happy. And I haven’t even mentioned the lawyer’s duty to the court (which is supposed to be our primary duty)! Apparently Slater & Gordon’s company constitution explicitly confirms that its primary duty is to the court, then to clients, and then to its shareholders, so it is trying to manage this aspect.

I wonder whether this will catch on elsewhere? I suppose we’ll just have to watch and see whether it is a success and whether other firms follow suit.

Update

I recommend a couple of other commentaries on this issue:

• John Flood has offered a comprehensive and thoughtful post (as usual)
• Professor Mitt Regan is intending to publish an interesting discussion in the Georgetown Journal with Bruce McEwen and Professor Larry Ribstein – it takes a while to read, but it is worth it.
• Blawgs.com has also posted a small piece – I wonder whether there will be any responses?

Update 2

On further conversations with colleagues, more questions occur.

What happens if Slater & Gordon are running an action against a particular individual who is very well-resourced, and that individual buys a substantial number of shares in Slater & Gordon and then demands that the action against him cease?

I note that the prospectus is very clear that one of the risks of investing in the company is that it may be required to act against the interests of the shareholders, and that the corporate governance policy reiterates this (documents available here).

Secondly, what is the standing of the firm in a legal action? Is a public company a valid form for a law firm? Thirdly, does the fact the firm is a corporation limit the Law Institute’s ability to regulate the firm? I note that the prospectus says that investors must be aware that the Law Institute will have disciplinary powers over lawyers who do not meet practicing standards.

I don’t know the answers to these questions – I’m just putting them out there for consideration.

Drugs and the law

Craziness! A top barrister has been admitted to hospital. He collapsed in a hotel, allegedly after a prostitute administered drugs to him. It is not clear at this point what the drug was or whether it was administered with the barrister’s consent.

Another top barrister has said lawyers should be drug tested because of drug use in the legal profession. The head of the Victorian bar has said that this is nonsense.

It has to be admitted that about 10 years ago, Legal Eagle heard rumours of rampant cocaine abuse amongst some groups of solicitors and barristers. Some lawyers purportedly held cocaine parties, where all tabletops and cupboard tops were covered with cocaine.

Legal Eagle has actually tried cocaine herself. What?! When was this, I hear you ask?

Sorry to disappoint. It was under medical supervision during an operation. I broke my nose as a child, and had to get it straightened out again, because I was getting constant sinus infections. Anaesthetists administer cocaine during this operation as it stops bleeding and dulls pain. I wouldn’t recommend it as a way of trying cocaine. It did feel good for about 15 minutes after the operation, but then it wore off and my poor schnozzle hurt like hell. I had a nose like a strawberry for two weeks. My husband had to get a sinus operation, and was hoping he would get to try cocaine too, just once, but either he didn’t get given it or it had worn off by the time he came to. He was most disappointed.

Anyway, that’s the only time I’ve come across cocaine in my legal career. I’ve never seen or heard of any drug use by lawyers of my acquaintance. Obviously, I just move in the “wrong” circles? Or perhaps all those rumours are false?

I know that they do have drug tests at some companies already (eg, mining companies). Perhaps that’s the way of the future. I was thinking of the prospect. I would be pretty offended if someone wanted to test me for drugs. I spent years (a) cramming knowledge into this brain and (b) getting myself into a happy state. I’m not the kind of person to mess with that by taking drugs. So on a personal level, I’d hate it if they introduced drug tests for lawyers. But on a more abstract level, it would be interesting to see what the results would be if they did introduce drug tests amongst lawyers…?

Update

Peter Faris QC has prepared a fiery open letter to Michael Shand QC, Chairman of the Victorian Bar regarding cocaine use at the bar.

Update 2

Vale Peter Hayes QC, who died today. As I have said in a comment below, one of the problems with drug and alcohol use in the legal community is the devastating impact it can have on the physical and mental health of users.