Accident Claims Lawyers Pty Ltd (Subject to Deed of Company Arrangement) v Legal Practice Board
[2024] WASC 249
•15 JULY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ACCIDENT CLAIMS LAWYERS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) -v- LEGAL PRACTICE BOARD [2024] WASC 249
CORAM: SEAWARD J
HEARD: 29 SEPTEMBER 2023
DELIVERED : 15 JULY 2024
FILE NO/S: CIV 1630 of 2023
BETWEEN: ACCIDENT CLAIMS LAWYERS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Applicant
AND
LEGAL PRACTICE BOARD
Respondent
Catchwords:
Judicial Review - Application to review decision made by the Legal Practice Board to appoint an auditor under s 256 of the Legal Profession Uniform Law (WA) - Statutory construction - Whether s 256 permits an audit to be conducted of the compliance of the associates of a law practice - Whether the Legal Practice Board has misdirected itself or acted for an improper purpose
Legislation:
Legal Profession Uniform Law (WA), s 256
Legal Profession Uniform Rules (WA)
Legal Profession Uniform General Rules 2015
Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015
Result:
Application granted
Category: B
Representation:
Counsel:
| Applicant | : | Ms J Lucy |
| Respondent | : | Mr J Winton |
Solicitors:
| Applicant | : | Rostron Carlyle Rojas Lawyers |
| Respondent | : | Legal Practice Board |
Cases referred to in decision:
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
Aldi Foods Pty Ltd v Shop, Distributive & Allied Employees Association [2017] HCA 53; (2017) 262 CLR 593
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384
Humich Nominees Pty Ltd v Commissioner of Main Roads [2020] WASCA 175
Kelly v Birchwood Consolidated Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2023] WASCA 76
Kirk v Industrial Court of New South Wales [2010] HCA 1; (2010) 239 CLR 531
LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] HCA 12; (2024) 98 ALJR 610
Minister for Immigration and Citizenship v SZGUR; [2011] HCA 1; (2011) 241 CLR 594
Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 276 CLR 80
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
R v Lavender [2005] HCA 37; (2005) 22 CLR 67
Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362
Tah Land Pty Ltd v Western Australian Planning Commission [No 3] [2023] WASC 35
Thompson v Randwick Corporation (1950) 81 CLR 87
SEAWARD J:
Overview
Accident Claims Lawyers Pty Ltd (ACL) is a law firm which provides legal services to persons seeking compensation as a result of an accident. ACL is also an Australian proprietary company registered in Western Australia and is an incorporated legal practice for the purposes of the Legal Profession Uniform Law (WA) (Uniform Law). ACL utilises case management systems and employees, known as legal assistants, provided by a third party in the provision of its legal services.
In May 2022, the Legal Practice Board (Board) received a complaint that one of these legal assistants was holding himself out to be a lawyer. This resulted in a committee of the Board resolving to appoint a suitably qualified person to conduct an audit of ACL's compliance with the Uniform Law, the Legal Profession Uniform Rules (WA) (Uniform Rules) and other applicable professional obligations pursuant to s 256 of the Uniform Law.
ACL has commenced an application for judicial review challenging the validity of the Board's decision. ACL claims that the Board made a jurisdictional error by misconstruing and misdirecting itself as to the power contained in s 256 of the Uniform Law and acting for an improper purpose.
The application for judicial review raises the following issues:
(1)Does s 256(1) of the Uniform Law permit an audit to be conducted of the compliance of the associates of a law practice with the Uniform Law, the Uniform Rules and other applicable professional obligations; and
(2)Has the Board misconstrued the power to conduct an audit under s 256(1) of the Uniform Law and:
(i)misdirected itself as to the power to appoint a suitably qualified person to conduct an audit; and/or
(ii)acted for an improper purpose.
Answering the first issue involves construing the Uniform Law to understand the conditions, limits and purpose of the conferral of the decision‑making authority on the Board under s 256 of the Uniform Law. The second issue involves considering the decision in fact made by the Board having regard to the appropriate construction of s 256(1) of the Uniform Law.
For the reasons set out below, I am satisfied the Board made a jurisdictional error.
What was the decision of the Board?
On 8 December 2022, the Professional Affairs Committee of the Board resolved to appoint Mr Ashley Macknay of MDS Legal to conduct a compliance audit of ACL (the Decision). The minutes of the meeting held December 2022 (Minutes) record as follows:[1]
[1] Affidavit of Barrie Goldsmith affirmed 22 August 2023 (Goldsmith affidavit) page 21.
To consider a proposed resolution to appoint a suitably qualified person to conduct an audit of Accident Claims Lawyers Pty Ltd (ACL) pursuant to section 256 of the Legal Profession Uniform Law (WA) (Uniform Law).
The identified concerns, which gave rise to the resolution below to appoint an auditor, were as follows:
(a) paralegals potentially engaging in unqualified legal practice, including on a systemic basis;
(b) potential inadequate supervision of paralegals and other non‑legal staff (including staff or contractors based in the UK) by ACL's sole legal director Morgan Hawkins and/ or his predecessor Nathan Lord; and
(c) potential conflicts of interest arising from ACL's briefing of doctors sourced from InstaMed, a company which is part of the same corporate group as ACL, in circumstances where disbursements paid to InstaMed are on-charged to ICWA and without disclosure of the relationship.
For the purposes of section 256 of the Uniform Law, the relevant sections of the Uniform Law, Uniform Rules and other applicable professional obligations which underpin the appointment of the auditor are as follows:
a. Unqualified legal practice - sections 10 and 11 of the Uniform Law;
b. Supervision - Rule 37 of the Australian Solicitors Conduct Rules;
c. Conflict concerning a solicitor's own interests - Rule 12 of the Australian Solicitors Conduct Rules; and
d. Rule 4 of the Australian Solicitors Conduct Rules being the duty to (inter alia):
i. act in the best interests of a client;
ii. deliver legal services competently and diligently; and
iii. avoid any compromise to their integrity and professional independence.
This is without limitation to any further professional obligations (ie under the general law) which may be relevant to the identified conduct.
Resolved:
Pursuant to section 256 of the Uniform Law, Mr Ashley Macknay of MDS Legal be appointed to conduct a compliance audit of Accident Claims Lawyers Pty Ltd.
For the purposes of these reasons, I will refer to the Decision as having been made by the Board.
The Decision was communicated to ACL by letter dated 23 January 2023.[2]
[2] Affidavit of Simon Paul Shaw, sworn 21 August 2023, attachment SPS-4, pages 28 - 29.
The Board and the solicitors for ACL then exchanged correspondence in April and May 2023 regarding the validity of the Decision. In correspondence from the Board dated 12 May 2023, the Board stated that it had resolved not to take any action against the legal assistant about whom the complaint was made, and also that it was prepared to withdraw the third issue in the Minutes, being the potential conflicts of interest, from the audit.[3]
[3] Goldsmith affidavit, attachment BG-2, pages 17 and 19.
The parties were unable to resolve their differences regarding the validity of the appointment of Mr Macknay, and accordingly by application dated 15 June 2023, ACL applied for judicial review of the Decision.
What are the grounds of judicial review?
ACL presses only grounds 1(a) and 1(b) of the application for judicial review, which are as follows:
1.The Professional Affairs Committee of the respondent (the Committee) acted ultra vires, acted for an improper purpose, or misdirected itself as to its functions, when making the impugned decision (the Decision), in that:
(a)it purported to appoint a suitably qualified person to conduct an audit of the compliance of solicitors who were employed or engaged by the applicant with the Legal Profession Uniform Law (WA) (Uniform Law) and the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (WA) (Conduct Rules) and did not appoint that person to conduct an audit of the compliance of the applicant with the Uniform Law, the Legal Profession Uniform Rules made under Part 9.2 of the Uniform Law (the Uniform Rules) and other applicable professional obligations;
(b)it made the Decision for an improper purpose, being the purpose of auditing the compliance of solicitors who were employed or engaged by the applicant with the Uniform Law and the Conduct Rules, and not for the purpose of auditing the applicant's compliance with the Uniform Law, the Uniform Rules and other applicable professional obligations;
ACL seeks a writ of certiorari, a writ of prohibition, a declaration, an injunction and an order setting aside the Decision.
Legal principles - judicial review
ACL bears the onus of establishing jurisdictional error on the part of the Board.[4]
[4] Minister for Immigration and Citizenship v SZGUR; [2011] HCA 1; (2011) 241 CLR 594 [67] ‑ [68]; Humich Nominees Pty Ltd v Commissioner of Main Roads [2020] WASCA 175 [142].
A decision will involve jurisdictional error if the decision is made outside the limits of the powers and functions given to the decision maker.[5] As observed by the High Court in Kirk v Industrial Court of New South Wales,[6] it is neither necessary, nor possible, to attempt to mark the metes and bounds of jurisdictional error. However, two accepted examples of jurisdictional error by a statutory administrative decision maker are:
(a)if the decision maker misconstrues the statute conferring jurisdiction and thereby misconceives the nature or the function which it is performing or the extent of its power in the circumstances of the case; and
(b)if the decision maker makes the decision for an improper purpose.
[5] Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 [163].
[6] Kirk v Industrial Court of New South Wales [2010] HCA 1; (2010) 239 CLR 531 [71].
An improper purpose is a purpose other than the purpose, or purposes, for which a discretionary power is conferred. Determining the purpose for which a power is conferred is a matter of statutory construction. The legal principles relevant to the question of whether a statutory power has been exercised for an improper purpose were outlined by Smith J in the decision of Tah Land Pty Ltd v Western Australian Planning Commission [No 3] as follows:[7]
(a)a decision made pursuant to a statutory power will only be invalid for improper purpose if it is established that it was made for a purpose beyond the scope of the relevant Act;
(b)where the relevant power derives from legislation, the purposes for which the power has been conferred will be derived by construing the legislation;
(c)when improper purpose is alleged, it is first necessary to identify the statutory or authorised purposes for which the relevant discretionary power has been given and it is then necessary to identify the purpose in fact of the relevant decision-maker;
(d) what is relevant is the subjective purpose of the decision-maker, although that may be inferred from objective factors, including the nature of the decision, the circumstances in which it was made, and its effect. The focus is on the conduct of the decision-maker;
(e)in the absence of evidence establishing improper purpose or displacing all possible legitimate purposes, it will be presumed that the power was exercised for a purpose falling within the scope of the purposes for which the power was conferred, and an improper purpose will not lightly be inferred; and
(f)the applicant must establish that the improper purpose is a substantial purpose in the sense that the power would not have been exercised but for the desire to achieve the improper purpose. Thus, the improper purpose must be the operative subjective purpose of the decision-maker.
[7] Tah Land Pty Ltd v Western Australian Planning Commission [No 3] [2023] WASC 35 [94] (citations omitted). See also Thompson v Randwick Corporation (1950) 81 CLR 87, 105 ‑ 107.
In addition, an error will only be jurisdictional if the error was material to the decision that was made. Some errors (eg bias or unreasonableness in the final result) will, of their nature, always be jurisdictional errors. However, for most cases an error will only be jurisdictional if the error was material to the decision that was made in fact, in the sense that there is a realistic possibility that the decision that was made in fact could (not would) have been different if the error had not occurred.[8] What must be shown to demonstrate that an established error meets the threshold of materiality will depend upon the error, but the threshold is not demanding or onerous.[9]
[8] LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] HCA 12; (2024) 98 ALJR 610 [6] ‑ [7]; Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 276 CLR 80 [32] ‑ [33], [46], [63].
[9] LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [14] ‑ [15].
The Board accepts that if it made the error alleged by ACL in ground 1(a), then that error was material to the Decision and constitutes a jurisdictional error.
Statutory overview
Prior to considering the proper construction of the statutory power contained in s 256, it is helpful to provide an overview of the statutory regime. The Decision was made under s 256 of the Uniform Law, which took effect as a law of Western Australia on 1 July 2022.[10] The Uniform Law is divided into nine chapters, and the parties have referred to various provisions in support of their respective constructions.
[10] Legal Profession Uniform Law Application Act 2022 (WA), s 6 and s 7.
Objects
The objects of the Uniform Law are set out in s 3 and are expressed at a high level of generality. Whilst there are a number of different objects, relevant for present purpose are the following:[11]
(1) ensuring lawyers are competent and maintain high ethical and professional standards in the provision of legal services; and
(2) enhancing the protection of clients of law practices and the protection of the public generally; and
(3)promoting regulation of the legal profession that is efficient, effective, targeted and proportionate.
Threshold for legal practice
[11] Uniform Law, s 3(b), s 3(c) and s 3(e).
A key aspect of the Uniform Law is that it establishes the threshold requirements for legal practice, including the requirements for admission. Two of the provisions relied upon by the Board in the Decision are s 10 and s 11 of the Uniform Law. Section 10(1) provides that an entity must not engage in legal practice unless it is a qualified entity. Section 11(1) provides that an entity must not advertise or represent that it is entitled to engage in legal practice unless it is a qualified entity. Section 11(2) extends the same prohibition to a director, partner, officer, employee or agent of an entity.
An 'entity' is defined in s 6(1) of the Uniform Law as including:
(a) an individual, an incorporated body and an unincorporated body or other organisation; and
(b) in the case of a partnership —
(i)the partnership as currently constituted from time to time; or
(ii) the assignee or receiver of the partnership;
A 'qualified entity' includes, relevantly for present purposes, an 'Australian legal practitioner' and a 'law practice'. An 'Australian legal practitioner' is an Australian lawyer who holds a current Australian practising certificate, whilst an 'Australian lawyer' is a person admitted to the Australian legal profession in this jurisdiction or any other jurisdiction. Finally, 'engage in legal practice' includes:
practise law or provide legal services, but does not include engage in policy work (which, without limitation, includes developing and commenting on legal policy)[.]
Accordingly, both individuals and organisations are required to be qualified entities to engage in legal practice in Western Australia.
Legal practice
Also relevant for present purposes is ch 3 of the Uniform Law, which is concerned with legal practice and details the requirements for the provision of legal services, including rules regarding practising as an Australian legal practitioner or as a foreign lawyer; practising certificates; and rules relating to incorporated and unincorporated legal practices and community legal services. The Board places some reliance on ch 3 in its construction.
The objects of ch 3 are contained in s 30 as follows:
(a) to enable the provision of legal services through a range of business structures; and
(b) to ensure that any particular type of business structure does not hinder a law practice and the legal practitioners within it from complying with this Law, the Uniform Rules and the other professional obligations of Australian legal practitioners; and
(c) to ensure that clients of law practices are adequately protected regardless of the business structure through which a law practice provides legal services; and
(d) to regulate the provision of legal services through community legal services.
Section 32 of the Uniform Law provides that legal services may be provided under any business structure, subject to the provisions of the Uniform Law and the Uniform Rules.
Section 33 of the Uniform Law is concerned with compliance with various obligations by both Australian Legal Practitioners and law practices. Section 33 provides:
(1) An Australian legal practitioner must comply with this Law, the Uniform Rules and his or her other professional obligations, regardless of the business structure in which or in connection with which the practitioner provides legal services.
(2) A law practice must comply with this Law, the Uniform Rules and its other professional obligations, regardless of the business structure in which or in connection with which the law practice provides legal services.
Section 34 is concerned with the responsibilities of a principal of a law practice and s 34(1) provides that each principal of a law practice is responsible for ensuring that reasonable steps are taken to ensure that:
(a) all legal practitioner associates of the law practice comply with their obligations under this Law and the Uniform Rules and their other professional obligations; and
(b) the legal services provided by the law practice are provided in accordance with this Law, the Uniform Rules and other professional obligations.
A failure of a principal to uphold the responsibility in s 34(1) is capable of constituting unsatisfactory professional conduct or professional misconduct.[12]
[12] Uniform Law, s 34(2).
Section 35 is concerned with the liability of principals, and s 35(1) provides that if a law practice contravenes any provision of the Uniform Law or the Uniform Rules imposing an obligation on the law practice, a principal of the law practice is taken to have contravened the same provision, if -
(a) the principal knowingly authorised or permitted the contravention; or
(b) the principal was in, or ought reasonably to have been in, a position to influence the conduct of the law practice in relation to its contravention of the provision and failed to take reasonable steps to prevent the contravention by the law practice.
Section 35(2) provides that a contravention by a principal arising under s 35(1) is capable of constituting unsatisfactory professional conduct or professional misconduct by the principal.
Finally, s 36(1) makes specific provision for a legal practitioner associate of a law practice to discharge the obligations of a law practice on behalf of the law practice. However, s 36(4) provides that nothing in s 36 affects any liability of a principal of a law practice.
Business practice and professional conduct
Section 256 of the Uniform Law is contained in ch 4, which is headed 'Business practice and professional conduct'. The objectives of ch 4 are contained in s 126 and are as follows:
(a) to ensure appropriate safeguards are in place for maintaining the integrity of legal services; and
(b) to apply those safeguards regardless of the type of business structure used for the delivery of legal services.
Chapter 4 of the Uniform Law contains provisions which specifically apply to law practices. See, for example, pt 4.2 which is concerned with trust money and trust accounts. Section 127 provides that the objective of pt 4.2 is to ensure that trust money is held by law practices in a manner that protects the interests of the persons for whom or on whose behalf it is held.
Section 130 provides that the part applies to, amongst others, a law practice in respect of specified trust money received by the law practice. Terms such as 'trust account' and 'trust property' in s 128 and 'trust money' in s 129 are defined by reference to accounts or property or money of a law practice. The part goes on to specify how a law practice is to deal with trust money and trust accounts, including making provision for civil penalties. See, for example, s 135 and s 136 of the Uniform Law.
Section 256 provides for the conduct of an audit of the compliance of a law practice as follows:
256Compliance audits
(1) The designated local regulatory authority may conduct, or appoint a suitably qualified person to conduct, an audit of the compliance of a law practice with this Law, the Uniform Rules and other applicable professional obligations if the designated local regulatory authority considers there are reasonable grounds to do so, based on —
(a)the conduct of the law practice or one or more of its associates; or
(b) a complaint against the law practice or one or more of its associates.
(2) The appointment of a suitably qualified person may be made generally, or in relation to a particular law practice, or in relation to a particular compliance audit.
(3) A report of a compliance audit is to be provided to the law practice concerned and may be provided to the designated local regulatory authority.
Note
Chapter 7 applies to a compliance audit.
Section 256 contains a number of defined terms. In terms of the 'designated local regulatory authority', it is not in dispute that in Western Australia the Board is the 'designated local authority'.[13] It is also not in dispute that the Board delegated the function under s 256(1) of the Uniform Law to the Professional Affairs Committee, with effect from 1 July 2022.[14]
[13] See definition of 'designated local regulatory authority' in s 6(1) of the Uniform Law and the Legal Profession Uniform Law Application Act 2022 (WA), s 20.
[14] See the minutes and the instrument of delegation and authorisation in the Goldsmith affidavit pages 24 ‑ 36.
The text of s 256 refers to both a 'law practice' and an 'associate' of a law practice. A law practice is defined in s 6(1) as:
(a) a sole practitioner; or
(b) a law firm; or
(c) a community legal service; or
(d) an incorporated legal practice; or
(e) an unincorporated legal practice;
An associate is defined in s 6(1) as:
a person who is one or more of the following —
(a) a principal of the law practice;
(b) a partner, director, officer, employee or agent of the law practice;
(c) an Australian legal practitioner who is a consultant to the law practice[.]
An audit under s 256 is concerned with compliance with the Uniform Law, the Uniform Rules and other applicable professional obligations.
The Uniform Rules means the Legal Profession Uniform Rules made under pt 9.2 of the Uniform Law.[15] The provisions regarding the making of the Uniform Rules, and the different categories of rules, are discussed further below. The term 'professional obligations' is defined in s 6(1) of the Uniform Law as:
(a) duties to the Supreme Courts; and
(b) obligations in connection with conflicts of interest; and
(c) duties to clients, including disclosure; and
(d) ethical standards required to be observed —
that do not otherwise arise under this Law or the Uniform Rules[.]
[15] Uniform Law, s 6(1).
Chapter 4 also provides for other types of investigations, in addition to the compliance audit in s 256 of the Uniform Law.
Division 3 of pt 4.2 provides for trust records examinations. Section 155 relevantly provides:
(1)A law practice must once in each financial year have its trust records externally examined by a suitably qualified person appointed in accordance with the Uniform Rules as an external examiner.
Civil penalty: 50 penalty units.
(2)The designated local regulatory authority may examine, or may in writing appoint a suitably qualified person as an external examiner to examine, a law practice's trust records if the designated local regulatory authority is not satisfied —
(a)that the law practice has had its trust records externally examined as required by this section; or
(b)that an external examination of the law practice's trust records has been carried out in accordance with the Uniform Rules.
Division 4 of pt 4.2 provides for an external investigation known as a trust records investigation. The principal purposes of an external investigation are to ascertain whether a law practice has complied with or is complying with the requirements of pt 4.2 and to detect and prevent fraud or defalcation.[16] Section 162(1) provides that the designated local regulatory authority may investigate, or may appoint a suitably qualified person to investigate, the affairs or the specified affairs of a law practice. The affairs of a law practice include the following:[17]
(a)all accounts and records required by or under this Law or the Uniform Rules to be maintained by the law practice or an associate or former associate of the law practice;
(b)other records of the law practice or an associate or former associate of the law practice;
(c)any transaction —
(i)to which the law practice or an associate or former associate of the law practice was or is a party; or
(ii)in which the law practice or an associate or former associate of the law practice has acted for a party[.]
[16] Uniform Law, s 161.
[17] Uniform Law, s 6(1).
Part 4.3 is concerned with legal costs and is another example of a part imposing obligations on law practices. Part 4.3 specifies how a law practice must charge legal costs, including (for example) specifying that a law practice must charge costs that are no more than fair and reasonable in all the circumstances;[18] must not act in a way that unnecessarily results in increased legal costs payable by a client;[19] and must provide the client with information disclosing the basis on which legal costs will be calculated and an estimate of the total legal costs.[20] There are also provisions regarding costs agreements between a client and a law practice.[21]
[18] Uniform Law, s 172(1).
[19] Uniform Law, s 173.
[20] Uniform Law, s 174(1)(a).
[21] Uniform Law, s 179 - s 185.
Parts 4.4 and 4.5 are concerned with professional indemnity insurance and fidelity cover. These parts are not limited to law practices and extend to Australian legal practitioners and Australian‑registered foreign lawyers.
Section 256 is contained in pt 4.6 which is headed 'Business management and control'. Also relevant in pt 4.6 is s 257 of the Uniform Law, which concerns the ability of the Board to give management system directions. Section 257 provides as follows:
257Management system directions
(1) The designated local regulatory authority may give a management system direction to a law practice if the authority considers it reasonable to do so after the conduct of any examination, investigation or audit referred to in Chapter 7.
(2) A management system direction is a direction to a law practice or class of law practices —
(a)to ensure that appropriate management systems are implemented and maintained to enable the provision of legal services by the law practice, or by a law practice of that class, in accordance with this Law, the Uniform Rules and other professional obligations; and
(b) to provide periodic reports to the designated local regulatory authority on the systems and on compliance with the systems.
(3) A law practice must comply with a management system direction given to it.
Section 258 outlines various services and businesses that a law practice must not promote, operate or provide (such as managed investment schemes).
Section 259 provides that the Uniform Rules may make provision with respect to the following matters concerned with law practices:
(a) the provision of legal services by law practices or particular categories of law practices; and
(b) the provision of other services by law practices in circumstances where a conflict of interest relating to the provision of legal services may arise and the imposition of additional duties and obligations in those circumstances; and
(c) requirements for law practices in or in connection with providing legal and other services referred to in paragraph (a) or (b).
Dispute resolution and discipline
Chapter 5 is concerned with dispute resolution and professional discipline. ACL places some significance on the fact that this chapter is largely (but not exclusively) concerned with regulating the conduct of lawyers, as opposed to law practices.
The objectives of ch 5 are contained in s 260 and are:
(a)to provide a framework for the timely and effective resolution of disputes or issues between clients and lawyers or law practices; and
(b) to provide a scheme for the discipline of the Australian legal profession, in the interests of the administration of justice and for the protection of clients of law practices and the public generally; and
(c) to monitor, promote and enforce the professional standards, competence and honesty of the Australian legal profession.
The term 'lawyer' in this chapter includes an Australian legal practitioner.[22]
[22] Uniform Law, s 261.
Under ch 5, a complaint may relate to any dispute or issue about any conduct to which ch 5 applies.[23] A complaint may be made by any person or body, and the designated local regulatory authority may also initiate a complaint.[24]
[23] Uniform Law, s 265.
[24] Uniform Law, s 266.
A complaint is made to the designated local regulatory authority in writing and must identify the complainant and the lawyer or law practice about whom the complaint is made.[25] A complaint may contain either or both of a consumer matter or a disciplinary matter.[26] A consumer matter is:[27]
so much of a complaint about a lawyer or a law practice as relates to the provision of legal services to the complainant by the lawyer or law practice and as the designated local regulatory authority determines should be resolved by the exercise of functions relating to consumer matters.
[25] Uniform Law, s 267.
[26] Uniform Law, s 268(1).
[27] Uniform Law, s 269(1).
A disciplinary matter is:[28]
so much of a complaint about a lawyer or a law practice as would, if the conduct concerned were established, amount to unsatisfactory professional conduct or professional misconduct.
[28] Uniform Law, s 270.
Chapter 5 goes on to detail the process for investigating a complaint, and the various powers of the designated local regulatory authority to investigate complaints, including appointing a suitably qualified person to conduct a complaint investigation.[29]
[29] Uniform Law, s 282.
Chapter 5 also details the powers of the designated local regulatory authority to resolve a consumer matter and a disciplinary matter by making a determination.[30] For both consumer matters and disciplinary matters, the designated local regulatory authority may make an order requiring the respondent law practice to arrange for a legal practitioner associate of the law practice to undertake training, education, counselling or be supervised.[31]
Investigatory powers
[30] Uniform Law, s 290 and s 299.
[31] Uniform Law, s 290(d) and s 299(1)(e).
Chapter 7 is headed 'Investigatory powers' and the objective of the chapter is to set out the powers that are exercisable in connection with:[32]
(a) trust records examinations; and
(b) trust records investigations; and
(c) compliance audits; and
(d) complaint investigations.
[32] Uniform Law, s 368(1).
A person who carries out an examination, investigation or audit referred to above is referred to in ch 7 as an 'investigator'.[33] Chapter 7 outlines various powers of an investigator, including requiring a law practice to provide access to documents or information.[34]
[33] Uniform Law, s 368(2).
[34] Uniform Law, s 370(1) and s 371(1).
Section 386 of the Uniform Law addresses the circumstances where, in the course of a trust records examination, a trust records investigation, a compliance audit or a complaint investigation, an investigator becomes aware of any matter that the investigator thinks may be unsatisfactory professional conduct or professional misconduct. If this occurs the investigator:[35]
must, unless the matter is or has been already the subject of a complaint under Chapter 5, refer the matter to the designated local regulatory authority to consider whether disciplinary action should be taken against an Australian legal practitioner or Australian-registered foreign lawyer.
Uniform Rules
[35] Uniform Law, s 386(2).
Chapter 9, amongst other matters, addresses the making of the Uniform Rules. Pursuant to s 419(1) of the Uniform Law, the Legal Services Council may make Legal Profession Uniform Rules with respect to any matter that by the Uniform Law is required or permitted to be specified in Uniform Rules or that is necessary or convenient to be specified for carrying out or giving effect to the Uniform Law. The Uniform Rules may apply to an Australian Legal Practitioner, a law practice,[36] and lay associates of law practices.[37]
[36] See s 419(2)(a) and the definition of 'qualified entity' in s 6(1) of the Uniform Law.
[37] Uniform Law, s 419(2)(e).
Section 420 provides for the following categories of rules:
(a)Admission Rules; and
(b) Legal Practice Rules; and
(c) Legal Profession Conduct Rules; and
(d) Continuing Professional Development Rules.
Uniform Rules not so designated may be known as general Uniform Rules or by another designation specified in the Rules.[38]
[38] Uniform Rules, s 420(2).
Sections 421 - 427 make further provision for the making and content of the various categories of rules. Section 422 provides that the Legal Practice Rules may provide for any aspect of legal practice by, relevantly, Australian legal practitioners and law practices. Section 423 provides that the Legal Professional Conduct Rules may provide for any aspect of the professional conduct of, relevantly, Australian legal practitioners and law practices.
The following (relevant) rules have been made by the Legal Services Council:
(a)the Legal Profession Uniform General Rules 2015 (General Rules); and
(b)the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (Solicitors'Conduct Rules).
The objective of the General Rules is to set out provisions contemplated by the Uniform Law, save for those provisions that are or may be included in the other category of rules.[39] The General Rules were not referred to in the Minutes. The General Rules contain a large number of rules, some of which specifically apply to law practices and some of which apply to Australian lawyers, Australian legal practitioners and foreign lawyers.
[39] General Rules, r 3.
The objective of the Solicitors' Conduct Rules is to assist solicitors to act ethically and in accordance with the principles of professional conduct established by the common law and the Solicitors' Conduct Rules.[40] The following rules in the Solicitors' Conduct Rules are referred to by the Professional Affairs Committee in the Minutes:
[40] Solicitors' Conduct Rules, pt 1 r 3.1.
(a) rule 37.1: which provides that a solicitor with designated responsibility for a matter must exercise reasonable supervision over solicitors and all other employees engaged in the provision of the legal services for that matter;
(b) rule 12: which is concerned with conflicts between a solicitor's own interests (or an associate of the solicitor) and the interest of a client;
(c)rule 4: which is concerned with other fundamental ethical duties and provides that a solicitor must also:
(i)act in the best interests of a client in any matter in which the solicitor represents the client;
(ii)be honest and courteous in all dealings in the course of legal practice;
(iii)deliver legal services competently, diligently and as promptly as reasonably possible;
(iv)avoid any compromise to their integrity and professional independence; and
(v)comply with the Solicitors' Conduct Rules and the law.
What is the proper construction of s 256 of the Uniform Law?
The competing constructions
ACL submits that s 256 permits an audit to be conducted of the compliance of a law practice with the Uniform Law, etc, but does not permit an audit to be conducted of the compliance of ACL's employed solicitors with the Unform Law, etc.
The Board submits that, properly construed, s 256 permits the Board, or a suitably qualified person, to conduct an audit of the compliance of both a law practice and its associates with the Uniform Law, etc.
Legal principles - statutory construction
The general principles concerning the process of statutory construction are well known and are not in dispute. Statutory construction involves the attribution of objective meaning to the statutory text having regard to considerations of text, context and purpose. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The statutory text is the surest guide to Parliament's intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of the provision, in particular the mischief it is seeking to remedy.[41]
[41] CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384, 408; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [47]; SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 [14].
In relation to the statutory purpose, the Court of Appeal observed in Kelly v Birchwood Consolidated Pty Ltd (Receivers and Managers Appointed) (In Liquidation):[42]
As to the last matter, statutory purpose, French CJ, Hayne, Kiefel, Gageler and Keane JJ said in Thiess v Collector of Customs:
Objective discernment of statutory purpose is integral to contextual construction. … For:
'it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.'
The statutory purpose of legislation may be discerned from an express statement of purpose in the statute, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose must be discerned from what the legislation says, as distinct from any assumptions about the desired or desirable reach or operation of relevant provisions.
[42] Kelly v Birchwood Consolidated Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2023] WASCA 76 [177] - [178].
The court may have regard to extrinsic material to confirm the ordinary and natural meaning of statutory provisions or in cases of ambiguity or uncertainty,[43] but extrinsic material cannot be used to negate the plain meaning of statutory provisions.[44]
[43] Interpretation Act 1984 (WA), s 19.
[44] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [47].
Finally, the provisions of the statute must be understood, if possible, as parts of a coherent whole and be construed on the prima facie basis that the provisions are intended to give effect to harmonious goals.[45]
The text - s 256
Plain language
[45] Project Blue Sky Inc v Australian Broadcasting Authority [70]; Aldi Foods Pty Ltd v Shop, Distributive & Allied Employees Association [2017] HCA 53; (2017) 262 CLR 593 [16]; Kelly v Birchwood Consolidated Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [181].
The Decision was made under s 256 of the Uniform Law. Given its centrality to the question of construction, it is helpful to repeat the text of s 256(1), which makes provision for the statutory power to conduct an audit:
(1) The designated local regulatory authority may conduct, or appoint a suitably qualified person to conduct, an audit of the compliance of a law practice with this Law, the Uniform Rules and other applicable professional obligations if the designated local regulatory authority considers there are reasonable grounds to do so, based on —
(a)the conduct of the law practice or one or more of its associates; or
(b) a complaint against the law practice or one or more of its associates.
By its terms, and in particular the phrase 'an audit of the compliance of a law practice with', s 256(1) specifies the entity which is the subject of the audit: a law practice. The text expressly refers to compliance of a law practice and does not refer to the compliance of the associates of a law practice.
There are references to the associates of a law practice in s 256(1)(a) and s 256(1)(b). However, properly construed, I do not consider these references alter the plain language and the express reference to a law practice. First, neither subsection refers to the conduct of, or a complaint about, an associate's compliance with the Uniform Law, etc. Secondly, these references are not inconsistent with the express reference to compliance of a law practice. Rather, each acknowledges and accommodates the situation where it is the conduct of an associate that gives rise to the reasonable grounds about the compliance of the law practice with the Uniform Law, etc. These references also accommodate the definition of a law practice and the various business structures included in that definition and acknowledge that some structures, such as an incorporated legal practice, can only act through the actions of individuals.
I also accept that in many cases when an actual audit of the compliance of a law practice is conducted the auditor may need to review the actions or conduct of associates of the law practice. Again, this is not surprising given the various business structures accommodated in the definition of a law practice. That it is necessary to consider the actions of the associates of the law practice as part of conducting an audit under s 256(1) does not mean that the audit must necessarily also audit compliance by the associates with the Uniform Law, etc. Rather, to the extent the actions of the associates of the law practice are considered or reviewed, it is for the purposes of auditing compliance of the law practice with the Uniform Law, etc, and not for the purposes of auditing compliance of the associates.
For example, it may be that a complaint is made about a payment from a trust account. In such a case it will be relevant for both the local designated regulatory authority and the auditor to consider the actions of the associate who made the payment, to audit whether the law practice has complied with the relevant provisions of the Uniform Law, etc, regarding trust accounts. Further, as envisaged by s 36 of the Uniform Law, it may be that a legal practitioner associate of a law practice has discharged particular obligations of the law practice. Again, in such a case it will be relevant to consider the actions of the legal practitioner associate in the context of auditing whether the law practice has complied with the Uniform Law, etc.
Alternatively, if there were to be a requirement in the Uniform Rules that a law practice is responsible for ensuring that its legally qualified associates comply with particular professional obligations, then it will be relevant to consider whether the legally qualified associates have complied with particular professional obligations as part of the audit as to whether the law practice has, in turn, complied with the Uniform Law, etc.
However, these examples are concerned with the exercise of the statutory power in the context of the facts of a particular case, and not with the conditions, limits and purpose of the conferral of power.
Section 256(3) of the Uniform Law is also consistent with the plain language of s 256(1). Under s 256(3) a report of a compliance audit is to be provided to the law practice concerned. Significantly, a report is not required to be provided to the associates of the law practice. This is consistent with the plain language of s 256(1) and the audit being directed to compliance of the law practice.
For these reasons I do not consider that the references to the associates of the law practice in s 256(1)(a) and s 256(1)(b) expand the scope of the audit as submitted by the Board. Rather, properly construed, the reference to the conduct of, or a complaint about, an associate is a basis upon which the designated local regulatory authority may consider there are reasonable grounds to conduct an audit into the compliance of the law practice.
Surrounding words
The Board submits that the phrase 'compliance of the law practice' cannot be read in isolation from the words surrounding it in s 256(1) of the Uniform Law. The Board relies on (a) the definition of law practice and (b) the reference to the Uniform Rules and other professional obligations in s 256(1), in support of its submission that an audit conducted under s 256(1) extends to an audit of the compliance of the associates of the law practice. The Board's submission is based on the following propositions:
(a)the process of construction first requires the definitions of any defined terms to be read into s 256(1). In this regard, the term law practice is defined to include a 'sole practitioner', which is in turn defined to mean an Australian legal practitioner who engages in legal practice on his or her own account. Further, the term includes a 'law firm' which is defined as a partnership consisting only of Australian legal practitioners (or one or more Australian legal practitioners and one or more Australian‑registered foreign lawyers).[46] Accordingly, in many cases the entity that bears the obligations imposed on the law practice and the obligations imposed on the legal practitioner will be one and the same, and there will be no distinction between the obligations owed by the law practice and the legal practitioner;
(b)an audit can review compliance with the Uniform Rules, which includes both the General Rules and the Legal Profession Conduct Rules. Section 423 of the Uniform Law provides that the Legal Professional Conduct Rules may provide for any aspect of the professional conduct of, relevantly, both Australian legal practitioners and law practices;
(c)an audit can review compliance with other applicable professional obligations, which are defined to include duties to the Supreme Courts; obligations in connection with conflicts of interest; duties to clients, including disclosure; and ethical standards required to be observed that do not otherwise arise under the Uniform Law or the Uniform Rules.[47] These professional obligations are imposed on Australian legal practitioners;
(d)the text of s 256(1) qualifies the term professional obligations with the words 'other applicable', but does not qualify the words Uniform Law and Uniform Rules in the same manner;
(e)in light of propositions (a) - (d) above s 256(1), in express terms, permits an audit to be conducted of the compliance of a sole practitioner or a partner of a law firm with their obligations under the Legal Professional Conduct Rules and the ethical standards required to be observed that do not otherwise arise under the Uniform Law or the Uniform Rules;
(f)the same conduct which is capable of audit in respect of a sole practitioner or a partner of a law firm must necessarily be capable of being audited within a multi-practitioner law firm. In this regard, the Board relies on s 33 and s 35 of the Uniform Law; and
(g)in these circumstances, the Board submits that ACL's construction impermissibly requires additional words to be read into the text of s 256(1) as follows (additional words as marked):
The designated local regulatory authority may conduct, or appoint a suitably qualified person to conduct, an audit of the compliance of a law practice with obligations imposed on the law practice by this Law, the Uniform Rules and other applicable professional obligations if the designated local regulatory authority considers there are reasonable grounds to do so, based on …
[46] Uniform Law, s 6(1).
[47] Uniform Law, s 6(1).
I do not accept the premise of the Board's submission or that it alters the plain language of s 256(1) of the Uniform Law for the following reasons.
First, contrary to the Board's submission, when regard is had to the other provisions of the Uniform Law and the Uniform Rules (which are discussed later in these reasons when considering context), a distinction is drawn between obligations imposed on a law practice and obligations imposed on an Australian legal practitioner - they are not one in the same. This is notwithstanding that one set of rules may contain obligations imposed on both a law practice and an Australian legal practitioner. In addition, the Uniform Law contains a separate process for the investigation of complaints regarding an Australian legal practitioner and whether they have engaged in unsatisfactory professional conduct or professional misconduct. Not only are the obligations imposed on sole practitioners and partners of a law firm not one in the same, but the method of investigating compliance with those obligations is not one in the same.
Secondly, the definition of law practice includes a variety of business structures. Not all of these other business structures are individuals, and therefore not all owe obligations both as a law practice and as an Australian legal practitioner. In addition, the definition of associate is broader than a sole practitioner and a partner of a law firm and includes a number of different individuals.[48] Accordingly, the Board seeks to expand the plain language of s 256(1) based on the circumstances applicable to some but not all categories of law practices and one type of associate.
[48] Whilst the definition of 'associate' does not include a 'sole practitioner', it does include a 'principal of a law practice', which is defined in s 6(1), in the case of a sole practitioner, as being the sole practitioner.
Thirdly, nothing in the plain language of s 256(1) is inconsistent with s 33 or s 35 of the Uniform Law. These sections are considered later in these reasons when considering context. For present purposes, nothing in the plain language of s 256(1), or the phrase 'audit of the compliance of a law practice', results in a law practice or an Australian legal practitioner failing to comply with the Uniform Law, etc, as a result of the business structure in connection with which each provides legal services.
Finally, I do not accept that ACL's construction requires additional words to be read into the text of s 256(1) of the Uniform Law. By its terms, s 256(1) specifies (a) the entity the subject of the audit is a law practice; and (b) the audit concerns the compliance of that entity 'with' the Uniform Law, etc. An entity will only ever be able to comply 'with' so much of the Uniform Law, etc, that actually applies to it. It is not to the point that aspects of the Uniform Law, etc, may[49] also apply to other entities.
[49] Observing the relatively broad scope of the rule making power under the Uniform Law.
In reaching this conclusion, I acknowledge that the text of s 256(1) qualifies the term professional obligations with the words 'other applicable' but does not do the same in relation to the Uniform Law or the Uniform Rules. However, I do not consider that this has the effect of displacing the plain language of the text. Not all parts of the Uniform Law or the Uniform Rules impose obligations on either a law practice or an associate of a law practice, see for example ch 8 dealing with regulatory authorities. It cannot have been intended that an audit of a law practice would audit compliance 'with' those parts of the Uniform Law and the Uniform Rules which do not apply to it, or do not in any way impose obligations on a law practice.
Context
Immediate context ‑ ch 4 and s 257
The plain language of s 256(1) is consistent with the immediate context in which it is placed - being ch 4 of the Uniform Law. Whilst some provisions in ch 4 apply to both law practices and Australian legal practitioners (eg pt 4.4 and pt 4.5 concerning professional indemnity insurance and fidelity cover), the chapter is primarily concerned with matters that apply only to law practices: costs requirements, trust account obligations and requirements as to the various services and businesses that a law practice must not promote, operate or provide.
Chapter 4 also makes provision for two additional types of investigations: trust records examinations and trust records investigations. The text of the sections of the Uniform Law concerning these investigations directs the focus of these investigations into the actions of a law practice and not its associates.
The Board places significant reliance on the power of the designated local regulatory authority under s 257 of the Uniform Law to give a management system direction to a law practice after the conduct of any examination, investigation or audit. The Board submits that the definition of a management system direction is sufficiently broad to include a direction which ensures that legal services are being delivered by the law practice, either by a sole practitioner or through legal practitioner associates, in accordance with their personal professional obligations. The Board also submits that the conferral of a power to issue a management system direction is only coherent if the auditor is permitted to review whether legal practitioners are complying with their professional obligations and the power is therefore remedial.
It is not necessary or appropriate for the purposes of this application to construe the precise scope of the statutory power contained in s 257 or resolve precisely what matters may form the content of a management system direction. However, proceeding for now on the basis as submitted by the Board, I do not consider that the power to give such a management system direction in s 257 of the Uniform Law has the effect submitted by the Board.
Section 257 authorises the designated local regulatory authority to give a management system direction to a law practice after the conduct of any examination, investigation or audit referred to in ch 7 of the Uniform Law. The examinations, investigations or audits referred to in ch 7 are: trust records examinations, trust records investigations, compliance audits and complaint investigations.[50] A compliance audit means an audit under s 256 and a complaint investigation means an investigation of a complaint under s 282.[51] A complaint may relate to any dispute or issue about any conduct to which ch 5 of the Uniform Law applies,[52] which includes consumer matters and disciplinary matters. Both consumer and disciplinary matters may be about a law practice or a lawyer.[53]
[50] See Uniform Law, s 368(1).
[51] Uniform Law, s 6(1).
[52] Uniform Law, s 265.
[53] Uniform Law, s 268, s 269(1) and s 270.
Accordingly, the power of a designated local regulatory authority to issue a management system direction to a law practice to ensure that the legal services being delivered by that law practice though either a sole practitioner or legal practitioner associates are in accordance with their professional obligations,[54] does not depend on an audit being conducted under s 256(1) of the compliance of the sole practitioner or the legal practitioner associates with the Uniform Law, etc. Those matters may be investigated in a complaint investigation under the relevant provisions in ch 5. Therefore, I do not consider that s 257 of the Uniform Law supports the construction of s 256 advanced by the Board.
Disciplinary matters
[54] Assuming, without determining, that such a power exists.
The plain language of s 256(1) is also consistent with the scheme of the Uniform Law for dealing with legal practitioner associates and in particular the separate process in ch 5 for investigating disciplinary complaints.
Chapter 5 of the Uniform Law is concerned with dispute resolution and professional discipline. Under ch 5, complaints can be made about a lawyer or a law practice and may concern consumer or disciplinary matters. Consumer matters concern parts of a complaint relating to the provision of legal services by the lawyer or law practice,[55] whilst disciplinary matters are concerned with conduct that, if established, would amount to unsatisfactory professional conduct or professional misconduct. Under s 282, the local designated regulatory authority may investigate the whole or part of a complaint or may appoint a suitably qualified person to conduct a complaints investigation.
[55] And which the designated local regulatory authority determines should be resolved by the exercise of functions relating to consumer matters.
Accordingly, the Uniform Law provides for a separate investigative process to consider whether legal practitioner associates of a law practice are complying with their obligations under the Uniform Law, etc. Chapter 5 includes an express reference to both lawyers and law practices. This separate regulatory process includes the power to make an order requiring a law practice to arrange for a legal practitioner associate of the law practice to undertake training, education, counselling or to be supervised.
Investigatory powers
The Board also relies on s 386 of the Uniform Law in support of its construction. Section 386 of the Uniform Law is concerned with the situation where, in the course of a trust records examination, a trust records investigation, a compliance audit or a complaint investigation, an investigator becomes aware of any matter the investigator thinks may be unsatisfactory professional conduct or professional misconduct. If this occurs, the investigator must refer the matter to the designated local regulatory authority.
The Board submits that s 386 reveals that the Uniform Law contemplates that an audit under s 256 would be reviewing an associate's compliance with their obligations under the Uniform Law, etc, and imposes a consequential obligation on the auditor if an instance of serious non-compliance is found, unless it is already the subject of a complaint.
I do not accept this submission. To the contrary, the inclusion of s 386 is consistent with an audit under s 256(1) being limited to compliance of the law practice and the consequential need to ensure that if, in the course of an audit, a matter concerning possible unsatisfactory professional conduct or professional misconduct comes to light, a mechanism exists for referring that matter to the local designated regulatory authority. Such a mechanism would not be required if s 256 already permitted an audit of the compliance of legal practitioner associates.
Sections 33 - 35
The Board relies on s 33 - s 35 the Uniform Law in support of its construction. The Board makes a number of submissions in this regard.
First, the Board submits that there is an obligation on law practices to comply with the relevant obligations imposed on practitioners under the Uniform Law and Uniform Rules. The Board's case is that this obligation arises because of the requirement in s 33(2) of the Uniform Law that a law practice must comply with the Uniform Law, etc, regardless of the business structure in which or in connection with which the law practice provides legal services.
I do not accept that s 33(2) has the effect contended for by the Board. The text of s 33(2) only refers to a law practice and the requirement that it comply with the Uniform Law, etc. Further, s 33(1) expressly imposes a similar obligation on Australian legal practitioners. In these circumstances, I do not accept that s 33(2) is as wide as submitted by the Board.
Secondly, the Board submits that the Uniform Law establishes a regulatory scheme whereby law practices have an obligation to provide legal services in accordance with the Uniform Law and the Uniform Rules. The Board submits that the effect of s 33 ‑ s 35 is that the Uniform Law contemplates that the question of whether a law practice is complying with its professional obligations depends, in part, on whether its associates are complying with their own professional obligations in delivering legal services on behalf of the law practice. Therefore, the scope of s 256(1) must include the ability to audit compliance by the associates of the law practice with the Uniform Law, etc.
At a general level, there is nothing controversial in the Board's proposition that the Uniform Law is a regulatory scheme whereby law practices have an obligation to provide legal services in accordance with the Uniform Law and the Uniform Rules, or that the question of whether the law practice is complying may depend upon the actions of its associates. However, I do not accept that s 33 ‑ s 35 of the Uniform Law have the effect as submitted by the Board.
I do not consider that the text of s 34 and s 35 supports the Board's construction. To the contrary, it supports ACL's construction and the plain language of the text of s 256(1) of the Uniform Law. Section 34 expressly provides that each principal of a law practice is responsible for ensuring that reasonable steps are taken to ensure that:
(a)all legal practitioner associates of the law practice comply with their obligations under the Uniform Law, etc; and
(b)the legal services provided by the law practice are provided in accordance with the Uniform Law, etc.
The text expressly uses the word principal and not law practice. In the case of a sole practitioner, the principal will be that sole practitioner. However, it is not the case that the principal of the law practice will be the same entity as the law practice for all the remaining categories of law practices. For example, in the case of a community legal centre, it is the supervising legal practitioner and in the case of an incorporated legal practice, it is an Australian legal practitioner who holds an Australian practising certificate authorising the holder to engage in legal practice as a principal of a law practice and who is a validly appointed director of the company.[56] Therefore, the concepts of a law practice and a principal are not one in the same.
[56] Uniform Law, s 6(1), 'principal'.
The distinction between a law practice, a principal and a legal practitioner associate is further underscored by s 36 of the Uniform Law which provides that a legal practitioner associate may, on behalf of the law practice, discharge the obligations of a law practice. In this circumstance, the relevant provisions of the Uniform Law and the Uniform Rules apply to the legal practitioner in the same way as they apply to the law practice, and nothing affects any liability of a principal.
The Board specifically refers to s 34(1)(b) of the Uniform Law. The Board submits that whilst s 34 imposes an obligation on the principal, that obligation includes ensuring that the legal services provided by the law practice are provided in accordance with the Uniform Law, etc, and this will inevitably depend upon whether the legal practitioner associates within the law practice are complying with their obligations under the Uniform Law, etc, when delivering legal services on behalf of the law practice.
I do not accept this submission. It is not entirely clear to me that s 34(1)(b) does impose such an obligation on a practice. Section 34 must be considered as a whole, and one possible construction is that it is s 34(1)(a) which is concerned with the responsibility for ensuring that legal practitioner associates within the law practice are complying with their obligations under the Uniform Law, etc, whilst s 34(1)(b) is directed to other aspects of the provision of legal services by the law practice. This construction is consistent with the definition of legal services, which means 'work done, or business transacted, in the ordinary course of legal practice'.[57] However, I do not consider it is necessary to form a final view on the construction of s 34(1) for the purposes of this application. Even if s 34(1)(b) has the effect as contended by the Board, this does not have the consequence that s 256(1) should be construed as submitted by the Board. In circumstances where ch 5 provides for other methods for investigating whether the legal practitioner associates of the law practice are complying with their obligations under the Uniform Law, etc, nothing in s 34(1)(b) overcomes the plain language contained in s 256(1) of the Uniform Law.
[57] Uniform Law, s 6(1).
Further, s 34(2) provides that a failure of the principal to uphold the responsibility imposed under s 34(1) is capable of constituting unsatisfactory professional conduct or professional misconduct. The appropriate mechanism for investigating the principal's alleged failure under s 34 is therefore through a complaint investigation under ch 5, and not an audit under s 256(1) of the Uniform Law.
I also do not consider that s 35 of the Uniform Law supports the Board's construction. Section 35 imposes liability on a principal of a law firm for a contravention by the law practice of any provision of the Uniform Law, etc, if certain criteria are met. Again, a distinction is being drawn between a law practice and a principal.
Thirdly, I do not consider that ACL's construction of the conferral of statutory power under s 256(1) is in any way inconsistent with s 33 ‑ s 36 of the Uniform Law. Confining an audit under s 256(1) to compliance by the law practice with the Uniform Law, etc, does not result in either a law practice or an Australian legal practitioner failing to comply with the Uniform Law, etc, because of the business structure in which or in connection with which either provides legal services. It also does not impact upon the liability of a principal under s 34 or s 35 of the Uniform Law and nothing in this construction prevents a legal practitioner associate of a law practice from discharging the obligations of the law practice under the Uniform Law or the Uniform Rules in accordance with s 36 of the Uniform Law.
Historical context
The Board also relies upon the historical context of the power contained in s 256(1), being s 118 of the Legal Profession Act 2008 (WA) (2008 Act) (repealed). Section 118(1) provided as follows:
(1)The Board or the Complaints Committee may conduct an audit of —
(a)the compliance of an incorporated legal practice (and of its officers and employees) with the requirements of —
(i)this Part; or
(ii)the regulations or the legal profession rules, so far as they relate specifically to incorporated legal practices;
and
(b)the management of the provision of legal services by the incorporated legal practice (including the supervision of officers and employees providing the services).
The relevant transitional provision is s 314 of the Legal Profession Uniform Law Application Act 2022 (WA), which provides that if the Board or the relevant committee commenced an audit of an incorporated legal practice under s 118 of the 2008 Act before the commencement day, and immediately before the commencement day the audit was not completed or had not otherwise ended, the audit is taken to be an audit under s 256 of the Uniform Law and may be continued under that section.
The Board submits that the effect of the transitional provision is that there is no narrowing of the scope of an audit under the 2008 Act, and therefore the construction of s 256 must at least authorise an audit that was permitted under the 2008 Act.
The legislative history of a statutory provision is an extrinsic matter to which regard may be had when construing the provision, including repealed aspects of a continuing provision.[58] However, I was not referred to any authorities concerning transitional provisions to the effect submitted by the Board.
[58] R v Lavender [2005] HCA 37; (2005) 22 CLR 67 [41] ‑ [42].
I do not consider that s 314 assists the Board. As a transitional provision it is concerned with making provision for what happens to an investigation which at the time the 2008 Act is repealed has in fact commenced but has not yet been completed. It is not concerned with, and says nothing about, investigations or audits commenced under the Uniform Law, and says nothing about the interpretation of the Uniform Law going forward.
Whilst it is appropriate as part of considering the context of s 256(1) to have regard to the legislative history, including s 118 of the 2008 Act, I also do not consider that this history assists the Board.
Section 118 by its terms applied to incorporated legal practices only. Section 118(1)(a) authorised an audit of the compliance of an incorporated legal practice and its officers and employees with the requirements of pt 7 of the 2008 Act or the regulations and rules so far as they relate specifically to incorporated legal practices. There is no suggestion in this language of an audit extending to auditing whether officers and employees complied with the requirements of the regulations and rules so far as they relate specifically to the officers and employees.
Accordingly, to the extent s 118 of the 2008 Act is relevant to the construction of s 256(1), I do not consider it supports a construction which authorises an audit of the compliance of the associates of a law practice with the Uniform Law, etc, save for where a review of the actions of associates is necessary to audit compliance of the incorporated legal practice itself.
Purpose
I am also of the view that ACL's construction of s 256(1) is consistent with the objects and purpose of the Uniform Law, as revealed by its text. The objective of the Uniform Law is found in s 3, being to promote the administration of justice and an efficient and effective legal profession by making provision for different matters regarding the regulation of the profession. Of particular relevance for this application are:
(c) enhancing the protection of clients of law practices and the protection of the public generally; and
(e)promoting regulation of the legal profession that is efficient, effective, targeted and proportionate.
The Board submits that it is also relevant to consider the objectives of ch 3 of the Uniform Law, which concerns legal practice. The Board relies on the following objectives contained in s 30 of the Uniform Law, and submits that ACL's construction of s 256(1) would improperly constrain these purposes:
(a) to enable the provision of legal services through a range of business structures; and
(b) to ensure that any particular type of business structure does not hinder a law practice and the legal practitioners within it from complying with this Law, the Uniform Rules and the other professional obligations of Australian legal practitioners; and
(c) to ensure that clients of law practices are adequately protected regardless of the business structure through which a law practice provides legal services; …
Both parties accept that the objectives of ch 4, which are contained in s 126, are relevant. That section provides that the objectives of that chapter are:
(a) to ensure appropriate safeguards are in place for maintaining the integrity of legal services; and
(b) to apply those safeguards regardless of the type of business structure used for the delivery of legal services.
What emerges from the Uniform Law, both in so far as particular objectives are specified and when considering the Uniform Law as a whole, is that one purpose of the Uniform Law is to provide protection for clients of law practices. That protection is achieved in multiple ways, including by requiring legal services to be provided by qualified entities; by imposing rules and obligations on both law practices and Australian legal practitioners; by making provision for complaints to be made about the conduct of law practices and lawyers and by empowering a designated local regulatory authority to investigate those complaints and to conduct audits of compliance by law practices with the Uniform Law, etc, and other investigations. The Uniform Law also seeks to ensure that this protection exists regardless of the business structured adopted by the law practice. In this context, the purpose of s 256 is to make provision for an audit to be conducted of the compliance of law practices with the Uniform Law, etc, to ensure legal services are provided in accordance with the Uniform Law, etc, and to provide protection for clients of law practices.
I am of the view that the plain language of s 256(1) is consistent with these articulated objectives and this particular purpose of the Uniform Law. Section 256(1) enhances the protection of clients of law practices and the protection of the public generally, and ensures that clients of law practices are adequately protected and that appropriate safeguards are in place for maintaining the integrity of legal services by making provision for a designated local regulatory authority to audit compliance by a law practice with the Uniform Law, etc.
ACL's construction also promotes regulation that is efficient, effective, targeted and proportionate in that it requires the existence of reasonable grounds prior to the exercise of the power, and those reasonable grounds can be based on the conduct of, or complaints against, the law practice or one or more of its associates.
The Board submits that ACL's construction of s 256 results in a significant fetter on an important tool in the designated local regulatory authority's belt, and it will limit the ability of the regulator to identify and address systemic issues arising across law practices, or a class of law practices.
I do not consider that s 256(1) must provide for a compliance audit in relation to all entities or individuals covered by the Uniform Law in order to be consistent with the objectives of either ch 4 or the Uniform Law as a whole. This is particularly the case where there are other provisions which enable investigations into the actions of associates of a law practice and enable an investigation into the compliance by those associates with the Uniform Law, etc. Section 256(1) is simply one way in which this objective can be achieved. It must be read in the context of the other investigative processes in ch 4 and ch 5 of the Uniform Law, and the obligations imposed on principals under s 34 ‑ s 36 of the Uniform Law. That a broader construction may enable the designated local regulatory authority to audit a wider variety of conduct and entities is not to the point. Ultimately, that is a question of policy for the legislature. Therefore, a construction of s 256(1) which limits an audit to compliance by the law practice is not inconsistent with the objectives and purpose of the Uniform Law, or the objects and purpose of s 256 itself. Rather, it furthers that purpose in a specific targeted manner and is therefore consistent with it.
I also do not accept that anything in the plain language of s 256(1) hinders the provision of legal services; hinders a law practice and the legal practitioners within it from complying with the Uniform Law; diminishes the protection afforded to clients; or impacts upon the integrity of legal services, due to the business structure adopted by the law practice. The construction of s 256(1) applies equally to all law practices, regardless of the business structure adopted. For the reasons outlined earlier, a different outcome does not arise for sole practitioners or law firms.
In these circumstances, I am satisfied that the plain language of s 256(1) is consistent with the object and purpose of the Uniform Law.
Construction conclusion
I am therefore of the view that, properly construed, an audit under s 256 of the Uniform Law is an audit into the compliance of the law practice with the Uniform Law, etc. Whilst such an audit may, depending on the facts of the individual case, involve consideration of the actions of associates of that law practice, properly construed s 256 does not authorise an audit into the compliance of the associates of the law practice with the Uniform Law, etc.
Has the Board misconstrued s 256(1) and misdirected itself and/or acted for an improper purpose?
Having construed the conditions, limits and purpose of s 256(1) of the Uniform Law, it is necessary to consider the Decision and determine whether in making the Decision the Board has in fact misconstrued s 256(1) and thereby misdirected itself and/or acted for an improper purpose.
In considering that question, I have had regard to the Minutes and the letter sent by the Board to ACL informing of the appointment of the auditor. I consider these are the contemporaneous documents detailing the reasons for and basis of the Decision. There is also additional correspondence between the parties which the Board relies on, including the letter from the Board to ACL's solicitors dated 12 May 2023. However, this correspondence is part of an exchange between the parties after the Decision had been made and communicated, in which ACL challenges the validity of the Decision and the Board responds. I consider these documents to be akin to submissions or an explanation as opposed to constituting evidence of the factual basis upon which the Decision was made, and I have had regard to these documents in that context only.
ACL submits that the Minutes reveal that the issues of concern to the Board are all issues regarding compliance with rules which impose obligations on solicitors only, and not on law practices. ACL submits that the Board thereby misconstrued s 256(1) and misdirected itself as to its statutory powers under s 256, and/or acted for an improper purpose.
The Board submits that auditing the compliance of solicitors with their professional obligations is a proper purpose for the purposes of s 256 of the Uniform Law. However, the Board also submits that when regard is had to the totality of the evidence, the purpose for which the Board exercised its power was to ascertain whether, and ensure that, appropriate safeguards were in place to maintain the integrity of the legal services provided by ACL. The Board submits that this is a proper purpose for the exercise of the power under s 256 of the Uniform Law.
I find that the Board did in fact misconstrue s 256(1) and therefore misdirected itself as to the conditions, limits and purpose of the statutory power under s 256(1) of the Uniform Law. I also find that this misdirection has resulted in the Board making the Decision for an improper purpose, being the purpose of auditing compliance of the associates of ACL with the Uniform Law, etc, and not for the purpose of auditing compliance of ACL with the Uniform Law, etc. I have reached this conclusion for the following reasons.
First, the Minutes and the letter identify the concerns which gave rise to the Decision. None of these concerns involve compliance of ACL with the Uniform Law, etc, but rather concern compliance of others.
The first concern identified is paralegals potentially engaging in unqualified legal practice, including on a systemic basis. Pursuant to s 10(1) of the Uniform Law, an entity must not engage in legal practice unless it is a qualified entity. The definition of qualified entity includes both a law practice and an individual. However, there is no reference in the Minutes or the letter to ACL itself being unqualified, only potentially paralegals. Section 34 provides that the responsibility for ensuring that legal services provided by the law practice are provided in accordance with the Uniform Law, etc, lies with each principal of the law practice. Section 34 does not impose that responsibility on the law practice. The use of the word 'systemic' does not alter the construction or application of s 10 and s 34 of the Uniform Law.
The second identified concern is that of potential inadequate supervision of paralegals and other non-legal staff by ACL's sole legal director and/or his predecessor. It is expressly stated in the Minutes that the concern is whether the principal of the law practice and his predecessor has complied with their obligation. This is consistent with s 34 of the Uniform Law.
Secondly, the Minutes and the letter specify the relevant sections of the Uniform Law and the Uniform Rules which underpin the appointment of the auditor. None of the sections identified concern compliance by ACL, rather they concern compliance by Australian legal practitioners or the principal of the law practice.
Sections 10 and 11 of the Uniform Law concern the requirement that an entity must not engage in legal practice (or advertise or represent that it is entitled to engage in legal practice) unless it is a qualified entity. As outlined above, whilst these sections apply to both law practices and individuals, there is no suggestion that ACL is unqualified to engage in legal practice. Rather, the expressed concern is in relation to paralegals.
Rule 37 of the Solicitors Conduct Rules provides that a solicitor with designated responsibility for a matter must exercise reasonable supervision over solicitors and all other employees engaged in the provision of the legal services for that matter. Rule 4 is concerned with other fundamental ethical duties on the part of a solicitor. A solicitor is defined in the glossary as:
(a) an Australian legal practitioner whose Australian practising certificate is not subject to a condition that the holder is authorised to engage in legal practice as or in the manner of a barrister only, or
(b) an Australian registered foreign lawyer who practises as or in the manner of a solicitor.
Rule 12 is concerned with conflicts of interest. Whilst this concern was ultimately withdrawn from the audit, r 12 is also concerned with conflicts between a solicitor and a client and imposes obligations on a solicitor, and not a law practice.
Thirdly, the Minutes and the letter also state that the list of provisions of the Uniform Law and the Solicitors Conduct Rules is without limitation to any further professional obligations which may be identified. However, none are specified, and no reference is made to any professional obligations that may apply to ACL.
Fourthly, I do not accept the Board's submission that when regard is had to the totality of the evidence, the purpose for which the Board exercised its power was to ascertain whether, and ensure that, appropriate safeguards were in place to maintain the integrity of the legal services provided by ACL. This submission seeks to characterise the purpose of the Decision at too high a level of generality. This characterisation is largely the wording of the purpose of ch 4 as contained in s 126 of the Uniform Law.
Ascertaining the substantial purpose of the Decision requires consideration of the Board's purpose in exercising the statutory power in the context of the facts surrounding its exercise. In the present case, that statutory power is appointing a suitably qualified person to conduct an audit under s 256 of the Uniform Law. The objective evidence, in the form of the Minutes and the letter, reveals that the Board's substantial purpose in exercising that power on that occasion was to audit compliance of associates with identified obligations and aspects of the Uniform Law, etc. In light of my conclusion as to the proper construction of s 256(1) of the Uniform Law, this is a purpose other than the purpose for which the discretionary power is conferred.
In these circumstances, I am satisfied that the Board has misconstrued s 256(1) of the Uniform Law and has made the Decision on the basis that s 256(1) permits an audit of compliance of associates of a law practice with the Uniform Law, etc. In misconstruing s 256(1), I am satisfied that the Board has misdirected itself as to the conditions, limits and purpose of its statutory power and has also acted for an improper purpose.
I am satisfied that these errors are material. The nature of the misconstruction of s 256(1) of the Uniform Law is of such significance to the Decision that there is a realistic possibility that the Decision could have been different if the error had not occurred. The Board has therefore made a jurisdictional error when making the Decision.
Conclusion
As the Board made a jurisdictional error when making the Decision, I am satisfied that it is appropriate in all the circumstances to make an order quashing the Decision.
I will hear further from the parties as to whether, in all the circumstances, any of the other remedies sought are required or should be granted in the exercise of my discretion. I will also hear further from the parties as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AA
Associate to the Honourable Justice Seaward
15 JULY 2024
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