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Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
1
Review of Lawyers’ Practising Certificate Fees SUBMISSION
In response to
THE VICTORIAN LEGAL SERVICES BOARD + COMMISSIONER DISCUSSION PAPER
Date: 31 March
Contact:
Gemma Hazmi Acting Principal Lawyer, Legal Policy T: (03) 9607 9374 E: [email protected]
W: www.liv.asn.auwww.liv.asn.au
© Law Institute of Victoria (LIV).
No part of this submission may be reproduced for any purpose without the prior permission of the LIV.
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
2
ABOUT THIS SUBMISSION
The Law Institute of Victoria
The Law Institute of Victoria (LIV) is Victoria’s peak body for lawyers and represents more than 19,500
people working and studying in the legal sector in Victoria, interstate and overseas. The fundamental
purpose of the LIV is to foster the rule of law and to promote improvements and developments in the law as
it affects the public of Victoria. Accordingly, the LIV has a long history of contributing to, shaping and
developing effective state and federal legislation, and has undertaken extensive advocacy and education of
the public and of lawyers on various law reform and policy issues. The LIV also assures the standards and
professionalism of lawyers, including accreditation and specialisation in contemporary legal disciplines.
The LIV welcomes the opportunity to provide its submission on the Victorian Legal Services Board +
Commissioner’s (VLSB+C) Review of Lawyers’ Practising Certificate Fees Discussion Paper (Discussion
Paper). The setting of practising certificate fees (PC fees) is an issue which has a direct impact on the legal
profession, members of the community in Victoria who come in contact with the legal system, those who rely
on the services provided by lawyers and Victoria’s economy more broadly.
The Review
A significant increase in practising certificate fees is being considered by the VLSB+C. The fee increase
options are being reviewed through a Regulatory Impact Statement (RIS) process as part of the impact
assessment of the sunsetting Legal Profession (Practising Certificate Fees) Regulations 2012.
A standard RIS process involves two key stages:
Stage 1: initial consultation
This is being undertaken by the VLSB+C through the release of the Discussion Paper; and
Stage 2: the RIS
The RIS will be prepared by the VLSB+C after consideration of submissions responding to the
Discussion Paper. The Commissioner for Better Regulation will then assess its adequacy with
reference to further submissions.
To date, the LIV has:
1. written to the VLSB+C in 2016 to influence more effective consultation (which has led to the release
of the Discussion Paper), and called for more appropriate lead times for the RIS process;
2. written to the VLSB+C in February 2017 to provide an Initial Report, outlining deficiencies with the
RIS process, the limited scope of the Discussion Paper and requesting a supplementary discussion
paper be provided to address these issues. The LIV also maintained the call for more appropriate
lead times so that both proper consultation and implementation can be undertaken; and
3. undertaken a survey of LIV members seeking information about how the proposed changes would
affect the legal profession. The survey received 769 responses, constituting effective consultation
with PC holders. Analysis of this data has been provided as part of this Submission.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
3
This Submission
This Submission constitutes the LIV’s formal response to the Discussion Paper (Stage 1) and addresses the
questions, and the issues underpinning those questions, in its body. It is based on independent economic
advice, assessment of the proposals against principles of good regulation and member feedback obtained
through consultation with LIV members via the LIV Survey.
The LIV Survey was open to all members who currently hold a PC. This ensured that members were
provided with an opportunity to directly contribute to the discussion of this topic which has significant impact
on their practise of law. The results and individual responses from the LIV Survey, as well as its analysis, are
used throughout the Submission. Comments from members provide useful examples and anecdotal
evidence of the significant issues that would arise, should any of the proposed options to increase PC fees
be implemented. These have been highlighted in the Submission as blue quotations.
As survey respondents provided almost 200 individual comments, not all of them have been included in this
Submission. For completeness and transparency, all verbatim comments are available to view at
https://www.liv.asn.au/Professional-Practice/Compliance/PC-Fee-Increase/Survey-Results.aspx. In some
cases, comments in the report have been edited for typographical corrections.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
4
TABLE OF CONTENTS
About this Submission ......................................................................................................... 2
Executive Summary ............................................................................................................. 6
Glossary of Key Terms ...................................................................................................... 14
1 Introduction ..................................................................................................................... 16
1.1 The 10 principles of good regulation ............................................................................ 16
2 Who Benefits and Who Pays .......................................................................................... 19
3 Whole of System Context ............................................................................................... 21
3.1 History of the PPF and legal regulation ........................................................................ 21
3.2 Total regulatory revenue .............................................................................................. 22
3.3 Cumulative impacts on industry and the economy ....................................................... 22
3.4 Revenue cross-subsidisation ....................................................................................... 23
4 Achieving Genuine Regulatory Efficiency ....................................................................... 25
4.1 Good governance and independent reviews ................................................................ 26
4.2 Value for money ........................................................................................................... 27
4.3 Benchmarking against NSW ........................................................................................ 33
5 VLSB+C Position on Fee Increases ................................................................................ 35
6 Ensuring Effective Processes and Timing ....................................................................... 42
6.1 Full consultation on likely impacts ................................................................................ 42
6.2 Timing .......................................................................................................................... 42
6.3 Implementation ............................................................................................................ 42
6.4 Adopting a risk-based approach .................................................................................. 43
7 LIV Survey Results and Analysis of PC Fee Increase Impacts ....................................... 44
7.1 LIV Survey of Members and Analysis Framework ....................................................... 44
7.2 The Extent of PC Fee Increases .................................................................................. 44
7.3 Flat vs Tiered System .................................................................................................. 46
7.4 What Benefits and Costs need to be Considered? ...................................................... 47
7.5 Why Significant Negative Impacts Occur Regardless of Capacity to Pass on Costs ... 63
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
5
Summary of Findings ......................................................................................................... 65
Recommendations ............................................................................................................. 66
APPENDIX A Survey Methodology and Analysis .............................................................. 67
APPENDIX B LIV Survey ................................................................................................... 69
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
6
EXECUTIVE SUMMARY
The Victorian Legal Services Board + Commissioner (VLSB+C) are proposing significant increases in
Practising Certificate (PC) fees for Victorian lawyers. A Regulatory Impact Statement (RIS) process
pursuant to sun-setting regulations offers several options all of which involve substantive increases.
This Submission by the Law Institute of Victoria (LIV) is in response to the accompanying Review of
Lawyers’ Practising Certificate Fees Discussion Paper (Discussion Paper) released by the VLSB+C and
representing the first stage of the a consultation process under the Subordinate Legislation Act, Rules and
Guidelines (SLA). It includes findings and recommendations.
The LIV has obtained independent economic advice (LIV Initial Report) and undertaken extensive research,
canvassing legal practitioner views on both the likely impacts of the VLSB+C’s proposals and its processes
in assessing those impacts. In particular the LIV has examined threshold requirements under the SLA to
establish both effectiveness of the regulation to be paid for and the efficiency of that regulation. The LIV
contends that:
1. the current legal profession regulatory model in Victoria is not best practice and is measurably
inefficient. Victoria’s regulatory costs are estimated to be 60% more expensive than the costs per
practitioner in New South Wales (NSW);
2. there has been no compelling justification provided for why PC fees should increase;
3. the proposals put forward by the VLSB+C, and the scope of its assessment, are limited to
consideration of the current, inefficient regulatory model with an increased regulatory burden through
substantially higher fees;
4. the size of proposed fee increases are unprecedented. If implemented, they detrimental impacts to
the legal industry and for clients are expected, with measurable negative flow on impacts for the
Victorian economy and key government policies.
5. the current RIS process is deficient. An effective RIS would:
a. be informed by the consultation process (Stage1) and should not be drafted prior to its
completion; and importantly should include representations raised during any consultation
by the LIV as a designated local authority, which has not been evident to date1;
b. ensure relevant information is available to enable informed decision making, including
relevant context such as history, all appropriate revenue sources available for regulation and
current cross-subsidisation;
c. undertake benchmarking to ensure that the optimum level of regulation and regulatory
efficiency is established, and review the current system against this;
d. consider and assess other relevant models of regulation (Australian and international) to
ensure regulatory efficiency is optimised with industry and society, and that economic
burdens are kept to a minimum for a given regulatory outcome;
1 See Section 156 of the Legal Profession Uniform Law Application Act (Vic) and LSB+C correspondence 7 March 2017
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
7
e. provide a full assessment of the likely costs against regulatory benefits;
f. ensure all relevant government departments and agencies are consulted, given the costs to
key government policies; and
g. provide a clear implementation plan for the proposed options ensuring that business
certainty, including financial year budgeting and reducing bill shock impacts, are fully
established. The current process and timing fails to take into account the realities of
conducting business;
Importance of a genuine, comprehensive and balanced RIS process
“Efficient regulation ensures efficient government with a flow on effect to productivity and general
community wellbeing.”2 – Tim Pallas, Victorian Treasurer
Good regulation can provide the framework for a highly efficient and equitable economy, reducing market
failure while allowing both government and the private sector to operate effectively. The RIS process is vital
in ensuring regulation is equitable and efficient, and that overregulation and poor regulatory practices do not
slow the economy or cause significant detriment to specific sectors or industries. As such, a RIS needs to be
undertaken in a comprehensive manner in order to provide evidence-based information for decision-makers
to arrive at well-informed conclusions. The Victorian Guide to Regulation (Guide to Regulation) notes that
the RIS should be a:
“…credible, evidence-based advice that facilitates consultation with the community and helps the
Government determine the best approach for achieving better community outcomes as well as
broader growth and productivity objectives.”3
It is crucial for Victoria’s productivity that a RIS not be used as a vehicle to advance a particular view, but
instead forms the framework for balanced, evidenced-based decision-making. A RIS should not be used as
the basis for increasing the government’s footprint unless there are significant and very clearly delineated
reasons for doing so, due to substantial changes in the environment.
Expectations of RIS decision-makers
The processes and issues raised in the VLSB+C’s Discussion Paper, the LIV’s Initial Report and this
Submission are in some respects unique to the legal industry and bring their own complexities. Those who
lead a RIS process, however are tasked with assessing the adequacy of the RIS in order to make final
decisions on the appropriate level and type of regulation. They need to remain cognisant of the overarching
purpose of regulation which is to increase overall community wellbeing. In doing so, they must consider the
following three core policy considerations:
1. It is expensive for government, and costly for the economy, for government to be where it
does not need to operate
Economic efficiency is enhanced where governments limit their role to where they are genuinely
needed. Attention is required when reviewing regulations to ensure that government regulatory
bodies regulate only to the extent of mitigating market failure4 and that government is not protected
in ways that enable it to unfairly compete or take over beyond the market failure. Any review should
2 Tim Pallas Victorian Treasurer, Victorian Guide to Regulation, Commissioner for Better regulation Victorian Government 2016 pg 3.
3 Commissioner for Better Regulation, above n 1, 3.
4 Market failure can include for example: inequality, productive and allocative inefficiency, monopoly power, missing, incomplete or
unstable markets, de-merit goods, information asymmetries and externalities.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
8
also examine whether a private sector body could be used as an effective part of the regulatory
system.
2. The review of regulation must continually strive for efficiency gains (not decrease efficiency)
Government legislation, regulation, policy and guidelines must always aim to achieve what is best for
Victoria as a whole, including the efficient operation of government that supports (or, at a minimum,
does not detract from) employment and growth. There must be proper consideration of the cost to
wealth-creation in Victoria through overreach by government departments or other government
bodies. Given increasing budget pressures, decision-makers must guard against the pressure to
misapply government policy to achieve short term budget gains at the cost of good governance,
economic principles and long-term prosperity.
3. The review of regulation should protect against the incentives to overregulate
Government must constantly protect against incentives to overregulate, including vested interests
within the government itself. For example, those that stand to gain from an increased regulatory
burden should not be the ones undertaking a regulatory review. Without this continuous vigilance,
Victoria’s economic growth will slow.
The LIV is dedicated to 10 fundamental principles for good governance and regulation based on Victorian
government policies and international best practice. (See 1.1) The three considerations outlined above are
central to the concerns held by the LIV regarding the analysis and processes behind the current Review.
These may lead to an unsatisfactory RIS and potential detrimental outcomes for the legal profession and the
Victorian economy.
Limitations of the Discussion Paper
The LIV supports a genuine and effective RIS process that delivers relevant information to decision-makers
and stakeholders, as well as achieving optimal outcomes for Victoria. The Review to date overlooks analysis
of several key issues, summarised below. It is essential that the forthcoming RIS addresses the following
issues raised in this Submission in a comprehensive and balanced way:
1. Measuring the true economic benefits of a well-regulated legal system
The Discussion Paper does not give full consideration to the wider benefits of a resilient, robust and
well-regulated legal profession in which all Victorians can have confidence. See, for example, page 5
of the Discussion Paper which limits consideration of the beneficiaries of legal practice regulation to
legal practitioners and their clients. The LIV calls for a comprehensive analysis of benefits, including
the economic and social benefit to all Victorians. Effective analysis of this is crucial in a genuine RIS
process, because it is central to an assessment of ‘who should pay’.
2. Consider whole of system context
An effective RIS process needs to provide all information that decision-makers would require in
order to make an informed decision. To do this, the whole of system context, including fees, all
revenue sources and financial impacts need to be comprehensively assessed. The Legal Services
Commissioner, in his letter to the LIV dated 13 September 2016, refers to achieving “complete
recovery of costs of legal regulation in Victoria” and states that the current system only provides
“[p]artial cost recovery” at 33%. This fails to take into consideration the Trust Account Income as an
appropriate source of revenue to cover the costs of regulation. The Discussion Paper also uses ‘cost
recovery’ as part of its rationale for emphasising PC fees as the most relevant source of regulatory
income. The limitations in this argument are carefully examined in this Submission. The RIS process
should provide clarity regarding how the current system works, the extent of cross-subsidisation
between different revenue sources, including beneficiaries and context, and thorough consideration
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
9
of who currently benefits and pays. For example, the interaction between the Fidelity Fund and PC
fees in Victoria should be clarified and compared with other relevant jurisdictions.
3. Target genuine regulatory efficiency
The Discussion Paper limits the scope of options considered to those resulting in significant fee
increases. Limiting the scope in this way does not support the government’s policy objective of
cutting red tape by using sun-setting regulations as periodic opportunities to identify and achieve
improvements in regulatory efficiency. Page 15 of the Discussion Paper, for example, concludes that
the current regulatory model is ‘efficient’ without consideration of alternative models (implemented
both internationally and in Australia) or undertaking regulatory burden benchmarking with relevant
jurisdictions.
4. VLSB+C’s misconceptions supporting assertion that a fee increase is required
The Discussion Paper’s limited scope does not engender confidence that the VLSB+C have
considered all relevant aspects or other less expensive options prior to commencing the RIS
process. The LIV is concerned that the rationale for fee increases is predicated on a number of
misconceptions by the VLSB+C (listed below), which are explored in greater detail in this
Submission.
a. A fee increase is supported by the Cost Recovery Guidelines (CRG)
This represents a fundamental misconception of the core objective of the CRG and how they
should be applied.
b. Funding stability will be achieved only through additional fee income
The Discussion Paper does not properly consider the actual strength and stability of the
VLSB+C's financial position, as well as those of its administered funds. The LIV analysis
demonstrates, in this Submission, that this argument does not provide a justification for a
significant and detrimental increase in PC fees.
c. Allocative efficiency is achieved and no flow-on impacts will occur
The LIV in concerned that the VLSB+C’s suggestion as to allocative efficiency do not
properly consider actual flow on effects that would occur.
d. Cross-subsidisation of legal aid is required through fee income
The VLSB+C argue that increasing PC fees would leave the Trust Account Income to fund
other areas (potentially Legal Aid, for example). The LIV believes that some cross-
subsidisation can be justified on economic and equity grounds to the extent that it supports
areas that strengthen the social fabric of the legal system. However, full or significant cross-
subsidisation funded from a PC fee increase would be detrimental to the legal system as a
whole.
e. New costs have been incurred by the VLSB+C
Although not discussed in the Discussion Paper, the RIS may suggest that there are now
new costs for the VLSB+C including, for example, trust account compliance audits (see
Discussion Paper page 21). However, these new costs have been relatively minor. Given
the scope for operating efficiencies driven by adoption of new technologies and automated
business processes, it could be argued that reductions in PC fees might be warranted in the
near future.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
10
5. Full analysis of the negative impacts of fee increases
Negative impacts of price increases on the legal industry will undermine growth and the achievement
of key government policies. The LIV calls for the RIS process to comprehensively consider the
potential and significant detriments to:
a. Victoria’s growth and productivity, including impacts on key productivity drivers such as the
small business sector;
b. Victoria as the preferred place to do business;
c. growing Victoria’s regional economy, centres and suburbs;
d. employment, workplace flexibility, as well as age and gender diversity and other aspects of
diversity of the legal profession; and
e. access to justice and vertical equity (the notion that people with less capacity to pay, should
pay less).
6. Ensuring effective process and timing
The timing of any potential PC fee changes requires careful deliberation and should be
communicated well in advance to enable law practices and sole practitioners to account for any
increase within their financial year budgetary cycle. This is an essential part of providing regulatory
certainty for businesses. Given the proposals for unprecedented increases to PC fees, the increases
could result in ‘Bill Shock’ if implemented without appropriate planning.
Size of proposed increases
The extent of the proposed PC fee increases is unprecedented. Further, the VLSB+C have not outlined the
size of the proposed increases in a clear way. Sub-sections 10(1)(ba) and 12H(1)(c) of the Subordinate
Legislation Act 1994 (SLA) require a comparison of existing and proposed fees, including the percentage
change. In order to provide clarity and ensure the proposals can be considered fully by decision makers,
stakeholders and the community, the LIV has prepared Table 1 below, which underlines the unprecedented
size of the proposed fee increases and a description of the options suggested by the VLSB+C.
This increase is well above any CPI or other related increases, particularly in the absence of information
justifying a need for greater regulation expenditure as detailed in this submission.
In addition, previous increases have not reached close to comparative levels.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
11
Table 1 – Size of proposed fee increases
PC type
Current fees
(2016-17) $/PC
Option 1
$/PC
%
increase
Option 2
$/PC
%
increase
Option 3
$/PC
%
increase
Option 4
$/PC
%
increase
Without trust
authorisation 344 913 165.4 1033 200.3 456 32.6 517 50.3
With trust
authorisation 509 1,623 218.9 1033 102.9 811 59.3 517 1.6
Total revenue
$million 7.6 21 176.3 21 176.3 10.5 38.2 10.5 38.2
The Discussion Paper effectively only provides two fee increase options on the existing regulatory model. These options involve a total increase in revenue, for the VLSB+C, from PC fees of either 38.2% or 176.3%. Option 1 The $21 million cost of regulation solely recovered from PC fees, using a tiered structure. A tiered structure would mean that those with PCs with trust authorisation would pay more for their PCs than practitioners without trust authorisation, with a proposed fee increase of 165.4% without trust authorisation and 218.9% with trust authorisation. Option 2 The $21 million cost of regulation only recovered from PC fees using a single fee structure. This would mean that all practitioners (regardless of whether or not they have trust authorisation) would pay the same fee, with a proposed fee increase of 200.3% for without trust authorisation PCs and 102.9% for PCs with trust authorisation. Option 3 Recovery of the $21 million cost of regulation 50% from PC fees and 50% from interest generated from solicitors’ and barrister’s clerks trusts accounts paid into the PPF, using a tiered structure. This would mean lower PC fees than the 100% recovery from PC fees option 1. The tiered structure, again, would mean that those with PCs with trust authorisation would pay more for their PCs than practitioners without trust authorisation, with a proposed fee increase of 32.6% without trust authorisation and 59.3% with trust authorisation. Option 4 Recovery of the $21 million cost of regulation 50% from PC fees and 50% from interest generated from solicitors’ and barrister’s clerks trust accounts paid into the PPF, using a single fee structure. This would mean lower PC fees than the 100% recovery from PC fees option 2. This would also mean that all practitioners (regardless of whether or not they have trust authorisation) would pay the same fee, with a proposed fee increase of 50.3% without trust authorisation and 1.6% with trust authorisation.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
12
Key findings
Based on the Victorian Government’s Guide to Regulation and Cost Recovery Guidelines , survey data and
individual responses provided by LIV members, independent economic advice and assessing the issues
against standard principles of good regulatory practice, the significant PC fee increases outlined in the
Discussion Paper would likely result in:
1 Unacceptable increases in regulatory burden.
2 Negative impacts on Victoria’s productivity, innovation and growth.
3
Reduced competition within the industry, with flow on effects from the reduction in competition among the lower charging (often smaller suburban and regional) law practices to larger practices and businesses.
4 Increased costs for small businesses and individuals seeking legal services.
5
Reduced competitive standing of Victoria as a cost-efficient place to do business (both within and beyond the legal sector).
6 Higher costs for hiring an additional worker in small to medium-sized law practices.
7
Reduced legal profession diversity and workplace flexibility, including
a. higher relative costs for self-employed legal practitioners, or those undertaking part-time or casual work at less than full-time hours with consequent impacts on diversity in the legal profession including reduced age, gender and other diversity; and
b. higher relative costs for employers in potentially hiring part-time or casual workers at hours less than full-time, with consequent reduced availability of flexible work arrangements;
8
Reduced diversity of legal service provision in the sector, including government, in-house and not-for-profit lawyers unable to pass on the increase in fees to clients or absorb it into department/organisation budgets.
9 Reduced growth potential for Victoria’s regional economy and centres.
10
Reduced resilience of a well-regulated legal sector with price pressures providing growth incentives for other areas such as less accountable offshore internet services.
11
Reduced financial resilience of regulatory income resulting from a reduction in the number of PCs with (reduced use of Trust Authorisation) or without trust authorisation (reduced number of lawyers overall) depending on which option is adopted.
12
Reduced access to justice with fewer lawyers available in certain locations (including suburban and regional), reduced competition at the lower charge end resulting in higher fees for those already struggling to afford legal services, and PC fees passed on to clients as higher legal fees where feasible.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
13
Recommendations
1 The review process should be undertaken by an independent body
The LIV considers that the VLSB+C is not an appropriate body to undertake this RIS process
because it is arguably conflicted. Notwithstanding the VLSB+C’s role in making recommendations for
the setting of fees under the legislation, it stands to gain directly from increased PC fees. The use of
a conflicted body (who stands to gain from increased regulatory burden) to undertake this RIS
process is inappropriate, against the basic principles of good governance, counter to the Victorian
Public Sector Values5 and does not support government policy to pursue continuous improvement in
regulation.
2 Changes to the regulatory model, or the mix between the Trust Account Income and the PC
fees income, should be revenue neutral
The VLSB+C has not adequately justified the need for a significant increase in revenue. Any valid
justifications presented for future proposals to increase fees would need to be balanced against the
economic and social costs of increased regulatory burden.
3 Current fee units and tiered fees should remain
Unless, as part of a broader review of legal profession regulation in Victoria, there is sufficient
demonstration of efficiency gains under alternative arrangements, there should be no change to the
existing arrangements. Any change in the mix between reliance on Trust Account income and PC
fees should only be as a result of detailed analysis of economic efficiencies and price responses and
should not be used to drive increased revenue for the VLSB+C.
4 A full review of the Victorian legal profession regulatory framework is required
The current regulatory framework for the legal profession in Victoria is not based on international
best practice (or best practice in Australia). A broad review is needed to consider the best regulatory
models for delivering the most satisfactory regulatory outcomes in the most efficient and effective
way. It needs to be adequately resourced, with appropriate lead times.
5 See, for example, Victorian Public Sector Commission, Public Sector Values (1 March 2015) <http://vpsc.vic.gov.au/ethics-behaviours-
culture/public-sector-values/>; Victorian Public Sector Commission, Public Sector Values (22 August 2016)
<http://vpsc.vic.gov.au/resources/conflict-of-interest-and-duty-guidance-for-directors/>.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
14
GLOSSARY OF KEY TERMS
CRG Department of Treasury and Finance (Vic), Cost Recovery
Guidelines (2013)
Discussion Paper Victorian Legal Services Board + Commissioner, Review of Lawyers’
Practising Certificate Fees Discussion Paper(2017)
Fidelity Fund A fund comprising annual monetary contributions from lawyers to
compensate clients for defalcation by solicitors
Guide to Regulation Commissioner for Better Regulation (Vic), Victorian Guide to
Regulation (2016)
General Rules Legal Profession Uniform Law General Rules 2015 (NSW), adopted
in Victoria pursuant to the Legal Profession Uniform Law Application
Act 2013 (Vic)
LawNews Daily online bulletin operated by the Law Institute of Victoria
LIV Law Institute of Victoria
LIV Initial Report The Law Institute of Victoria’s initial response, comprising a letter and
independent economic report, to the Victorian Legal Services Board
+ Commissioner’s Review of Lawyers’ Practising Certificate Fees
Discussion Paper (2017)
LIV Survey The Law Institute of Victoria’s online survey of members in relation to
practising certificate fees issues
LPA1996 Legal Practice Act 1996 (Vic)
LPA2004 Legal Profession Act 2004 (Vic)
LPLC Legal Practitioners’ Liability Committee
LPUL Legal Profession Uniform Law (NSW), adopted in Victoria pursuant
to the Legal Profession Uniform Law Application Act 2013 (Vic)
LPULA Legal Profession Uniform Law Application Act 2013 (Vic)
NSW New South Wales
OECD Organisation for Economic Co-Operation and Development
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
15
PC Practising Certificate
PC Fees Regulations Legal Profession (Practising Certificate Fees) Regulations 2012 (Vic)
PI Insurance Professional Indemnity Insurance
PPF The Public Purpose Fund, which is funded by practitioners’ practising
certificate fees and trust account income. The Public Purpose Fund
is used to cover the cost of regulating the legal industry and funding
public interest entities such as Victoria Legal Aid, the Victoria Law
Foundation and the Victorian Law Reform Commission
RIS Regulatory Impact Statement
SLA Subordinate Legislation Act 1994 (Vic)
Trust Authorisation A class of practising certificate which authorises a practitioner to
receive trust money
Trust Account Income Interest from client money held on trust by lawyers which is donated
to the Public Purpose Fund
Uniform Law Legal Profession Uniform Law Application Act 2013 (Vic)
VLA Victoria Legal Aid
VLF Victoria Law Foundation
VLRC Victorian Law Reform Commission
VLSB+C Victorian Legal Services Board + Commissioner
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
Victorian Legal Services Board + Commissioner – Submission in response to Review of Law-
yers Practising Certificate Fees – Discussion Paper
16
1 INTRODUCTION
The Victorian Legal Services Practice Board + Commissioner (VLSB+C) have proposed an increase in
Practising Certificate (PC) fees. The proposed fee increases are substantial. The fee increase options are
being reviewed through a Regulatory Impact Statement (RIS) process as part of the impact assessment of
the sunsetting Legal Profession (Practising Certificate Fees) Regulations 2012 (Regulations). This
Submission has been prepared in response to the VLSB+C’s Review of Lawyers’ Practising Certificate Fees
Discussion Paper (Discussion Paper) and constitutes the first stage in the consultation process.
The Law Institute of Victoria’s (LIV) comprehensive review of the Discussion Paper has raised fundamental
concerns with VLSB+C’s processes and arguments for the introduction of significant increases in PC fees.
The concerns with the Discussion Paper are based on an assessment against key principles of good
regulation as well as regulatory behaviour. This Submission expands on the concerns raised in the LIV’s
Initial Report, including further analysis of likely economic and policy initiative costs.
The costs of inappropriate regulation of the legal profession are likely to be substantial for the profession
itself and, more importantly, the Victorian economy. Following extensive consultation with LIV members,
independent economists and other relevant stakeholders, and after weighing the VLSB+C’s proposed
options against the 10 principles of good regulation (see below), the LIV has formed the view that the extent
of the proposed increases will be detrimental to the legal industry and the Victorian economy. If adopted, the
proposals will also have negative implications for key government policies.
Given the extent of direct and indirect negative impacts, the LIV calls for the VLSB+C to follow best practice
in undertaking its Review of PC fees.
1.1 The 10 principles of good regulation
The following principles of good regulation draw from international best practice, as well as the Victorian
Government’s own policies and guidelines.6
1. Makers of regulation and regulators need to strive for the optimum level of efficiency in making
and administering regulation. The overarching requirement is that regulation should pose minimum
detriment to any one group or the economy more broadly, for a given regulatory outcome.
2. Government should only intervene where there is a market failure, including equity issues, and only
to the extent of that market failure.
3. Regulation should be proportionate to the issue at hand. Market failure should not become an
excuse for excessive regulation.
6 See, f for example, OECD, OECD Guiding Principles for Regulatory Quality and Performance (2005)
<https://www.oecd.org/fr/reformereg/34976533.pdf>; Scottish Government, Five Principles of Better Regulation (6 May 2016) <http://www.gov.scot/Topics/Business-Industry/support/better-regulation/5principlesofBetterRegulation>; Department of Treasury and Finance (Vic), above n 4; Commissioner for Better Regulation, above n 1. or example, OECD Guiding Principles for Regulatory Quality and Performance https://www.oecd.org/fr/reformereg/34976533.pdf; the Scottish Government’s five Principles of Better Regulation May 6, 2016 http://www.gov.scot/Topics/Business-Industry/support/better-regulation/5principlesofBetterRegulation; the Victorian Government’s Cost Recovery Guidelines 2013 and Victorian Guide to Regulation, Commissioner for Better Regulation Victorian Government 2016
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4. Regulation should be simple. It should be simple to understand, simple to administer and simple to
comply with.
5. Regulation should be logical. A layperson should be able to understand why the regulation exists
and why it is administered in a particular way.
6. Regulation should not be used in a way that protects or secures a government body’s position
against a private sector competitor where the role could be undertaken more effectively and
efficiently by the private sector.
7. Frequent reviews of regulation should be undertaken to ensure that regulators are working with up-
to-date information, policies and practices. For example, regulation to mediate a market failure of
asymmetrical information may no longer be relevant where the internet or applications make
information readily available. New and more efficient methods of regulating should be regularly
considered.
8. The review of regulation should be independent. Those that stand to gain from an increased
regulatory burden should not be the ones undertaking a regulatory review.
9. Regulation must be just and equitable (including consideration of both vertical and horizontal
equity).
10. The benefits of regulation must outweigh the costs. Both immediate and indirect (but very real)
costs of regulation must be carefully considered. In particular, this should include costs to basic
human rights such as access to justice, costs to the key drivers of growth, employment and
innovation including, importantly, the small business sector. Flow on impacts across other areas,
such as the social fabric of a regional centre or areas where a proposal could undermine the
outcomes of a key government policy or measure, must be carefully considered. Where possible,
these costs should be avoided.
Continuous improvement and innovation in regulation is vital for Victoria’s economy. The Victorian
Government’s Guide to Regulation summarises the key reasons why RIS processes exist for sunsetting
regulations as follows:
“A RIS for sunsetting regulations needs to analyse the problem as if the existing regulations did not
apply. This enables significant changes in technology, community expectations and business
practices to be considered so that the basis for analysis is the nature of the problem today, and not
10 years ago.”7
The purpose of the RIS process and consultation is to ensure that the decision-makers have all the relevant
facts they need to make the right decision. A thorough evaluation of regulatory arrangements will facilitate
“…continuous improvement in regulatory design and practice over time”8. A whole of system view needs to
be undertaken to ensure that all relevant information is clearly understood and presented, and the best
alternatives are assessed using evidence-based analysis.
7 Commissioner for Better Regulation, above n 1, 19.missioner for Better Regulation (Vic), Victorian Guide to Regulation (2016) 19.
8 Ibid 1.
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Measured against the Government’s Guide to Regulation, the Cost Recovery Guidelines and principles of
good regulation, the LIV has concerns that key aspects of the RIS process will not be undertaken or will be
undertaken inadequately including:
identifying who benefits the extent of benefits of the regulation;
providing the full context and all relevant information for regulators to make appropriate decisions;
and
using the RIS process to achieve genuine regulatory efficiency.
Each of these is discussed in greater detail in Chapters 2 to 4 below.
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2 WHO BENEFITS AND WHO PAYS
“The need to regulate is a benefit to the whole community who use legal services and the cost
should not be borne by lawyers alone. The burdens around regulation are becoming too great.”
To comprehensively assess the benefits and costs of potential regulatory options, it is essential to determine
who benefits from the regulation.
There are significant social benefits from a strong, resilient and well-regulated legal profession, in which all
Victorians can have confidence. In all jurisdictions, appropriate legal profession regulation ensures the
integrity and robustness of the legal system and the broader social framework. There are significant and
highly deliberate positive externalities for the whole of Victoria from a strong and well-regulated legal
profession.
Economic literature consistently suggests that the health and wealth of a society is fundamentally dependent
on how far the rule of law is maintained. The World Bank and United Nations, for example, provide the
following summaries:
“It is widely believed that well-functioning law and justice institutions and a government bound by the
rule of law are important to economic, political and social development. As a result, practitioners in
the development field have turned increasing attention to reforms intended to improve law and
justice institutions.”9
“Promoting the rule of law at the national and international levels is at the heart of the United
Nations’ mission. Establishing respect for the rule of law is fundamental to achieving a durable
peace in the aftermath of conflict, to the effective protection of human rights, and to sustained
economic progress and development.”10
A robust legal system is underpinned by society’s confidence that rules will be applied consistently and that
the custodians of those rules uphold the basic principles of law (rule of law). Without appropriate regulation,
the integrity and reputation of the legal system can be undermined by the actions of a few individuals. The
benefits of good regulation, and the costs of poor or no regulation, have significant implications not only for
practitioners and clients, but also for the rest of society. Loss of confidence and uncertainty in elements of
the legal system (such as the legal profession) and, as a consequence rule of law, access to justice and the
security of private property rights will, as a minimum, have serious consequences for the economy and the
speed with which we can do business, innovate or invest. Society and the economy as a whole clearly
benefit from a well-regulated legal profession.
9 World Bank, Rule of Law and Development (2016) <http://go.worldbank.org/8LNEUA7E60>.Bank
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTLAWJUSTINST 10
United Nations, Justice and International Law (2017) <http://www.un.org/en/sections/priorities/justice-and-international-law>.ted Nations http://www.un.org/en/sections/priorities/justice-and-international-law/
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The ‘who benefits’ question is central to the issues addressed under the CRG11
. As outlined in Chapter 5
below, these issues need to be carefully considered against the CRG during the RIS process. This includes
consideration of whether full cost recovery is appropriate. In cases where the good is non-rivalrous, non-
excludable and there are significant positive externalities, on pure economic grounds, there is a strong case
for the use of consolidated revenue, and full cost recovery should not be used.
In the current circumstances, given the strength of the Public Purpose Fund (PPF), the LIV does not believe
that use of consolidated revenue is necessary. However, this is on the basis that income from foregone
interest on client trust accounts (Trust Account Income) continues to be allocated (as demonstrated in Box
C) on an effective, efficient and equitable basis to cover the cost of regulation for the use of trust accounts,
rather than being substantially diverted to other causes. Costly PC fee increases should not be introduced to
augment the overall revenue.
11 Department of Treasury and Finance (Vic), above n 4, Ch 2.
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3 WHOLE OF SYSTEM CONTEXT
In order to make informed decisions, decision-makers need to be able to consider the context of the
regulation in question. In the case of present proposals, regulatory change should involve consideration of:
historical and contemporary context, including: fees; total regulatory revenue; financial, including cumulative,
impacts; and cross-subsidies. The Discussion Paper’s scope of analysis limits capacity for informed
decision-making and does not provide a comprehensive background for an appropriate consultation process.
Therefore, it is inconsistent with the CRG and proper RIS processes. The RIS should provide a
comprehensive analysis, including all revenue sources currently used in regulation.
3.1 History of the PPF and legal regulation
Historically, the legal profession in Victoria has been substantially self-regulated through the LIV. Later, it
moved to a co-regulatory model where the LIV regulated the profession in conjunction with various
independent government bodies. Later still, with the establishment of the VLSB+C, the legal profession in
Victoria became entirely government-regulated (the LIV maintains limited delegated functions).
The regulatory functions of the LIV were originally codified under the Legal Profession Practice (Amendment)
Act 1946 (Vic). This Act provided the LIV with broad powers to regulate the conduct of solicitors, and also
established the Solicitors’ Guarantee Fund (SGF) which was managed and administered by the LIV. The
SGF was the precursor to the PPF. It was initially set up by industry – through the LIV with contributions from
the legal profession – with the sole purpose of providing fidelity compensation to clients who were defrauded
by lawyers misappropriating trust money.
In the 1960’s, the purpose of the SGF evolved to include funding of the regulation and education of the legal
profession. In addition, further surpluses at this time allowed the SGF to contribute funds towards relevant
and desirable public purposes, including legal aid. Bodies such as Victoria Legal Aid (VLA; then known as
the Legal Aid Commission of Victoria), the Victoria Law Foundation (VLF) and the Victorian Law Reform
Commission (VLRC) were eventually established to fulfil these public purpose needs, and drew funding from
the SGF.
The 1990’s saw a series of government-led reviews into the legal profession, culminating in the Legal
Practice Act 1996 (LPA96). LPA96 introduced a range of changes to the regulation of the legal profession,
including the establishment of a Legal Ombudsman, an independent Legal Practice Board and a Legal
Profession Tribunal. The changes meant that, for the first time in Victoria’s history, its legal profession
operated under what was essentially a co-regulatory model, where practitioners would be answerable to the
above independent bodies when complaints arose. Section 372 of LPA96 also established the PPF, and,
while its nomenclature changed, its primary purpose of fidelity compensation remained.
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In 2004, the Legal Profession Act 2004(Vic (LPA04) introduced further, extensive changes to the regulatory
framework of the legal profession in Victoria. In essentially moving away entirely from a self-regulatory or co-
regulatory model, LPA04 abolished the Legal Ombudsman, Legal Practice Board and the Legal Profession
Tribunal and established, in their places, the Legal Services Board (LSB) and the Legal Services
Commissioner. Since the establishment of the LSB – which was to be the peak regulatory body of the legal
profession in Victoria – its key functions have included the management of the PPF and the administration of
PCs. As a result, the cost of regulating the profession became primarily funded through PC fees and the
Trust Account Income, which remain to this day as two major sources of income for the PPF.
In FY2016, the VLSB+C had revenues of $93.802 million, consisting of PPF revenues of $79.850 million,
Fidelity Fund revenues of $3.761 million, and other income (including PC fees) of $10.191 million. This was a
25% increase over FY2015 revenues of $74.691 million.
3.2 Total regulatory revenue
The Discussion Paper fails to provide any analysis of the economic impacts of the continued use of the Trust
Account Income at its current level, or the benefits this has as an efficient source of regulatory income. All
sources of revenue appropriate for use in regulation of the legal sector should be considered. Although the
sunsetting Regulations only relate to PCs, other significant sources of revenue for regulating the legal
profession (including Trust Account Income, investment returns, fines from disciplinary action, and so forth),
and their viability as appropriate sources of regulatory income under the CRG (see Box B) should be
considered under a full RIS. Box B outlines the beneficial elements of the Trust Account Income with respect
to equity and efficiency.
3.3 Cumulative impacts on industry and the economy
“...our PI [Professional Indemnity Insurance] fees, the cost of practising certificates for our
employees, the Limitation of Liability Scheme, paying our employees’ LIV membership etc, it all adds
up to an enormous amount of money currently and it all needs to be paid roughly at the same time
each year and has a huge impact on our cash flow as we are a small law firm (4 lawyers including
the directors) and 2 other staff. The additional cost for fees for practising certificates is in my opinion
unfair and unnecessary…”
The full and cumulative impacts of all regulations and fee costs on the industry must be assessed and
analysed when gauging the overall potential detriment to the legal industry. The Discussion Paper only
considers the burden and financial costs from the PC fees perspective. However, the issues are much
broader and potential increases in PC fees must be reviewed as the combined impact on the industry (see
Table 2 below):
“As a practitioner of 15 years who runs my own small suburban practice, with 2 - 3 lawyers at any
given time, a significant increase to PC fees will only add more burdens to my already stretched
capacity to financially run this practice. In addition to PC fees, CPD [Continued Professional
Development] costs and LPLC [Legal Professional Liability Committee] fees, as a migration lawyer I
am also required to pay an additional $1595 for each lawyer as a result of dual regulation with the
MARA [Migration Agents Registration Authority]. When all these ‘costs' add up, it is an incredible
burden on a small 1 partner practice.”
The LIV has undertaken an analysis, as set out in Table 2 below, in relation to some of the upfront costs that
the industry currently faces and what those costs are projected to move to in the near future. The table
shows both the size of the proposed impact compared to other movements within the industry and the
layering impact within the industry of these fees.
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As can be seen from the table, PC fees comprise a major part of the upfront costs for community legal
service lawyers due to the fact that their insurance premiums and Fidelity Fund contributions are
comparatively low or NIL, reflecting vertical equity and access to justice issues in the setting of those fees.
The proposed increases in PC fees will have the most impact on these lawyers (compounding the fact that
they will already be impacted most because they cannot pass on costs). As PC fees are fixed regardless of
practice size or income produced, they will have the most significant impact on the small business sector as
well.
Table 2 – Current and expected future upfront costs for legal practitioners
LIV
m
em
be
rsh
ip
fee
Inc
rease
aL
PL
C
pre
miu
ms
Inc
rease
bP
C f
ees
Inc
rease
cF
ide
lity
Fu
nd
Co
ntr
ibu
tio
n
Inc
rease
TO
TA
L
Inc
rease
Cu
rren
t fe
es
Employee soli. (community legal) 480.00 176.66 344.00 - 1,000.66
Employee soli. (no trust) 480.00 1,807.80 344.00 124.00 2,755.80 Principal (with trust,
<$500k) 480.00 7,232.69 509.00 248.00 8,469.69 Principal (with trust,
>$500k) 480.00 7,232.69 509.00 496.00 8,717.69
E
mp
.
so
li.
CL
S
PC fees option 3 505.00 5.21% 181.08 2.50% 456.00 32.56% - 0.00% 1,142.08 14.13%
4 505.00 5.21% 181.08 2.50% 517.00 50.29% - 0.00% 1,203.08 20.23%
Pro
po
sed
fees
Em
p.
so
li.
no
tru
st
3 505.00 5.21% 1,853.00 2.50% 456.00 32.56% 129.00 4.03% 2,943.00 6.79%
4 505.00 5.21% 1,853.00 2.50% 517.00 50.29% 129.00 4.03% 3,004.00 9.01%
Pri
n.
tru
st
<$500k
3 505.00 5.21% 7,413.51 2.50% 811.00 59.33% 258.00 4.03% 8,987.51 6.11%
4 505.00 5.21% 7,413.51 2.50% 517.00 1.57% 258.00 4.03% 8,693.51 2.64%
Pri
n.
tru
st
>$500k
3 505.00 5.21% 7,413.51 2.50% 811.00 59.33% 516.00 4.03% 9,245.51 6.05%
4 505.00 5.21% 7,413.51 2.50% 517.00 1.57% 516.00 4.03% 8,951.51 2.68% aLPLC premiums:
Premiums include GST and stamp duty.
Estimated future premiums are based on the assumption that premiums will continue to rise by 2.5% per annum in approximate accordance with wage growth.
Premiums are subject to adjustment based on risk rating.
Practices with more than $5 million in gross fee income (GFI) may be subject to higher premiums.
Sole practitioners with a GFI of less than $125,000 and no employee solicitors are entitled to reduced premiums; see table here: https://lplc.com.au/policies-premiums/solicitor/premiums.
Practices in which all practitioners practise exclusively in the area of criminal advocacy or exclusively as mediators or cost consultants are eligible to pay the minimum contribution.
bPC fees based on data provided by the VLSB+C.
cFidelity Fund Contributions based on data provided by the VLSB+C. The full table of Contributions, which is subject to the status of a legal practice’s trust account (ie. whether or not
the practice holds a trust account, whether total trust money exceeds $500,000 and whether the practice is an exempt entity).
3.4 Revenue cross-subsidisation
As part of providing the whole of system context and understanding who currently benefits and who currently
pays (see the discussion in Chapter 2 above), the full RIS should provide discussion on how the current
regulatory system operates and the extent of cross-subsidisation between different revenue sources and
their beneficiaries. It is highly appropriate for the Trust Account Income to be used to regulate the use of trust
accounts. A combination of PPF revenue streams, including the Trust Account Income, is used to fund other
important initiatives such as VLA, the VLF, the VLRC, and other recipients of grants for law-related services
and activities. While these are important initiatives, there is only a tenuous link between them and the Trust
Account Income, unlike the regulation of trust accounts themselves. To ensure clarity and transparency, the
RIS process should clearly establish the size and extent of the cross-subsidisation of revenue across these
different beneficiaries.
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Another area of cross-subsidisation that must be addressed is the availability of the Fidelity Fund to
subsidise or supplement PPF revenue. In 2015-16, $3.2 million was transferred from the Fidelity Fund to the
PPF. This is permitted by section 127 of the Legal Profession Uniform Law Application Act 2014 (LPULA)
under certain circumstances. However, if the Fidelity Fund has become a regular source of income which is
being used for other purposes, further scrutiny would be warranted.
Additionally, it is worth noting that the Fidelity Fund contributions made by legal practitioners when renewing
their PCs are substantially higher in Victoria than in the other jurisdictions. Depending on their trust account
situations, Victorian practitioners are currently required to contribute up to $496 to the Fidelity Fund upon
renewal of PCs. By comparison, in other Australian States and Territories these contributions are typically
much lower. See Table 3 below for a comparison of Victoria’s PC fees and Fidelity Fund contributions with
other jurisdictions in Australia.
Table 3 – Comparison of current PC fees and Fidelity Fund contributions (or equivalent)
State PC fee Fidelity Fund contribution (or equivalent) Contribution separate to
PC fee Vic. Trust-authorised: $509
Not trust-authorised: $344 Volunteer/pro bono: nil
Australian legal practitioner/approved clerk Trust-authorised; practice received trust money >$500,000: $496 Australian legal practitioner Principal without trust authorisation; practice received trust money >$500,000: $496 Australian legal practitioner/approved clerk Trust-authorised; practice received trust money <$500,000: $248 Australian legal practitioner Principal without trust authorisation; practice received trust money <$500,000: $248 Employee without trust authorisation: $124 Exempt entities Corporate and sole practitioners without trust authorisation, employees employed by practice without trust authorisation, community legal services: nil Foreign lawyer Trust-authorised; practice received trust money >$500,000: $496 Foreign lawyer No trust authorisation; practice received trust money <$500,000: $248
Yes
ACT Restricted Private/in-house: $798 Government: $556 Non-ACT: $426 Volunteer: nil Unrestricted Private: $1,247 In house: $1,101 Government: $785 Non-ACT: $773 Volunteer: nil
$146 (only payable by unrestricted private practitioners – the base unrestricted private practice PC fee is $1,101, equivalent to the in-house PC fee, but this does not include the $146 levy)
No
NSW $370 $70 (only payable by law firm principals or employees) Yes NT Unrestricted: $1610
Restricted: $1449 Community legal centre (unrestricted): $115
$280 (only payable by unrestricted practitioners)
Yes
Qld. Principal: $458.00 Non-principal: $229.00
$50 Yes
SA $595 $265.60 (included in PC fee) No Tas. Principal: $1,153.62
Employee: $861.39 Corporate: $442.17 Locum: $300 Community Legal Centre: $119.34
There is no Fidelity Fund in Tasmania
-
WA $1250 $20 (only payable by practitioners who have been practising >2 years but <7 years) Yes
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4 ACHIEVING GENUINE REGULATORY EFFICIENCY
Sunsetting regulations provide opportunities to achieve step-change improvements vital for the growth of
Victoria’s economy. Poor regulation, excessive fees and red tape result in decreased productivity with fewer
jobs, less growth and lower income12
. The Victorian Guide to Regulation notes that the RIS process can
facilitate continuous improvement in regulatory design and practice over time13
, and highlights that “[t]he
impact assessment represents an important stage in the life of regulation, to identify opportunities to review
current practices”14
.
Sunsetting regulations provide opportunities to reconsider best practice regulation and strive for the
minimum regulatory burden that is feasible.
“…best practice cost recovery arrangements require that charges are set at a level that recover the
‘efficient’ (i.e. minimum) costs of providing the good/service at the required quality, or of undertaking
the necessary regulatory activity…”15
The Organisation for Economic Co-operation and Development (OECD) notes the importance of
systematically assessing impacts and reviewing regulations to ensure that they meet their intended
objectives efficiently and effectively in a changing and complex economic and social environment. The
OECD also recommends the periodic review of regulation to ensure that the benefits of the regulation
outweigh the costs, and to test whether alternative arrangements can equally meet the objectives of the
regulation but with fewer negative impacts.16
A genuine and effective RIS process will ensure that the government activity creates benefits rather than
burdens for the community. To review and assess the benefits and costs effectively requires context (see
Chapter 3 above). The analysis should consider all potential unintended consequences, and should result in
options that minimise the costs, inconvenience and likely burdens of regulation. In assessing those options,
the process needs to take into account the preferences, views and expertise of the community and all
relevant stakeholders17
. Sunsetting of regulations should not be used to undertake a quantum increase in the
burden of the replacement regulation. Regulatory efficiency in the legal sector, in particular, is vital for the
economy as a whole. As demonstrated in Chapter 7 below, there will be negative flow on impacts through a
range of economic and social areas where regulatory burdens are increased.
12 Regulatory cost awareness has led to a focus by organisations such as the OEDC and World Bank on countries successful in
reducing regulatory burdens and ‘red tape’. See for example, David Parker and Colin Kirkpatrick, “Measuring Regulatory Performance - The Economic Impact Of Regulatory Policy: A Literature Review oOf Quantitative Evidence ” Expert Paper No. 3, August 2012 (2012) pg 99 <https://www.oecd.org/gov/regulatory-policy/3_Kirkpatrick%20Parker%20web.pdf>. 13
Commissioner for Better Regulation, above n 1, 1.Gtbr Pg 1 14
GTBR pg 13Ibid 13. 15
Department of Treasury and Finance (Vic), above n 4, 8CRG January 2013 pg 8 16
OECD, OECD Guiding Principles for Regulatory Quality and Performance (2005) <https://www.oecd.org/fr/reformereg/34976533.pdf>.OECD Guiding Principles for Regulatory Quality and Performance Pg 8 https://www.oecd.org/fr/reformereg/34976533.pdf 17
Commissioner for Better Regulation, above n 1, 2.GTBR Pg 2
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4.1 Good governance and independent reviews
A core principle in good regulation is that it is not appropriate for those who are set to benefit most from an
increase in fees or regulatory burden to set or review the fees or level of regulation.
The LIV believes that it is arguably a conflict of interest, and inconsistent with the Victorian Government’s
Public Sector Values, for a government body to review the regulation which determines the appropriate level
of fees from which it draws a significant portion of its revenue18
. That is, notwithstanding the fact that PC fees
are set on the recommendation of the VLSB+C under current legislation, having the VLSB+C undertake the
review of the Regulations constitutes a conflict of interest and is contrary to the Public Sector Values. The
unprecedented extent of the fee increases proposed by the VLSB+C underline the flaw in this governance
model. Given the importance of minimising the regulatory burden, the LIV would welcome a full and
independent review of legal profession regulation in Victoria. Such a broad review would necessarily include
consideration of the current regulatory model, its impacts and avenues for efficiency improvements.
A recent report by the Victorian Auditor General noted that excessive or poor regulation can take a wide
variety of forms including: slowing down approvals; duplicated reporting and compliance requirements;
outdated rules as a result of technological advancements; barriers to new ideas and opportunities; increased
intrusion into businesses; lack of understanding of the costs imposed on businesses; lack of concern about
delays and their impacts on business, especially projects; and excessive time wasted not working on the
business. The costs are insidious and highly detrimental for the economy, productivity, growth, innovation
and, crucially, employment.19
Without appropriate governance such as arm’s length reviews, there is a very real threat that the RIS
process could be used to increase regulation, fees and the overall burden and footprint of government. The
costs of overregulation, including ‘gold plating’, ‘cost padding’ and ‘regulatory creep’, can be significant. The
CGR outlines some of these risks, shown in Box A below.
Box A – Cost Recovery Guidelines, page 17
Before considering cost recovery arrangements, it is important to ensure that the level and standard of
provision of government goods and services, and the nature of any regulation imposed by government, are
the minimum necessary to meet the needs of the community and achieve the government’s objectives.
Without this discipline, the ability to cost recover may create incentives that can result in unnecessarily high
cost recovery charges. This may be due to factors known as:
‘Gold plating’: where unnecessarily high standards or facilities are adopted in the provision of goods and
services – with government agencies imposing their own preferred levels of service, rather than the lower
levels that would be sufficient to meet client needs or achieve government objectives;
‘Cost padding’: where costs are inflated above efficient levels, motivated by the knowledge that all costs
can be recovered; and
18 See for example,; Victorian Public Sector Commission, Public Sector Values (1 March 2015)
<http://vpsc.vic.gov.au/ethics-behaviours-culture/public-sector-values/>; or the Victorian Public Sector Commission, Public Sector Values (22 August 2016) <http://vpsc.vic.gov.au/resources/conflict-of-interest-and-duty-guidance-for-directors/>.example, the Victorian Public Sector Commissions (VPSC) Public Sector Values http://vpsc.vic.gov.au/ethics-behaviours-culture/public-sector-values/ Or the VPSC’s guidance on conflict of interest for directors of government organsiations http://vpsc.vic.gov.au/resources/conflict-of-interest-and-duty-guidance-for-directors/ 19
See generally, Victorian Auditor General, Reducing the Burden of Red Tape (May 2016) <http://www.audit.vic.gov.au/publications/20160525-Red-Tape/20160525-Red-Tape.pdf>.
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‘Regulatory creep’ or overregulation: where additional or unnecessary regulation is imposed without
adequate scrutiny. Regulatory creep or overregulation can impose significant additional costs that are
recovered from affected parties.
Valuable information about the appropriate standards and level of provision of goods and services can be
obtained through consultation with the community, and through benchmarking (i.e. comparing) with similar
goods and services provided in other jurisdictions. Consultation and benchmarking are also among the
strategies that can be adopted to address cost padding by assisting efforts to keep costs at ‘efficient’ levels.
4.2 Value for money
A key policy of the Victorian Government is to reduce overregulation and ‘red tape’ with the aim of presenting
Victoria as the state with the most efficient and effective regulatory frameworks. This is done in order to
support businesses, investment, innovation and employment in the state.
A sunsetting regulation RIS is an important review stage to consider both the life of the regulation, how
regulation occurs, and the role of the regulator. There is limited consideration in the Discussion Paper as to
the current regulatory practices and potential for increased efficiencies within the VLSB+C’s own regulatory
framework. Crucially, the RIS process for sunsetting regulations requires the policy maker to analyse the
problem “as if the existing regulations did not apply”20
. This step is crucial in reducing the burden of
regulation across government as it enables major changes to be considered, including: efficiencies; new
circumstances such as technological advancements, information and community expectations; as well as
more effective models and methods.
Options for regulatory models
The RIS process requires the VLSB+C to consider their own regulatory practices through the lens of optimal
service for minimum regulatory burden and financial cost. While this is briefly discussed in the Discussion
Paper (see, for example, page 15), it is not undertaken in a way where more efficient models are considered,
or through conducting benchmarking with relevant jurisdictions. Maintaining the previous regulatory model
and increasing PC fees, as a result, is contrary to expectations that government will strive for better practices
and reduce costs to society due to its regulatory activities wherever feasible.
“I understand that with the trust authorisation comes additional risks and therefore an increase in
insurances. So, I understand why the fee for such a practising certificate might need to be higher
than an ordinary practising certificate. However, I do not see the need for fees to rise, if the
profession gets no additional benefit from the rise.”
Not only has this important broader review not been undertaken, but the Discussion Paper has not provided
the basis for seeking a fee increase against what additional services and benefits would be provided as a
result. There is no demonstration of efficiency benefits from the options proposed, and the concept that the
regulator is accountable is not outlined effectively in the Discussion Paper.
“The issue is not so much an increase, per se, but whether there is a better performing regulatory
system if the fees are increased.”
In order to provide the appropriate information and analysis for our regulatory decision-makers, consideration
of a range of models and benchmarking should be undertaken to assist with areas such as the appropriate:
20 CoVmmissioner for Better Regulation, above n 1, 19ictorian Guide to Regulation, Commissioner for Better regulation Victorian
Government 2016 pg 19
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form that regulation should take (including self-regulation);
type of collection model; and
level of fees.
The RIS should not be limited to a narrow set of options which are apparently based solely on extending the
status quo. As the Office of the Commissioner for Better Regulation (OCBR) notes:
“…a broad range of options are worth considering when you are approaching a policy problem...”21
To date, the Discussion Paper only examines the status quo fee structure with various degrees of fee
increases within that structure. Under a genuine RIS process, the analysis would strive to examine options
which would increase regulatory efficiency and minimise negative regulatory impacts. This is consistent not
only with government policy but also with community expectations. The comment below is typical of a
number of LIV member responses on this issue:
“…[a]re there ways to make regulation of the profession more efficient and thereby avoid a PC fee
hike?”
Further, as noted in the Victorian Government’s Guide to Regulation, sub-sections 10(1)(c)and 12H(1)(d) of
the Subordinate Legislation Act 1994 (SLA) require a RIS for a proposed regulation or legislative instrument
to describe other practicable means of achieving the objectives, including ‘non-regulatory’ options22
. There
are many examples that can be taken from international (and domestic) best practice when looking to
improve regulatory efficiency23
and the Guide to Regulation also notes a number of these24
. Non-regulatory
or non-legislative measures are often less costly for government and the individuals and/or groups being
regulated. Such options could include the following measures:
Performance-based regulations, where the required outcome is specified as leaving regulated
individuals or groups to choose the processes by which they will comply with the regulation. They
will, naturally, choose the least costly way to comply;
Self or co-regulation, where the regulatory role is either undertaken significantly by the industry
itself, through an industry body, or shared between government and industry. Often this is achieved
through legislative reference or endorsement of a code of practice. The extent to which the industry
self regulates should be examined through both a governance (for example, government
undertaking regular audits of compliance) and efficiency framework (industry is often in a stronger
position to undertake the regulatory role in a more efficient way). Box B below outlines some of the
many benefits for government of a self or co-regulatory model;
Information and education campaigns, to raise awareness, address information asymmetries and
empower individuals to reduce their own and collective industry risks. These campaigns can be
provided by either government or industry. However, it is often more effective, and better value for
money, for these to be provided through industry;
Funding or delivery of grants or support services, these programs can be used to support or
incentivise the market to develop cost-efficient solutions; and
Market-based approaches, such as the use of tradeable permits.
21 Ibid 1.Victorian Guide to Regulation, Commissioner for Better regulation Victorian Government 2016 pg 1.
22 Commissioner for Better Regulation, above n 1, 28.Gtbr pg 28
23 See for example, OECD, OECD Reviews of Regulatory Reform: Regulatory Policies in OECD Countries (2002)
<http://regulatoryreform.com/wp-content/uploads/2015/02/OECD-Regulatory-Policies-in-OECD-Countries-2002.pdf>.or example the OECD review of a range of countries http://www.oecd.org/gov/regulatory-policy/35260489.pdf 24
Commissioner for Better Regulation, above n 1, 28.GTBR pg 28
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The right balance needs to be assessed and achieved on the most appropriate regulatory model. That is, the
model which can remove market failure with least disruption to the efficient operation of the market. There
are a large number of efficiency and regulatory burden issues that could be considered as part of a broader
review. However, as a bare minimum, this RIS process needs to consider more than the status quo with
increased fees.
Box B – Benefits for government of a self or co-regulatory model
To get the best result out of the RIS process, policy makers are encouraged to “keep opportunities open
for identifying new and different options for addressing the problem”25
. The full continuum of options
for regulation should be considered and discussed. This includes options such as self-regulation26
. Such
arrangements can have optimal impacts with significantly lower regulatory burden costs including
administrative costs for government.
Internationally, there is significant economic policy agreement that in general, self-regulation models deliver
cost efficiencies, market independence and an alignment of knowledge and oversight27
. Rather than exclude
consideration of options such as self-regulation, the RIS process is designed so that all options that will
achieve the best outcomes for regulation at the least cost to the economy and society more broadly will be
considered. It is also worth considering that the current regulation consists of many different components.
Some of these components could arguably have government involvement but most of these could be
provided very effectively by the private sector.
The benefits of self-regulation are numerous, but include:
1. a reduced role for government at a time where government skills and resources are required elsewhere;
2. reduced overall administrative and compliance costs for government;
3. increased flexibility and innovation provided by the private sector in achieving the optimum outcome, with
the least regulatory burden and cost to members, though a range of self-regulation, accreditation and
education methods;
4. the industry association has better capacity to recognise and address emerging regulatory and efficiency
challenges within the industry;
5. the industry association has better capacity to influence culture and bring about cultural change within the
industry28
6. a significant reduction in information asymmetries – it is generally the industry association that will know
where most of the areas of risk are. Information asymmetries can cost the government, particularly
through compliance and monitoring;
25 Commissioner for Better Regulation, above n 1, 28.Victorian Guide to Regulation, Commissioner for Better regulation Victorian
Government 2016 pg 13 26
Victorian Guide to Regulation, Commissioner for Better regulation Victorian Government 2016 pg 1.Ibid 13. 27
PLaw Institute of Victoria, ‘Regulatory Role & Charitable Status: Discussion Paper’ (September 2016) 17.resentation to the Taskforce by the Professional Standards Council cited in LIV’S REGULATORY ROLE AND CHARITABLE STATUS: DISCUSSION PAPER pg 17 September 2016 28
Post the Global Financial Crisis the culture of an industry has been increasingly recongised by governments as a crucial element in successful regulation, see Law Institute of Victoria, ‘Regulatory Role & Charitable Status: Discussion Paper’ (September 2016) 20.Liv’s Regulatory Role And Charitable Status: Discussion Paper September 2016 pg 20 for further discussion on reducing conduct risk.
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7. provision of targeted education programs around key regulatory issues by the body that has the greatest
expertise and role in educating its members and understands both the information gaps and the best
methods of providing information; and
8. ownership by the industry of the issues, including greater recognition by individuals of their roles in self-
monitoring (and monitoring of their colleagues). Greater ownership of issues by the industry reduces
costs for government in administration, monitoring and compliance29
.
Self-regulation and independence of the legal profession
The LIV has undertaken extensive work to research the various legal profession regulatory models across
Australia and internationally. Through this, it has found that Victoria is one of only a few jurisdictions where
the profession itself little to no role in its own regulation (notwithstanding that the LIV retains limited
delegated regulatory functions).
There is a wide range of successful self or co-regulatory models for the legal profession internationally where
the right balance between the protection of public interest, direct consumers of legal services and legal
practitioners; efficiency gains; and appropriate levels of regulatory independence have been achieved (see,
for example, Table 4 below). In contrast to this, there has been a gradual erosion of the self-regulatory
functions of the LIV, as a key legal profession industry body, through legislative amendments spanning over
two decades30
.
Internationally, an important role of a law society is to promote, protect and enforce the role of an
independent legal profession. It is a vital part of the societal framework that the independence legal
profession is upheld, and a co-regulation model supports this independence. This view is upheld by the
United Nations’ work on Basic Principles on the Role of Lawyers:
“Lawyers shall be entitled to form and join self-governing professional associations to
represent their interests, promote their continuing education and training and protect their
professional integrity. The executive body of the professional associations shall be elected
by its members and shall exercise its functions without external interference.”31
Law societies play a vital role in professional discipline and the admission process for lawyers and this
aspect is usually controlled by law societies or bar associations (or their equivalent industry bodies) not by
the government. Internationally, it is the legal profession that generally determines who is competent to
practice law and for discipline within the profession. These are key issue if there is to be an ‘independent’
profession as it is this feature that creates the independence from government. So that while, generally,
governments pass laws, and appoint judges and prosecutors, the one area in the prosecution chain that is
not controlled directly by the government is the legal profession.
Table 4 – Comparison of legal profession regulatory models
Jurisdiction Self-regulatory Law Association (or
29 See, for example, the Professional Standards Council, Annual Report 2014-2015, (2015) 27: “There is interest from governments in
reforming law in the professional/trade regulatory area to secure greater individual and association commitment to improving professional standards.” page 27 30
Liv’s Regulatory Role & Charitable Status Discussion Paper September 2016 pg 5-7Law Institute of Victoria, above n 31, 5. 31
United Nations, Basic Principles on the Role of Lawyers (7 September 1990) <http://www.refworld.org/docid/3ddb9f034.html>.ted Nations, Basic Principles on the Role of Lawyers, 7 September 1990, available at: http://www.refworld.org/docid/3ddb9f034.html [accessed 21 March 2017]
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equiv.) issues PCs
Victoria No No
New South Wales Yes Yes
Queensland Yes Yes
Western Australia No No
Australian Capital Territory Yes Yes
Northern Territory Yes Yes
Tasmania Yes Yes
England & Wales No No
American Bar Association Yes No
US State Bars Unified (32 states) Yes Yes
Canada Yes Yes
Singapore Yes Yes
Hong Kong Yes Yes
Germany No No
France No No
South Africa Yes Yes
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Assessment of key fee options
If, through an assessment of a full range of potential effective models and systems which could be used, the
current model is considered the most optimal, then this analysis needs to draw evidence-based conclusions
regarding minimum costs and what the optimal fee burden should be within that model.
The Guide to Regulation requires the base case to be considered32
. That is, the case if no government
action was taken. This helps decision makers, and the community through consultation, understand why
regulations are required in the first place. While the Discussion Paper very effectively outlines why there
should be regulation (as opposed to the base case of no regulation), it does not address issues needed to
comprehensively asses what the optimal level or type of regulation should be.
As part of this, consistent with best practice and the government’s aim of continuous improvement, all
significant fee options for regulation should be considered. This should include:
retaining the current system; and
reducing the overall fee and regulatory impact.
The Discussion Paper automatically rules out consideration of no fees or a reduction in fees before
commencing consultation and well ahead of the RIS process being undertaken. The RIS must cover these
two options thoroughly as part of its full analysis.
“Where is the discussion about what can be done to lower our fees? They are already too high – and
prohibitive of a small suburban firm being able to hire more staff (in conjunction with the insurance
costs).”
Current system as an alternate base case
The Discussion Paper proposes a reinstatement of the existing regulations plus a significant fee increase.
Were these regulations not sunsetting and the VLSB+C wanted to increase the fees by the unprecedented
amounts proposed in the Discussion Paper, a review would need to be undertaken with a full RIS analysis
including the base case of the current system. Increases of this magnitude would need to be thoroughly
justified. This has not occurred to date in the Discussion Paper, and the LIV is concerned that it may not be
included in an already substantially drafted RIS.
It is crucial to outline the change in the overall burden for the industry, taking into account other factors,
including price increases or additional layers of regulation through other areas. A comprehensive RIS in this
unusual case of both sunsetting regulations combined with significant proposed fee increases should
extensively examine the changes against two alternative base cases: no regulation and the existing model.
Providing regulatory efficiency through reduced fees
The RIS process is designed to ensure that the most efficient cost of delivering government processes and
programs is considered33
. Under the RIS process, any fees and any fee increases must be clearly
demonstrated to be warranted34
. A key fee option that meets the principles of good regulation but was not
discussed or assessed in the Discussion Paper is reduced fees.
32 Commissioner for Better Regulation, above n 1.
33 Law Institute of Victoria, above n 31, Adapted from Table Liv’s Regulatory Role & Charitable Status Discussion Paper September
2016 pg 19. 34
Commissioner for Better Regulation, above n 1, 2.GTBR Pg 2
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Regulatory efficiency through a fee reduction could be provided through a range of options including co-
regulation with industry, finding efficiency measures through better targeting of regulation (including through
a risk-based model) and more effective use of new technology. As discussed above, the self or co-regulation
option incentivises efficiency gains. Unlike a government regulator, industry does not have the same
incentives to overregulate. The members of member-based organisations paying the fees understandably
want to keep costs to a minimum. Given the collective benefits of a well-regulated industry and the
substantial costs of poor regulation, member associations have significant incentives to achieve the right
balance, including losing their social licence to operate if under-regulation were to occur.
4.3 Benchmarking against NSW
“I doubt that my practice would see any benefit in the increase...”
The RIS process requires that appropriate benchmarking be undertaken to inform the optimal level, and
type, of regulation with minimal burden, and as part of understanding what is ‘good value for money’.
The LIV submits that the RIS should include a comparison between Victoria and New South Wales (NSW),
as the legal professions in both jurisdictions are regulated under the Legal Profession Uniform Law (LPUL).
As the two largest jurisdictions in Australia, practices in NSW and Victoria are also affected by cross-border
competition. This has increased, with the introduction of LPUL effectively lowering the regulatory barriers for
practices between these two states. This not only applies to larger, national law firms, but also small firms
and sole practitioners as cross-border transactions and legal matters involving interstate parties continue to
increase in number.
From an analysis of the cost of regulation of the legal profession on a per practitioner basis, it becomes
apparent that NSW uses a comparatively efficient and effective regulatory model. Under the Victorian
regulatory model, the cost of regulation on a per practitioner basis is more than 60% higher than NSW (see
Table 5 below).
In addition to the higher regulatory cost per practitioner in Victoria, once Fidelity Fund contributions are taken
into account, it is also outright cheaper to renew a PC in NSW compared to Victoria. In NSW, principals or
employees of law practices pay a flat fee of $440 to renew their practising certificates, which includes the
$70 Fidelity Fund fee. This is in contrast with Victoria, where a renewal of a practising certificate itself would
cost a practitioner either $344 or $509 depending on authorisation to receive trust money, and a further
Fidelity Fund contribution of up to $496 depending on the status of a practitioner or their practice’s trust
account35
.
“It seems that the costs of regulation in Victoria are significantly higher than other comparable states,
from what I have read NSW seem to be far more efficient. I often wonder whether [why] there is both
a legal services board and commissioner. I cannot see why the job of regulation could not be
incorporated into the role of the LIV and utilise the existing infrastructure within the LIV.”
An investigation of how to extract efficiencies within the Victorian regulatory model is vital when considering
the arguments for fee increases. The LIV recognises that, in some circumstances, a fee increase can be
justified. However, this should only occur following full and proper consideration of how to deliver the most
effective and efficient methods of regulation.
35 Victorian Legal Services Board and Commissioner, Fidelity Fund Contributions (14 March 2017)
<http://lsbc.vic.gov.au/?page_id=279>.
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Table 5 – Breakdown of comparative costs of regulation: Victorian and NSW legal profession
regulation costs per practitioner (note that slight discrepancies in the data may occur due to the
availability of collated information)
Cost of regulation ($m) Vic. NSW %
Services and professional discipline# 13.01 16.70
Investigations and interventions 4.30 4.00
Indirect costs^ 3.45 N/A
Total 20.76 20.70
Number of practitioners 20,593 32,976 -37.55%
Cost per practitioner ($) 1,008.11 627.73 60.60% #
Services and professional discipline costs include licensing, legal practice services, CPD compliance, professional discipline and
associated legal expenses, civil and administrative tribunal and compliance audits.
^ Indirect costs include staff costs associated with regulation and the costs of occupancy, IT, administration, depreciation, Board and
Committee member fees, consultants, investment advice and auditing. However, these costs are already included in the Law Society
of NSW’s activity costs through its shared costs model.
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5 VLSB+C POSITION ON FEE INCREASES
Much of the Discussion Paper is built around the suggestion that there should be a substantial fee increase.
As outlined in Chapter 4 above, the RIS process plays an important role in ensuring that the most effective
and efficient regulatory options are adopted and that these are then reviewed, as part of efforts to increase
efficiency, on a regular basis. The aim is to ensure an effectively regulated society and economy without
accumulation of unnecessary regulation. Naturally, an effective RIS process provides a framework through
which decision makers can consider relevant options and work towards the most efficient and effective
model, form and structure of regulation to achieve a desired regulatory outcome. As such, the regulatory
review process should not be used to justify a position that is already held. However, it is clear that the
VLSB+C’s position is to increase PC fees significantly. It is, therefore, important to analyse each of the
arguments advanced for this significant increase in fees and consequent regulatory burden.
A fee increase is supported by the Cost Recovery Guidelines As currently drafted, the Discussion Paper appears to be based on an apparent misconception of the core
objective of the CRG. It is general government policy that regulatory fees and user charges should be set on
a full cost recovery basis because it ensures that both efficiency and equity objectives are met. Full cost
represents the value of all the resources used or consumed in the provision of an output or activity36
. The LIV
supports this principle as providing an effective way of government to ensure, where feasible, that those who
benefit from regulation are those who pay for it. Consistent with the CRG, the LIV also notes that:
who is benefiting from the regulation needs to be clearly assessed; and
the CRG principles need to take into account impacts on disadvantaged groups, competition and
any adverse impacts on government policy.
Importantly, the CRG do not dictate where the ‘recovery’ (revenue) must come from and, indeed, the CRG
fully acknowledge that a range of measures should be considered. Nor do the CRG dictate how it is to be
collected. Provided those who benefit from the regulation (or give rise to the need for government regulation)
pay for it, and that those parties who do not benefit or take part in a regulated activity do not have to bear the
costs, the core objective of the CRG are satisfied. In the case of the current system, the PC fees are only
one source of this revenue for the VLSB+C.
“Having a trust account is a service to the client as it assists matters to resolve.”
Trust accounts benefit both lawyers, but also more importantly, clients. Clients benefit from the use of trusts
as it mitigates information asymmetries (including who will pay when payment is committed to) and provides
greater business certainty. Clients currently ‘donate’ interest from their money held in trust to the PPF. A
proportion of this Trust Account Income is then used in regulating trust accounts, ensuring business certainty
and the protection of client money37
.
36 Department of Treasury and Finance, above n 4, 7.Cost Recovery Guidelines January 2013 pg7
37 64% of the total regulation revenue comes from trust account income. The cost of Trust Account regulation is $2.479m as a delegated
function to the LIV: Victorian Legal Services Board and Commissioner, Annual Report 20016 (2016) <http://lsbc.vic.gov.au/documents/Report-Victorian Legal_Services_Board_and_Commissioner_annual_report_2016.PDF>. (VLSB+C Annual Report 2015-16 page 25)
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Lawyers also pay for the use and the benefit of trust accounts. Lawyers’ costs in doing so are quite
substantial, as outlined in Table 6 below. Under the current system, the practice or individual lawyer acts as
the government’s (highly efficient) administrator and tax collector. This is a far superior system, with fewer
deadweight costs, than having government charge and then deliver that tax collection and administration
service themselves.
“…[t]he cost of having a trust account is already high as the audit costs and time away from the
practice in admin is significant...”
The users and beneficiaries of trust accounts are already paying for the regulation of trust accounts through
Fidelity Fund contributions, PC fees and foregone interest. Therefore, cost recovery is already reflected in
the regulation of trust accounts.
“I do not operate a trust account as it is not worth my while for what is then involved in administering
a trust account…”
Table 6 – Costs per year in maintaining trust accounts
Practice type Sole-prac. (suburban)
Small firm (regional)
a PI firm (nat.)
d
Comm. firm (int.)
e
Bookkeeping $7,000 $45,000b
$75,000 $40,000
External examiner $3,000 $5,000 $14,000 $11,000
Sundries (software, stationery, bank fees) $3,000 $4,000c
$5,000 $6,000
Training (including internal training and CPD costs) $5,000 $5,000 $2,000 $1,000
TOTAL $18,000 $59,000 $96,000 $58,000 a Law practice in major regional centre with <20 practitioners b Internal accounting staff dedicate approximately 50% of their time to managing the practice’s trust account; cost is equivalent to 1.5FTE salaries pro rated for time taken to
manage trust accounts. c Law practice provided a figure which included the total cost of all sundries. This figure is estimated based on how much sundry costs are dedicated to the maintenance of the trust
account. d Large personal injury practice with multiple offices in Victoria. e Large commercial law firm with one Victorian office.
100% cost recovery
In his letter to the LIV of 13 September 2016 the Commissioner refers to achieving “complete recovery of
costs of legal regulation in Victoria” and states that the current system only provides “[p]artial cost recovery”
at 33%. The LIV believes that these assessments require further consideration.
Two sources of income are currently used to fund the regulation of legal practitioners: PC fees; and Trust
Account Income. Cost recovery from the industry is currently already at 100% of the $21 million cost of
regulation, with $13.4 million or 64% coming from the Trust Account Income and $7.6 million or 36% funded
by PC fees. As outlined in the Discussion Paper (page 5) there are two38
beneficiaries from regulation of the
legal sector and two sources of cost recovery income.
The CRG note that the nature of government regulation is diverse and that no single cost recovery
charging mechanism will be appropriate in every case and, further, that analysis may not suggest a
single charging approach. To achieve optimal efficiency and balance, the approach will require careful
consideration against criteria such as efficiency and equity39
. Using the Trust Account Income as the key
source of income for the purposes of regulation is appropriate and consistent with the CRG. This must be
given full consideration in the full RIS process.
38 LIV disagree that it is limited to only two noting the significant benefits for the community and economy more broadly from a well-
regulated legal system see Chapter 2 39
Department of Treasury and Finance, above n 4, 2.Cost Recovery Guidelines January 2013 pg 2.
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Full cost recovery solely from PCs is not appropriate
In addition to the above, there are other fundamental justifications why cost recovery based solely on PC
fees is inappropriate. Consistent with the CRG, we encourage the RIS to explore the range of policy
implications, including:
positive externalities that may be removed (see Chapter 2 above);
impacts on government policy and objectives, including access to justice (see Chapter 7 below); and
competition impacts and preventing introduction of further barriers to lawyers practising (see Chapter
7 below).
This is an essential part of providing comprehensive and clear information for decision-makers, and a full
consultation process. According to the CRG:
“While general policy is for costs to be recovered on a full cost basis, there are nevertheless situations
where it may be desirable to recover at less than full cost, or not to recover costs at all. Examples of
such situations are discussed in more detail in Chapter 4, and include circumstances where:
practical implementation issues make cost recovery infeasible;
there are benefits to unrelated third parties (sometimes referred to as ‘positive externalities’);
social policy or vertical equity considerations are considered to outweigh the efficiency
objectives associated with full cost recovery; and/or
full cost recovery might adversely affect the achievement of other government policy
objectives.”40
The last three points of this excerpt from the CRG are highly relevant when considering the options proposed
by the VLSB+C as outlined in greater detail in Chapter 7 below.
Box C – Sourcing regulation revenue from Trust Account Income41
The trusts are used as an insurance mechanism by both clients and practitioners. Both sides benefit from the
effective regulation of these accounts. The continued use of the Trust Account Income for the purpose of
covering the costs of regulation is consistent with the CRG for the following reasons:
● Consistent with, and supportive of, the policy objectives of cost recovery advancing:
○ efficiency: the capture of trust income is highly efficient. There are significant administrative costs
for individual practitioners involved in keeping trust accounts and ‘skimming’ for the purpose of the
PPF. However, this method of revenue collection has significantly greater efficiencies for the
economy as a whole than using a centralised collection. The individual practitioner acts as tax
collector, administration officer and auditor. In each case, the practitioner effectively ‘self-selects’ to
take on these charges weighing up their own benefits and costs. The trust accounts are used by the
practitioners who have the most need for them due to the type of work they undertake or clients that
they have, so these collection costs go to those who use and benefit from the trust accounts and can
see value in paying for them;
○ equity: in using the Trust Account Income to pay for regulation, only those who benefit from the use
and regulation of trust pay for them. In addition, as noted in the Discussion Paper, those clients with
significantly greater amounts held in trust (and, therefore, the highest risks or those who have the
40 Cost Recovery Guidelines January 2013 pg 7Ibid 7.
41 Ibid.
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most to lose) benefit the most from effective and robust regulation of trust and also pay the most;
and
○ fiscal sustainability: the Trust Account Income has grown well ahead of CPI despite interest rates
being at historical lows (see discussion on financial stability below);
● Imposed directly – use of the Trust Account Income recovers costs directly from those that benefit
from, and whose actions give rise to, the need for the regulation of trusts;
● Cost effective and practical – as outlined above, the cost of administering the cost recovery
arrangements through the trust, is a cost to each individual. This is achieved without the administrative
expenses or deadweight costs of a tax. To the extent that it is the practitioner’s choice whether to use
trust accounts, the system is self-selecting and therefore undertaken through the market. Appropriately,
the regulatory costs that ensure the effective regulation of trusts are covered by the Trust Account
Income;
● Feasible and legal – there have been no insurmountable policy, legal or other impediments to the
implementation of cost recovery arrangements through the Trust Account Income to date; and
● Consistent with other policy objectives – the use of the Trust Account Income for the regulation of
trusts provides individual users with the comfort that they are secure without negatively impacting any
other government policy or objective. Further, to the extent that there is income remaining post
regulatory costs, this can be used to promote other government objectives within the legal sector. For
example, the Trust Account Income is also currently used to finance other initiatives such as legal aid.
The VLSB+C needs improved funding stability
What is the optimal balance?
The second argument provided in the Discussion Paper for significant PC fee increases is the VLSB+C’s
need for income stability. The CRG recommend seeking stability in funding, as this helps organisations to
budget and operate effectively.
There is no evidence to suggest that the existing combination of revenue sources is insufficient or
suboptimal. The existing revenue mix of 36% reliance on PC fees and 64% on Trust Account Income
provides a balanced and growing portfolio of revenues. Given the efficiencies of using the Trust Account
Income (as outlined above) and the very real economic and social costs of relying on PC fees more than
they already are (see Chapter 7 below), it is highly likely that, when weighing these costs and benefits
against the cost of a more variable income stream, the existing balance is already the most optimal. It is also
feasible, once societal benefits and costs are weighed up on balance that, in fact, a greater reliance should
be given to the Trust Account Income with a reduction in PC fees.
What has caused the recent fall in revenue?
The VLSB+C surpluses decreased from $25.305 million in 2014-15 to $3.568 million in 2015-16. The
suggestion in the Discussion Paper that the reduction in the 2015-16 surplus is a result of declining interest
rates is inaccurate and is undermined by comments in the 2015-16 VLSB+C Annual Report that show that
revenues have in fact been increasing. The 2015-16 VLSB+C Annual Report clearly states that the
“increase in revenue to $83.611 million from $65.280 million in the prior year was primarily driven by
the increase in interest and investment distributions revenue of $18.331 million. Despite the
continuing fall in interest rates, interest income increased due to higher Statutory Deposit Account
and residual trust balances”.
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Table 7 – Financial performance of the VLSB+C
Detailed analysis of the VLSB+C’s financial performance from its 2015-16 Annual Report indicates that the
decline in surplus to $3.568 million from $25.305 million in the previous year can be explained by losses of
$28.384 million on financial instruments that are unrelated to falls in interest rates. Notwithstanding these
financial losses, the VLSB+C’s operating results are at a 5-year high and demonstrate significant and
improving income stability.
The VLSB+C’s proposals could undermine revenue stability
The proposals outlined in the Discussion Paper could impact on revenue stability in a negative way.
Significantly increasing costs to business could have a number of unintended and negative consequences.
For example, the increased costs may push more practitioners to provide services without a PC, or employ
those who do not have PCs, or result in businesses holding PCs simply failing to compete with those taking
the more cost effective path:
“Charge out rates in country Vic[toria] are lower than city and such substantial increases on the cost
of opening the doors will jeopardize legal practice and lead to increase in use of unqualified clerks
for legal services which results in lower standard of legal practice.”
In addition, as noted in the Discussion Paper, adding pressure on PCs with trust account authorisation could
encourage some practitioners to use trusts without the appropriate regulation (and not pass on the interest).
“The costs of insurance and compliance to small practices of 5 or less employed solicitors is a huge
barrier for growth. The second I hired a second employee my insurance alone increased 7-fold! To
now increase practi[s]ing certificate costs, particularly when there are so many shonky businesses
out there providing pseudo-legal advice is really infuriating. What's the point in being a lawyer
anymore?”
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
Net operating result $10,539 $4,224 $3,954 $11,200 $30,399
Net gain/(loss) on financialinstruments
-$6,184 $16,275 $16,915 $14,105 -$26,831
Net results from continuingoperations
$4,355 $20,499 $20,869 $25,305 $3,568
-$30,000
-$20,000
-$10,000
$-
$10,000
$20,000
$30,000
$40,000
(th
ou
san
ds)
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
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yers Practising Certificate Fees – Discussion Paper
40
As discussed in more detail in Chapter 7 below, increasing PC fees in what is an increasingly competitive
environment including under the LPUL (which also operates in NSW) could result in relocations from one
state to another.
There could also be an increased push towards the use of the PEXA Source Account, which operates to
facilitate electronic conveyancing transactions. Interest is not earned on the PEXA Source Account does not
benefit the PPF, and encouraging greater use of these accounts through high and uncompetitive fees will
undermine the stability of the Trust Account Income.
“Smaller (part time) practices will already be impacted by outside drivers, e.g. to engage in PEXA
and therefore open a trust bank account – all these additional imposts will be unsustainable for small
part-time practices…”
Given neither income stability nor the CRG assertions can be reasonably used to support a significant and
costly increase in PC fees, the LIV recommends that the proposed options detailed in the Discussion
Paper be reconsidered in the RIS.
A significant increase in fees will improve allocative efficiency
The Discussion Paper also argues that significant PC fee increases would provide an ‘appropriate price
signal’ and improve allocative efficiency. Regulatory fees in the shape of either PC fees or the significant
administration burden of being a tax collector and administrator (see Table 6) for the Trust Account Income
currently provide a signal that there are costs involved in regulating the system.
Given that the positive externalities of having a resilient legal system are so significant, it does not
automatically follow that a consequential allocative efficiency, or market-correcting behaviour changes,
would result from a fee increase. Significant negative externalities and vertical equity issues arise in
increasing barriers to entry through price increases and reduced resilience and competition within the
industry overall. Negative impacts are likely to include reduced access to legal representation where the
‘price signal’ precludes individuals due to affordability (see the discussion on access to justice in Chapter 7
below).
“Fee increases will cause financial strain on small regional practices which provide, of necessity, a
significant pro bono and community service to small communities in regional areas. It's the
community that is ultimately disadvantaged.”
In order to have a robust legal system which represents broader society, there needs to be diversity of
practitioners, ranging from solicitors in large firms to sole practitioners who service regional centres, through
to practitioners who engage in casual work. As discussed in more detail in Chapter 7, access to legal
representation and the robustness of the industry more broadly will be impacted if sole practitioners or those
who choose to do fewer or more flexible hours are forced out of practising law. If this were to occur there
would be a withdrawal of the number of providers and a reduction in the range of legal fees offered.
“I think I practice in the very low fee area of the industry. These kinds of practices play quite an
important role in servicing clients who would otherwise, just not access a lawyer or who would just
ignore the law. The burden of these higher fees may materialise in the community in other forms,
which may be more costly in the end result.”
The Discussion Paper does not provide any evidence to support the notion that the proposed significant
increases in PC fees will be balanced by commensurate allocative efficiency benefits.
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yers Practising Certificate Fees – Discussion Paper
41
In theory, adding the cost of regulating an industry to that industry could provide a price signal and,
therefore, an appropriate adjustment in the marketplace. For example a high licence fee on the property right
to fish a rare type of crab can be expected to impact on the final restaurant price, providing an automatic
adjustment in the market as fewer people order the expensive crustacean and, therefore, ultimately leading
to reduction of the crab-catch (as producers move to stronger demand, higher margin products). However, in
the case of an increase in PC fees, the price signals are unlikely to act as deterrence to poor behaviour
(unlike fines or, say, higher insurance premiums). Higher PC fees will deter practitioners from operating,
regardless of the standard of their practice42
.
Because of the significant vertical equity issues with the proposed options, the proposals could have the
reverse effect
“I have retired from income earning practice. All the work I do is now pro bono. I maintain a full
practising certificate to enable me to provide a complete and independent service to vulnerable
clients on a pro bono basis. I urge that any proposed fee increase take account of a person who
works solely in a pro bono capacity and who bears all their own expenses and costs, including the
practising certificate fee and PI insurance cost.”
There also appears to be an apparent misperception in the Discussion Paper regarding the appropriateness
of creating barriers to operation, as indicated by the phrase “there may be an oversupply of legal services”
on page 33. The only barrier to entry the legal sector should pursue is with regard to quality. If an
experienced, semi-retired, sole practitioner wants to average only four clients a year, then the PC fees
should not be used to discourage that.
The Trust Account Income should be used to fully cross-
subsidise other legal initiatives
The Discussion Paper suggests that PC fees should be increased, leaving the Trust Account Income pool of
funds for bodies such as VLA, the VLF and the VLRC. The LIV considers that some cross-subsidisation is
justified in order to support areas that bolster the whole social fabric of the legal system, but that there is no
viable argument to support full cross-subsidisation with large PC fee increases to the detriment of the legal
system framework itself.
The fee increase is needed to cover new costs
The Discussion Paper briefly considers that there could be a need for a fee increase due to new costs.
Although not clearly outlined out in the Discussion Paper, there could be an argument that there are now
‘new costs’ for the VLSB+C including, for example compliance audits (see Discussion Paper, page 21).
However, technological advancements and automation of business processes are likely to enable significant
efficiency gains, potentially even justifying PC fee reductions in the future. Notwithstanding any efficiency
gains, the LIV understands these ‘new costs’ to be minor and certainly not sufficient to justify the
unprecedented PC fee increases proposed in the Discussion Paper.
42 Ideally, depending on other costs, pricing would accurately reflect risk. However the Discussion Paper does not suggest a tiered
approach based on risk and while work on risk profiling is underway the results of this will be more than a year too late for this review’s current proposed timing.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
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yers Practising Certificate Fees – Discussion Paper
42
6 ENSURING EFFECTIVE PROCESSES
AND TIMING
The timing of the RIS process, consultation and any regulatory changes needs to be more effectively
deliberated on in order to minimise disruption to business practices and provide business certainty, as well
as to incorporate new information from work currently being undertaken.
6.1 Full consultation on likely impacts
Given the above issues and the expected impacts within the economy, including on key government policy
objectives, it is vital that a full consultation process include all relevant government departments. At a
minimum, the Department of Economic Development, Jobs, Transport and Resources needs to be consulted
in relation to the expected impacts on: small businesses, Victoria’s competitive environment, jobs,
investment and innovation. The Department of Justice and Regulation will also need to be consulted, given
the expected costs to access to justice, particularly for the ‘missing middle’. It is also advisable that the
Department of Premier and Cabinet be consulted about the impacts on a range of government policies,
including impacts on gender diversity and workplace flexibility.
6.2 Timing
Under existing timing, submissions to the Discussion Paper are due at the end of March 2017. It is proposed
that a full RIS then be undertaken with a subsequent further consultation.
Under this scenario, given the magnitude of the RIS required and the extent of consultation, the full RIS
process is likely to be completed in the latter stages of 2017. However, as part of standard financial year
budgetary processes, all law practices, including sole practitioners, ought know what the fees will be when
setting their FY2017 budget.
Regulatory certainty is a crucial part of an effective economic framework for encouraging business growth. It
follows that sudden changes to the business operating environment should be avoided, particularly within a
budget period, which can create barriers to investment or innovation due to uncertainty. Implementation of
replacement regulations in March 2018 falls within the July 2017 to June 2018 budget cycle. As this process
is well short of having a final outcome before the commencement of FY2017, it is not recommended for
these changes to be implemented in March 2018.
6.3 Implementation
Were any of the current options outlined in the Discussion Paper enacted, a measured and comprehensive
implementation plan would need to be prepared and executed in order to avoid bill shock within the legal
industry. To be compliant, the RIS process would need to include a full implementation plan and consider
and mitigate the impacts of increases to PC fees, an upfront one-off annual cost, of potentially 32% to 218%.
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6.4 Adopting a risk-based approach
The VLSB+C and the LIV are currently collaborating on a project regarding regulatory risk which may be
used to inform an appropriate regulatory framework through a risk-based analysis. The results of this project
may be used to better inform the current RIS process and provide strong a dataset to underpin the
sophisticated analysis and consideration of options required for this RIS, potentially reducing the costs of
regulation without sacrificing the benefits. However, the data and analysis are not likely to be available within
the next twelve months.
The need for regulation of practitioners with access to trust accounts is reasonably understood and
established. Moreover, the regulatory costs of regulating trusts are substantial, including:
significantly higher risks from the category of practitioners who hold trust-authorised PCs from either
deliberate or accidental misuse of trust money; and
additional auditing, education and certification.
Despite the above, there remain significant gaps in data and analysis. The risks and regulatory costs in
relation to practitioners without trust account authorisation are less well-established. The Discussion Paper
lacks sufficient data to effectively outline or analyse the regulatory risks regarding lawyers who do not have
access to trust money and, therefore, makes it more difficult to substantiate imposing additional fees on this
segment of the profession.
Given the need for an appropriate lead time for any changes to PC fees (assuming that is considered to be
the optimal outcome), to maximise industry certainty (and minimise the costs of change and uncertainty),
have effective and full consultation, and incorporate updated information which is not available in the existing
timelines, a further extension of the current regulations is recommended. On this basis, any change should
be adopted well in advance of the July 2018 budget-setting process, with changes to be implemented
in March 2019.
LAW INSTITUTE OF VICTORIA 31 MARCH 2017
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yers Practising Certificate Fees – Discussion Paper
44
7 LIV SURVEY RESULTS AND ANALYSIS
OF PC FEE INCREASE IMPACTS
7.1 LIV Survey of Members and Analysis Framework
The LIV has undertaken a comprehensive survey (LIV Survey) of its members, with 769 responses on the
likely impacts of the significant fee increases proposed in the Discussion Paper. Some of the 215 written
survey responses received through the LIV Survey are shown in blue and provide ‘coal face’ perspectives to
the issues and economic discussion of unintended and negative consequences of the proposed PC fee
increases.
Survey methodology and respondent demographics is provided in Appendix A. A list of the questions asked
in is provided in Appendix B.
This chapter provides economic and policy analysis of the impacts of the proposed fee increases based on:
data obtained from the LIV Survey;
additional feedback and information obtained from LIV members outside of the LIV Survey;
the Victorian Government’s Guide to Regulation;
the CRG;
independent economic advice; and
an assessment of the proposals and process against the principles of good regulation (outlined in
Chapter 1 above).
7.2 The Extent of PC Fee Increases
As discussed in Chapter 4, sunsetting regulations and corresponding RIS processes often present
opportunities to consider improvements in regulatory efficiency. However, the scope of the Discussion Paper
is limited to the consideration of proposed options which represent significant PC fees increases and do not
take advantage of an opportunity to improve regulatory design and practice.
“The cost of regulation is not funded in any way by the public purse or the Government, nor by the
Legal Services Board: it is funded by the legal profession and our clients. Rather than bumping up
PC fees by rates far in excess of CPI, the Commissioner and the Board should be reviewing red
tape in the regulation of the profession and striving for efficiencies to actually reduce expenditure on
regulation...”
Sub-sections 10(1)(ba) and 12H(1)(c) of the SLA provide that a RIS must include a comparison of existing
and proposed fees, including the percentage change. Notwithstanding that it is not subject to the SLA, the
Discussion Paper fails to set out the percentage change between the current and proposed fees.
Consequently, it lacks the level of transparency regarding the scale of the proposed increases, necessary to
consider and assess the impact on industry and the broader economy. To provide clarity regarding the size
of the increases proposed the LIV has provided Table 1 below (reproduced from the Executive Summary to
this Submission) which illustrates the unprecedented size of fee increases suggested.
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Sudden, substantial fee increases are discouraged within government due to the significant, detrimental
impact they can have on a specific sector and the broader economy. To provide context, Victorian
government policy requires that any fee increase above 2.5% a year cannot be undertaken without a RIS.
“I am strongly opposed to the proposed fee increases. They are dramatically higher than CPI. In my
view they are unjustifiable. I am staggered by the assertion that it costs in excess of $21 million per
year to regulate the legal profession in Victoria.”
Table 1 – Size of proposed PC fee increases
PC type
Current fees
(2016-17)
$/PC
Option 1
$/PC
%
increase
Option 2
$/PC
%
increase
Option 3
$/PC
%
increase
Option 4
$/PC
%
increase
Without trust
authorisation 344 913 165.4 1033 200.3 456 32.6 517 50.3
With trust
authorisation 509 1,623 218.9 1033 102.9 811 59.3 517 1.6
Total revenue
$million 7.6 21 176.3 21 176.3 10.5 38.2 10.5 38.2
The Discussion Paper effectively only provides two fee increase options on the existing regulatory model.
These options involve a total increase in revenue for the VLSB+C from PC fees of either 38.2% or 176.3%.
Option 1
The $21 million cost of regulation solely recovered from PC fees, using a tiered structure. A tiered structure
would mean that those with PCs with trust authorisation would pay more for their PCs than practitioners
without trust authorisation, with a proposed fee increase of 165.4% without trust authorisation and
218.9% with trust authorisation.
Option 2
The $21 million cost of regulation only recovered from PC fees using a single fee structure. This would mean
that all practitioners (regardless of whether or not they have trust authorisation) would pay the same fee,
with a proposed fee increase of 200.3% for PCs without trust authorisation and 102.9% for PCs with
trust authorisation.
Option 3
Recovery of the $21 million cost of regulation 50% from PC fees and 50% from interest generated from
solicitors’ and barrister’s clerks trusts accounts paid into the PPF, using a tiered structure. This would mean
lower PC fees than the 100% recovery from PC fees option 1. The tiered structure would again mean that
those with PCs with trust authorisation would pay more for their PCs than practitioners without trust
authorisation, with a proposed fee increase of 32.6% without trust authorisation and 59.3% with trust
authorisation.
Option 4
Recovery of the $21 million cost of regulation 50% from PC fees and 50% from interest generated from
solicitors’ and barrister’s clerks trust accounts paid into the PPF, using a single fee structure. This would
mean lower PC fees than the 100% recovery from PC fees option 2. This would also mean that all
practitioners (regardless of whether or not they have trust authorisation) would pay the same fee, with a
proposed fee increase of 50.3% without trust authorisation and 1.6% with trust authorisation.
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yers Practising Certificate Fees – Discussion Paper
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Alternative options
As outlined in Chapter 4 the Discussion Paper focuses on increasing PC fees and, other than as a base
case, does not assess either the status quo (fees and current funding structure remaining as is) or reduced
regulatory burden (including consideration of best practice and benchmarking against relevant jurisdictions
as relevant options). The LIV submits that there are more effective models with reduced regulatory costs and
equal, or superior, regulatory outcomes that could be explored, were government to commit to a full and
independent review of how the legal profession is regulated. Further, should the charging of PC fees remain
a regulatory option, consideration should be given to the full range of fees options as indicated above.
7.3 Flat vs Tiered System
PC fees are currently tiered according to whether or not a practitioner is authorised to receive trust money. In
addition to options which maintain the tiered structure, the Discussion Paper also proposes options where
flat fees will apply to all practitioners irrespective of the type and conditions of their PCs.
When asked whether PC fees should remain tiered or a flat fee should be applied, over two-thirds of the
survey respondents considered that fees for PCs with trust authorisation should be set higher than those
without trust authorisation. The comment below is typical of a number of comments provided by respondents
to the LIV Survey:
“The idea of charging the same PC fee, whether or not you have trust authorisation, is unreasonable
and unfair to those who do not need trust authorisation. It imposes unjustified costs on practitioners
without trust authorisation. It is contrary to the ‘user pays’ principle, as those who hold trust
authorisation should bear the cost of regulation of trust accounts. It cross-subsidises the cost of
regulating trust accounts by imposing those costs on practitioners who do not hold trust accounts.”
PCs with trust authorisation
While the comment above (and other similar comments) indicates that the current tiered structure achieves
regulatory objectives, it should not be considered as justification to further increase fees for PCs with trust
authorisation. The costs of maintaining and auditing trust accounts are borne directly by law practices, so
government is absolved of its tax collector and administrator functions. It is recognised that this is still the
most efficient system, as otherwise government would be required to charge the private sector for the
performance of such functions. However, as outlined in detail in Chapter 5 and Box C above, the costs
associated with maintaining trust accounts are considerable.
Beyond the benefits to government of reduced administrative costs, and the direct allocative efficiency price
signals for practitioners who receive trust money, there are a number of positive externalities from having
well-regulated trusts. These include:
increased business certainty for all parties involved;
reduced information asymmetries; and
greater confidence in the system and capacity to conduct business fairly.
Given these positive externalities and efficiency benefits of the client trust accoutns for government,
government should be careful not to incentivise practitioners moving away from holding PCs with trust
authorisation. When respondents were presented with Option 3 from the Discussion Paper and asked to
what extent would a fee increase of 59% or greater for PCs with trust authorisation influence their decision to
hold this authorisation, more than 76% of respondents indicated that it would have either a noticeable or
significant impact which would prevent them from holding a PC with trust authorisation.
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yers Practising Certificate Fees – Discussion Paper
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PCs without trust authorisation
Proposals for flat fees should not be considered as justification for unprecedented increases in fees for PCs
without trust authorisation. Given the vast majority of practitioners are not authorised to receive trust money;
the impacts of such increases could be detrimental to the legal system as shown later in this chapter.
Similar to the example above, respondents were also presented with Option 3 and asked how much an
increase in fees of 32% or greater for PCs without trust authorisation would influence their decision to retain
a PC and continue practise. 62% of respondents indicated that such an increase would have a significant or
noticeable impact, which suggested that this would have a significant impact and could compromise ongoing
practise.
Given that the flat fee proposal under Option 4 would in fact increase fees for PCs without trust authorisation
by more than 50%, the negative impacts would be even greater than what is already suggested by the data
above.
7.4 What Benefits and Costs need to be Considered?
“...law firms cannot pass the cost of those fee increases onto their clients. Law firms are operating in
a saturated and highly competitive market. Firms are all experiencing significant downward pressure
on fees…[m]ost law firms in Victoria are small practices of less than 10 lawyers. I expect that in
many cases the proposed increase in fees will be the tipping point…”
A significant increase in PC fees can be expected to have wide-ranging negative flow on effects. The
Discussion Paper accurately identifies three key potential effects of the proposed fee increases. These are:
creating an incentive for practitioners to practise law in other jurisdictions where practising
certificates are cheaper;
increasing the cost of legal services for users of those services and so deterring some people from
using legal services; and
increasing the cost of legal services for the ‘missing middle’ – the majority of low and middle-income
earners who would not otherwise qualify for legal aid.
The LIV supports the full and transparent assessment of these impacts and likely productivity, employment
and equity outcomes, in the RIS.
However, the extensive negative impacts can be expected to be more far-reaching than those listed above.
Given the importance of the legal sector as a fundamental component of the economy43
, adverse impacts
within the legal sector can be expected to have a range of disadvantageous flow on effects through other
parts of the economy. Notably, a significant PC fee increase could undermine productivity, economic growth,
employment and the achievement of other key government policies.
43See Chapter 2 of this Submission for a broader discussion.
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Negative impacts on the economy and government policy objectives
There are a broad range of adverse impacts that need to be fully assessed and outlined as part of a
comprehensive RIS process and consultation, many of which have not been considered in the Discussion
Paper. A number of the negative impacts from the proposed fee increases will directly undermine key
Victorian government policy objectives. In brief, these include:
detriment to Victoria’s growth and productivity;
detriment to Victoria as the preferred place to do business;
detriment to growing Victoria’s regional economy, suburbs and National Employment Clusters;
reduced employment, workplace flexibility and age and gender diversity; and
detriment to access to justice and vertical equity.
Each of the above will be discussed in greater detail in this chapter.
Detriment to growth and productivity
“I…feel that the profession is over-regulated and does not allow practitioners sufficient flexibility to
respond innovatively or dynamically to doing business in the modern day.”
The impact on growth and productivity of increased costs of doing business and costs of increasing the
regulatory burden are well-documented. Direct and indirect costs of regulation can place a substantial impost
on the ability of businesses to employ and retain employees, start new businesses, innovate and take on
more risk (including growth opportunities), or respond with agility to market opportunities and threats.
Increased costs must either be absorbed through cost reductions in other areas, such as employment costs
or passed on to customers or owners. Increasing the cost of doing business increases barriers to entry,
thereby reducing competition and other potential benefits44
.
“The higher…fees…operates as an effective barrier to entry for many smaller firms.”
These fixed costs and negative flow on impacts hit hardest where there are a larger proportion of the overall
costs and revenue-base of an organisation. This makes the fee increases particularly detrimental for
Victoria’s small and medium law practices, community legal services and sole practitioners. The vast
majority of legal practitioners are either sole practitioners or part of a small business (less than 20
practitioners), as also demonstrated in our survey data see Chart 1 below.
44 See, for example, for example, Nicoletti and Stefano, ‘Regulation, Productivity, and Growth: OECD Evidence’ (2003) The World Bank,
where the authors looked at differences in the scope and depth of pro-competitive regulatory reforms and privatisation policies as a possible source of cross-country dispersion in growth outcomes and, in addition to recognising the benefits of lower costs to entry, also found that regulations that limit entry may hinder the adoption of existing technologies.
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yers Practising Certificate Fees – Discussion Paper
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Chart 1 –
The detrimental impact to competition will be most evident in suburban and regional areas, where
geographic accessibility to legal services is most limited and local competition scarce.
Chart 2 –
However, costs to productivity and growth from poor or overly burdensome regulation even form one specific
sector are insidious across the board as can be shown from productivity gains when that burden is lifted.
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Access Economics (now Deloitte Access Economics) notes that it is the efficiency losses, including through
increased costs to business, that are likely to be the largest of the productivity burdens.
“An indirect yardstick of the current burden of regulation on prosperity comes from estimates of the
efficiency gains from two decades of deregulation and reform. Access Economics has estimated
these at 10.8% of GDP, while the Productivity Commission, the Melbourne Institute and others have
estimated smaller efficiency gains from individual reforms (such as national competition policy or tax
reform).”45
The costs from overzealous regulatory burdens can be significant for Victoria’s economy:
In Australia the Productivity Commission estimated that improvements in productivity flowing from
microeconomic reforms, such as the deregulating reforms of National Competition Policy, have
benefited the average Australian household by $7,000. Productivity improvements and price
changes in infrastructure sectors have created a permanent increase of 2.5 per cent in Australia’s
GDP, equivalent to around $20 billion.46
The OECD has estimated that the direct compliance costs of regulation for small and medium-sized
Australian businesses in 1998 was more than $17 billion.47
Expected results:
Increased costs of doing business reduces the productivity drivers within Victoria including:
direct and disproportionate negative impacts on small business;
“We are a small country practice that has only been around for less than 3 years. We are struggling
to make this practice work…”
“The current regulation is onerous. Any increase in regulation and compliance adds to the cost of
operating a practice.”
“The proposed fee increase will not affect my decision to renew my practicing certificate and
continue to practice but it has huge implications for me as the director of a firm in terms of
dramatically increased business expenses.”
jeopardising the viability of small business;
“I run a small firm in [redacted] where I employ myself and 3 paralegals. 2 of my paralegals will be
admitted to the legal profession this year, and I have been training them with a view to having them
admitted and to hit the ground running when they are. The increases in fees would have a huge
impact on my cash flow and overall staffing costs. As a small business, these kinds of changes have
a significant effect on my ability to do business and pay my bills.”
“As a practitioner of 15 years who runs my own small suburban practice, with 2-3 lawyers at any
given time, a significant increase to PC fees will only add more burden to my already stretched
capacity to financially run this practice. In addition to PC fees, CPD [continued professional
45“Access Economics, Benefits and Costs of Regulation (2005) 13.
46Productivity Commission, Review of National Competition Policy Reforms (2005) 17
<http://www.pc.gov.au/inquiries/completed/national-competition-policy/report/ncp.pdf>. 47
OECD, Businesses’ Views on Red Tape – Administrative and Regulatory Burdens on Small and Medium Sized Enterprises (OECD, 2001).
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development] costs and LPLC [Legal Practitioners’ Liability Committee] fees, as a migration lawyer
[I] am also required to pay an additional $1595 for each lawyer as a result of dual regulation with the
MARA [Migration Agents Registration Authority]. When all these ‘costs’ add up, it is an incredible
burden on a small 1 partner practice.”
discouraging innovation, risk-taking and pursuit of growth opportunities;
“As a sole practitioner with two employee solicitors, the impact of a fee increases makes it less
attractive to employ qualified professionals. Many non-qualified paralegal/assistants are able to
conduct work under supervision. Taking into account the professional indemnity insurance and the
fees for practising certificates it would make me less likely to grow the practice and more likely to
scale down.”
“The costs of insurance and compliance to small practices of 5 or less employed solicitors is a huge
barrier for growth.”
“Suburban and country practitioners are a dying part of the profession yet we are at the coal face
providing a vital service to normal people who are not part of the big end of town but who,
nevertheless require basic legal services. Don't expense us out of the system! Such a big increase
would impact on our discussion to grow our firm so please don't increase it.”
discouraging promotion, employment and training opportunities;
“The regulation costs and insurance costs of a law practice are already extremely high. In particular,
the practising certificate and Law Institute membership, and LPLC premium for a junior practitioner is
up to 10% of the total costs associated with our office employing a junior practitioner. If practising
certificates rise by the amount proposed by the LSC I would expect that this would:
impact our preparedness to employ and train junior solicitors
impact any wage review of junior solicitors as they become more senior. Ie, create a de
facto pay rise freeze
create a shift in our business from employing more solicitors to employing more support staff
to generate more work from solicitors already employed
create a disincentive for providing young practitioners with 1-2 years initial training in our
firm. I am happy to discuss these”
“As a small business owner, the proposed increase in fees are substantial and would most definitely
stop me from employing more lawyers.”
“I work for a CLC [community legal centre] that is struggling to maintain the current number of
lawyers we have due to funding constraints and at least 2 positions will go in July unless we are
successful in obtaining further grants we are currently applying for so a big increase in fees will have
a major impact on our CLC and all others who would be in the same situation as ours.”
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Detriment to Victoria as the Preferred Place to Do Business
“The regulatory model is far too complicated and should be simplified and made more cost efficient.”
Victoria’s rapid population growth48
is a key driver in fuelling the state’s property sales, finance growth and
consumer demand. Despite this, Victoria is ranked fourth in Australia behind NSW, Northern Territory and
ACT in terms of overall growth. Competitive pressures continue to be significant, and Victoria remains
second to NSW for business investment49
.
Competition between states for businesses is real and has been increasing in the legal sector. From 1 July
2015, the LPUL was introduced by the Victorian and NSW governments through new legislation. As part of
the suite of legislative changes, the Legal Profession Uniform General Rules 2015 (LPUR) were also
introduced. The LPUR provide a consistent set of requirements for all aspects of legal practice, including
admission and registration, continuing professional development and professional conduct standards. LPUL
has further exposed the pricing of PC fees to competition. While this is subject to the two rules outlined
below, neither of these would prevent a practitioner from reconsidering where their ‘principal place of
practice’ should be due to the higher costs of doing business in one state compared with another:
Section 46 of LPUL requires a lawyer to inform the local regulatory authority (in Victoria, the
VLSB+C), when applying for a PC, if Victoria will be the principal place of practice, and to notify the
VSLB+C if the principal place of practice changes; and
Rule 12(1) of LPUR requires a lawyer, when applying for a PC, to state the participating jurisdiction
(Victoria or NSW) that the lawyer reasonably intends will be the lawyer’s principal place of legal
practice in Australia.
Were Victoria to charge significantly higher PC fees, not only would this incentivise lawyers to apply for their
PCs in the less costly state, but the principal place of practice rule could have the additional adverse
incentive of encouraging sole practitioners or large firms (where they are paying for multiple PCs) to move
states on a permanent basis.
“It seems that the costs of regulation in Victoria are significantly higher than other comparable states,
from what I have read NSW seem to be far more efficient. I often wonder whether there is both a
legal services board and commissioner. I cannot see why the job of regulation could not be
incorporated into the role of the LIV and utilise the existing infrastructure within the LIV.”
It is already significantly cheaper to renew a practising certificate in NSW compared to Victoria, when taking
into account contributions to the legal practitioners’ fidelity funds in each jurisdiction. In NSW the $70 Fidelity
Fund fee is included within the $440 flat fee to renew PCs. This is in contrast with Victoria, where a further
Fidelity Fund contribution of up to $496, depending on the status of a practitioner or practice’s trust account
must be paid on top of PC fees. A significant increase in PC fees would further exacerbate Victoria’s
competitive disadvantage compared with NSW.
From the LIV’s analysis of the cost of regulation of the legal profession, it is apparent that NSW uses a highly
efficient and effective regulatory model (under the same Uniform Law) with a cost of regulation per
practitioner which is more than 60% cheaper than Victoria (see Section 4.3 for further discussion).
48 Victoria grew by 127,498 people in the year to September 30 2016 to a new record total of 6,100,877, an astounding 2.13% pa growth
rate (just below the record was set in June 2009 of 2.29%. 49
ComSec State of the States - State & territory economic performance report January 2017
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Expected Results:
Undermining Victoria’s reputation as a low-cost and low-regulatory burden state in which to do
business.
Businesses of all sizes considering whether, given fee changes, they should operate wholly or
predominantly from NSW rather than Victoria.
Decreased employment.
Decreased investment.
Decreased availability of lawyers and reduced competition in some geographic areas (potentially
decreasing downward competitive pressures on fees).
A shift from Victoria to NSW as the ‘legal hub’ of Australia.
Detriment to growing Victoria’s regional economy, suburbs and National
Employment Clusters
The legal community plays an important role in regional centres, and ensures access to justice not only for
individuals but for the many small to medium businesses that operate in that centre. But as a number of
studies indicate there is a level of fragility in the resilience of a number of regional (and suburban)
practices50
:
“The continuing provision of effective legal services to regional Victoria is of strategic importance to
the future of these communities and the State and National economies. Yet, recent studies point
towards a growing gap in the local availability of legal services for regional communities and
commerce.”51
This fragility and the importance of legal practices in regional and suburban areas is apparent from
comments provided by LIV members. It is clear that significant fee increases would have major ramifications
for small practices in regional and suburban centres from loss of employment and decreased access to
justice, through to more insidious damage to the social framework of an area.
“There are only [redacted] firms in [redacted]. We are independent and small and need a trust
account to operate. Our presence is like the banks in the towns- they are disappearing in the non
lucrative areas and providing call centre advice. Why do you want to further destroy our viability?”
“I do not feel that I can just shut down my practice because of the social obligation I have to the
community, so I continue to practice, increasingly unprofitably. Access to the legal system is hard
enough for country people and if I do make the decision to close my business (because I can
certainly be better rewarded financially doing something other than practice law in the country) my
client base will have no choice other than to travel.”
50 See , for example, the submissions of the Deakin Law School’s Centre for Rural and Regional Law and Justice:
https://www.deakin.edu.au/__data/assets/pdf_file/0010/258553/inquiry-5.pdf;
https://www.parliament.vic.gov.au/images/stories/committees/fcdc/inquiries/57th/Disability/Submissions/13_Centre_for_Rural_Regional
_Law_and_Justice.pdf;
http://www.pc.gov.au/inquiries/completed/access-justice/submissions/submissions-test/submission-counter/sub020-access-justice.pdf; and http://www.lawreform.vic.gov.au/sites/default/files/Submission_CP_5_Centre_for_Rural_Regional_Law_and_Justice_28-09-15.pdf 51
Deakin University, Providing Legal Services to Small Business in Regional Victoria (2012)
<https://www.deakin.edu.au/__data/assets/pdf_file/0006/258135/pubs-6.pdf>.
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Ensuring that there is business certainty and logical business outcomes is a vital part of regional productivity.
The local solicitor often plays a significant role in developing and maintaining the social fabric of the regional
town.
“We are a small country practice that has only been around for less than 3 years. We are struggling
to make this practice work and given the massive push for practitioners in regional areas, there
should be some incentives. This fee increase would be very difficult for us coupled with the LPLC
fees…”
There have been a number of studies done on the importance of a strong legal framework and social fabric
in regional centres for them to prosper52
. The country solicitor often plays a significant role in the community.
They are often the Justice of the Peace as well as taking on the role of sheriff and mediator. In addition, they
are frequently the keeper of the governance skill base for a centre with a range of volunteer roles on the
boards and committees which help to ensure the success of the organisations, from the local school through
to the regional basketball association to the agricultural co-operative. For example, in a 2012 submission,
Deakin University noted that:
“...legal practitioners with local knowledge and mediation or collaborative practice skills, who foster a
less adversarial approach, are vital in smaller communities where those in dispute need to continue
to work and live together. In many instances, effective advice requires a local understanding of the
unique circumstances of a particular region or industry, placing regional law firms in a prime position
essential for providing small business with the capacity to optimise the commercial opportunities
arising as a result of these evolving specialist areas.”53
A significant rise in fees could jeopardise the ongoing viability of a number of suburban and regional legal
practices with flow on business and social impacts through the geographic areas in which they are
embedded.
“Sole practitioners in country Victoria are doing it tough. The clients you do get don't want to pay city
prices and often don't want to pay at all! I think there should be a different rate for trust account
holders and for both categories (Trust Acc and no Trust Acc) there should be a concession rate for
country practitioners.”
A rise in fees is also likely to force practices to increase their fees and reduce their pro-bono or lower fee
work.
“Firms doing legal aid work have no capacity to increase fees to VLA when overheads increase. The
result will further erode firms' ability to do legal aid work in the country.”
In response to the question “How much impact would an increase of 59% or greater on the current practising
certificate fee of $509 have on your decision to hold a practising certificate and continuing to practise?” 78%
answered that this would have a noticeable or significant impact to the point of compromising ongoing
practise. Of the suburban and regional respondents, 83% felt that there would be either a noticeable
or significant impact to the point of compromising ongoing practise.
52 Ibid.
53 Deakin University, above n 54.
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Reduced employment, workplace flexibility and age and gender diversity
“The higher the practising certificate fees the less likely we will be able to employ solicitors as the
costs become too large and we are better off employing a clerk for whom we do not have to pay
fees.”
Employment
PC fees are one of the core costs of doing business in the legal sector. An increasing business cost
particularly in environments where there is little leeway to pass on costs, requires all business costs to be
reviewed. Given comparatively smaller margins, the fixed cost of a PC, regardless of profit, is likely to be felt
more drastically by smaller practices and sole practitioners. Sadly, practitioners operating in outer-suburban
or regional areas in more disadvantaged communities will be least able to pass on increased business costs,
are likely to be already facing slim profit margins and are consequently more likely to reduce the number of
employees (or fail to employ new ones) as demonstrated by a sample of LIV members’ comments below:
“[I]t would affect the firm's willingness to hire additional lawyers or to continue to employ existing
lawyers unless strictly necessary.”
“It will impact upon future employment prospects of current employee lawyers.”
“I am a lawyer working for a non-profit organisation (union) which provides legal services to union
members. We do not bill for our work. Our small team services around 20,000 members who would
otherwise be unable to afford legal assistance. Currently my organisation is proactive in taking on
junior graduate lawyers and fostering their development, which I feel is very beneficial to the
continuation and advancement of the legal profession given the glut of law graduates in the market
looking for work. A large increase in fees would be a significant obstacle to my employer continuing
to take this approach to hiring and fostering development of young lawyers, and may even threaten
the jobs of the current (quite small) team that we have.”
There is a highly significant correlation between decreased employment and increased disadvantage in an
area. Impacting on small businesses in outer-suburban and regional areas can have significant and long
lasting negative impacts including contributing to intergenerational disadvantage.
Gender diversity
The proposed substantial fee increases will have ramifications for gender diversity in the sector. Gender
diversity has been slowly improving over the last ten years, and is now expected to reach 50% parity in early
201754
. Similar to other industries, it is likely that a key aspect of this increased diversity has been the
employment flexibility55
. afforded through many legal profession roles. Part-time and casual work is a
significant factor in this flexibility equation, including the ability of sole practitioners (including stay-at home
mothers) to increase, decrease or adapt their workloads.
“I work part-time, I pay for my own practicing certificate, and CPD. These items together cost more
than what I earn.”
54 Victorian Legal Services Board and Commissioner, Annual Report 2016(2016) 6<http://lsbc.vic.gov.au/documents/Report-Victorian
Legal_Services_Board_and_Commissioner_annual_report_2016.PDF>. 55
See for example Douglas Hall and Victoria Parker, ‘The Role of Workplace Flexibility in Managing Diversity’ (1993) 22(1) Organizational Dynamics, 5.
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“I believe all fee structure options proposed by the VLSB+C will disproportionately negatively affect
sole practitioners practising without trust authorisation and will push many of them out of practice
thereby reducing the overall number of practitioners in Victoria. The sole practitioners in this
category I believe would be mostly mothers with small children who are not able to take full time
employment in law firms due to their family commitments. As such, the fee rise will again hit such
female lawyers the hardest and further reduce the number of women practising law.”
The literature indicates that a likely theme in the positive diversity story is the legal sector’s capacity to have
effective ‘off ramps and on ramps’56
. This includes the capacity of women juggling family to keep ‘their hand
in’ and skills fresh by assuming occasional or less than full time work. The legal sector currently offers part-
time and contract work in small, medium and larger firms, providing a conducive environment for those
juggling other roles to work. A significant proportion of the legal sector is made up of sole practitioners and
micro businesses where individuals pay for their own PCs.
“It is costly for me to maintain a PC just so I can do a little work around a young family and I would
not appreciate soaring PC fees. Increased fees would not impact on my applying for a PC with trust
because I need that to legally do my work but it would impact on me financially…”
In response to the question “How much impact would an increase of 59% or greater on the current practising
certificate fee of $509 have on your decision to hold a practising certificate and continuing to practise?” 78%
answered that this would have a noticeable or significant impact to the point of compromising
ongoing practise. Of these respondents, 74% pay for their own fees. This is disproportionate against the
total sample where self-paying and employer paying ratio is 50:50, providing strong evidence that it is the
smaller businesses and sole practitioners where individuals pay for their own PC who will be most negatively
impacted by a significant increase in PC fees.
If the cost of PC fees rises from its current rate, it can be expected to impact more generally on cost of doing
business, and therefore decisions such as whether to remain in the industry and/or whether or not to employ
additional employees, including casual or part-time, with consequent workplace flexibility and gender
diversity impacts. This includes the marginal work-hour practitioners including stay-at-home mothers and
semi-retirees.
Increasing PC fees can make employers of casual or part-time workers reluctant, for example, before hiring
two employees (who require two PCs) to job share as it is double the cost. Economic literature backs the
view that cost of employment increases due to fee increases, and are likely to impact on the decision
whether to take on additional employment. Given their PC fee is fixed, while output is potentially variable this
will be particularly so for the extra casual or part-time employee where employers pay for the PC fees.
In responding to the question “How much impact would an increase of 32% or greater on the current
practising certificate fee of $344 have on your decision to hold a practising certificate and continuing to
practise?” As discussed above, 62% said that there would be either a noticeable or significant impact
and could compromise ongoing practise. However, this percentage increased markedly to 77% when
looking at part-time or casual employees who pay for their own PCs. This is highly disproportionate against
the total sample responses, indicating that part-time or casual employees will feel a disproportionately
greater negative impact as a result of a $344 fee increase.
56 See Sylvia Ann Hewlett and Carolyn Buck Luce, Off-Ramps and On-Ramps: Keeping Talented Women on the Road to Success
(March 2005) Harvard Business Review <https://hbr.org/2005/03/off-ramps-and-on-ramps-keeping-talented-women-on-the-road-to-
success>.
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An increase in PC fees will act as a deterrent to hiring. Of those respondents that had capacity to make
hiring decisions over 75% indicated that the increase in fees would prevent them from hiring an
additional person or have an impact on the marginal hiring decisions (where other factors are also
influencing). Alarmingly, 23% of those with the capacity and authority to hire would not be able to hire
under the scenario of the proposed fee increase.
The impact of PC fee increases on respondents’ marginal decision to hire (52% of respondents) should not
be underestimated. Economic evidence backs the view that increasing employment costs within a specific
sector will have a substantial impact on employment within that sector, including the ‘3 for 10 rule’, based on
a range of international studies that demonstrate a 10% increase in labour costs will generally result in
decreased employment or employment hours or a combination of both by 3%57
.
“When labor costs increase, an employer’s immediate options are to do nothing and absorb the extra
cost, or to reduce the amount of labor employed. It takes time to alter capital investments in
machinery, buildings, and technology, which might allow a more efficient operation. On the other
hand, changing workers’ hours, or the number of workers, is quicker and easier. So an employer’s
first decision when labor costs rise is whether to do nothing or to reduce employment and/or hours;
and, if the latter, by how much.”58
There is often a significant lag in employing new people even when the increased workload from new
business or opportunities is substantial. With business absorbing extra workload using current staffing where
possible, rather than hiring new employees. Providing increased costs to hiring an employee puts off hiring
decisions further. Where this occurs in one firm it will not register in the economy; however the proposed fee
increases outlined in the Discussion Paper will impact across the entire Victorian legal sector and the
employment costs can be expected to be measurable.
Age diversity
A significant proportion (more than 20%) of the respondents have been working more than 35 years and may
be undertaking or looking for greater workplace flexibility or semi-retirement now or in the next 10 years (see
Chart 3 below). It is important for the diversity and experience levels of the legal profession that the costs of
doing business are not increased to the point of losing key members of the legal workforce.
“I have been practising since 1969 and there seems little consideration for senior lawyers and the
cost of maintaining a certificate.”
“My practice is part-time; I am semi-retired. And my Trust Account, though necessary for Estates, is
little-used. I have no capacity to absorb any sizeable increase in fees.”
57 See for example, Daniel Hamermesh, Do Labor Costs Affect Companies Demand for Labor?, (2014) IZA World of Labor
<https://wol.iza.org/articles/do-labor-costs-affect-companies-demand-for-labor/long>.
58 Ibid.
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“Although I hold a Full Practicing Certificate, I work part - time only ie one day a week as the General
Counsel for a construction company. I do not have any other income. I am also the volunteer
General Counsel for the Asylum Seeker Resource Centre (ASRC) in Footscray. The substantial
increase in fees will greatly affect my ongoing volunteer commitment as General Counsel to the
ASRC and my part-time employment. I have been practising law for more than 35 years, and this
proposed increase lacks consultation with the legal profession, lacks understanding of the various
roles undertaken by lawyers, lacks the depth of proper research and is totally unrealistic and
unwarranted. I am a lawyer who is working part-time as I am not ready to give up my legal
profession and in addition I am committed to continue working for the ASRC. The proposed increase
must be objected to and challenged by the Law Institute.”
Chart 3 –
More than 20% of survey respondents have been in practice five years or less. The detriment of an increase
in PC fees for those who are less experienced and either trying to find or retain work can be substantial. This
is because fixed costs against employees who are still improving their productivity, or are less productive
because they are doing fewer hours, are relatively higher than those against a full time more experienced
employee, as illustrated by employer responses59
:
“If practicing certificate fees increase it will be more difficult for graduates to gain employment as
solicitors/lawyers. It is already very difficult as some firms would rather hire paralegals and/or clerks
(i.e. have a law degree, but you don't have a practicing certificate).”
50CommSec, State of States – Executive Summary State & Territory Economic Performance Report (2017).
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“I run a conveyancing practice. I will be much less likely to employ law grads if the PC fees increase
much. We charge low, fixed fees so the burden of PCs, LIV Membership, PI insurance and CPD (all
of which I pay) is already significant. “
A number of practitioners, including those in the first few years of practice, are paying their own PC fees. An
increase in the PC fees will form a barrier to entry for some of these practitioners or jeopardise the viability of
them continuing to practise.
“I am a first year lawyer and earn $25 per hour a fee increase of any kind affects me greatly as I
don't earn very much”
Diversity of practitioner and legal businesses
A resilient legal sector will have many different types of practitioners and robust competition. A significant fee
increase will impact on a range of different businesses and practitioners.
For some practitioners, a significant PC fee increase is expected to impact on crucial decisions, such as
whether to invest or remain in the industry.
The RIS should fully assess the impacts on these various groups within the legal sector. The higher fees
may result in fewer government lawyers renewing their practicing certificates.
“Practising certificates are paid for Government lawyers in our State Government department.
Higher fees may mean place this arrangement in doubt if those fees place too much pressure in
internal budgets, meaning lawyers will need to pay for their own. There is no capacity to recoup
costs from internal clients as we do not charge fees.”
Higher fees may also mean that there are fewer surviving community legal practices and pro bono work
undertaken.
“Any of the increases proposed will have a very significant impact on Community Legal Centres
which have no capacity to recoup the costs of Practicing Certificates, are likely to have more part-
time solicitors and are facing funding cuts.”
“[T]his will have a significant impact on the already underfunded community legal sector and there
should be a fee waiver for community legal centre paid lawyers”
“The profession is overly regulated already…Firms doing legal aid work have no capacity to increase
fees to VLA when overheads increase. The result will further erode firms' ability to do legal aid work
in the country.”
“I work for a not for profit provider of legal services. We do not charge client fees. Any increase in
costs associated with the right to practice cannot be passed on to clients. An increase in the cost of
practising therefore results in a reduction in service delivery. Practitioners in not for profit
environments should therefore not be paying the same rate as practitioners in for profit
environments. There is a long history of Pro Bono in the law. Why shouldn't this extend to providing
free practising certificates for not for profit providers of legal services?”
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Expected Results:
Reduced employment (potentially measurable impacts in some areas of the legal sector).
Reduced flexible options within employment.
Impacts on availability of flexible roles or incentives for women to maintain suitable ‘on ramps’
through continued, but significantly lighter, caseloads.
Impacts on senior, experienced practitioners.
Barriers to entry or to remaining within the legal profession for practitioners with experience of five
years or less.
Impacts on government lawyers.
Impacts on pro-bono work and the not for profit sector.
Detriment to Access to Justice and Vertical Equity
“…given the cost of running a practice is constantly increasing, including PI insurance, rent, wages
etc., the reality is we will have no choice to pass this increase onto customers by increasing our
rates, and therefore shutting out consumers from obtaining legal advice…”
The Discussion Paper refers to Access to Justice issues on page 38. The Discussion Paper raises the
expectation that the fee increase could decrease competition at the lower charging end, which caters for
clients with lower capacity to pay (see pages 46 and 49 of the Discussion Paper for example)60
. However the
next step of the connection between this reduced competition, availability of lawyers offering services at the
lower end and the consequent legal services prices increase further providing increases to legal fees (in
addition to passing fees on) is not fully outlined. A substantial increase in PC fees will impact on access to
justice, regardless of whether fees are ‘passed on’ or not. The full costs of reduced access to justice need to
be examined in detail in the full RIS.
“The market in which country practitioners operate is vastly different to that of our City colleagues.
The pricing of legal services is absolutely limited by the client’s capacity to pay. I for one have not
increased my fees for the last three years simply because the economic environment I live and work
in has stagnated (in an area that was already a designated as socially and economically
disadvantaged), the costs of running my practise have in that same period continued to rise
inexorably (compliance costs, wages, town agents fees, rent etc).
“I do not feel that I can just shut down my practise because of the social obligation I have to the
community, so I continue to practise, increasingly unprofitably. Access to the legal system is hard
enough for country people and if I do make the decision to close my business (because I can
certainly be better rewarded financially doing something other than practise law in the country) my
client base will have no choice other than to travel (and by travel I do mean not just next door or
walking down the street as is the case or the option for clients in the city and suburbs, where there
are a plethora of legal practises to choose from.”
A reduction in the level of Access to Justice is a significant concern when increasing the cost of doing
business in the legal sector. Consistent with Box E above, there are impacts on Access to Justice from
significant fee increases, regardless of whether or not fees can be passed on to the client. Where
practitioners are able to pass on costs there will likely be an increase in fees for those paying for the relevant
service. Fees will usually be passed on where the market can absorb them. In practice, this may mean that
60 Victorian Legal Services Board + Commissioner, Review of Lawyers’ Practising Certificate Fees Discussion Paper (2016) 46, 49
<http://www.lsbc.vic.gov.au/documents/Discussion_paper-Review_of_practising_certificate_fees-2017.pdf>.
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there are a sufficient number of clients with the capacity and willingness to pay to enable a viable business to
continue. There may also be a number of clients without capacity to pay the increase who then do not seek
or have access to legal assistance or representation.
“The majority of my work is from community legal services for clients who do not qualify for legal aid.
These clients cannot absorb any increase in my fees.”
In some cases, the client will have both the capacity and willingness to pay. However as a number of reports
have noted, 61 there is a significant proportion of those who need legal advice, are not eligible for Legal Aid
assistance but do not have the capacity to pay. Increasing PC fees where these fees can be passed on and
individuals are already on the margin of being able to afford legal services will have a direct impact on
access to justice. More than 17% of respondents to the LIV survey indicated that they would have capacity to
pass on the fees to their clients (see chart x below).
As Box E Section X above illustrates, where practitioners are not able to pass on the fee rise costs, the
adverse effect on Access to Justice is also likely to be significant. As the added costs of doing business are
fixed costs, it is the smaller businesses with less capacity to absorb the fees that will be hit hardest. For
businesses already facing slim profit margins, the costs can be significant.
“I do a lot of free or very low cost work for those who can't afford to pay much, as well as for the local
sports club. After paying fixed costs and CPD each year, I usually break even or make a few
thousand dollars. I am happy with this situation as I get personal satisfaction from helping people
who otherwise could not access legal advice, but any rise in my fixed costs would mean I could not
continue to operate the way that I do and I will have to stop practising law. As I am 54 and have
been self employed for 17 years, I would find it pretty hard to get another job in law and will probably
end up changing career or more likely, being unhappily unemployed. I think I provide quite a
valuable service to my friends, family, neighbours and community and I would be very sad if I
couldn't continue.”
It is often these lower margin businesses charging lower legal fees that play an important role in providing
access to justice for those with limited capacity to pay. Increased fees can impact on competition at this
access to justice point of entry.
“As a community legal service, any rise in practising certificate costs will be a significant impact on
our service delivery to vulnerable people.”
Increased PC fees may also result in a number of law practices closing down further exacerbating issue of
the availability of legal services and geographic price competition.
“Country practitioners and more specifically the law firms are under extreme cost pressures and
quite frankly most are not profitable. Further imposts by the VLSB on lawyers should be resisted.”
Competition may also be reduced due to the increased fees resulting in practitioners:
finding alternative employment outside the legal sector;
moving interstate (for example NSW, where the costs of running a legal practice are lower); and
fewer legally trained graduates being able to pay their own way or being hired due to the increased
costs of hiring.
61 See for example, Productivity Commission, Access to Justice Arrangements – Inquiry Report No. 72 (2014)
<http://www.pc.gov.au/inquiries/completed/access-justice/report>.
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The reduced competition is likely to result in a reduction in locally available lawyers, including in regional
centres, with flow on price increases. In addition to a reduction in legal service availability, declining
competition will have a similar impact to the situation where fees can be passed on directly. Under declining
competition, the costs increases create a barrier to access to justice.
“Suburban and country practitioners are a dying part of the profession yet we are at the coal face
providing a vital service to normal people who are not part of the big end of town but who,
nevertheless require basic legal services. Don't expense us out of the system!”
More than 82% of respondents indicated that they or their firm would not have the capacity to pass on the
increase in fee costs. Amongst the small to medium sized businesses (those with 20 practitioners or less),
this figure was larger again with 83.6%, and amongst those small to medium sized businesses for those
based in regional centres this figure was even larger at 85%.
“The proposed increase will ultimately be reflected in fee increases, will influence marginal
employment decisions and does not account for the already high cost of maintaining trust accounts.
The interest earned should in the first instance act as an offset against increased costs rather than
pass those costs on. Costs passed on ultimately affect price.”
Chart 4 –
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Expected Results:
In around 17% of cases fees, will be fully passed on as added legal costs. In some of these cases
the client will not have the capacity to pay and will forgo legal services.
Reduced number of ‘marginal’ practitioners (who change industries, state or become unemployed),
resulting in reduced availability of legal services, particularly in some geographic areas.
Reduced competition among small business and sole practitioners who previously catered to the
‘missing middle’, resulting in potentially higher fees in that immediate market.
Reduced competitive pressure on the larger law practices with likely flow-on consequences for their
prices.
7.5 Why Significant Negative Impacts Occur Regardless of Capacity to Pass on Costs
“I am really struggling to keep the doors open and find additional costs a severe impact as I have
returned to work after a period at home with children. The cost of CPD is also very expensive as it is
a formal requirement – hard to get private study verified. It must be remembered that this is one of a
number of significant costs imposed on what is essentially a small business. Family law clients (such
as mine) are paying out of after-tax dollars and I can't charge more. I do a lot of pro bono, and the
more overheads I have to cover, the less pro bono I can afford and the more I have to push clients
for payment of outstanding accounts.”
The Discussion Paper explores, whether the significant increase in PC fee costs can be passed on to clients
and, particularly, if passing on costs would lessen the impact on small business (legal practices with 20
practitioners or less). The current extent to which a legal practitioner can pass on costs to their clients
depends on a range of factors, and varies across different practice areas and specialties. In areas where
there are fewer practitioners and significant client competition for services, practitioners may be in a position
to increase their legal fees to cover increases in PC fees. Factors such as location, specialisation, brand and
reputation can substantially influence this capacity. It is likely that larger, more established and well-known
law practices may have this capability. In general, there is significant competition among practitioners and
practices; this includes many small suburban practices and most sole practitioners.
It is also important to note that there are substantial costs to the community and economy as a whole from
significant PC fee increases, regardless of whether the law practice or sole practitioner can or cannot pass
on costs. Box E below provides an example of this in relation to access to justice principles. However, there
are a number of other productivity and equity detriments that could be used to illustrate this point.
Box E - How Access to Justice is negatively impacted regardless of whether the
increase in fee costs can be passed on
Example 1: Practitioners are able to pass on the full costs
Where this occurs, there will be a relative increase in fees for clients paying for the legal service. In some
cases, the client will have both the capacity and willingness to pay. However, as a number of reports have
noted62
, and the Discussion Paper itself outlines, there is a significant proportion of those requiring legal
services who do not have access to legal aid and are already struggling to pay legal fees. Increasing PC
fees where these fees can be passed on will have a direct impact on access to justice. More than 17% of
62 See for example: Ibid; Richard Coverdale , Postcode: Justice – Rural and Regional Disadvantage in the Administration of the Law in
Victoria(2011) Deakin University <http://www.civiljustice.info/cgi/viewcontent.cgi?article=1000&context=access>.
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respondents to the LIV survey indicated that they would have capacity to pass on the fees, indicating that
legal fees will increase for legal services provided by those practitioners
Example 2: Practitioners are not able to pass on costs
Where increased fees cannot be passed on, this becomes an additional layer in the cost of doing business in
Victoria. The potential costs for those who are already facing slim profit margins can be significant, with
detrimental impacts on both the legal industry and the broader economy. These potential costs are outlined
in greater detail above, but can range from reduced competition (within the legal industry and with other
industries that provide ‘pseudo’-legal services), reduced diversity of practitioners and services, increased
costs for other small businesses, decreased appetite for hiring additional staff (and, in particular, legal
practitioners), to lesser capacity for innovation. From a vertical equity assessment, increased fees are a fixed
cost and, therefore, will have disproportionately harsher impacts on smaller businesses (often suburban and
regional) where the fees make up a larger part of the cost base. These are often small firms and sole
practitioners servicing clients who have limited capacity to pay.
“I do a lot of free or very low cost work for those who can't afford to pay much, as well as for the local sports
club. After paying fixed costs and CPD each year, I usually break even or make a few thousand dollars. I am
happy with this situation as I get personal satisfaction from helping people who otherwise could not access
legal advice, but any rise in my fixed costs would mean I could not continue to operate the way that I do and
I will have to stop practising law.”
Increased fees can have a significant impact on competition at this level of legal service provision. An
increase in PC fees is likely to trigger a range of responses, such as individual practitioners moving
interstate, practitioners seeking alternative employment outside the legal industry where practising
certificates are not required, or law practices employing fewer practitioners – particularly graduates or those
working fewer hours – where productivity per fixed practising certificate cost is less. Given the already
marginal viability of a number of practices in outer-suburban and country Victoria, there will be a number
which may cease operating as law practices. This reduced competition will result in a reduction in locally
available lawyers, particularly in regional centres, which may result in flow-on price increases and can also
flow through to larger practices. Practices currently providing pro bono or subsidised fee options for clients
for social equity reasons may need to reduce the provision of these services if the costs of doing business
become too high.
“Law firms cannot pass the cost of those fee increases onto their clients. Law firms are operating in a
saturated and highly competitive market. Firms are all experiencing significant downward pressure on fees.
The increase [in] a significant component of the overhead of each law firm by nearly 60% will have a
substantial impact on the profitability of many law firms.”
More than 82% of respondents to the LIV Survey indicated that they or their practice would not have the
capacity to pass on the increase in PC fees. Among small practices (those with 20 practitioners or less), this
figure was even greater at 86%. Among small to medium-sized businesses based in country Victoria, this
figure was even greater at 90%.
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SUMMARY OF FINDINGS
Based on the Victorian Government’s Guide to Regulation and Cost Recovery Guidelines , survey data and
individual responses provided by LIV members, independent economic advice and assessing the issues
against standard principles of good regulatory practice, the significant PC fee increases outlined in the
Discussion Paper would likely result in:
1 Unacceptable increases in regulatory burden.
2 Negative impacts on Victoria’s productivity, innovation and growth.
3
Reduced competition within the industry, with flow on effects from the reduction in competition among the lower charging (often smaller suburban and regional) law practices to larger practices and businesses.
4 Increased costs for small businesses and individuals seeking legal services.
5 Reduced competitive standing of Victoria as a cost-efficient place to do business (both within and beyond the legal sector).
6 Higher costs for hiring an additional worker in small to medium-sized law practices.
7
Reduced legal profession diversity and workplace flexibility, including
a. higher relative costs for self-employed legal practitioners, or those undertaking part-time or casual work at less than full-time hours with consequent impacts on diversity in the legal profession including reduced age, gender and other diversity; and
b. higher relative costs for employers in potentially hiring part-time or casual workers at hours less than full-time, with consequent reduced availability of flexible work arrangements;
8
Reduced diversity of legal service provision in the sector, including government, in-house and not-for-profit lawyers unable to pass on the increase in fees to clients or absorb it into department/organisation budgets.
9 Reduced growth potential for Victoria’s regional economy and centres.
10 Reduced resilience of a well-regulated legal sector with price pressures providing growth incentives for other areas such as less accountable offshore internet services.
11
Reduced financial resilience of regulatory income resulting from a reduction in the number of PCs with (reduced use of Trust Authorisation) or without trust authorisation (reduced number of lawyers overall) depending on which option is adopted.
12
Reduced access to justice with fewer lawyers available in certain locations (including suburban and regional), reduced competition at the lower charge end resulting in higher fees for those already struggling to afford legal services, and PC fees passed on to clients as higher legal fees where feasible.
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RECOMMENDATIONS
1 The review process should be undertaken by an independent body
The LIV considers that the VLSB+C is not an appropriate body to undertake this RIS process
because it is arguably conflicted. Notwithstanding the VLSB+C’s role in making recommendations for
the setting of fees under the legislation, it stands to gain directly from increased PC fees. The use of
a conflicted body (who stands to gain from increased regulatory burden) to undertake this RIS
process is inappropriate, against the basic principles of good governance, counter to the Victorian
Public Sector Values63
and does not support government policy to pursue continuous improvement in
regulation.
2 Changes to the regulatory model, or the mix between the Trust Account Income and the PC
fees income, should be revenue neutral
The VLSB+C has not adequately justified the need for a significant increase in revenue. Any valid
justifications presented for future proposals to increase fees would need to be balanced against the
economic and social costs of increased regulatory burden.
3 Current fee units and tiered fees should remain
Unless, as part of a broader review of legal profession regulation in Victoria, there is sufficient
demonstration of efficiency gains under alternative arrangements, there should be no change to the
existing arrangements. Any change in the mix between reliance on Trust Account income and PC
fees should only be as a result of detailed analysis of economic efficiencies and price responses and
should not be used to drive increased revenue for the VLSB+C.
4 A full review of the Victorian legal profession regulatory framework is required
The current regulatory framework for the legal profession in Victoria is not based on international
best practice (or best practice in Australia). A broad review is needed to consider the best regulatory
models for delivering the most satisfactory regulatory outcomes in the most efficient and effective
way. It needs to be adequately resourced, with appropriate lead times.
63 See, for example, Victorian Public Sector Commission, Public Sector Values (1 March 2015) <http://vpsc.vic.gov.au/ethics-
behaviours-culture/public-sector-values/>; Victorian Public Sector Commission, Public Sector Values (22 August 2016)
<http://vpsc.vic.gov.au/resources/conflict-of-interest-and-duty-guidance-for-directors/>.
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APPENDIX A SURVEY METHODOLOGY AND ANALYSIS
To inform its response to the Discussion Paper, the LIV developed a survey which ensured that its members
were provided with an adequate opportunity to contribute to the discussion around PC fees, which directly
impact on their practices.
The LIV Survey was circulated to over 12,500 LIV members via e-mail and LawNews, the LIV’s daily online
bulletin. This represents all practising LIV , members, and covers approximately 68% of all practising
solicitors in Victoria. The survey was also circulated directly to approximately 1350 LIV Practice Section
Committee and Working Group members.
LIV Survey Methodology
The LIV Survey went live on 3 March 2017, with a deadline for responses of 17 March 2017.
The LIV Survey was designed to distil the range of issues and PC fee options canvassed in the Discussion
Paper into a form that would efficiently and effectively elicit relevant responses. The questions asked are
detailed in Appendix B of this Submission.
Responses were collected anonymously to provide respondents with the best opportunity to provide honest
feedback without potential undue influence.
There were 769 responses to the Survey.
Respondent Profiles
In order to contextualise the results obtained from the LIV Survey, respondents were asked relevant
threshold questions to gather demographical data.
The following is the demographical breakdown of survey respondents:
Location of Business
Out of 769 respondents:
327 (42.52%) practised in the Melbourne CBD;
293 (38.10%) practised in suburban Melbourne;
146 (18.99%) practised in country Victoria; and
3 (0.39%) practised interstate.
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Size of Practice
Out of 769 respondents:
253 (32.90%) were sole-practitioners;
160 (20.81%) were in a practice with 2 to 3 practitioners;
77 (10.01%) were in a practice with 4 to 5 practitioners;
97 (12.61%) were in a practice with 6-10 practitioners;
57 (7.41%) were in a practice with 11 to 20 practitioners;
31 (4.03%) were in a practice with 21 to 40 practitioners; and
94 (12.22%) were in a practice with more than 40 practitioners.
Years in Practice
Out of 769 respondents:
159 (20.68%) have been in practice for 5 years or less;
220 (28.61%) have been in practice between 6 to 15 years;
234 (30.43%) have been in practice between 16 to 35 years; and
156 (20.29%) have been in practice for more than 35 years.
Work Arrangements
Out of 769 respondents:
583 (75.81%) worked full-time;
138 (17.95%) worked part-time;
25 (3.25%) worked casually;
3 (0.39%) were on leave; and
20 (2.60%) indicated that they engaged in other working arrangements.
Specific responses where respondents indicated they engaged in other working arrangements ranged from
retired or semi-retired to those who held practising certificates but were no longer working as legal
practitioners (e.g. legal education, conveyancing, non-legal government department), or worked on a
voluntary/pro bono basis only.
Practising Certificate Payment
Respondents were evenly distributed as to whether or not they paid for their own practising certificates:
377 (49.02%) paid for their own practising certificates; and
392 (50.98%) has their employer pay for their practising certificates.
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APPENDIX B LIV SURVEY
Question 1
Where is your business located?
a) Melbourne City
b) Suburban Melbourne
c) Country Victoria
d) Interstate
e) Overseas
Question 2
What is the number of practitioners in your law practice?
a) 1
b) 2-3
c) 4-5
d) 6-10
e) 11-20
f) 21-40
g) >40
Question 3
How long have you been practising law?
a) 0-5 years
b) 6-15 years
c) 16-36 years
d) More than 35 years
Question 4
Which category do you feel best describes your work?
a) Full-time
b) Part-time
c) Casual
d) On leave
e) Other (please specify)
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Question 5
Who pays for your practising certificate?
a) I pay for it myself
b) My employer pays for it
Question 6
How do you feel about the regulation of the legal profession in Victoria?
a) Satisfied
b) Neither satisfied nor dissatisfied
c) Dissatisfied
Question 7
If the level of regulation remains the same, would you be prepared to pay more for regulation of the legal
profession through an increase in practising certificate fees?
a) Yes
b) No
Question 8
Do you currently hold a practising certificate with trust authorisation (that is, you are authorised to receive
trust money)?
a) Yes
b) No
Question 9
How much impact would an increase of 59% or greater on the current practising certificate fee of $509 have
on your decision to hold a practising certificate and continuing to practise?
a) No impact
b) Noticeable impact
c) Significant impact and could compromise ongoing practise
Question 10
How much impact would an increase of 32% or greater on the current practising certificate fee of $344 have
on your decision to hold a practising certificate and continuing to practise?
a) No impact
b) Noticeable impact
c) Significant impact and could compromise ongoing practise
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Question 11
To what extent would a fee increase of 59% or greater for practising certificates with trust authorisation influ-
ence your decision whether or not to have this authorisation?
a) Not applicable. I do not have authorisation to receive trust money and practising certificate pricing
has not influenced this decision
b) It would not influence my decision to have trust authorisation
c) It would be of marginal consideration
d) It would be of noticeable influence
e) It would prevent me from having trust authorisation
Question 12
What is your view on the benefits and disadvantages of a single fee versus a higher fee for practising certifi-
cates with trust authorisation?
a) Fees for practising certificates with trust authorisation should be higher than practising certificates
without trust authorisation
b) There should be a single fee for both practising certificates with and without trust authorisation
Question 13
To what extent would an increase of 32% or greater on the current practising certificate fees influence your
decision to hire an additional practitioner?
a) Not applicable. I do not have authority to hire (for example, I am a sole practitioner, barrister or not in
management)
b) It will have no impact
c) It will influence marginal hiring decisions
d) I will not be able to hire an additional practitioner
Question 14
Would your law practice have the capacity to pass on an increase in practising certificate fees to clients?
a) Yes
b) No