12 January 2007
Key Points:
Commonwealth departments and agencies should review their own practices, and the requirements they impose on their legal services providers, following amendments to the Legal Services Directions.
What’s changed?
First issued in 1999, the Legal Services Directions ("LSDs") have been varied. Most of the changes are clarifications, rather than substantive variations. However, three significant changes should not go unnoticed, leading to:
Promoting a whole-of-government approach to legal issues
As the central plank in the whole-of-government approach to legal issues, the LSDs impose new requirements on inter-agency sharing of advice.
Under the old LSDs, an agency seeking legal advice on legislation administered by another agency had to consult the administering agency before requesting the advice; and, after receiving the advice, provide the administering agency with a copy of that advice.
Now, the requesting agency must also provide the administering agency with an opportunity to consult before the advice is finalised, including an opportunity to consult with the requesting agency’s lawyers. However, as with the old LSDs, routine matters which involve advice on the application of the law according to settled interpretation of legislation remain exempt from the consultation requirement.
Most importantly, the administering agency must now follow up on the advice received. The administering agency must consider the advice to determine whether any remedial steps should be taken, including legislative amendment.
To alleviate any problems arising from the increased flow of information across agencies, thought should be given to putting in place clear administrative and operational guidelines for receiving and distributing inter-agency correspondence, possibly by designating responsible officers to co-ordinate consultation on, and implementation of, legislative initiatives.
While promoting a whole-of-government position on legislation, these requirements also increase the possibility that differing legal positions among agencies may become apparent. The LSDs provide an oddly non-legal method of resolving such differences: both the requesting agency and the administering agency are required to "negotiate" to resolve any disagreement on the correct interpretation of legislation.
However, such negotiated interpretation will not be conclusive of the legal position under legislation without endorsement from the courts. That said, agencies should be guided by the persuasiveness of legal principles in arriving at a consistent, whole-of-government, interpretation of legislation.
Broader and clearer litigation, dispute resolution and settlement rules
Under the new LSDs, the rules on the handling of monetary claims now apply to both claims against the Commonwealth and claims by the Commonwealth. The threshold for the settlement of major claims before independent legal advice is required has been raised from $10,000 to $25,000.
The new LSDs also place more emphasis on the different pathways and outcomes that may be involved in resolving a dispute. Apart from the conventional process of court litigation, the new LSDs highlight the important, yet not always obvious, role of alternative dispute resolution techniques and procedures.
An agency’s contracts with third parties may also be affected by the expanded coverage of the model litigant rules. Where an agency grants a third party a right of subrogation (to step into its shoes when undertaking litigation), the agency is required to use its best endeavours to ensure that the third party acts as a model litigant. As a starting point, agencies could review their template contracts to include this new requirement. However, whether this is actually possible depends largely on the commercial realities and the relationship between the agency and the third party.
Greater transparency and accountability in legal services
As the new LSDs attempt to ensure greater compliance with their requirements, accordingly there are more reporting obligations and more requirements for supervision of external lawyers.
First, the new LSDs require agencies to report their annual legal expenditure by 30 October each year. They also require the Chief Executive of the agency to certify, 60 days after the end of each financial year, the extent to which the LSDs have been complied with. Further, the LSDs clarify that the agencies’ existing obligation to report on significant issues to the Attorney-General is an ongoing one.
Agencies would be well-advised to have in place appropriate recording systems to ensure that legal expenditure is properly accounted for. It is anticipated that the Australian National Audit Office will produce a Better Practice Guide on Legal Services Arrangements to assist agencies in this respect.
Secondly, the new LSDs seek to increase the stakes of not complying with their terms. Under the Judiciary Act 1903, compliance with the LSDs is not enforceable except by, or upon the application of, the Attorney-General. The new LSDs explicitly state that the Attorney-General may impose sanctions for non-compliance with the LSDs.
Agencies are also required to have contractual mechanisms to encourage their external legal services providers to play a more active role in ensuring compliance with the LSDs. As a preliminary observation, all legal service providers (both in-house and external) have always been legally bound to comply with the LSDs by virtue of the Judiciary Act. However, the new LSDs require agencies to include contractual provisions that impose appropriate penalties if a legal services provider has contributed to a breach of the LSDs. Suggested penalties include termination of the contract in an appropriate case.
Any new panel arrangements with external legal services providers should be closely considered. As a practical matter, the difficulty lies in determining and negotiating appropriate penalties in appropriate cases. Although the Office of Legal Services Coordination has provided template provisions for agencies to include in their contracts with external lawyers, uniform standards of conduct across agencies could be difficult to achieve.
For further information, please contact Philip Harrison.
