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January 29 - February 4, 2010 news
It s nice to see a touch of the
old putting its mark on the
new year. Would you believe
it, a group of big wigs from the
lawyer trade unions has come
out in opposition to a reform
floated within the Commonwealth
Attorney-General s Department
that proposes lawyers face
disciplinary action for overcharg-
The legal establishment doesn t
much like the idea of discipline
for legal practitioners who charge
more than is "reasonable",
"proportionate" and "fair" for
the reason that those terms are
Nor is it keen on new regula-
tions being too prescriptive.
Between opposing vagueness and
prescriptiveness there s a lot of
However, the sage heads of the
law industry gracefully concede
that something called "gross
overcharging" could be subject
to disciplinary action. In this
context disciplinary action does
not mean criminal prosecution,
although some overcharging is
criminal -- for example, obtaining
and attempting to obtain by
However, consumers need
to be reminded that judges in
New South Wales in effect did
away with the offence of "gross
overcharging", which is a form
of theft. The Court of Appeal
has said that if a lawyer does not
have the "intention" of grossly
overcharging, then no penalty can
be imposed. In the case considered
by the appeal judges, a secretary,
not the principal of the firm, sent
out the vastly inflated bill. It was
all a terrible mistake.
This explains why the legal
business is opposed to another
component of the federal reform
agenda -- that all bills sent out
to clients have to be signed by a
principal of the firm. "We are
opposed to the suggestion to
require principals of law practices
to take responsibility for the
content of bills sent to clients ."
That would all be too much
additional and costly administra-
tion. It would also mean that if
lawyers were signing the bills
they would be unable to argue
that gross overcharging was
It s comforting to know the
legal profession is in favour of
disciplining practitioners who
grossly overcharge their clients as
long as there is no way the charge
Professor David Lemmings
of Adelaide University, in his
landmark study of how the legal
culture of England changed
between the 17th and 18th
centuries, noted that between
1580 and 1640 there was a civil
litigation boom. Lawyers charged
reasonable fees, typically less than
10 per cent of the amount at stake.
The common law was accessible
by every man.
Today charges in some cases
are getting close to 100 per cent or
more of the amount in dispute.
In the first half of the 18th
century England was hit by a
Lawyers responded by
concentrating on work that
would support higher fees, that is
working for the rich.
By 1750, the number of civil
cases being pursued was one-sixth
of the figure in 1640. 75 per cent
of barristers turned away from
the common law to the Court of
Chancery, which concentrated on
commercial disputes and deceased
By 1800 the Court of Chancery
was finalising only 30 to 90 cases
a year, but creating 5000 to 8000
hearings a year. The perfect make-
work scheme for lawyers had been
created. Professor Lemmings says:
"There are substantial grounds
for suspicion that the 18th century
Chancery was operating an
elaborate racket in the administra-
tion of the law, which amounted to
a conspiracy for making the most
out of a declining source of work."
Lawyers had captured control
of the process from the judges
and the fee machines went into
More recently in Britain,
research produced the alarming
figure that in commercial claims
of up to £12,500 ($22,300), litigants
were spending £5 for each £1
Here s a final consideration.
In 1887 in the English case of Re
Hill, a lawyer s fees were taxed
(reduced by the court) to 45 per
cent of the amount claimed. The
court said this gave rise to an
inference of fraud.
In 2000 or thereabouts Cherie
Blair, the wife of the then prime
minister of Britain, sent out a bill
in a legal aid case for £9500.
It was reduced by the billing
authorities to 53 per cent of the
original amount. She appealed
suggested that this was fraud.
You have to go back a long way
to understand how things evolved
in the law and why we re where we
lie in history
The Federal Government has fore-
shadowed the possible introduction
of US-style Chapter 11 bankruptcy
protection provisions in a discussion
paper of likely changes to insolvency
laws that have drawn a mixed response
from the financial industry.
The Minister for Financial Services,
Superannuation and Corporate Law,
Chris Bowen, called for submissions
on proposals to take a more informal
approach to business rescue plans,
including a more lenient treatment of
His announcement was timed
to coincide with controversial law
changes overruling the 2007 Sons of
Gwalia High Court decision.
"The use of formal insolvency
reorganisation procedures is not
always appropriate," Mr Bowen said,
highlighting the cost and complexity
of external administrations and the
impact on stakeholders including
shareholders and employees.
He set out three options: maintain-
ing the current insolvent-trading
laws, adopting a modified business
judgment rule or an expressly invoked
He said there was a "certain
attractiveness" to a modified business
Among proposals are a possible
"safe harbour" for company directors,
in effect allowing a company to trade
while insolvent to determine whether
it can be rescued rather than moving
straight to voluntary administration.
"The scope and application of a safe
harbour ... would essentially relieve
directors of their liability in relation
to insolvent trading for a period of
time," the discussion paper said.
But the paper acknowledged the
risk of such a proposal, including "the
possibility that any safe harbour might
be subject to abuse and might create
additional difficulties in addressing
undesirable behaviour such as
phoenix company activity".
The third option features a morato-
rium on insolvency trading provisions
similar to the US Chapter 11 rules. This
allows directors to continue trading
even while insolvent until creditors
order a stop, a suggestion Mr Bowen
acknowledged was "more radical".
Some shareholder groups were
unhappy. The president of the
Australian Shareholders Association,
Stuart Wilson, said: "There is a
responsibility on directors not to
mislead the owners of the company,
and with this ruling it simply means
that shareholders won t have any
effective means of suing when they ve
had wrong done to them."
John Walker of the litigation funder
IMF Australia said it was a question of
"where you draw the line on how much
insolvent trading is too much."
Chapter 11 mooted for
Change long overdue
"It won t happen overnight,
but it will mean a change in the
dynamic of the suburbs around
it," Urban Development Institute
president Ian Marker said this
"The size of the site means
change will be long term; you
certainly won t drive past in a
year s time and say Wow, look
at that. Whatever happens at
the site, it needs to be done in a
way that provides a catalyst for
reinvigoration of the whole area,"
Mr Marker said.
"It s doubtful that you would
attract a single user to such a large
site, so its best use is multiple
tenants and multiple purposes."
Mr Marker said the difficulty
will be generating interest in the
"This will be a long period of
transition for the inner south. But
similar regions around the world
go through this -- it s a natural
Back in 1963 when Chrysler
began building its assembly plant
at Tonsley Park, the suburbs of
Mitchell Park, Clovelly Park,
Marion and Sturt were half
housing, half bushland.
The government of Tom
Playford engineered a ready-made
workforce with massive Housing
Trust construction and private
development that turned the area
into a monoculture of Chrysler
workers, all living the dream on
a quarter-acre block. By the 1970s
it was common for father and son
to be worker and apprentice and
almost every family to be driving a
Valiant, Galant or Sigma.
The car plant sported a new
owner when Mitsubishi increased
its share of Chrysler s Australian
business and eventually took over
the lot. The new owners were
embraced into the lives of the
working class southern suburbs
families and times looked good.
The Magna ruled the late 80s
and 90s but the new century
brought changes. Sales slumped
and by 2004 there were 4000 unsold
cars in the back lot.
Enter CEO Tom Phillips and
the ad campaign with his personal
pitch that "If you can find a better-
built, better-backed car anywhere,
then buy it."
The campaign reprised the
efforts of legendary US Chrysler
executive Lee Iacocca who told
American consumers in 1985 "If
you can find a better car, buy it."
That campaign was credited
with the 1980s revival of Chrysler
in the US.
For Tom Phillips, the pitch
was a short-term success, but not
even Tom could make the new
Mitsubishi 380 sell. After four
years of speculation, Mitsubishi
announced on February 5, 2008,
that the party was over. Years of
government subsidies had failed
to stop the inevitable evolution of
worldwide car making.
For the local residents, it was
akin to losing a family member.
Mitsubishi promised to leave
town, repay its most recent
government handout of $35
million and leave the site to its
But the money s loop back into
the bank account of Mitsubishi
and the company s deal to remain
as a tenant for at least 10 years will
be an ongoing reminder of a time
when car-making drove the state
What s next is even more crucial
to the character of the south.
From Page 11
Minister Chris Bowen
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Proven experience in supporting a busy executive is needed and you will also
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ARE YOU AN
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