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Disruption Is Now: Where To From Here?

10 June 2020 - By Jarrod Coburn

It is a point of pride to me that Ebborn Law/Portia is NZ’s largest family legal aid provider and one of the country’s top-ten legal aid providers by volume. Over the past five years 83% of our clients have been subsidised in one way or another by government funding. It makes us an important government contractor, a signal deliverer of justice and living proof that the legal aid system can be workable.

The firm’s efficiency and productivity has been honed on the grindstone of legal aid. Those who deliver this service will know what I mean when I say that the pickings are slim. There is little room for wastage or indulgence when working within a legal aid scope of work. This in turn has forced our firm to focus on delivering the necessities and we have found clients for the most part appreciate this. It has allowed us to innovate in how and where we deliver our services. This meant that the lockdown caused little disturbance for us as our staff relocated and worked from their homes with only the smallest of inconvenience relative to other firms.

This article originated as a conversation about the new Community Law pro bono clearing house model and has expanded into a reflection of the current state of affairs and the future of the profession. If a theme ties this all together it is the barriers to accessing justice in Aotearoa New Zealand. The clearing house model is - on the face of it - an initiative that will improve the situation.

Photo of Jarrod Coburn
Jarrod Coburn

At Ebborn Law/Portia we put a lot of effort into strategic planning and forecasting. We try to stay up-to-date with global trends and take a holistic view of the market. With that in mind I would like to share a number of insights that are ripe for wider discussion. I’ve divided these into four areas – Access to Justice; Use of Public Funds; Rights of the Client, and; Market Disruption. Some relate specifically to the clearing house model, some are more relevant to access to justice as a whole.

Access to Justice

All lawyers have a duty under the Client Care Rules to advise if a potential client might be eligible for legal aid (9.5, Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008). If clients are eligible for legal aid then referring them to a legal aid lawyer rather than providing a pro bono service is more advantageous for them for reasons discussed later. But if all lawyers did advise their clients as per the rules, and then - say - 50% of the clients were referred to legal aid lawyers, would this improve access to justice, considering how hard it already is to find a legal aid lawyer? That alone is a subject worthy of debate. My purpose here, though, is to protect what we have in the way of legal aid.

The New Zealand Bar Association report on the clearing house model is clear that it "…should not be a substitute for a fully-funded legal aid system". Despite the high demand and relative low supply, any deviation of legal aid clients away from firms that go to the effort of providing those services could harm the equanimity of legal aid service provision.

Pro bono work is a worthy tradition of the profession and many people and organisations have benefited from this generosity. Nothing can or should take away from that message. Yet when choosing to deliver such a service care must be taken to ensure that specialist advice is not being given by lawyers with insufficient background or experience – the public see lawyers as one colour, when in fact there is a spectrum of specialties and many hues of skill and ability. The lack of payment cannot excuse or explain a diminution in quality.

A person seeking assistance from a lawyer must be informed if they might be eligible for legal aid and I believe should also be referred to a legal aid provider if they are eligible. This benefits the profession overall because when there is one party in a dispute it follows that there will be at least one other. Many law firms in provincial parts of the country benefit from the presence of at least one legal aid provider.

The pro bono clearing house model introduces a number of opportunities. There is an opportunity for legal aid lead providers who are donating time to act as lead on a file for supervised providers, so that a supervised provider can get more experience. This increases the capacity of lawyers able to do certain types of work. For example, it is hard to find a civil lead provider and yet there are lawyers who would provide more civil legal aid if there was a lead provider willing to supervise.

Opportunity also exists for basic legal advice given and then an application for legal aid filled in with a volunteer lawyer, then the client transferred to a legal aid provider once approved (either within or outside of Community Law).

The possibility of providing training to lawyers participating in the pro bono clearing house on legal aid and FLAS eligibility is particularly exciting, as lawyers are uncertain about the specifics of the Ministry’s policies: particularly the grounds where there is exception to the income threshold (e.g. hardship).

Use of Public Funds

A key area of concern for me is the potential of Community Law Centres acting as gate-keepers. They have significant influence through their brand and have at times followed a model that funnels clients to lawyers who volunteer with them. My concern is not only grounded in getting the best outcome for each individual, but also within the kaupapa - the essence - of volunteering. While I understand Community Law’s need for legal volunteers, the quid pro quo of repaying that commitment with referrals departs from the spirit of volunteerism: a thing given without expectation of payment.

As public funds are being used to support Community Law, then Community Law should be sending its clients to law firms or lawyers that provide the most appropriate service in the timeframe required. People living in abject poverty will need legal aid lawyers for a variety of reasons, some are listed further in this article. All are important to consider.

With the advent of the pro bono clearing house the expectation of greater oversight of Community Law by government arises, to ensure similar standards expected of legal aid contractors are in place for the pro bono work. The argument that ‘these lawyers are providing their services for free’ carries no weight when they are delivering legal services under the auspices of a government-funded programme.

My final point regarding public funds relates to governance. Community Law Centres are independent bodies connected via the umbrella of Community Law Centres o Aotearoa. Care must be given to any potential lack of cohesiveness impacting upon the clearinghouse concept, which would work most efficiently where there is consistency in systems and application. Where public funds are concerned, efficiency is paramount.

Rights of the Client

There is a significant distinction between services delivered pro-bono, services delivered under private arrangement and services delivered under legal aid contract.

Pro bono is a contraction of the Latin for ‘in the public good’. It is an undeniable good for society overall that people without means have access to a lawyer. This was the basis for the establishment of legal aid systems in many parts of the world. When we talk of pro bono today it has more of a transactional meaning: the person is getting a lawyer for ‘free’. This way of thinking places the client as a supplicant, receiving something for nothing, and creates potential for gratitude for this charitable act. As such, clients receiving this service are in a position of heightened vulnerability.

A ‘something-for-nothing’ transaction sometimes causes feelings of guilt or shame. This status will affect the relationship of a client toward their lawyer and I argue that a greater fiduciary duty falls upon the lawyer as the balance of power veers in their favour (even though the Lawyers and Conveyancers Act makes no distinction between paying and non-paying clients). This is particularly applicable for people suffering chronic depredation.

There are many people needing a lawyer who have personality disorders, addiction, lack of education, mental health issues, cultural differences. Oftentimes these issues create a barrier that makes it hard for a lawyer to help their client – but that does not diminish their need or merit for that help. In many cases the person must have representation because it is in the interest of justice – something that is greater than the sum of its parts. A pro bono relationship is in danger of being weakened by the inequity inherent in it, and as such measures to ensure lawyers commit fully to delivering the legal service required, even if the client makes things difficult, must be carefully considered.

I want to acknowledge that clients can be very demanding. It’s a combination of personality, stress, frustration and misguided expectations. In a world of mediocrity lawyers are one of the few professions that must consistently deliver to a very high standard. Sometimes the expectations placed upon lawyers are ridiculous but, nevertheless, the duty still exists.

The contract between a client and their lawyer is formed under the Lawyers and Conveyancer’s Act. We take the approach of having three separate documents to form a retainer: the Client Care Statement (outlining generic rights); the Terms of Engagement (containing details specific to that client), and; the Scope of Work (the work we will perform and what the cost will be). The New Zealand Law Society regulates the Act and the client is free to make a complaint about a lawyer if they feel the need to. We actively educate our clients about the NZLS complaints process and encourage them to make a complaint if they feel we have not resolved a situation to their liking. This practice should apply whether or not a client is being charged.

There is no oversight of a private legal service, aside from auditing of the trust account. Aside from the protections of and repercussions exacted by the law, there is little to moderate the quality of service a private-paying client receives. It is pretty much caveat emptor across the board.

In terms of consumer protection, the legal aid system is brilliant. Clients pay less, some do not have to repay the fee at all. The work done for them is subject to audit and they have an additional mechanism for complaints. Most importantly, in many cases they are indemnified against costs in litigation.

There are many reasons why we should be proud of our legal aid system in this country, particularly when considering the rights of the client.

It is important a client’s dignity is not lost in the process of applying for legal aid. The process - while streamlined compared to a few years ago - still involves probing and very personal questions: things people might feel uncomfortable talking about to a stranger. Thus, the need for legal aid or pro bono clients to be treated the same as those paying privately.

Market Disruption

None of the above is intended to diminish the positive and beneficial formation of the pro bono clearing house. I see Community Law as a grand institution that is too often taken for granted by New Zealanders. There are several people not eligible for legal aid because they earn just a little bit too much, but who are miles away from being able to pay a lawyer privately. These are people who have a much-reduced ability to access justice. The disruption we are facing due to the pandemic (and yes, for the first time since World War 2 we are seeing true disruption of the profession!) will only make things worse for them, but in the process it will also create a significant shift in the practice of law.

Predicting the future is an inaccurate art but I see affluent families suffering most with the twin blows of lowered income and unemployment creating tension. Based on the current and predicted economic situation I expect luxury items will need to be sacrificed by the middle classes and this includes the ability to pay a lawyer privately at the rates seen pre-COVID.

Large corporations and government agencies will have less budget to spend on external counsel, reducing the B2B and G2B spend toward the big law firms. These firms have the acumen and means to aggressively compete for clients normally left for medium-sized firms – and they will do so to survive if necessary.

Sadly, medium-sized firms will continue to shed staff - not just administrative staff but lawyers (their means of income-generation) in anticipation of the downturn in demand; law firms that do not reduce their fees or their expenditure (or both) will suffer most and some will go out of business as they run out of private-paying customers.

Due to the rise in tensions and economic pressure at home there will be an increase in demand for lawyers in areas of employment, family and crime. There will be a spate of personal grievances generated by how workers are treated by employers during and after COVID. However, house prices will bottom-out toward the end of 2021 and this will have a serious effect on firms reliant on conveyancing.

An initial boom of criminal cases will ease as the backlog clears (probably within a few months) but will rise with unemployment.

There will be more people eligible for legal aid. More lawyers will be seeking to register as legal aid lead providers, while those who hold lead provider status will increase the amount of legal aid they provide, but this will barely keep up with demand. Law firms unused to providing high levels of legal aid services will suffer a secondary economic shock as they grapple with reducing their overheads to meet lower income (but for the same workload). Many firms will be stuck with high-paid lawyers who will not be used to working at the level of productivity required to profit from legal aid.

Before the end of 2020 a number of smaller law firms will break up, merge or get absorbed into larger firms. There will be an increase in the number of barristers and sole practitioners delivering legal aid services, creating more supply but also greater competition for the private market. The risk of a price war is very high and if that happens then those law firms that have not already adopted efficient practices will surely fail.

Non-lawyers (including legal executives) will suffer the most as lawyers are forced to take on more administrative tasks themselves and firms start utilising technology to replace manual processes or outsource those services.

There could be as much as a 19% increase in Family Court applications for 2020, rising to 24% in 2021. I also predict an increase of up to 25% in the family legal aid expenditure this year, rising to 35% the following year.

There will be lots of work available, but not much private work. There’s likely to be a shift to alternative dispute resolution as this is less expensive than litigation. The economy will contract, and the private market will shrink, and this is the disruption that the profession is facing. It might be too late for some firms as the time to prepare for this passed long ago.

Providing Legal Aid

A common theme I’ve picked up from members of the public is that firms that do legal aid aren’t very good. Or: they aren’t as good as ‘private’ firms. Or: there is something ‘wrong’ with lawyers that do legal aid.

My background is in organisational management, systems and strategic marketing. I’ve been trained to analyse value chains, means of production, business lifecycles and such things. The law profession is a closed environment and as such is quite straightforward to interpret - there aren’t a lot of moving parts to it - and I can tell you with all the strength of my management experience that, in aggregate, law firms providing legal aid are significantly better than firms that don’t. Why? It’s all about hurdles.

Hurdle One: Entry Requirements. Lawyers wanting to deliver legal aid must convince the government they are capable to do so. The Ministry of Justice wants to know all about the programme of supervision, what software is used, what the complaints process is, what documentation is given to clients… the list of requirements is long and entirely justified. I’ve had several lawyers tell me they don’t provide legal aid because of this administrative barrier and choose instead to stick to charging privately, favouring pro bono work to make a social contribution.

Hurdle Two: Billing Paradigms. Legal aid fees are meagre compared to the private sector. The client essentially gets the same great service at a quarter of the market price. This means that most firms providing legal aid take one of three approaches: they have a strict quota (maybe 10%) and essentially let the private clients subsidise the legal aid clients; they use legal aid as a training tool for junior lawyers, or; they adopt a value-billing mentality. While the latter is a leap of faith for many, few return to the old ways of thinking.

Hurdle Three: Quality Control. Legal aid clients receive a higher standard of legal service because legal aid providers are strictly audited by Ministry of Justice. They are not easy audits to pass: a selection of random files is sent to an independent auditor and every little thing is examined and questioned, including whether the Ministry got value for money for the fraction of the private fee paid. Sometimes the auditor will visit the office to review the operation as well. The reward for doing lots of legal aid is more audits.

Hurdle Four: Reverse Economies of Scale. The level of administrative crap that law firms have to deal with when providing legal aid is overwhelming. The more legal aid you do, the more tied up in bureaucracy things seem to get. Seriously, you would think that the more legal aid you did then the easier it would be. Not so. To manage large numbers of legal aid clients there needs to be very tight management, systems to check and double-check that invoices are being paid, follow-ups with lawyers when invoices are rejected, processes to make LARP (legal aid review panel) requests. The list goes on. The business of legal aid is a business and needs strong management processes to maintain.

So why even bother? The fact is that the hurdles above are also what are preventing law firms from becoming sustainable in the face of economic downturn. Overcome these hurdles and two things become very apparent: firstly, your firm will be able to survive if private clients become few and far between, and; secondly, there is nothing stopping you servicing private clients and charging what non-legal aid law firms charge. That means you compete equally, charge the same, but your profit margins on private clients is greater than many other firms. Why? Because legal aid has forced you to be efficient. You’re no longer wasting large chunks of your income on things that don’t make you any money.

Back to the Clearing House

The affluent middle-classes who are affected through loss of one or more income, reduced incomes, pressure to reduce overhead (such as private schooling, health insurance, lawyers), will benefit from the pro bono clearing house concept. They will join a burgeoning cohort who find lawyers financially inaccessible; often ending up as self-litigants.

The people most at need at this time are those who currently fall outside of the legal aid eligibility framework, but who cannot afford to pay lawyers privately. This is a key reason why the pro bono clearing house is good news for access to justice. It will not diminish the pool of private clients, though some firms might feel animosity toward the scheme as the economic situation becomes more dire. But in these turbulent times, the decency of lawyers and their drive to see justice done will contribute appreciably to the good of society.

Jarrod Coburn JP, MMS(VUW), FIML, is the CEO/Kaiwhakahaere of Portia - a law firm that positions itself as the ‘evolution of law’. For nearly eight years he has been embedded in the law profession, labouring to grow a law firm using strategic business modelling and taking full advantage of technology. Jarrod studied management at Victoria University and has worked in the government and community sectors. He is a vocal advocate for business innovation within the law profession.

Last updated on the 10th June 2020