Is SA’s legal industry dying?
Is the legal industry dead or at least dying?
Richard Susskind’s seminal work The End Of Lawyers, published in 2010, is an interesting read. Susskind challenges the notion of what many in the profession might consider the ‘usual’ practice of the law by encouraging legal firms to embrace more advanced technology and information communication technology, to outsource and to attack regulation and process. In short, he challenges lawyers, as an old and often old-fashioned profession, to embrace a shifting world.
In South Australia, and notwithstanding our record number of legal graduates, the number of new lawyers joining firms has dipped. It is the lowest on record in recent years. For the first time in a while the profession in South Australia is smaller now than this time last year.
What is happening to the legal industry? Firstly, the industry is divided between the “big end” of town and the rest. By “big end” I mean the large law firms, of which South Australia has only a couple. In truth the legal profession in South Australia is a cottage industry, dominated by small firms and sole practitioners. Not only have we become a small capital city, our legal practices are largely at the “small end” of town.
As to our larger firms, many of whom would not even be considered mid-sized by eastern seaboard standards, they are principally commercial-come-insurance outfits. Stating the obvious, we are a two speed economy in Australia with South Australia at the bottom of the bottom end. With sluggish economic circumstances, there comes an unwillingness to part with money and a commensurate slow down in commercial enterprise.
Unsurprisingly, our local commercial firms are suffering, some very badly. I would venture a view that the majority of commercial firms are distressed.
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As to the alternative practice areas such as bodily injury motor vehicle accident claims, the stuffing has been kicked out of them by recent tort reform. New client inquiries have reduced by at least half; of the surviving claims, they are worth considerably less or fall below the current thresholds. It is not an exaggeration to say that probably 75 to 80 per cent of the work has gone.
On top of that the Motor Accident Commission is to be privatised. The recent PWC report commissioned by Suncorp, no doubt one of the intended tenderers for the insurance work, which predicts an economic boon to the state from privatisation, is as transparent as it is laughable. Certainly as far as Compulsory Third Party insurance is concerned there will be few claims left to defend. Unless it is intended that the private insurers pocket our insurance premiums in return for not much by way of cover for bodily injury, I fail to see where our promised economic advantage lies. The report also ignores entirely the economic damage caused to the legal industry by tort reform and privatisation. Redundancies of plaintiff and defendant lawyers alike is happening now and will be a growing trend for the foreseeable future.
In addition there is radical reform to workers compensation and no one knows what the fall-out will be for the legal industry. Certainly the insurance defendant firms will be reeling as a result of the changes.
Finally, for those who are reliant on the legal aid dollar, the best advice is – don’t be. Commonwealth funding in this area is shrinking not growing. The rates paid are preposterously low and the only business structure that can survive is one with low overheads and scant client service. As the old saying goes: price, quality, speed; pick any two but you’ll never get all three.
Flourishing legal firms are those in niche markets such as taxation or specialised litigation. However, that is not enough of its own. Brave, nimble and tough management is required. To be successful in the current market place legal firms must be tightly and innovatively led. Where one door closes another often opens. Growth areas – given our relative prosperity compared with say 50 years ago – include family law, estate planning and elder law, and the online legal marketplace.
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"As to the aspiring law student, it might be time for a rethink. The profession is unlikely to grow much if at all any time soon."
Where to from here? Retuning to Richard Susskind, he is quite correct that for the legal profession it is probably a case of adapt or die. There are some impressive legal tech startups now in Australia, such as LawPath, a platform for online legal documents and services, and innovative “virtual” law firms such as Hive and Nest Legal. India beckons as a Commonwealth English-speaking jurisdiction that has been back ending legal and accounting firms in Australia for some time. When will the consumer wake up and start using Indian providers direct?
Legal research has reached an entirely different level with ‘ROSS’ an artificially intelligent attorney to help you power through legal research’. Another sophisticated research tool, Syl Semantics, is being rolled out by Minter Ellison and other large corporates. When intuitive IT systems do better research than your law clerk you know things are really changing.
The death throes of the high street solicitor is now almost well and truly done save for some regional and rural centres. What comes next is a new method for the delivery of legal services, where the successful law firms will continue to add value for their clients but in a new fashioned way. Take note of the recent report on the delivery of civil justice by the Federal Productivity Commission which gives a flavour of likely future directions for the law. Lawyers will be expected to deliver a more competitive, flexible and commercially realistic version of justice if the ‘missing middle’ are to continue to afford legal services.
With generation X now firmly ensconced in positions of leadership and listening to their millennial colleagues, there is bound to be change and for the better. If you are on older lawyer and not engaged in a bit of reverse mentoring you are going to miss the boat. In truth those who will succeed have already set sail.
So my summary is that some in the legal industry are dead or dying – but not all.
As to the aspiring law student, it might be time for a rethink. The profession is unlikely to grow much if at all any time soon. If you are determined to pursue a career in the law then start researching the likely future trends of the law and where you might add value to a firm. Just holding an LLB may not be enough for the large majority.
The ultimate challenge for the profession is whether its current regulation and insurance arrangements are sufficiently flexible to enable a new fashioned practice of the law. The challenge for South Australia is whether it is able to match such an evolution or whether it will be held back by a chronic underinvestment in the Courts Administration Authority.
There is little point expecting lawyers to reinvent themselves if our courts are not also prepared for the new age.
Morry Bailes is managing partner at Tindall Gask Bentley Lawyers, Member of the Executive of the Law Council of Australia and immediate past President of the Law Society of SA. The opinions expressed in this column are his own.
His column appears every second Thursday.
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