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Technology and Liability: Innovation in the Legal Profession

Technology and Liability: Innovation in the Legal Profession

 

 

Benjamin John


The law and technology are an odd couple. Where the legal profession functions to mitigate risk, technology creators take business risks to innovate.[1] To avoid becoming redundant, law firms and practitioners have been forced to adopt a positive attitude towards modern technology - so far, the integration of new platforms and devices is generally seen to have improved the efficiency of practice.[2] Despite a sense of agreement between these two worlds, a foundational tension between conservation and experimentation lies below the surface of the interaction between law and technology. Errors caused by technology may invoke a sentiment of distrust within the legal sphere, which has the potential to manifest in the allocation of risk between law firms and legal-tech companies.

 

The Changing Landscape and a Shifting Liability

With the legal landscape becoming ever-more dominated by technology, well resourced firms will be seeking to mould their contracts with technology vendors with a view to mitigate risk and liability. Although offsetting liability may appear to be the natural and commercially sensible way of avoiding additional costs for law firms, to do so may stifle innovation in the sector.

Recently, the positive attitude towards innovation embraced by the Australian courts reflects an acknowledgement of the key role technology has in assisting the “quick, inexpensive and efficient resolution of proceedings”. [3] Certain innovations, such as technology assisted review (TAR), have become common usage in Australian legal practice.[4] As technology advances and new opportunities arise, the broader profession will be naturally eager to implement changes in the hope of improving access to justice and increasing the speed that structured data and information is made available to lawyers.[5] However, with the exponential increase of technology in all areas of practice, which place greater reliance on these technologies, the chance of error also increases. New technology will continue to be implemented into practice where mistake and error carries legal liability.

Although innovations are likely to reduce mistakes overall, the legal profession faces new risks associated with more complex and challenging technologies.[6] As ironic as it may have been when Counsel jokingly called a “rogue iPad” in need of repair “guilty of contempt” in Tomlinson v Ramsey Food Processing Pty Ltd,[7] experimentation in practice conceivably raises questions of new liability. As entire platforms and codes begin to underlie major sections of practice,[8] experimentation and adoption of technology increases the potential for large scale disruption and loss. Yet, where human error may be more frequent, the damage is generally more contained.[9] When underlying codes and platforms fail, the delay or damage to a case or transaction is more likely to be significant and costly. Although not necessarily within the legal sphere,[10] the Centrelink debt recovery incidents of 2016 exemplify this point. An online compliance intervention (OCI) system was introduced to automatically send out debt recovery letters to payment recipients where a discrepancy existed in their data. The system was significantly more efficient, but a plethora of complaints proceeded from individuals who received notices in error.[11] Within legal practice, a similar technological error would pose questions for both liability and the conception of fault in malpractice claims against solicitors.

Consider the following three hypotheticals:

1.

Firm A adopts a new document review system based on the most recent innovations in artificial intelligence. A lawyer from the firm enters search terms and the algorithm filters out all documents it deems irrelevant. The platform employs DeepMind technology and is able to learn and improve each time it makes a search from feedback provided by the lawyer. DeepMind technology mimics the human brain’s short-term memory neural networks to learn in a similar way that human beings do.[12] The process of review by paralegals and junior lawyers is effectively bypassed. Mid-way through the process, a system check is completed, finding that several highly significant documents that were expected to exist have been missed by the search. New orders have to be made to the court and significant delays are encountered, leading to financial loss on behalf of the client. Whilst the technology is being patched, the firm has to reconsider the estimated costs and time frame of their services, which have become higher due to the error. The damage arose not from the lawyer’s lack of training in the technology nor from any human error on behalf of the lawyer.

2.

Firm B decides against adopting complete AI technology for their practice. Instead they begin to explore the possibilities of using Rule Tree Diagram technology, also known as a logic tree process. The firm signs a contract with a legal-tech start-up on the promise that the new platform will aid their lawyers in giving advice to clients. The visual diagram on the tree presents an overall question to be answered, and on each node below that question, a proposition is outlined, which the lawyer decides is either true or false depending on the facts of the situation.[13] As the logic tree creates the various nodes, drawing from relevant statutes and precedents, a programming error means the tree fails to capture the most recent cases and legislative amendments. Only as the case goes to trial does the firm become aware that the platform has not captured the most up to date information. Firm B is forced to seek leave to make urgent amendments and change their trial strategy. Cost orders are awarded against the client for delaying the start of the trial. The firm is also open to a negligence action from the client. To offset the financial detriment suffered, the firm will have to cross claim against the technology provider. The firm’s reputation with the client has been damaged and to lay blame upon the technology provider is unlikely to be an acceptable response to the client. 

3.

Noting that some of their clients had begun to outsource contract review to smaller start-up companies, Firm C decides to engage a legal software company to create a similar machine learning contract review system. The system works by comparing the clauses of a contract with the relevant compliance regulations.[14] By offering the new service to their clients, the firm hopes to retain its current client base and improve efficiency. After tests are run on the software and no issues arise, the firm implements the technology into the services they provide to clients. However, on the first day of use, the system crashes due to the extent of data being fed through the algorithm. In a similar vein to Firm A, Firm C has to reconsider the time frames for completion of matters and suffers further reputational damage with its clients.

The hypothetical firms in these instances may have to absorb the costs of the mistakes and reimburse the clients. The client expects firms to engage with the latest technology, but until technology becomes the norm in legal practice, they are less prepared to pay directly for it, let alone carry the burden of financial or opportunity loss.[15] Technology vendors may also be forced to carry a greater degree of liability. For example, in AI controlled motor-vehicles, it is proposed that liability for crashes will shift from the at-fault independent human driver (and their insuring party) to the manufacturer of the vehicle.[16] Thus, in a similar fashion, where error is occasioned purely as a result of technological failure, liability may shift to the vendor. The costs of delay, opportunity loss and mistake will ultimately lie somewhere within the chain of contracts between client and firm, and firm and technology provider. However, where it continually falls upon the lawyer or solicitor, a more cautious and defensive approach to innovation may be taken by firms and professionals. Where it falls upon the vendor, technology companies’ capacity to research and explore is reduced.

The combination of competitive pressure on firms to offer clients the latest technological procedures and the proliferation of such technology across the profession makes the reality of technological error and liability a real concern.

 

A Possible Remedy to the Problem of Liability?

Firms have been proactive in bridging the gap between technology providers, directly investing in start-up companies and appointing partners in charge of change and innovation.[17] However the problem of liability remains.[18] A solicitor or firm may be subject to a new breed of civil claim for missed deadlines or mistakes where technological error is at fault and not the legal practitioner.[19] It is unclear whether a court would hold a practitioner directly responsible for delay caused by technological error,[20] as imposing liability would discourage the adoption of technology and be at odds with the notion of fault for a finding of malpractice.[21] However, the costs must fall somewhere, and presumably, not with the client. Expanding the scope of professional liability insurance in Australia may be a potential solution to reducing the likelihood of conflict and dispute between firms and technology companies. Where no-fault insurance covers technological error in practice, the fear of litigation and dispute is removed, encouraging innovation and the adoption of new tech platforms. Expanding professional indemnity insurance packages would require firms to re-negotiate additional cover with their current insurer, however this would provide greater certainty for firms, and may go a long way to avoiding distrust towards technology within the legal sphere.

 

References

[1] Albert Danso et al, ‘Risk-taking Propensity, Managerial Network Ties and Firm Performance in an Emerging Economy’ (2016) 25(2) The Journal of Entrepreneurship 155, 156.

[2] T F Bathurst, ‘Advocate v Rumpole: Who Will Survive? An Analysis of advocates’ ongoing relevance in the age of technology’ (2015) 40 Aust Bar Rev 185, 187.

[3] Federal Court of Australia, Technology and the Court Practice Note (GPN-TECH), 25 October 2016, 2.1.

[4] McConnell Dowell Constructors (Aust) Pty Ltd v Santam Ltd [No1] [2016] VSC 734, [5].

[5] Bonnie Rose Hough, ‘Let’s Not Make It Worse: Issues to Consider in Adopting New Technology’ (2012) 26(1) Harvard Journal of Law & Technology 256, 257.

[6] Maura R Grossman and Gordon V Cormack, ‘Technology-Assisted Review in E-Discovery Can be More Effective and More Efficient Than Exhaustive Manual Review’ (2011) 17(3) Richmond Journal of Law and Technology article 5, 2. 

[7] T F Bathurst, ‘Advocate v Rumpole: Who Will Survive? An Analysis of advocates’ ongoing relevance in the age of technology’ (2015) 40 Aust Bar Rev 185, 189 quoting Transcript of Proceedings, Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCATrans 77 (10 April 2015). 

[8] Samantha Woodhill, ‘Lawyers need to keep up to date with technology, experts warns’, Australasian Lawyer (online), 19 January 2016                                                              <https://www.australasianlawyer.com.au/news/lawyers-need-to-keep-up-to-date-with-technology-expert-warns-210672.aspx>.

[9] Grossman and Cormack, above n 6, 37. 

[10] Bianca Hall, ‘Centrelink robo-debt scheme an absolute atrocity but class action not on cards’, The Sydney Morning Herald (online), 8 February 2017 <http://www.smh.com.au/federal-politics/political-news/centrelink-robodebt-scheme-an-absolute-atrocity-but-class-action-not-on-cards-20170208-gu7zhz.html>.

[11] Richard Glenn, Submission No 02 to Commonwealth Ombudsman, Centrelink’s automated debt raising and recovery system, April 2017, 4.

[12] Sam Shead, Google DeepMind: What is it, how does it work and should you be scared? (15 March 2016) Tech World < https://www.techworld.com/apps-wearables/google-deepmind-what-is-it-how-it-works-should-you-be-scared-3615354/>.

[13] Vern R Walker, Rule Tree Diagrams (19 October 2015) LLT Lab < https://www.lltlab.org/rule-tree-diagrams/>.

[14] Melissa Coade, ‘Legaltech’s long road to innovation’, Lawyer’s Weekly (online), 29 September 2017 < https://www.lawyersweekly.com.au/biglaw/21982-legaltech-s-long-road-to-innovation>.

[15] Herbert Smith Freehills Artificial Intelligence: The Client Perspective (at page 6, 8)

[16] James M Anderson et al, Autonomous Vehicle Technology: A Guide for Policymakers (Rand Corporation, 2014), 115-6.

[17] Katie Walsh, ‘Innovation a leadership game for Gilbert + Tobin, KWM, Clayton Utz and law firms’, The Australian Financial Review (online), 9 June 2017< http://www.afr.com/business/legal/innovation-a-leadership-game-for-gilbert--tobin-kwm-clayton-utz--law-firms-20170503-gvy50r>.  

[18] Michelle Worrall Tilton, ‘An Insider’s Guide to Lawyers Professional Liability Insurance’ (2017) 46(2) The Brief, 56, 56.

[19] Stephen Walmsley et al, Professional Liability in Australia (Lawbook Co, 2002) 275.

[20] Queensland Art Gallery v Henderson Trout [2000] 93 QSC (10 November 1998).

[21]  Walmsley, Professional Liability in Australia, above n 19.