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Navigating Equine Law with Daniel Morgan

Few nations on earth stop for a horse race; but every November Australia does just that. Billed as the “race that stops the nation”, the Melbourne Cup is a national – perhaps even international – icon. But our national love for horses goes far beyond just racing.

The Light Horse Brigades are an important part of Australia’s wartime history, the brumby is a controversial but beloved modern symbol of the Australian Alps, and did you know the Mounted Unit of the NSW Police is the oldest continually operating mounted unit in the world? It’s no surprise then that our national love of horses crosses into legal practice. What may not have crossed your mind is the complex way in which horses are owned, stabled, raced, and even bred is the subject of webs of legal arrangements often requiring specialist legal knowledge to understand and construct.

Morgan + English Partner Daniel Morgan joins David Turner on Hearsay the Legal Podcast to fire the starting gun on the intersection of the legal world with the world of horses as he dives into complexities of equine law.

The insights below are derived from Daniel’s CPD episode: Trooping the Colour: Horses, Racing and the Law. Sign up for a trial to listen now for free on Hearsay the Legal Podcast.

The Role of the Personal Property Securities Act (PPSA)

As Daniel explains, equine law is not just about horses; it’s about how they fit into broader legal frameworks, such as corporate law, property law, and even insolvency. The evolution of the thoroughbred industry from informal, handshake-based agreements to a sophisticated, multi-million-dollar global business has necessitated rigorous legal bulwarks to protect stakeholders and ensure ethical practices.

One of the key legal frameworks impacting equine law in Australia is the Personal Property Securities Act 2009 (Cth) (PPSA). Section 86 of the PPSA is particularly relevant as it grants priority interests to those who feed or develop livestock over other creditors. By providing clarity and security for practices in an industry where horses can be worth millions, this provision has revolutionised how equine transactions are managed.

However, there remains a curious challenge in equine law. Daniel raises the example of  vessels like an aeroplane or a motor vehicle, both of which have their own specific identification numbers. Similarly for horses, they have their individual ID and their DNA, which is tested at birth to ensure correct reporting of their lineage and that the mother and the father match. However, horses are not yet classified as serial-numbered property under the PPSA, meaning that they would have to be registered against the owner of the horse. This raises another issue, as it can be a bit difficult to determine exactly how many owners there are as  you can have up to 20 registered owners with the stud book and with Racing Australia. On its site in relation to horse racing, the RSPCA calls for “the development of a national identification and traceability system for racehorses”.

 Contracts and Agreements in Equine Law

Equine law encompasses a variety of contracts unique to the industry, such as:

  1. Stallion Service Agreements

This is a formal contract between the owner of a stallion (the stallion owner or manager) and the owner of a mare (the mare owner). This agreement outlines the terms and conditions under which the stallion will “cover”, or breed the mare, either through natural mating or artificial insemination.

  1. Agistment Agreements

This is a legal contract where an – ideally qualified – landowner will take care of livestock owned by someone else for a specified period in exchange for payment. These arrangements can be more intricate than just feed and shelter, and can potentially include breeding services. Livestock owners sometimes turn to agistment agreements when their own property cannot adequately support their animals.

  1. Foal Share Agreement

This is a legal agreement which allows a mare owner with valuable breeding stock, such as a mare with black-type or group race wins, to partner with a stallion owner. Instead of paying the stallion’s service fee—often upwards of $200,000 to $300,000—the mare is bred to the stallion, and the resultant foal is shared between the parties. The mare owner typically cares for the mare and foal until the foal is sold, usually about 18 months later. This arrangement enables participation in high-end breeding without upfront stallion fees.

Horse Welfare and Industry Regulation

The welfare of horses is another critical aspect of equine law that is governed by both industry rules and broader animal welfare legislation. While Racing Australia oversees the welfare of ownership and management of horses, local Principal Racing Authorities also enforce their local rules of racing to ensure that horses are cared for responsibly, with strict sanctions such as long-term race disqualifications for individuals who breach these rules. The rules imposed by these organisations work in tandem with the state legislation regulating the treatment of animals, which would be the Prevention of Cruelty to Animals Act 1979 in New South Wales.

Racing Australia has also introduced welfare programs and racing initiatives such as Equimillions, where retired race horses are taken on by equestrian enthusiasts and are retrained to be dressage horses or show jumping horses to demonstrate the industry’s commitment to ethical practices.

Practical Takeaways for Aspiring Equine Lawyers

For those considering a career in equine law, Daniel stresses the importance of a passion for horses and hands-on experience in horse farms or working with horses. Growing up in the Hunter Valley, a hub for thoroughbred breeding, Daniel developed for himself a lifelong passion for horses. This passion, combined with legal expertise, enabled him to carve out a successful career in this niche field. For those with a love for horses and a talent for the law, equine law offers a rewarding and dynamic career path. As Daniel puts it, “If you’ve got the passion for it, there is a capacity to carve out a career in the industry”

Daniel believes that building strong networks and seeking mentorship is crucial for those pursuing a career in equine law. He advises aspiring professionals to find a mentor within the industry who can provide guidance, introduce them to key connections, and support their career development. Reflecting on his own experience, he acknowledges the significant role mentorship played in helping him navigate his path as a young student.

Conclusion

Equine law is a fascinating and multifaceted field that blends legal expertise with a deep appreciation for the thoroughbred industry. As Daniel’s insights reveal, it’s a field that requires passion, precision, and a commitment to ethical practices. Whether dealing with contracts, navigating the PPSA, or advancing welfare standards, equine lawyers play a vital role in ensuring the industry’s integrity and success.

Navigating Immigration Law with Marsha Bassily

Previously on Hearsay, Marsha Bassily, Principal Immigration Solicitor at MB Lawyers joined David Turner to uncover the shape of the changes in the migration arena, with a look back at the removal of the dual registration requirement and the Novak Djokovic deportation.

This blog post draws insights from Hearsay’s interview with Marsha. Check out episode 86: Migration Nation: The Immigration Advice Landscape and the Future of Migration Practice on Hearsay the Legal Podcast now.

The 2021 Change

Unlike other legal fields, immigration law is constantly evolving due to political influences and policy shifts. Marsha stresses the need for immigration law practitioners to be incredibly agile and well-informed against the rapidly changing landscape of immigration law.

One of the biggest shifts in immigration law came in 2021 with the Migration Amendment (Regulation of Migration Agents) Act 2020 (Cth), when the requirement for Australian lawyers to be dual-registered with the Migration Agents Registration Authority (MARA) to provide immigration advice was removed.

Marsha welcomes this change, explaining that it finally eliminated an unnecessary regulatory burden. Lawyers are already held to high professional standards by the Law Society, and the additional MARA registration was redundant. This reform meant that legal practitioners could now focus solely on their expertise without the bureaucratic constraints of a dual regulatory system. However, as Marsha points out, the presence of migration agents remains essential, as they provide valuable services to individuals who may not necessarily require a lawyer.

Although the removal of dual registration may raise concerns on the quality of the advice offered as lawyers who are not specialists would be giving migration advice, Marsha assures that it is unlike the case. “I don’t think any lawyer would go into immigration law blindly,” says Marsha as she emphasises the intricacies of immigration law as a deterrent to potential lawyers interested in the space. Immigration law requires deep expertise and constant vigilance of any changes in the regulations. The stakes are high, as clients’ futures hinge on the legal advice they receive.

The Future of Skilled Migration in Australia

The Australian government recently released the Outline of the Government’s Migration Strategy: A Migration System for a More Prosperous and Secure Australia, which signals a major shift in migration policy. While still in its early stages, this strategy suggests that skilled migration will be restructured to better align with labour market needs.

One of the most significant proposed changes is the restructuring of the skilled migration program into three tiers:

  1. High-Skill Tier – This category aims to fast-track the entry of highly skilled professionals, likely through salary benchmarks that will ensure efficient visa processing.
  2. Agile Response Tier – The government will use real-time data from Jobs and Skills Australia to adjust skilled migration targets quarterly.
  3. Lower-Skill Tier – This category is expected to cover lower-paid roles that are still essential to the economy.

If implemented effectively, these reforms, which include an overhaul of the work visa system to make it more responsive to market needs, eliminating redundant labour market testing, and allowing businesses to recruit skilled migrants more efficiently could create a more responsive and efficient migration system that benefits both employers and skilled migrants. The government will also raise the Temporary Skilled Migration Income Threshold from $53,900 to $70,000 starting July 1 to better align it with market realities.

Considering the struggles some businesses face with hiring foreign talent, Marsha views the new policy as a positive shift for businesses and skilled migrants.

The Student Visa Dilemma

International students play a crucial role in Australia’s economy and workforce. However, many face significant hurdles when trying to transition from student visas to permanent residency. The current system often leaves them in limbo and forces them to blindly navigate a complex web of visa options with little certainty.

The government’s new strategy aims to provide clearer pathways for international students to remain in Australia post-graduation. Marsha highlights the importance of retaining skilled graduates, as they represent a valuable pool of talent that Australia has already invested in. By simplifying the transition to permanent residency, Australia can strengthen its workforce and economic stability.

The Djokovic Case: A Lesson in Ministerial Power

No discussion on immigration law would be complete without mentioning the high-profile deportation of tennis star Novak Djokovic. Marsha found the case fascinating, as it highlighted the significant discretionary power that the Minister for Immigration holds and the glaring disparity between the experiences of high-profile individuals and everyday people navigating immigration law.

While the media often focuses on humanitarian visas, she pointed out that immigration law also plays a huge role in determining “how Australia runs, who we let in, who we don’t, and how complex that really is”. Despite all the controversy surrounding Djokovic’s case, no changes were made to migration laws as a result.

Djokovic’s case demonstrated how quickly immigration decisions can be made and reversed at the highest levels. The average applicant would struggle to obtain a waiver after deportation as securing a waiver for early re-entry is extremely difficult—it requires a strong, well-argued case. However, Djokovic was granted one within the exclusion period even though deportation normally comes with a strict three-year ban. This then raises questions about the accessibility and consistency of immigration law. Marsha notes that it wasn’t just about his wealth or fame, but rather the way his presence in Australia as a global tennis star – was framed as a benefit to the country. Ultimately, it wasn’t just about him as a person, but about what he represented and what he could offer to the community.

Advice for Aspiring Immigration Lawyers

For those interested in practicing immigration law, Marsha stresses the importance of staying informed. Immigration law is deeply intertwined with government policy and economic trends and lawyers must have access to reliable legal resources, such as the e-library LEGENDcom, and understand the Department of Home Affairs’ decision-making processes.

Marsha concluded the podcast episode with the message that the 2021 changes marked an excellent opportunity for young lawyers to enter into the immigration field as she states that “we can all start together, so we’re all going to learn together.

Curious to learn more? Listen to the full episode on Hearsay the Legal Podcast featuring Marsha Bassily. Sign up for a trial to listen now for free on Hearsay the Legal Podcast.

Understanding the Intersection of Asset Protection and Tax Avoidance: Legal and Ethical Implications

Working side-by-side with a client’s tax and/or financial adviser on a new deal or a new venture is remarkably common, and often, everyone’s responsibilities seem nicely partitioned – you’ll do the asset protection advice, and the tax adviser will look after the tax effectiveness and efficiency of the structure.

However, modern financial arrangements often blur the boundaries between asset protection and tax avoidance. When might it be ethically incumbent on a lawyer to give advice on the tax consequences of a structure recommended for asset protection purposes? When might the tax adviser’s ‘law-heavy’ advice venture into unqualified legal practice? 

Dr. Mathew Leighton-Daly, a lawyer and consultant specialising in corporate and taxation law, joined David Turner on Hearsay The Legal Podcast to examine the fine line between asset protection and tax planning, the complexities of Australia’s General Anti-Avoidance Rules (GAAR), as set out in Part IVA of the Income Tax Assessment Act 1936 (Cth), and the interdisciplinary approach needed to advise clients on asset protection.

Check out CPD episode 137: Getting Down to Brass Tax: Understanding Asset Protection vs. Tax Avoidance on Hearsay the Legal Podcast now. 

Defining Asset Protection and Tax Strategies

Asset Protection

Asset protection involves strategies to minimise risks from creditors, litigation, and unforeseen liabilities. While its scope is broad—encompassing insurance, trusts, and corporate structuring—legal measures remain at its core. For example, structuring a business through a trust with a corporate trustee not only facilitates tax efficiency but also provides a layer of protection against unsecured creditors.

Tax Evasion, Avoidance, and Minimisation

The Hearsay episode highlights the key distinctions in these terms:

  1. Tax evasion constitutes illegal acts to reduce tax obligations, such as underreporting income, and is subject to severe penalties under Australian law. An example of tax evasion would be a taxpayer who operates a cash business and deliberately omits income from tax filing. Obtaining property or financial benefits through deception is a crime, under section 134 of the Commonwealth Criminal Code.
  1. Tax avoidance includes schemes that are not illegal and designed to gain tax benefits counter to legislative intent. Such schemes are targeted by GAAR. A recognised avoidance tactic under GAAR would be when a taxpayer borrows funds for both a family home and a business property but then allocates deductible interest payments exclusively to the business loan.
  1. Tax minimisation involves lawful strategies to reduce tax liabilities, such as utilising deductions or restructuring operations. Many businesses incorporate trusts for this purpose, allowing income distributions to beneficiaries in lower tax brackets to reduce overall tax burdens.

The CPD episode underscores how these distinctions, while theoretically clear, become challenging in practice, particularly under the scrutiny of GAAR provisions.

GAAR and the Dominant Purpose Test

Part IVA of the Income Tax Assessment Act 1936 (Cth) introduces Australia’s General Anti-Avoidance Rules (GAAR), aimed at schemes where the dominant purpose is to exploit tax loopholes and obtain tax benefits. These provisions demand that lawyers carefully balance client objectives without inadvertently triggering anti-avoidance rules. With the GAAR, the ATO is able to cancel such benefits, even if the arrangement is not inherently illegal. 

The application of the GAAR hinges on the dominant purpose test, an objective evaluation of a scheme’s intent. In determining whether a scheme’s dominant purpose is to obtain a tax benefit, an assessment of factors including the form and substance of transactions, timing, and financial outcomes is required. The focus on objectivity also means that the taxpayer’s motivations or subjective intentions are not directly relevant when determining purpose. 

The test requires examining each step of a transaction rather than solely its overarching commerciality. This is foregrounded in Hart, where it was held that the presence of one factor may be enough to constitute a dominant purpose. Additionally, the Newton’s case highlighted how the test distinguishes between lawful tax minimisation and avoidance by focusing on whether the scheme aligns with ordinary commercial or family dealings. 

The test should not be seen as a simple ‘but for’ exercise. As established in Minerva and Mylan, the Commissioner must establish:

  1. The existence of a tax benefit compared to a reasonable alternate scenario.
  2. That obtaining the tax benefit was the dominant purpose of the scheme.

This approach ensures that tax benefits resulting from legitimate commercial arrangements are not automatically invalidated, provided they can withstand scrutiny under the alternate postulate and dominant purpose tests. In other words, the presence of a tax benefit alone does not suffice; the purpose of obtaining that benefit must dominate other motivations. This nuanced analysis underscores the tentative balance between ensuring GAAR compliance whilst achieving legitimate financial objectives.

Practical takeaways

In the episode, Mathew imparts some wisdom on how to best address the complexities of asset protection and tax planning:

1. Interdisciplinary Collaboration

  • Assemble expert teams early in the process, integrating legal, tax, and financial perspectives to ensure comprehensive advice.
  • For instance, lawyers should prepare asset protection advice on the basis that it does not consider tax liabilities, then collaborate with tax advisors to evaluate likely outcomes and append preliminary calculations where necessary.

2. Objective Compliance with GAAR

  • Practitioners must focus on the eight factors outlined in GAAR, such as the form and substance of transactions and the timing of execution, to ensure compliance.
  • Avoid schemes lacking commercial justification as they may be deemed artificial and trigger anti-avoidance provisions.
  • Ensure each step in a transaction aligns with legitimate commercial or family dealings to minimise the risk of scrutiny under the dominant purpose test.

3. Lawful Tax Minimisation Strategies

  • Explore lawful strategies such as using companies or trust structures to reduce tax liabilities.
  • For example, a sole trader paying high marginal tax rates might benefit from incorporating their business to reduce their taxable income. Similarly, a trust with a corporate trustee can allow income distribution to beneficiaries at lower marginal tax rates.

4. Ethical and Professional Accountability

  • Lawyers must address tax implications in asset protection advice to avoid potential negligence claims. Disclaimers alone may not fully shield against liability, especially if incidental advice touches on tax considerations.
  • Legal practitioners should prepare draft advice and involve tax specialists to validate or refine the approach, ensuring no critical aspect is overlooked.

If you enjoyed reading this blog post, you’ll like CPD episode 137: Getting Down to Brass Tax: Understanding Asset Protection vs. Tax Avoidance featuring Dr. Mathew Leighton-Daly.

Pafburn: A Landmark Case in Proportionate Liability

Principal at Redenbach Legal and a seasoned construction law expert, Keith Redenbach joins David Turner on Hearsay the Legal Podcast to delve into the landmark ruling of Pafburn. The case of The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301, or Pafburn, marks a significant shift in the legal landscape concerning proportionate liability in NSW construction cases, fundamentally altering over two decades of legal practice. 

Background 

The central issue in Pafburn was whether a builder being sued for negligence could rely on the proportionate liability provisions under the Civil Liability Act 2002 (NSW) to limit their liability, given the statutory duty of care imposed by the Design and Building Practitioners Act 2020 (NSW).

The New South Wales Court of Appeal held that the statutory duty of care under section 37 of the Design and Building Practitioners Act was non-delegable. This means that the builder could not apportion its liability to other concurrent wrongdoers, such as subcontractors or consultants, despite their involvement in the project. The court’s decision effectively rendered the proportionate liability provisions inapplicable in this context, holding Pafburn Pty Ltd fully accountable for the entire loss.

The Court of Appeal’s decision is due to be heard in the High Court. If upheld, it will solidify a new legal terrain in the world of building and construction.  In light of this ruling, staying informed and seeking expert legal advice is essential in safeguarding against unforeseen liabilities and ensuring successful and safe project outcomes.

Check out Keith’s episode: Brick by Brick: Unpacking Pafburn and its Effect on Proportionate Liability in NSW on Hearsay the Legal Podcast now. 

How Pafburn impacts:

Proportionate Liability

Proportionate liability was introduced in New South Wales and other Australian states to address the issues arising from joint and several liability. Under the traditional joint and several liability framework, any one of the multiple wrongdoers could be held liable for the full amount of the damage, regardless of their individual share of fault. This often led to situations where solvent parties bore the entire financial burden if other parties were insolvent.

The Civil Liability Act 2002 (NSW) aimed to mitigate this by allowing defendants to limit their liability to their proportionate share of responsibility. However, the emphasis on the non-delegable nature of the statutory duty of care in the Pafburn decision has effectively limited the applicability of proportionate liability defenses in cases involving the Design and Building Practitioners Act. This shift places a significant burden on builders and developers, who may now find themselves unable to distribute liability among other contributing parties.

Insurance Coverage Policies

The insurance section may also be affected by the Pafburn decision, as insurers may need to reassess their coverage policies in light of the increased liability exposure for builders and developers. The shift from proportionate to full liability could lead to higher insurance premiums and stricter underwriting processes, impacting the overall cost of construction projects.

Comparative Cases and Legislation

Pafburn aligns with a series of judicial decisions and legislative changes following catastrophic events, such as the Grenfell Tower fire in the UK and the La Crosse and Opal Tower incidents in Australia. These events have led to increased scrutiny of construction practices and a legislative push for enhanced accountability and consumer protection.

In the Brookfield case, the High Court ruled that a builder had no duty in tort to exercise reasonable care in certain circumstances, highlighting the complexities of liability in construction law. The Pafburn decision, however, underscores a movement towards holding parties fully accountable for their statutory duties, irrespective of contractual provisions.

For clients seeking legal services in the construction industry, the Pafburn decision underscores the importance of comprehensive risk management strategies. Builders, developers, and other stakeholders must be vigilant in ensuring compliance with statutory duties and maintaining robust quality control measures throughout the construction process.

Legal practitioners should advise clients on the potential risks associated with non-delegable duties and explore alternative dispute resolution mechanisms to mitigate liability exposure. Additionally, reviewing contractual agreements and ensuring clear delineation of responsibilities among parties can help manage the impact of similar legal challenges.

If you enjoyed reading this, you’ll like CPD episode 123 of Hearsay the Legal Podcast featuring Principle of Redenbach Legal with Keith Redenbach, where the effects of Pafburn on proportionate liability are explored in further detail. 

Building Modern Law Firms: Lessons from Leadership

At the 2018 annual Bar Association Conference, the then-Chief Justice of the New South Wales Supreme Court, Tom Bathurst characterised the existing court system as “an antiquity, ever-evolving but not really radically different from its existence in the 19th century.” Riddled with “old school inefficiencies,” traditional law firms draw similar observations as they remain stagnant against the changing market dynamics. The need to redress the structural inertia within these firms has never been greater as clients find themselves in a buyer’s market and the trend of the “democratisation and commoditisation” of legal services proliferates.

Against this backdrop, the rise of NewLaw firms offers a glimpse into the future of legal practice.

Founder and director of NewLawfirm Law Squared Demetrio Zema joined David Turner on Hearsay the Legal Podcast to discuss the evolution of legal services, how modern law firms can adapt to 21st-century demands with innovative practices and the broader implications for lawyers and clients alike.

Check out CPD episode 65: The Future of the Profession: Building Law Firms for the 21st Century on Hearsay the Legal Podcast now.

Law as a service

NewLaw firms like Law Squared operate on a “law as a service” model. This means that clients are offered fixed-fee and subscription-based pricing as opposed to the traditional time-based billing. “Clients deserve to know what their exposure is going to be,” Demetrio states. This approach not only improves client satisfaction but also shifts the perception of lawyers from being mere service providers to strategic partners.

Ensuring cost transparency and shifting the focus from hours worked to the solutions delivered allows more holistic engagement with the client and lays the groundwork for authentic and long-lasting relationships. Law Squared’s approach to client relationships also departs from traditional norms. Instead of relying on individual partners to maintain client ties, the firm adopts a team-based strategy, ensuring that knowledge and relationships are shared across the organisation. This reduces the risk of losing clients when key personnel leave and ensures the firm’s ability to deliver services at a consistent level.

The death of billable hours

One of the most controversial elements of NewLaw is the rejection of billable hours. The conventional law firm model has long relied on billable hours, which often leads to inefficiencies and lawyer burnout. As Demetrio explained, “time-based billing model rewards inefficiencies” as performance and profitability are often tied to billable hours. This breeds incentives for inefficiency, whereby lawyers are rewarded for the time spent rather than the outcomes achieved which results in disenfranchised clients as they face additional unnecessary charges.

Moreover, 60% of lawyers leave private practice within the first ten years, highlighting the need for a more sustainable approach to legal practice to remedy concerns of wellbeing and burnout. Law Squared addresses this issue through the elimination of time-based performance metrics. By encouraging lawyers to focus on delivering value rather than meeting arbitrary billing targets, overall job satisfaction and retention rates are enhanced.

Breaking down hierarchical partner structures

The partnership model, with its Renaissance roots, is a staple of traditional law firms. Yet its  hierarchical “up-or-out” system results in a penchant to reward competition over collaboration as individual partner performance and revenue generation are prioritised. This stifles teamwork and creates fissures in team dynamics as partners are often rewarded for their own financial contributions rather than the collective success of the firm. Associates are also pressured to either ascend to partnership or leave the firm, creating a high-stakes environment that contributes to burnout and attrition.

In contrast, modern firms like Law Squared challenge the traditional partnership model by operating as incorporated legal practices with a flat, business-oriented structure. This approach eliminates partner-led silos and enables dynamic, flexible leadership structures that align more effectively with modern business practices. The focus on team-based budgeting and on firm-wide clients rather than individual ownership also nurtures a healthy culture of shared responsibility. The result is not only better outcomes for clients but also a more sustainable and rewarding environment for lawyers.

Technology as a Catalyst for Change

Technology serves as a cornerstone of Law Squared’s success. Whether it be with specialised legal tech solutions such as document automation and workflow management tools or general-purpose software like Microsoft 365, technology has revolutionised the delivery of legal services. In the CPD episode, Demetrio underscores the value of accessible, everyday tools, stating; “there are great legal technology tools, but there are non-legal tech tools that exist in a very cost-effective framework.”

The COVID-19 pandemic further accelerated this transformation, exposing the limitations of traditional law firms while highlighting the resilience of modern practices like Law Squared. With its pre-existing reliance on cloud-based tools and flexible work arrangements, the firm thrived in a fully digital environment where many others struggled to adapt. Remote work and virtual meetings are now integral to modern legal practice, offering flexibility for both clients and lawyers.

Beyond technology, Law Squared integrates project management methodologies inspired by industries like software engineering, demonstrating the potential for cross-industry learning. These innovations not only streamline operations but also focus on enhancing service delivery, enabling efficient matter management, transparent communication, and a more agile response to client needs. This adaptability has made remote work and virtual meetings an integral part of modern legal practice, providing flexibility for both clients and lawyers alike.

Lessons for Aspiring NewLaw Practitioners

For those considering a leap into NewLaw—whether by starting their own practice or joining an existing one—Demetrio offers this advice:

  1. Develop skills to break down legal work into manageable stages, similar to Agile or KanBan frameworks. Map out project timelines, set clear deliverables, and communicate expectations to clients at every stage. Consider using project management tools like Jira or Trello to track progress efficiently.
  2. Start with accessible tools like Microsoft 365. Avoid overinvesting in specialised tools before ensuring they align with your practice’s needs. Use document automation platforms to eliminate repetitive tasks and explore CRMs for managing client relationships effectively.
  3. Transition from billable hours to fixed or value-based pricing. Break complex matters into stages with granular fixed fees to provide transparency. Regularly update clients on costs and progress to build trust.
  4. Create a work environment that values collaboration over competition. Encourage team-based goals, provide opportunities for professional growth, and promote work-life balance with flexible schedules and remote work options.
  5. If founding a firm, consider an incorporated legal practice model for its flexibility and scalability. This structure supports team-wide accountability and removes partner-driven silos, ensuring better alignment with modern legal service delivery.

By embracing these strategies, aspiring NewLaw practitioners can build thriving firms that meet the evolving needs of both clients and lawyers.

Wrapping Up

The legal profession stands at a crossroads, as traditional models increasingly clash with evolving client expectations and market realities. While Demetrio acknowledges that conventional structures like partnerships and billable hours will continue to have a place, the success of NewLaw firms demonstrates a growing appetite for alternatives among both clients and lawyers.

As former Chief Justice Tom Bathurst’s remarks and the Macquarie Pulse Check reveal, the profession is being reshaped by demands for efficiency, transparency, and innovation. Firms like Law Squared exemplify how adopting NewLaw principles—innovative pricing models, modern technology, and supportive workplace cultures—can redefine the practice of law. By embracing change, prioritising collaboration, and fostering innovation, firms can meet the demands of the 21st century while redefining what it means to practise law.

For law firms seeking to adapt, the message is clear: embrace transformation or risk obsolescence. The future belongs to those willing to innovate.

If you enjoyed reading this blog post, you’ll like CPD episode 65: The Future of the Profession: Building Law Firms for the 21st Century featuring Law Squared‘s Demetrio Zema.

Combating Modern Slavery: Compliance Obligations and Beyond

Australia’s Modern Slavery Legislation

The Modern Slavery Act 2018 (Cth), which took effect on the 1st of January 2019 in Australia, introduced mandatory reporting requirements for larger companies to address modern slavery risks in their operations and supply chains. With references to the Australian Criminal Code and international conventions like the UN and ILO conventions, the legislation aims to promote supply chain transparency and due diligence to mitigate modern slavery risks. Entities with an annual consolidated revenue of at least $100 million AUD must report on the risks of modern slavery and the steps taken to mitigate them. This reporting process also require entities to submit a Modern Slavery Statement within six months after the end of their financial year for publication on an online register, addressing seven mandatory reporting criteria. While there is no template for the contents of the statement, organisations have the flexibility to include information demonstrating their risk management and procurement processes. The Act does not cover practices that only meet the threshold of being unlawful or harmful without elements of slavery, like substandard working conditions or wage underpayment. However, entities may choose to include disclosure regarding their compliance with labour and immigration laws when they report on their mitigation of modern slavery risks.

The Act was part of a broader effort by the Australian government to combat modern slavery and increase corporate transparency and accountability. A 2023 statutory review of the Act proposed significant amendments, including lowering the revenue threshold to $50 million AUD, introducing due diligence obligations, and imposing civil penalties for non-compliance. The review also suggested establishing a Commonwealth Anti-Slavery Commissioner.

Harmonising with its Commonwealth counterpart, the Modern Slavery Act 2018 (NSW) focuses on government bodies, local councils, and state-owned corporations in New South Wales. It imposes obligations to prevent modern slavery in public procurement processes and established the New South Wales Anti-Slavery Commissioner role to advocate against modern slavery in NSW. The Act aims to ensure businesses continuously review and improve their practices to mitigate modern slavery risks.

The Anti-Slavery Commissioner

The Commonwealth Anti-Slavery Commissioner, expected to be established, will raise awareness, engage with federal agencies, and guide future reforms to combat modern slavery. Businesses supplying to the Commonwealth Government should prepare for increased scrutiny regarding their modern slavery risk management practices. The responsibilities include assisting businesses in identifying and addressing modern slavery risks, promoting engagement with victims, and leading education and awareness campaigns. While the Commissioner will not have investigative or enforcement powers, future amendments may enhance their mandate. The new Commissioner is set to work closely with the New South Wales Anti-Slavery Commissioner.

Practical takeaways

Businesses are encouraged to pursue their passion for combating modern slavery, aligning their interests with their purpose. Pro bono work, along with private practice, can provide valuable experience and visibility, contributing to building capacity and expertise in addressing modern slavery issues within operations and supply chains.

If you enjoyed reading this blogpost, the topic of modern slavery legislation and its implications for businesses is explored further in the legal CPD Episode 131 featuring Eric Boone, Partner and Head of the ESG/Sustainability Division at Madison Marcus.

Musk v Altman: Contracts, Estoppel and (Maybe) the Future of Humankind

It’s not often you can say that the fate of humanity hangs on the outcome of a legal proceeding. It might sound absurd, but if you believe Elon Musk, the plaintiff in the latest lawsuit against OpenAI, then the outcome of his case might be just that important.

On 29 February this year, Elon Musk filed a complaint in the Superior Court of California against OpenAI founders Sam Altman and Greg Brockman, along with a list of OpenAI corporate entities, claiming that the defendants had breached a contract between the three men which required them to ‘develop [Artificial General Intelligence] for the benefit of humanity’ and make its research and technology open-source – freely available to the public.  

If you haven’t come across the term before, Artificial General Intelligence is a term without a precise definition – one of the challenges that will face any judge trying to decide this case – but is commonly used to refer to an AI model with human-like (or superhuman) intelligence across a broad range of skills, effectively making it a general-purpose AI system – or an effective replacement for human intellectual labour.

In the alternative, Musk pleads “promissory estoppel” – that even if there is no contract between Musk, Altman and Brockman, then the defendants induced him to make ‘millions of dollars in contributions to OpenAI’, to his detriment, in reliance on the promise that OpenAI would be a non-profit developing open-source technology for the good of humanity.

Musk’s third claim is actually a really unique one that should be getting a lot more attention in the reporting on this story – it’s probably a world-first, in fact.  Musk claims that the defendants breached the fiduciary duty they owe to humanity at large, under the charter for OpenAI, Inc. (the not-for-profit OpenAI entity) – including Musk himself.  Fiduciary duties are usually confined to well-defined relationships of trust and responsibility – directors to companies, trustees to beneficiaries, lawyers to clients – but a fiduciary duty owed to more than 7 billion people collectively is probably something that has never before been the subject of litigation.

Musk also claims unfair competition (a cause of action under California statute), and an account of profits.  He seeks orders for specific performance and injunctive relief, compelling OpenAI to make its AI research and technology – and based on the contents of the complaint, presumably the architecture of the market-leading GPT-4 model – publicly available, and preventing the defendants from using OpenAI or its assets or research for the financial benefit of any person.  Musk also seeks a declaration that GPT-4, and another rumoured new model yet to be publicly announced or confirmed, “Q*” (pronounced, Q-Star), constitute AGI.

The 46-page complaint is a fascinating read, whatever you think of the claim itself.  There are startling – maybe disquieting – passages about the existential threat of AI to humanity: from Bill Joy’s warning that if AGI is discovered, then “the future doesn’t need us”, to an incredible anecdote about an investor who met with Demis Hassabis, the founder of DeepMind (an AI startup acquired by Google in 2014)  and remarked that “the best thing [the investor] could have done for the human race was shoot Mr Hassabis then and there”. It also contains some entertaining turns of phrase that are regrettably rare in Australian legal filings, from describing OpenAI as “Microsoft’s ostensibly not-for-profit golden goose”, to claiming that since OpenAI is motivated to deny it has achieved AGI (which, when achieved, would not be not included in the licence of OpenAI’s technology to Microsoft) to keep Microsoft happy, “AGI, like “Tomorrow” in Annie, will always be a day away.” 

OpenAI, of course, denies all these claims, insists that it has always been faithful to its mission of developing AGI for the good of humanity, and has publicly stated it will seek to have them all dismissed.  Less than a week after the filing, on 5 March, OpenAI published a blog post detailing the founders’ conversations with Elon Musk, claiming that Musk always knew that to raise enough money to compete with the likes of Google, it would have to attract investors with for-profit operations.  Open AI also says that Musk was told that it would be irresponsible and dangerous to make all OpenAI’s advances open-source and freely available to the public.  

As anyone who has done discovery for litigation knows, there’s an oddly voyeuristic delight to reading someone else’s emails, and the correspondence between Musk, Altman and Brockman attached to the OpenAI blog post are no exception; it’s a rare chance to read these giants of tech talk strategy to one another in words never intended for public consumption.

To top it all off, Musk is seeking a jury trial.  The big questions Musk’s claim poses, from existential threats to OpenAI’s duty to humanity, will be decided by 12 ordinary jurors – if it makes it all the way to trial, that is.

Is GPT-4 an Artificial General Intelligence?  Is AGI a threat to humanity?  Would OpenAI publicly releasing the details of their research help prevent, or accelerate, that threat?  These questions, some of the greatest of our time, may well be decided in the unlikeliest of places – The Superior Court of California.

Decisions Demystified: The Art and Science of Making a Good Strategic Decision

In this episode WA local, leadership consultant and Legal Counsel Bernard Hill joins the podcast to share his insight into the minds of strategic decision makers. Reflecting on what constitutes a good decision, how to get there, and what to do when you arrive.

00:00:13David Turner:Hello and welcome to Hearsay the Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host David Turner. Hearsay the Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services and Hearsay the Legal Podcast is how we’re improving the experience of CPD. I think it would be an understatement to say that people can be unreliable decision makers. We’re sometimes impacted by biases, we prioritise the wrong information when we make decisions, and we reject information that might actually assist us in making a good one. But as lawyers our ability to make sound judgments is critical to our success in our profession, even more so for those in leadership roles in the profession. Now a decision-making model is a defined method that an individual or team can use to make decisions. Now this might sound sort of pedantic but a key part of good strategic decision-making is first determining what a good decision is. This can involve reviewing alignment with organisational goals and strategy, potential risks and possible benefits, ethical considerations and foreseeable and unforeseeable long-term impacts. Our guest today, Bernard Hill, brings a wealth of experience in both legal and leadership roles. He’s currently serving as legal counsel at the Catholic Education Office of Western Australia and he’s had over 36 years of service in the RAAF and worked as the town manager at New Norcia, the only monastic town in Australia – I’m interested to hear about that one – Bernard also consults on leadership and decision-making models. Bernard, thanks so much for joining me today on Hearsay!
00:01:53Bernard Hill:Thanks David, it’s wonderful to be here. I’ve listened to your podcast and I’m barely accepting that I’m sitting in a seat where so many other much more learned people than me have sat talking to you, so thank you.
00:02:04DT:It’s our pleasure. Now you’ve had a really interesting and varied career and I think there’s one role in particular I do want to hear more about. Tell us a bit about how you got started in the law and your journey to where you are today.
00:02:15BH:Yeah, I grew up – probably from aged eight or nine – determined I wanted to be a fighter pilot in the Air Force, which is probably not unusual for many boys. I’m not sure quite where that came from. So I think having that very clear sense of where I wanted to be – as hopefully we’ll talk about today – was instrumental and where I am now in terms of my understanding of decision-making. Because I was utterly determined. That’s what I wanted to be and clearly I didn’t end up with that outcome; so that could be seen as a failure or a bad decision. That was my determination and everything I did from a nine, ten year old was done with the deliberate intent of that decision or that action as much as you can at that young age, leading me towards that outcome. Subjects I chose at school, what I did at university, my activities that I did. Not in quite an obsessive way – although some people did say that I would be a poster boy for Air Force recruiting with all my posters on my wall and so on. So if you asked anyone who knew me at the time, they would say, “yep”; they pretty much knew what I wanted to be. And as I went through, I pretty much accepted that was what was going to happen until I had been accepted for training, wasn’t due to leave until late in my first year of university. So I thought; “oh well, I’ll go and do a year of arts” and with, at the time, the option, should I choose to do so – which I wasn’t going to – of getting into law later. And like most young people who can write a sentence, my teachers and parents always said; “oh, you make a good lawyer”. I had zero interest in being a lawyer. And I then went for my final eyesight test and was found to be deficient in my eyesight. So suddenly everything that I aimed for had come crashing down.
00:03:59DT:God, how crushing.
00:04:01BH:It was. My identity, everything, because everyone knew what I wanted to do. And so at the tender age of 18, my life was over. And so I found myself; first year arts degree that I hadn’t really put much effort into, for understandable reasons, suddenly needing to do something and needing to get the marks in those days to get into law. And so I put my head down for the final sort of three months, made it into law. And that was in my next handhold, I suppose. But I just didn’t want to be a lawyer. Here I was doing a law degree and one that was quite in demand at the time in Western Australia, there was only one law school. And so I had this mixed sense of well feeling fortunate and privileged that I got into law. And it was a profession that I obviously admired, but did not want to be a lawyer, did not want to be at university. Then I discovered the Defence Force had what’s called – I think it still has – an undergraduate scheme whereby at the time, if you’re a doctor or a dentist or an engineer, you could join the Defence Force and they would then pay for you to go through university. And then you do your officer training and you would then have what’s called a return of service. So you’d studied for three years, you did three years plus one. Very clever way of the military getting trained professionals through civilian universities. So I went and looked at that, but there was no legal officer undergraduate scheme. And I asked recruiting, “well, why not?”. They didn’t really know. And long story short, 18 months later, they said; “well, we’ve now got an undergraduate scheme for lawyers”. And so I applied for that and I got accepted. So suddenly I was now back on path somewhat, not going to be a fighter pilot, but being in the Air Force. I graduated from law school, did a year of articles that affirmed that I didn’t want to be a lawyer. And although I had a wonderful principal who taught me a lot of skills I still use to this day. And I think that was also very formative in me, in the sense of the law as a noble vocation. Finished my articles; got admitted. I went off to officer training school. And that was wonderful 17, 18 weeks of just starting from scratch and learning, if you like, the profession of arms. And so not a lawyer doing all the officer out in the bush type things with a bunch of really good people. And so that just reinforced that, yes, I’d chosen the career as an Air Force officer, that actually I think what I was really after as I’ve gained to understand over the years. And through my Air Force career, had various postings around the place, was fortunate – and I say that very sincerely – not to go to war. I claimed that when I got out of the Air Force, everything went to hell in a handbasket because I got out just as Timor broke out and then Iraq, Afghanistan. But have remained a reservist. And so that’s why I have that extended period. So I’m still a reserve legal officer. And my final posting in defence was the director of legal training. And that capped off what I really enjoy, which is delivering training, because I firmly believe in that saying; “you teach best what you most need to learn”. And often having to teach something means that you have to know it better yourself. And I think that also feeds into good decision making. And so what do you do after you’ve finished in the Air Force? Well, a mate of mine was setting up an IT startup company. And I jumped into that. So I went from the relative security of the public service, the military, into not knowing whether I was going to have a job in the next two weeks. And that was a real culture shock. But I was still relatively young, single. So I did that for three years in the IT industry and the startup industry. That company was quite successful and got bought out. I left and then returned to Perth where I was born and spent a year kind of consulting. And in that year, my now wife and I went to the monastery town of New Norcia, which is about 130 kilometres north of Perth. And it was established by Benedictine monks from Spain in the 1840s in Western Australia, who came out as missionaries to the Aboriginal people of the area. And in the years since it’s been through various phases, one of those was schools. So there were boarding schools for boys and girls. And then those closed down in the early 90s. And it was still a monastic town. So there was a monastery there. But the monastery, other than its farm, didn’t really have any sense of outlet for its mission, which again, is another dichotomy. And I love dichotomies. I love contradictions and the tensions because the word monk comes from the Latin “alone”. So the idea of a monk is to be alone in your cell, as they call their room, and to be alone with your thoughts and to listen to God and to pray and also to work. But the monks also recognised that if they’re seeking God – which is what they’re supposed to be doing in their prayer and their thinking and their listening – that God is in other people. And so historically, and I’m talking 1500 years, when the traveler comes by your monastery, the Rule of Benedict, the rule by which the monks live by, says you must hasten to greet them and bring them in and you wash their feet and you give them a bed. So this monastic tradition of hospitality. The trouble with New Norcia was that by the time I got there, there was about 18 monks by the time I visited. And there were 80,000 visitors a year coming to New Norcia. And so they were trying to balance their need for quiet solitude with running very busy, if you like, businesses; a hotel, museum, art gallery, education centre, but still attend to their prayers. And they weren’t doing it very well. So this became apparent to me and Belinda when we visited for the Easter weekend, as lovely as New Norcia is that the monks weren’t coping. We got talking to one of the monks. When we left, I said to Belinda, because I was consulting; “well, I might give up a day a week to come up and help them out”; because they needed just things like policies written and some structure. So I emailed and asked if I could do that. And they counter offered and said; “come and run the town”. Yes, which I said no to for various reasons. And my now wife wasn’t yet staying in Perth. She was going back to England to London where she was studying. Anyway, they said to her; “come and run our education centre” because Belinda had an education background, a master’s in education. So after initially saying no, again, like one of these things, we pondered it and thought; “what a wonderful opportunity”. And so I started as the town manager of New Norcia from 2004. And that basically involved running the business side of the town. The 70 staff, the 80,000 visitors, the usual activities that go into running a business, albeit this one was a town. And so human resources, policy writing, all those sorts of things, but with a monastic bend. So that experience was obviously formative because I was trying to balance those functional end result things with still being consistent with the monastic values, which for New Norcia was a European indigenous monastic values that they were seeking to apply. So I did that for four years, and that was pretty much 24/7. So that’s 12 years in any other job. And Belinda and I left and came back to Perth. And I then found a role as the director of professional standards for the Anglican Church. What do you do after you work for monks? Well, you go and work for the Anglicans. And that role pre-Royal Commission into institutional responses to child sexual abuse was looking at the historic allegations of child sexual abuse in the church in Western Australia – in the Anglican Church; the diocese of Perth, Bunbury and Northwest. And so suddenly I was plunged into this role where I was almost struck dumb. So after a career of pretty much structure, discipline, working to guidelines and a system, I found myself sitting on the end of the phone or in a room or in a coffee shop, listening to older people talk about horrible things that had happened to them in their childhood. And there’s not a lot you can say. So you have to just listen and you can’t give legal answers. You can’t give even pastoral answers. You just have to listen. And that was challenging for my brain – feeling helpless, feeling wordless. And for lawyers, our words are often our tool and the way we think. And I couldn’t do that. That was a discipline. And from there, I went to Curtin University as a director of professional standards. And that was a role that was set up post some issues that Curtin had that were looking at the behaviour of staff towards students. A lot of students at university are vulnerable in terms of – there’s a power imbalance. And so Curtin was eager to address that and to have a mechanism by which students and staff could seek redress if they felt that they had been bullied or harassed or in some way taken advantage of. And I stepped into that role and that role; I had staff, and I had… I think when I started, there was about 268 open complaints that we had to address. I did that for a couple of years and then wanted a change. And a position at Catholic Education Western Australia came up. The incumbent was taking leave for a year. And they said, come in and just do it for a year. And three days a week, as it was. And 11 years later, I’m still there. And fortunately, and very rare for in-house counsel – don’t tell anyone – I’m there for three days a week. And so I can do other things, as you mentioned earlier, do consulting, leadership, Air Force work. And actually, I think that’s also the secret that I’ve learned is that having that mixture of sort of a portfolio career of having, if you like, a job, what I call my real job, the Legal Counsel for Catholic Education Western Australia, which has 163 schools throughout Western Australia, 80,000 students. It’s across an area the size of Western Europe, and about 10,000 staff. So that’s a significant role in terms of advising the decision makers in Catholic Education, the Executive Director and our principals. But on the side, so to speak, I do other work. And I’ve said to my boss that my boss gets free professional development from me, because I’m taking what I learn in my other roles, my Air Force role, my consulting roles, and bring that back into my Catholic role, and vice versa. So for example, during the Royal Commission that I mentioned earlier into institutional responses to child sexual abuse, I was obviously heavily involved with that, and learning from that and following that for the bishops and the Catholic Education Western Australia, then the Air Force suddenly found itself involved in a case study. And so they looked around and thought, we couldn’t possibly have anyone that would know about young people and child sexual abuse. And there I was as a reservist. So they called on me. So I was able to use what I’d learnt in my in-house counsel job to support the Air Force in my reserve job.
00:14:57DT:Really is a testament to the value of a portfolio career and to having those, I think sometimes it’s a bit of a glib term, but sometimes we call them slashies.
00:15:05BH:Yeah, side hustles.
00:15:06DT:Side hustles, sometimes I feel like that term glorifies having a second job. But I do really believe in the benefit of having that multidisciplinary approach even within your own career. And what strikes me about your career path is – you say you love contradictions. I can’t think of a greater contradiction in terms of the discipline of the places and the structure and the rigour of places that you’ve worked going from the military and monastic discipline to working in a startup or working as a sole trader with a consulting business, completely different approaches to decision making, which is what we’re talking about today. And I think having that experience in organisations not just of different sizes but of different values, of different histories, of different ages, of different missions gives you, I imagine, a pretty global perspective on what makes a good decision and how you make a good decision in an organisational environment.
00:16:04BH:Well, I like to think so. And the thread that runs through all those is what I like to think about as the common language of the law. And by that I don’t mean statute and ratio decidendi, whatever you might want to say epitomises the law; just the mode of thinking, the disciplined, processed way of thinking. And indeed, we’re fortunate in Australia that as disparate as those roles may be, there’s still a thread running through it. And that is that we live in a society of laws. And so even the monks – 1500 year old organisation that evolved out of, if you like, the ruins of the Roman Empire. The founder, Saint Benedict, realised the need to have a rule. And so the Rule of Benedict, which was written 1500 years ago, is still followed today. The monks in New Norcia, as we speak and as people are listening, are still following the rhythms of the rule. They’re praying seven times a day. The Rule is the source of authority for what they do. And so again, that tension of this authority and yet the freedom of the human mind to wander, but coming back to those rhythms and stability. And we see that in our schools as well in that role, the need for stability for students to learn, the need for structure, predictability. And so I think the law does give you that. And often, and it’s only when you can step out of it, as I have the privilege of doing during my week, you can look back into an organisation or the law and see those benefits. You can see beyond the stereotypes of the law and the structure and the discipline in thinking. And there’s the saying; “discipline is freedom”. And it’s very true that to know the area in which you’re operating in and I often say that to principals; “here is the extent of your authority. Feel free to exercise your discretion within that, because at the end of the day, that’s where you can put your foot down and say to a parent or whoever it may be, no, this is my authority to make this decision”.
00:17:57DT:Absolutely. I completely agree with you in having that perspective on the law improves your performance as a lawyer and improves your performance in other domains. In my experience, I am a lawyer, of course, by training. In our technology startup, I also do software development and engineering. And having that engineering perspective on the law and that legal perspective on engineering, I think, improves both tremendously. They’re both ordered ways of thinking, but there are different traditions and there are different heuristics and frameworks from both. that I think can contribute there. When you’re describing New Norcia, one of my favourite books is The Pillars of the Earth by Ken Follett. It’s about a town called Kingsbridge Priory. It’s a monastic town. I was just imagining Kingsbridge when you’re describing New Norcia, because in the same way in the book, the town, the lay people have a very close relationship with the monks who are theoretically cloistered, but in reality, a very important part of the community.
00:18:49BH:That book is sitting on my bedside table, given to me by one of our former principals. He’s now moved to the Big Smoke in Sydney and he has given me that book to read. So now I definitely have to move that up my pile.
00:19:01DT:Look, it’s intimidating width, but yes, couldn’t recommend it more.
00:19:06BH:Yeah. Well, not having read the book, but that’s why New Norcia again was challenging. Because, for example, every morning the abbot who is in charge of the monastery, he would meet with ostensibly my boss, who was the prior. And the prior is if you like running the monastery, the business side of it, for want of a better term. They’d hate me saying business, but I think for our listeners I’ll say business, just the operations and day to day. They would meet every morning at eight o’clock. And so they would have mass at 7.30 and there are bells chiming. So you can never be late because there’s these bells chiming every 15 minutes. So at eight o’clock, they would meet straight after mass and then at 8.15 on the bell, I would step into the room and meet with them as the town manager. So that would give them 15 minutes to talk about monastery business, which monk was doing what or whatever they needed to do in private. And then I’d come in and we’d discuss any town business for that day. Now I would sit at the head of the table. The abbot would be on one side and Dom Chris, the prior, would be on the other. And I’d listen to them and watch them back and forth. And in the monastic rule, the rule says that the abbot is like Christ in the monastery. Wow, that’s pretty powerful, godlike. And the abbot used to say to me, he could always work out people’s understanding of Christ whenever he said that, what their reaction was, because the people went; “oh, you think you’re pretty good that you’re like God”. Clearly in his mind, didn’t understand the servant leadership of Christ and his ultimate sacrifice. But on the other side of the table was the prior, one of his monks. Now he had a vow of obedience to the abbot. So he had this tension of the abbot being subservient and wanting to serve his monks and the rule saying basically if he failed to do so, he would suffer for all eternity. And on the other side, an obedient monk who had to say; “yes, father abbot”. And I’d watch these two and I’d watch them balance, if you like, the spiritual in the case of the abbot, the mystical with the earthly. Well, as Dom Chris used to regularly say; “monks don’t live on air”. They had to make money. And that was their home. And if I didn’t succeed in ensuring they made their budget and made a profit, in his words, they’d “go down the gurgler”. So I’d watch this tension and became comfortable and saw the way it actually worked out. And so that was the other thing I was able to sit back and observe for four years. And even New Norcia itself is a contradiction in the sense that the original monk, salvado, came out to save the souls of the Aboriginal people. And we’re speaking as we’re recording this, it’s Reconciliation Week. So this is very powerful. He came out with that best intention. That was what he wanted to do. He wanted to save the souls of the Aboriginal people in the ignorant way that Europeans thought that the Aboriginal people were nomadic people wanting to be saved. Well, he and his party ventured out to walk into the bush and of course soon found themselves lost and dying. Well, who saved them? The Aboriginal people. And so they saved the lives of salvado at his party. And that made a huge impression, a huge humbling impression on salvado and why he continued to serve the Aboriginal people until his death. So those contradictions are full and just were all around me at New Norcia. Again, the monks living alone and 80,000 people beating a path to their gates.
00:22:25DT:And it’s such a great, again, a dichotomy between the pragmatic and the values driven, I suppose. And it really leads into the first question I wanted to ask you about strategic decision making, which is what makes a good decision? I think we often talk about decisions that are aligned with strategic goals or aligned with organisational values – but you have to eat. So what in your view makes a good decision?
00:22:51BH:Yes, and I try to avoid the five steps tool, but I’m going to have a five step tool because same as me, when I listen to people talk very abstractly, I think; “yeah, but what do I do?”. And so the first thing I’d come back to is what I spoke to from the outset of my sense as a young person of wanting to be a pilot in the Air Force. And I think it’s what I call having a widget. Now the widget – being from an engineering type, you would understand a term widget. IT people understand the term widget. It just means the thing you’re building or something that’s tangible that you can potentially measure. Now some people object to that term when I do presentations and say; “define your widget”. It’s too heartless and cold, but I’ll come back to that. But having a sense at least of; “why am I doing this work?”. And I talk to people – I start off in my presentations by inviting the group privately, you know, in a couple of minutes to work out or to think about what their personal widget is. What are they doing with their life? What’s their outcome? What is it that drives them? Because what I’ve found is a lot of workplace conflict arises from people not being able to reconcile their personal widget, whether it’s their family or they want to be a poet or a writer with their workplace. And they act out a lot of that tension in the workplace. Well, I invite people to think; “look, why are you here personally? Your whole life is not this workplace or this organization. So think about that first and now have that in your own head and heart. Let’s talk about what is your actual widget in this job? What are you being paid to do? How’s your boss measuring what you’re doing? What’s your boss’s widget? What’s the organization’s widget? Because you’re here to achieve those outcomes”. So when we’re confronted with a decision, we should be asking; “well, is this consistent with my widget?”. And that may come into play in values conflicts. It may come into play in career choices. If my family is my widget, but my promotion means being away from my family, am I achieving that widget? Because eventually that widget is going to come home and grind into you if it’s not meshing with your professional widget. Very few people, I think, and bless those who do, can combine their personal widget with their work widget. But those brave souls who do go and do that, I think have a greater level of satisfaction. So we need to define what our widget is. What am I here to achieve personally? And what does my boss want me to achieve? And often it might take a conversation with your boss and you might find your boss may not actually know. And so having that conversation is helpful. We try to do that in the workshops I run. And so having that sense, and then I talk about the five steps to a good decision, and I suppose I should define now what a good decision is. And this is my definition and I tweaked this over the years and I think it works. And as a lawyer, we know words matter. And so words are important. And so these words hopefully are chosen and have meaning. And that is that a good decision, and notice I don’t say right decision or correct decision. A good decision is one that advances you towards where you want to be, which means you have to know your widget. Because if you don’t know where you want to be, how can you measure the good decision? Now, some people can. They can just throw caution to the wind and that’s fine. But in some ways there will be a widget. And I’ve had some pretty robust discussions with senior leaders over the years where they’ve gone; “well, my widget is this”. And I’ve thought; “hmm”. But then I said to them; “okay, that’s your widget. It’s not for me to tell you it shouldn’t be that widget or it doesn’t fit with the organisation because that is going to be your benchmark of your good decision. If you think that’s what you’re here to achieve”. So a good decision is one that advances you towards where you want to be.
00:26:24DT:So like your North Star or something.
00:26:26BH:Yeah, exactly. Having a reference point. Yep, exactly right. I use that analogy a lot. So what a good decision making, again, important, is a deliberate process of enquiry that advances you towards where you want to be. So that’s important. It’s a conscious, deliberate, intentional, mindful process that you’re following. And I’ll get onto the process that advances you towards where you want to be. A deliberate process of enquiry. So get it out of the gut. And we may talk later about instinct and the role that plays. And make it intentional. And this is what I’m going to do. And then you follow that process. And therefore you’ve left, if you like, breadcrumbs behind. So wherever you end up at the end of that decision, you’re able to then reflect; “gee, I didn’t get where I thought I was going to get. What did I do, quote unquote, wrong?”. Which I would argue you probably didn’t do anything wrong because it has advanced you closer to where you want to be. And, sorry for all the military analogies, but I use the analogy of a submarine that basically beneath the surface navigates by sending out sonar pings. And so it’s constantly sending out a message to the world, hitting an object or not, which bounces back to the submarine and it adjusts its course. And it can navigate – in the case of a nuclear submarine all around the world – without being on the surface by pinging, by interrogating its surroundings as to where it’s at. And that’s essentially what we do each time we make a decision. So digressing slightly, when I started at one of my jobs, I went and spoke to one of the senior people and I said; “look, you’re bringing me in to do this role. What do you think is wrong with this organisation?”. And they very quickly said; “no one here will make a decision”. And I thought, okay. So I followed that up and I said; “why do you think that is?”. And they very quickly said, so they clearly thought about this, “because they’re afraid of the consequences”. So obvious follow up question; “what are the consequences?”. And this person said; “there are none”. So I left that meeting perplexed and thinking; “well, if there are no consequences, why wouldn’t you just be making lots of decisions? And who cares?”. Well, after some reflection, I realised that’s like a submarine that pings and gets no response. It doesn’t know where it is. So it usually just stops or in that analogy, it is reluctant to move forward because it doesn’t know what’s around it. Again, the dichotomy of that is every time the submarine pings, it’s announcing its position to the enemy. So it’s making itself vulnerable. So every time we make a decision, we’re declaring to the world; “this is who I am, this is where I am, this is what I stand for”. So whether that’s speaking up in a meeting or making a career change or giving a legal opinion, you are laying it out there for the world; “this is me”, and you’re immediately making yourself vulnerable. So the problem in that organisation was people didn’t want to make themselves vulnerable. So they basically just did busy work. And so a good decision making is a deliberate process of inquiry. That’s you interrogating the world, making decisions, getting feedback, and then working out where I am now on that map heading towards my widget. Now, there’s a lot of talk around leadership. So the final element to that is, and why I believe good leadership and management is all about good decision making – which nobody teaches or very few people teach it, ironically – is in the process you’re making good decisions. And if in the process, you’ll have this deliberate process of inquiry, and you look around, and there’s at least one person following you, you’re a leader. Because what you’re doing is casting out breadcrumbs, you’re making a path that other people can see you follow. And so the problem with a lot of leadership is it relies upon positional power, people just going; “well, I’m the boss, we’re going in that direction”. And because of that positional power, we all go; “yes, boss”, and we follow. But the problem is that you’re not laying out any path for others to learn from good or bad. 
DT:For yourself to learn from…
BH:Correct. Yes, exactly. So that should be where it begins. It shouldn’t be; “I want to be a leader”. It should be; “I want to do something that I think is valuable”, whether it’s a moral value or an economic value or sporting value. And if you turn around and other people are following you, then you’re a leader. And some people may not ask for that. But if you do seek a leadership role, you need to be showing your working out. And that’s what lawyers are very good at doing. We’re disciplined to showing our reasoning as to why we got to where we are. So that’s why I think discipline is the law. So a good decision is one that advances you towards where you want to be and good decision making is a deliberate process of inquiry that advances you towards where you want to be.
00:31:08DT:Absolutely. Sort of reminds me of the old saying about forecasting. The one thing you know about any forecast is that it will be wrong. And there’s almost a fatalism in that in making decisions in uncertainty and making decisions that are new that you can’t really assess the decision based on its outcome, because there’s no real data to know what the outcome is likely to be before you’ve made it. And so of course, a good decision and good decision making has to be one that’s about the process of getting there and about articulating that process as well, and recording it so that those unknowns become knowns. Now, you talked us through a five step methodology briefly, and appreciating that there’s maybe not as many resources on this topic as there should be. But are there any frameworks or methodologies that you use in your presentations for assessing a decision or making a decision?
00:31:58BH:Yes. I presented to groups of engineers over the years, and usually at this point of the presentation, they’re looking back at me glazed eyes, this is all very namby-pamby you know – show us the equation. So that point where I talk about the five steps, and again, this is just a framework that has worked for me. And I could potentially say each step is the most important one, but so forgive me if I do. So the first is so critical. And if you do nothing else, it’s this and step one is step back. Now, I’ve done a lot of reading over the years, and you don’t often see that you may see it in different ways, because there’s this emphasis on decisiveness. And yet, I’ve seen so many examples of the power of stepping back. And so by stepping back, I mean, I think it’s Viktor Frankl in Man’s Search for Meaning talks about a famous quote he has of; “between stimulus and response, there is a space. In that space lies our choices, in those choices lay our freedom”. So in every situation – and I can give some examples in high tempo critical military situations – there is a space, you may not have command over that space, but you do usually have command over an element of that space between the stimulus and your response. So what I say in practical terms is that in that first moment or days or whatever it might be of having to make a decision, surrender to your emotions. I say to people, get on LinkedIn when your boss is annoying you. Get on seek.com, start looking for another job. Lean back in your chair, stare into space. Google something, ring a mate and have a moan, go home and have a lemonade or six. Just be yourself, be authentic. Surrender to what is traditionally seen as a weakness of my emotions. And because that’s authentic, that’s who you are. At New Norcia, I would be at my desk and I’d get an email and it would be annoying. It would be something that’s happening in one area of the town, something had broken or someone was unhappy. And I’d be tempted just to sit down and pound back, a very logical, very power-based solution to that. I could have done that in 30 seconds, two minutes. What I often did was I got up from my chair – and fortunately, most of the areas of the town required a five minute walk for me to get to my office. It was incredible the number of times that in between getting that email and getting up and walking through the town and walking beneath the trees and seeing a few tourists and having a chat or whatever, and getting to the place where I needed to speak to somebody, my whole outlook had changed. And the solution that I thought was appropriate and probably was at the time was either different or framed differently or received differently. And so I learned that space was very important between my emotional, neural, hormonal responses and my ability to engage with the decision, often through another person. So that stepping back, I think again, is very important. So, for example, in the military, when I was at Defence Academy, there was some sort of scandal had happened and there was this snowball response. And I remember General Peter Leahy, who was retired at the time, former Chief of Army, saying it would have done well for the Defence Academy and the Minister to have followed the infantryman saying of; “contact, wait out”. And I’m not an infantry person, but what that means is when an infantry platoon gets under fire from the enemy, that means contact. And what the patrol leader will say is radio back to the boss saying “contact, wait out – leave me alone, give me time to sort myself out”. And so there is that period of even in that high tempo situation of the decision maker needing to pause and needing to step back a bit and see what’s going on with bullets flying all around. And so the military creates that discipline of doing that. An air traffic controller I knew, who taught air traffic control, used to say he would train the people in the air traffic control saying; “look, there are drills…” – and we may come back to that later about where drills fit in with instinct – “there are drills you follow and then when something happens, when aircraft are entering into the wrong airspace, you know what to do in half a second”. But you might have six seconds in which to make that decision and execute it. So in that five and a while, my drill says to do this, but I’m now going to reflect on what’s going on and basically do something else that will save Qantas 10,000 pounds worth of fuel or whatever it may be. And I think that’s an important discipline in decision making to be able to step back and assess the situation. But more importantly, as I said, to allow yourself to be human before you get into this mode of being boss or being lawyer; to go, “I’m entitled to feel really sucky about this and I’m just going to allow myself to do it”. The reason we don’t see that in – whether it be the President of the United States or the Prime Minister – is that’s a personal moment. They don’t say; “well, after the Cuban Missile Crisis, John Kennedy went off and did what he did or saw one of his mistresses or went for a swim in the White House pool”. We don’t see any of that. But if you do look at the leaders lives, they did have that personal outlet.
00:37:14DT:And taking that personal moment is an opportunity to separate it from the decision as well. Step two?
00:37:22BH:Yes. So step one, step back. Step two, define the issue. So there’s topics and there’s issues. The topic is what’s presenting. I suppose a doctor would say they’re presenting symptoms; “how is this being presented to you by the client?”. Seeing beyond that and going; “what’s the real issue here?”. Now that again might sound self evident. So often I’ve learnt in my own life that instinct sense of I know what the problem is. I know the client’s problem. You actually take the time to, through talking to the client or analysing or thinking, going; “actually, I can see what lies beyond this. This is the issue. And I need to define that. I can’t take for granted that I and the client know that”. And so in complaints management, we talk about saying to the complainant; “what is the outcome you’re hoping for?”. Very important language which complaint managers will know about. Hoping is doubt creation. So it’s not; “well, what are you going to get?”. It’s; “what are you hoping for?”. And I found in my time whenever I pose that to a complainant, quite often they’ll tilt their head to the side and they’ll look up a bit into space and they’ll go; “the outcome I’m hoping for…”. Then suddenly they’ll come back on and go; “why do I want this? To make sure that as a result of what’s happened to me, it won’t happen to anybody else or whatever.” So that process of defining the issue is very important, at least for yourself, but also for the client. It may be different to what you thought it was, but then you can at least you’ve articulated it.
00:38:37DT:Analogously, it’s a little bit like in negotiation theory, the difference between an interest and a position. The position is the topic and the interest is the issue and getting to the root of that. We had Steve Mark, the inaugural legal services commissioner on the show just recently. And he spoke about that from the perspective of negotiation ethics, but also from the perspective of understanding a client’s needs and serving those needs in a negotiation. And the difference between, you know – is the client’s best interests served by doing what they say or by understanding the interest? Even if that’s not overtly necessarily the same as the instruction at first blush.
00:39:15BH:Yes. And many of your listeners would have had the experience that I certainly have of having that define issue step and the client saying to you; “gosh, that was really helpful. Yeah. Well, thank you for that help”. And you actually think…
00:39:26DT:… I actually haven’t done anything yet!
00:39:30BH:You’ve given them that clarity because you have that objectivity if you like. So that’s step one; step back. Step two; define issue. Step three is; assess the information. So actually look at the information in front of you and assess it. Weigh it up. And that’s black and white lawyering really, but in decision-making to look at the information, evidence, whatever you want to call it in front of you and just assess it in a sober fashion. And step four is; give a hearing. And so keen listeners would note a lot of this is this steps I’ve derived from – I’m a bit of an admin lawyer – so from procedural fairness. And I think that procedural fairness is so powerful and I’m often drawn back to that sense of giving a hearing. Now giving a hearing is very technical in law, but more generally it’s just allowing any person that might be affected by the decision to speak and to put their case and for you to listen to what they have to say. And there’s a number of obvious reasons as to why that would be the case, but not least of which tactically, if you’re out there going; “gee, well, how’s this going to get me the upper hand?”. The best case is going to come back against you and you make the decision from a person who has a personal interest in it. So you might go; “well, I think my decision is going to affect these three people this way”. But not hearing from the person; can you really go, “wow, I didn’t think about that. I’m going to have to be prepared for that. It hasn’t changed my position and my decision, but I’m going to have to be prepared for it”? And as some of your guests may have said, there’s many studies have shown that simply by allowing a person to be heard, often if the decision goes against them – I’ve seen figures as high as 84% of people who don’t have the decision go the way – say; “I’m prepared to accept it because I felt listened to and therefore it was fair”. So the hearing element. Now you can frame that however you want the hearing – not necessarily the technical way of the law. So that’s the fourth step. And finally is to check for bias, to examine your own mind; “well, I’ve now looked at this based upon information, based upon interest”. I’ve hopefully purged myself of all my initial rage. Am I looking at this from an objective viewpoint? Now that can be very difficult, but at least bring it to your mind. And when we bring something to mind and we make it conscious, it’s therefore less likely to be influencing us beneath the surface, which I think is important. And then after those five steps, you make the decision and start all over again, because there will be another decision that will flow from that. But at least now a bit like a black box, you’re able to go back and see; “well, here’s my decision making process. I can understand now why the decision didn’t go well, because I may not have done this right”. And that’s what I talk to young leaders about them to avoid the positional power, because not only are your followers unable to then learn from your decision making, but your team is unable to learn because you aren’t able to open up the black box and see now what happened here and how did it happen?
00:42:20DT:And I suppose the other part of that, we’re talking about the post-mortem there, analysing a decision that didn’t go well. When you happen upon the golden path and you’ve found a great approach that you should be able to replicate, well, it’s difficult to capture that lightning in a bottle if you don’t know how you got there. And I suppose once you’ve discovered the process for making the right decision for a particular scenario, this might be a good chance for us to talk a bit about instinct and the role of making quick decisions. You talked about drills there in terms of having almost that muscle memory, I suppose, to make a decision quickly based on a disciplined, considered process. It’s the cop-out answer, isn’t it really? Well, what about instinct? Well, the answer is that you can instinctively make a decision based on a process if you’ve done it ahead of time. Do you want to expand on that a little?
00:43:07BH:Yeah. And again, privileged in the military to see this in action a lot. Now again, fortunately, I never saw it in capital A action, but watched people, very good people doing this. And my first exposure to this was; I was on exercise and we were drilling Australia being attacked from the north. And I was sitting two seats away from the commander who was doing that. And it’s just like the movies, big screen on a wall. We’re all sitting in a darkened room watching the plots on the map. And the commander turned to me, it was early days of lawyers being in this area, which was not exactly greeted with great joy. This is early days, pre-Iraq and Afghanistan. These days, lawyers are side by side with the commanders. I was almost side by side. And the commander turned to me at the end of the day in the bar and said; “oh, sorry, I didn’t engage with you today, but I didn’t have a neuron spare”. He was so busy. So me watching him and watching commanders do their work is inspiring to see the things that they need to juggle. I always wonder how war history is written based upon what I’ve experienced. What I wanted to say to the commander in the bar was; “well, sir, you better learn to have a neuron spare. That’s why I’m here. I’m here to basically almost be a symbol of the law”. And by that, I sort of meant – and I didn’t say this to him because he was quite senior to me – that when I teach the law of armed conflict, which is a law of war, I usually survey the room and usually young recruits at Defence Academy or wherever they may be. And I ask them; “what’s the role of the military? You’ve joined the Defence Force, what’s the role?”. That’s me getting them to define the widget. You’ll get the usual pat recruiting answers, defend Australia and her interests. I’ll go; “no!”. Protect our borders, “no!”. Peacekeeping, whatever they say; “no!”. So I’m pretty blunt. Now, usually be one kid that puts their hand up and says; “to kill the enemy”. And I’ll go, “yep”. Now, this is very unpopular, but I think the taxpayer would like to think that’s the role of the military to have the capacity, dormant as it might be, to kill the enemy. So I say to them; “the role of the military is to apply the maximum amount of force on the enemy permitted by law”. So I say; “that’s me here, I am the law part”. So sitting alongside the commander, who’s got this massive amount of violence at his fingertips – and they talk about officers in the military being managers of violence – because you’ve got very young people that have got violence at their fingertips and they can technically unleash that. The law is a constraint, we wear the hats, that constraint or force multiplier. Anyway, so I had this conversation with him. And even the Geneva Convention talks about – or the additional protocols to the Geneva Convention talks about the military drilling – applying the law of armed conflict. Because as you said earlier, rightly, we need to have the discipline. So fast forward a couple of days, and something happened, I gave him advice, and it gave him a massive operational advantage. And so he could see the law is often a force multiplier, it’s not just a constraint, or if it is a constraint, it actually can be a force multiplier. As we’ve seen in recent times, sometimes our soldiers not following the law can cause a massive effect on our capability more than the enemy ever wielded. So the law is an important element of that. So the commanders were learning to drill, he saw my benefit of unleashing his neuron from me to assist him. The air traffic controller, as I said earlier, is teaching the air traffic controllers to be able to drill at making those decisions at a basic, responsive level, same as a soldier; “contact, wait out”. This is what you do, bang. That frees up the person that bit removed, the patrol commander, to be more creative. And you’re dead right. After a while that builds up a muscle in your brain of making those decisions that then can allow instinct to come into play.
00:47:00DT:Now, this idea of making an ordered systemic decision and making a gut instinctual decision, a number of different authors have talked about this, Danny Kahneman calls it system one and system two thinking. That approach of applying the drill in a scenario of… I suppose it’s a high tempo scenario, but it’s a known scenario, you have the capacity to prepare for it. It’s because there’s that opportunity for process in advance. What about the unknown unknowns, the high tempo decisions that have to be made without prior knowledge?
00:47:42BH:Yeah, and that’s the area in which the military operates. The military starts out from the sense – there’s that great quote, I can’t remember, some dead German strategist said; “no plan survives first contact with the enemy”.
00:47:53DT:Is it Clausewitz?
00:47:54BH:Von Moltke? Could be Clausewitz. And the more contemporary version of that, I think, was Mike Tyson. What is it? “No plan survives the first punch” or something like that.
00:48:04DT:I think it’s like everyone’s confident until they get punched in the face.
00:48:08BH:Yes, yeah, yeah, yeah. So I certainly understand that. And gosh, I so admire those barristers who are standing up there in the courtroom and have their structure and have the law and get thrown that question by the judge. And again, I can only say that there is the discipline, there is the process that you can draw back on in those moments of chaos. And I’ve dealt with special forces soldiers who go; “I love the chaos”, because it’s almost like that’s where their individualism comes into play. And arguably, you mature as a lawyer or as a manager or as a person in those moments where you are off the map. And I was reading recently, I don’t know whether this is apocryphal, but of a senior barrister appearing before the High Court – might have been on one of your podcasts, actually – where he was asked a question by the bench; “do you agree with this proposition?”. And he stood there in silence for 55 seconds and then just said; “yes”. And I don’t know that many of us would tolerate that, but the bench tolerated it because they knew that he was doing his job and that they trusted him and he was reflecting. And this urge for us to have the quick answer, and certainly coming on this podcast and thinking; “gosh, what’s going to happen if I don’t know the answer?”. But as much as you can, and again, I’m talking about split seconds in air traffic control, soldiers coming under contact, you can, if you’re drilling, find in that moment of chaos that calm. And a lot of soldiers will talk about this, that calm. Yes, that’s coming from the drill, but that’s coming from that personal confidence of, I’ve spent years making decisions on a process. I’m in chaos here now, but my instinct is going to take me here. And if I have a widget, at least if it turns out bad, and most of us are not in situations where our lives are at stake, I can, as you say, do that post-mortem. Because I think your point is an excellent one that very often we hear people say; “what went wrong?”. Rarely do we hear; “what went right? Let’s sit down and examine how we achieve this so we can learn from it and continue to apply it”.
00:50:16DT:Absolutely. Just going back to this idea of instinct and the idea of that being the culmination of the drilling and the ability to apply that in that brief moment of calm in the chaos, is that what intuition really is? I mean, I think sometimes we talk about intuition as this kind of innate or almost divine kind of quality; “I just know, and it’s something about me”. But is it really a product of experience, a product of that ordered way of thinking about the scenario or the decision in advance?
00:50:49BH:That’s my view of it. There are people cleverer than me in around brain science and so on who probably explain to that the neural pathways. But I remember being taught very early on by a military person about the difference between unconsciously incompetent. So if you’ve never seen anyone juggle, you’re unconsciously incompetent. You don’t know what you don’t know. The moment you see someone juggle, you’re consciously incompetent. You don’t know how to juggle. You couldn’t juggle. What is this going on? You then take the juggling balls in your hand and you attempt to juggle. You’re consciously competent. You’re having to focus on what it is that you’re doing. The master, I suppose, is unconsciously competent. You can juggle, tell jokes, and perhaps throw a chainsaw in here as well. And so in our processes of thinking over the years, all these decisions I could say from wanting to be a fighter pilot as a nine or 10 year old, I was making decisions that were leading me towards that. So I think what serves the instinct is the widget. So we haven’t talked about ethical decisions. Well, if we have an ethical widget, if we have an ethical framework of our thinking, our instincts are built around that. That sense of the – and there’s a lot of science you probably would have read about really good sports people. They can’t actually fathom how they’re able to react so quickly – tennis players, cricket players – because they’re actually making a decision before the eye can see or whatever it might be and probably bungling that. But this sense of there’s some other element that’s at play in a master of what they’re doing. And I’m sure that’s the culmination of many years of doing something consciously that the instinct is built up. And that’s why the military does what it does. As we speak today, there’s lots of people doing tedious drills so that when that chaos happens, their instinct hopefully built up over those years. Mindful, this other element, that often if the instinct will get them killed because the enemy is prepared for their instinct. So there’s that extra layer. Sometimes the predictable action in really difficult scenarios is the most risky because it’s predictable to the enemy.
00:52:56DT:And I think also, we know this in the legal context, I think we spoke about this with Jennifer McMillan last season of the show, the most professional indemnity complaints or the most professional indemnity claims come from people who have practiced in that area for a long time and have that unconscious competence but have maybe lost the discipline of approaching that task in an ordered way because there is an assumption that; “well, I’m unconsciously competent about this task now. I don’t need the discipline of a process anymore. I’ve internalized this”.
00:53:31BH:Yes. And certainly, I had a pilot friend who once told me he was coming up to some, I think it was a thousand hours or 10,000 hours or something. And he said; “this is this area, this time when most pilot accidents occur”. And so there’s a couple of things out of that. You’re right. So how do we raise our instinct into our consciousness? Well, as a lawyer, having to do CPD every year sometimes makes me realize the things that I may have assumed. And then I do some CPD or listen to this podcast and one of your guests and go; “I didn’t know about that area of the law”. So that’s one thing, complaints management is another. People drawing it to your attention, how you’ve made a decision, an external complainant, I think is such an underrated value to an organization. And us as lawyers, standing hearing someone argue against what you think is a well-made argument or reading a judgment and reading different judges. And that sense of the definition I once heard – which I love – is the definition of wisdom is recognizing a better argument than your own. And so as lawyers, we’re constantly – I think this can lead to a degree of underconfidence – reading these amazing, well-argued points. And the law is regularly changing and evolving. And so one of my influences in the military in this area – a really big influence – was. I early on was prosecuting two F-111 pilots who had flown too fast and too low. And I was prosecuting them for breaching the Defense Force Discipline Act. And when I reached the base where I was doing the prosecution, the commanding officer briefed me and he said; “oh, it just so happened someone was videoing what they did. And so you might want to go to the squadron and look at the video”. I thought; “fantastic, the smoking gun”. Anyway, silly me, I was young and naive. I’d go to the squadron and you can imagine what happens when the prosecuting officer turns up to a flying squadron to prosecute two of their pilots. Everyone was polite, respectful, but clamped down; “oh, no, sir, we deleted that video. We don’t have it anymore. We recorded over it”. And so anyway, off I went, did the prosecution, convicted them both. Fast forward five years later, and I’m in the Directorate of Flying Safety and I’m telling one of my few war stories to them, which is prosecuting these two guys. And the squadron leader there says; “oh, do you want to see the video?”. And I went; “what video?”. And he went; “oh, come here” and puts it on and shows it to me. Now, the difference was I was there to prosecute these two guys in an adversarial criminal process. Whereas the two guys knew that the flying safety process was about keeping them safe. So they were happy to tell the investigators, the flying safety section, well, here’s what we did and here’s what we learnt from it. So the Air Force has what’s called ASORs, A-S-O-R, air safety occurrence reports. And pilots routinely report their mistakes because they know there’s an infinite number of ways in which they can die.
00:56:18DT:Even in civilian aviation, this approach to even the smallest deviation from a pre-flight checklist, for example, is meticulously recorded.
00:56:27BH:Yes. So back to your point about instinct and sort of bringing it to your consciousness about your instinct and make you consciously competent. The chief safety officer will often stand up and lead a brief by saying; “here’s how I screwed up”. And so he or she is giving permission for all the junior pilots to say; “here’s how I screwed up”, because they’re all benefiting from that. And so they’re all bringing to their consciousness, their biases, their instincts that might actually end up killing them.
00:56:50DT:Absolutely. Now, we’ve talked a little bit about post-mortem.
00:56:54BH:Pre-mortem!
00:56:55DT:Well, that is another very valuable tool for decision making. Looking at how this might go wrong or the way it’s commonly framed is; “if this project were to fail, why might it?” Which I think is a really valuable exercise in risk identification. I suppose I’m trying to think of the metaphor for a post-mortem of a good decision.
00:57:17BH:Yeah, the military does what it calls hot wash-ups. So I don’t know whether they still do it, but they all get everyone together. I remember after a particular, I think it was a kangaroo exercise or a pitch black, and the commander gathering us all together. And it’s called hot wash-up because it’s still fresh in our minds; “how did this go? How did it go well? What did we learn from it? How can we build on that?”. So there’s that element, which I think is so powerful. Now, then that’s followed up by more detailed, longer reports. The military is constantly wanting to learn and the army has a thing they call TEWT; tactical exercise without troops. So they’re planning these things around paper exercises, enemy course of action, and so on. And so what you see in the military is this sense of examining everything that you do in an after action report and learning from it. And I think that’s so powerful that many organizations don’t do it because when something goes well, we tend to go, great, move on. And yet I think also that denies the opportunity to, if you like, acknowledge why that went well. Whereas we’re very quick to call people in and do a post-mortem when metaphorically, someone dies. So I just think the reason we struggle to articulate that, that I’ve seen in the military, the tempo of organizations is so fast that we don’t pause to look at why something went well. Or if we do, it’s in a really tokenistic way.
00:58:56DT:Yeah. And I think sometimes there’s this – I remember being told when I started as a lawyer, and I think it was meant to inspire and maybe for a little while it did. And now looking back I think maybe a dangerous way to approach quality control, which was that perfect is the standard. If you’re doing your job well, you won’t hear anything. At university, you’re happy with a HD response. Well, every response has to be a HD response in practice. And that’s the baseline. But that assumption that, well, everything’s normal if it’s perfect and doesn’t warrant any commentary or introspection does mean that we lose the opportunity to examine why we’ve done well. And I think presumes the outcome of a decision doesn’t really give us an opportunity to look at the outcomes either. We’re just waiting to see something particularly disastrous waiting for the post-mortem. We’re nearly out of time today. But before we finish up, I wanted to ask you two questions. First,we’ve talked about how we can assess a decision, whether it’s a good decision, whether we’ve followed a good decision-making process, the importance of having a widget, of having a North Star, something to measure the decision by, and the importance of doing that exercise after you’ve made the decision. If one of our listeners, a lawyer or a law student, has done that exercise, they’ve looked at a decision that they’ve made, they’ve looked at the process they followed, they’ve looked at whether it’s brought them closer to their goal, their widget, and they’ve identified that it’s not a very good decision. They’ve fallen short of where they want it to be. What comes next? What do they do with that information?
01:00:28BH:Well, I’d say welcome to life. One of the most powerful examples we have as lawyers, which I took for granted until I started working with non-lawyers, is the High Court. And I say generally to audiences, but to specific people who are reluctant, first of all, to acknowledge that, who feel that’s a weakness, that I made a decision and got it wrong, or I don’t want to reveal my ignorance. I don’t want to put my hand up and ask a question, or I don’t want to seek help. Well, every time the High Court rules four-three, there’s three of the most eminent jurists who are wrong.
01:01:06DT:There might be four that are wrong.
01:01:07BH:Correct. Correct. And there they are being published for the whole world to see. And then beneath them, there’s potentially a Court of Appeal. And so on down the track, there are much smarter people than me anyway, who are quote unquote wrong. And so I think as a young lawyer, where we’re so under the pressure to be right and clients who come to us, just tell us what to do, it may not solve that immediate, but certainly for our wellbeing to go; “hey, there are these people who are at the top of the game and they’re quote unquote wrong. And it’s there for the world to see”. And I remember, I think it was Justice Rene Le Miere who recently retired from the Supreme Court of Western Australia was interviewed and he was asked; “how do you feel when one of your judgments is overturned?”. And he said; “I watch it with intellectual curiosity”. And I thought; “wow, what a healthy mind”. Because he of all people would be thinking; “well, I don’t want my status as a judge to be questioned”. And he presided over a long running case; was subsequently overturned on appeal. And his intellectual curiosity was such that; “what was the better argument? and what did I miss?”. Yeah. So that can be developed. And yeah, every day when someone is in a court case, someone’s quote unquote right and someone’s wrong. So that’s why the importance of having the overall widget, of having something that transcends that immediate wrongness. And it’s very human to react as you’ve described. So the importance of having that personal widget beyond your professional widget, because something I’m only realising relatively late in my career is the great majority of good decisions are quietly made and unacknowledged. So we don’t get to see and learn from that. We see the people that are given the awards or the Australia Day Honours. We’re not seeing all the people that are quietly making decisions good and bad, but evolving in their own sense of who they are and their orientation around the world. So my advice would be to sit back, lick your wounds and go, what has this taught me about my assumptions? And if necessary, tweak and adjust your course.
01:03:07DT:Absolutely. Last question before we go. For our student listeners, young lawyers just starting out, where can they go for some further listening or further reading about decision making?
01:03:16BH:Yeah. The first thing I’d say is just a general advice is, you know, I started off by talking about my widget and being a fighter pilot. Clearly I wasn’t a fighter pilot. I didn’t become one. And I’m so glad I didn’t. So that’s the other thing about, again, to finish off in something that’s a dichotomy and counterintuitive, it’s all about the widget, but it’s not about the widget. So the people that say to me, widget is too cold and clinical. I say, well, destroy it. In other words, by your decision making, redefine your widget. And so there’s that T.S. Eliot poem, Little Gidding, that has the line; “we shall set out from our exploration and at the end of our exploring, we shall arrive where we started and know it for the first time”. And so 40 years on from that young boy, I’ve not achieved my widget, but I’ve learnt so much along the way. If people want to learn more and perhaps read my writings, it’s very easy. It’s just bernardhill.com. I’ve got a blog. I just post stuff up there. A lot of these thoughts have been formed over writing them down. And so I’d encourage young lawyers to start writing your thoughts down. And that’s very powerful. I do a lot of reading, Daniel Kahneman, Thinking Fast and Slow. He’s great. He alone says; “I’ve written all about bias and I’ve won a Nobel Prize, but I’m still biased”. So that’s very humbling. So you do a lot of reading and get outside, as you said earlier, of the law and get some perspective.
01:04:36DT:Absolutely. And we’ll include a link to that blog in the show notes. Bernard Hill, thanks so much for joining me today on Hearsay.
01:04:41BH:Thanks very much, David.
RD:As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank our special guest, Bernard Hill, for being a part of it. As you well know, if you’re an Australian legal practitioner, you can claim one Continuing Professional Development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self-assessed, but we suggest this episode entitles you to claim a professional skills unit. More information on claiming and tracking your points on Hearsay can be found on our website. Hearsay the Legal Podcast is, as always, brought to you by Lext Australia, a legal innovation company that makes the law easier to access and easier to practice, and that includes your CPD. Hearsay is recorded on the lands of the Gadigal People of the Eora nation and we would like to pay our respects to elders past and present. Thanks for listening and see you all on the next episode of Hearsay!

A tale of two transactions: the importance of due diligence

A day hasn’t gone by at Elon’s Twitter where there hasn’t been controversy. 

From a simple exchange that read: “I love Twitter …  How much is it?”, we’re now way into the Musk Twittersphere. Although with all the financial and structural issues highlighted over the period, some may ask “did Elon even research the company in the first place?” 

That’s where due diligence comes in… or should have. 

The process of due diligence is a bit like dating. For the target, it involves teasing your assets for inspection by an interested bidder. Fail the inspection, no bid. Waiving it is a bit like jumping in headfirst and then discovering things aren’t as they seem. 

In April of 2022, Musk offered $54.20 per Twitter share or around US$43billion for the lot. This offer was unanimously accepted by Twitter’s board. This is where the fun begins. 

Twitter reported in a filing that they had found the platform had under 5% of bot users. Musk – purportedly suspicious of such claims – requested “details supporting calculation that spam/fake accounts do indeed represent less than 5% of users“, alleged the number was closer to 20%, and tried to back out of the deal. By May the deal was “on hold”. By July it was on the rocks. 

In issue; that April offer. Musk waived his right to conduct due diligence. But of course, that’s not the end of the story. By October, under the threat of continued legal proceedings, Musk reluctantly returned to the table. 

Judge Kathaleen McCormick of the Delaware Court of Chancery noted that the whole thing could have been avoided if due diligence was performed and not waived by Musk.

Morale of the story: do your due diligence!

CZeasoned Professional

The opposite could be said for ‘CZ’, the owner of Binance, who famously backed away from an acquisition of the notorious now-collapsed FTX crypto exchange (… excellent choice, in hindsight!).

Binance announced its plans to acquire its biggest competitor in November of  2022.

FTX had slowly become a giant in the crypto exchange market – becoming number 2 behind CZ’s own Binance – but after leaked documents began circulating about FTX’s dirty deals, the seasoned crypto kingpin pulled the pin on the nascent acquisition.

Interestingly, that rug pull happened quickly – only a day after announcing its plans to acquire FTX. CZ and Binance later cited “corporate due diligence issues” such as mishandling of customer funds which later turned out to be FTX using customer funds to cover for risky bets and debts from Alameda Research. 

Both issues show the importance of due diligence before an M&A transaction. While due diligence processes are arduous they save parties from future headaches and surprises. Someone probably should’ve told Elon this before he decided to buy twitter. 

For more check out Episode 80 of the podcast: Careful What You Wish For: Limiting or Waiving Due Diligence in Private Mergers and Acquisitions. While you’re at it, Hearsay also explored the FTX collapse on the Sidebar. Check out that episode here.

By: Hearsay The Legal Podcast with research by Ben Nguyen.

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