Often enough, judges refer the conduct of lawyers appearing before them (or disclosed by the case they are adjudicating) to the Legal Services Commissioner for investigation. A recent example is Re Manlio (no 2)  VSC 130. Judges also refer the conduct of non-lawyer parties to investigative agencies, e.g. where a tax fraud is suggested by evidence in the case.
Generally, this is not done pursuant to any statutory directive or authority. An exception is s. 202 of the Legal Profession Uniform Law which requires the Costs Court to refer a matter to the Legal Services Commissioner if it considers that the legal costs charged, or any other issue raised in the assessment, may amount to unsatisfactory professional conduct or professional misconduct. (Compare s. 3.4.46 of the Legal Profession Act 2004 which authorised rather than required the Taxing Master to make a referral.)
I have never been particularly clear about the nature of such a referral, or as to the procedures which ought to be followed. Gibson DCJ set out the principles recently, at least as they apply in NSW, in Mohareb v Palmer (No. 4)  NSWDC 127:
‘In the course of hearing proceedings, an issue may arise where one of the parties or the presiding judge considers that matters arising from the evidence or conduct of proceedings are of sufficient concern for the referral of a judgment to some appropriate investigating body. This is an independent administrative decision by the court, and not part of the judicial process. In some jurisdictions, this may include the court making an inquiry of its own motion into the conduct of a party or a legal representative if the circumstances warrant it (Re Manlio  VSC 130), but that is not what concerns me here.
The nature of a referral of this kind, and the manner in which the presiding judge should consider taking such as step, are both explained in Rafidi v Commonwealth Bank of Australia Ltd  NSWCA 96 at - as follows:
“ A decision “to refer papers” to some regulatory or policing agency (or on occasion the Australian Taxation Office) is, as the judge noted “an independent administrative decision by the court” and not part of the judicial process. That is an apt description of the process and one which casts doubt upon the propriety of the Bank’s application. There may be circumstances in which, for example, the parties to litigation appear to have been involved in a scheme designed to defraud the revenue. It is likely to be in the interests of neither for the attention of the Australian Taxation Office to be drawn to the circumstances revealed in the litigation. In such cases it may be appropriate for the Court to arrange for the Registrar to send a copy of the judgment to the ATO, or take any other more formal step in that regard; that is not a matter which arises in the present case. In this case, the Bank, through senior counsel, made an application in open court, supported by written submissions, that the Court should “refer certain of the papers in these proceedings (contained in the attached bundle, together with the entire transcript and the telephone records – which are not in the attached bundle – referred to in paragraph 25 below) to the Attorney-General for consideration as to whether charges should be laid …”. The allegations were then particularised.
 In the course of the submissions before the trial judge reference was made to a judgment of Brereton J in Paycorp Payment Solutions Pty Ltd v Chai (No 3), where a principle was set out as to the circumstances in which such a referral was appropriate. It has also been thought necessary in such cases to give notice to the affected parties so that they may be heard in opposition to such a “referral”.
 No doubt there may be circumstances in which documents have been obtained by discovery and a party may be unable to use them for purposes beyond the purposes for which they were obtained, merely on the basis that they appear to disclose criminal activity. In such a case, the party may wish to be released from the general undertaking relating to discovered documents. Indeed, such an application was made and granted in the present case on 14 December 2016. Whether the Bank had an acceptable justification for seeking such extrajudicial orders from the Court, in circumstances where the Bank itself was able to draw the matters to the attention of prosecuting authorities, is unclear.”
As Basten JA explains, the referral of a judgment to an investigating authority does not necessarily require the presiding judge to forewarn the parties or to invite submissions other than in specific circumstances of the kind his Honour refers to above.’
Of course there is a statutory provision which regulates referrals by the Costs Court. What it means is a matter of statutory construction. That process of construing the words will operate in the context of the common law tradition attaching to this kind of referral, but I would not be surprised if the Courts were to discern an implied obligation to afford some form of procedural fairness, or to provide proper reasons, before making a referral of this kind.
I gave a talk about costs in September 2011. At that point I did some research about what happened to referrals made by the Costs Court to the Legal Services Commissioner. This is what I said I had found, to my considerable surprise:
‘According to the Costs Court, since February 2006, there have been three referrals to the Commissioner apart from one which involved a client of mine, in March 2008, April 2010 and February 2011. I am informed by the Commissioner’s office that three of the four referrals raised a suspicion of gross overcharging on the part of the Costs Court, but following two of the three gross overcharging investigations prompted by the referrals, the Commissioner was not satisfied that there was a reasonable likelihood that VCAT would find the practitioner concerned guilty of unsatisfactory professional conduct or professional misconduct. In the third, the Commissioner was satisfied that there was a reasonable likelihood that the practitioner concerned would be found guilty of unsatisfactory professional conduct, but neither reprimanded nor prosecuted the practitioner.’
My experience since then is that courts’ referrals for investigation by the Commissioner do not lead to the practitioner being disciplined as often as might be assumed. Clearly, the Commissioner makes his own mind up after a careful investigation which, it may be assumed, often throws up aspects of the case which were not apparent to the referring judge.