Issues:
• What are the essential obligations imposed on a practitioner when a retainer commences?
• Is there a hierarchy of duties?
• What are the prescribed duties and what duties are implied or imputed into the retainer?
• What can the Society do to protect funds where a breach of trust or incapacity is established?
Desired Outcomes:
• An understanding of the express and implied duties bearing on the discharge of the professional relationship.
• An appreciation that the “fundamental” rules have not lost their importance when committed to written form.
• An appreciation of the care that is required in practice to balance the competing interests and to maintain the standard required when this may, and often does, conflict with the client’s aims and perceptions.
1. A solicitor's duty to the court
Practitioners, in all their dealings with the courts, whether those dealings involve the obtaining and presentation of evidence, the preparation and filing of documents, instructing an advocate or appearing as an advocate, should act with competence, honesty and candour. Practitioners should be frank in their responses and disclosures to the Court, and diligent in their observance of undertakings which they give to the Court or their opponents. Riley Solicitors Manual, LexisNexis Butterworths (loose-leaf service) (Riley)
Solicitors Rules, rr 17-23A
17 - Preparation of affidavits
Witnessing a false affidavit is grounds to be struck off the role.
If the practitioner
- is aware that a client is withholding information required by an order or rule of a court, with the intention of misleading the court; or
- informed by a client that an affidavit, of the client, filed by the practitioner, is false in a material particular;
and the client will not make the relevant information available, or allow the practitioner to correct the false evidence; the practitioner must, on reasonable notice, terminate the retainer and, without disclosing the reasons to the court, give notice of the practitioner's withdrawal from the proceedings
A practitioner must not draw an affidavit alleging criminality, fraud, or other serious misconduct unless the practitioner believes on reasonable grounds that factual material already available to the practitioner provides a proper basis for the allegation; the allegation will be material and admissible in the case, as to an issue or as to credit; and the client wishes the allegation to be made after having been advised of the seriousness of the allegation.
18 - Duty not to influence witnesses
A practitioner must not, in relation to any matter or event which is the subject of adversarial proceedings before a Court, confer with or interview the opposing party in the proceedings unless the unrepresented other party has been advised to seek independent legal advice or the solicitors for the other party agree
19 - Practitioner a material witness in client's case
A practitioner must not appear as an advocate and, unless there are exceptional circumstances justifying the practitioner's continuing retainer by the practitioner's client, the practitioner must not act, or continue to act, in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court.
20 - Admission of guilt
If a practitioner's client, who is the accused or defendant in criminal proceedings, admits to the practitioner before the commencement of, or during, the proceedings, that the client is guilty of the offence charged, the practitioner must not, whether acting as instructing practitioner or advocate:
- put a defence case which is inconsistent with the client's confession;
- falsely claim or suggest that another person committed the offence; or
- continue to act if the client insists on giving evidence denying guilt or requires the making of a statement asserting the client's innocence.
A practitioner may continue to act for a client who elects to plead "not guilty" after admitting guilt to the practitioner, and in that event, the practitioner must ensure that the prosecution is put to proof of its case, and the practitioner may argue that the evidence is insufficient to justify a conviction or that the prosecution has otherwise failed to establish the commission of the offence by the client.
21 - Admission of perjury
If a practitioner's client admits to the practitioner, during or after any proceedings, while judgment is reserved, that the client has given materially false evidence or tendered a false or misleading document in the proceedings, the practitioner must:
- advise the client that the Court should be informed of the false evidence, and request the client's authority to inform the Court and correct the record; and
- if the client refuses to provide that authority, withdraw from the proceedings
immediately, and terminate the retainer.
22 - Bail
A practitioner must not promote, or be a party to, any arrangement whereby the bail provided by a surety is obtained by using the money of the accused person, or by which the surety is given an indemnity by the accused person or a third party acting on behalf of the accused person.
A practitioner must not become the surety for the practitioner's client's bail.
23 - Advocacy Rules
Bar rules apply to solicitors acting as advocates
23A - Solicitor May Dress As Barrister When Acting As Advocate and Barrister Expected To Robe
2. A solicitor's duty to the client
Practitioners should serve their clients competently and diligently. They should be acutely aware of the fiduciary nature of the relationship with their clients, and always deal with their clients fairly, free of the influence of any interest which may conflict with a client’s best interests. Practitioners should maintain the confidentiality of their clients’ affairs, but give their clients the benefit of all information relevant to their clients’ affairs of which they have knowledge. Practitioners should not, in the service of their clients, engage in, or assist, conduct that is calculated to defeat the ends of justice or is otherwise in breach of the law.
• Riley
Solicitors Rules, rr 1-12, 38
1 - Acceptance of retainer - Instructions to act or provide a legal service
Must act honestly, fairly, with competence and diligence. Should accept instructions, and a retainer only when can reasonably expect to serve in that manner with reasonable promptness
2 - Confidentiality
Confidentiality not limited to information which might be protected by legal professional privilege, and is a duty inherent in the fiduciary relationship. Must not at any time disclose to any person (other than another partner or employee) any information which is confidential to a client acquired during the currency of the retainer, unless
• the client authorises disclosure;
• the practitioner is permitted or compelled by law to disclose; or
• the law would probably compel its disclosure, despite a client's claim of legal professional privilege, and for the sole purpose of avoiding the probable commission or concealment of a felony between the practitioner and client
3 - Acting against a former client
Consistently with the duty which a practitioner has to preserve the confidentiality of a client's affairs, a practitioner must not accept a retainer to act for another person in any action or proceedings against, or in opposition to, the interest of a person:
- for whom the practitioner or the firm, of which the practitioner was a partner, has acted previously;
- from whom the practitioner or the practitioner's firm has thereby acquired information confidential to that person and material to the action or proceedings; and
- that person might reasonably conclude that there is a real possibility the information will be used to the person's detriment.
4 - Practitioners employed otherwise than by a practitioner
A practitioner, who is employed by a corporation who is not a practitioner, must not, despite any contrary direction from the practitioner's employer, act as a practitioner in the performance of any legal work or service in breach of any of the provisions of the LPA 2004 or these Rules.
4A. Supervised Legal Practice
5 - Termination of retainer
A practitioner must complete the work or legal service required by the practitioner's retainer, unless -
• the practitioner and the practitioner's client have otherwise agreed;
• the practitioner is discharged from the retainer by the client; or
• the practitioner terminates the retainer for just cause, and on reasonable notice to the client.
6A - Legal Aid Application - Criminal proceedings
6B - Legal Aid: Court of Criminal Appeal proceedings
7 - Litigation lending
8 - Ownership of clients' documents - Termination of retainer
9 - Acting for more than one party
A practitioner who intends to accept instructions from more than one party to any proceedings or transaction must be satisfied, before accepting a retainer to act, that each of the parties is aware that the practitioner is intending to act for the others and consents to the practitioner so acting in the knowledge that the practitioner:
• may be, thereby, prevented from —
- disclosing to each party all information, relevant to the proceedings or transaction, within the practitioner's knowledge, or,
- giving advice to one party which is contrary to the interests of another; and
• will cease to act for all parties if the practitioner would, otherwise, be obliged to act in a manner contrary to the interests of one or more of them.
If a practitioner, who is acting for more than one party to any proceedings or transaction, determines that the practitioner cannot continue to act for all of the parties without acting in a manner contrary to the interests of one or more of them, the practitioner must thereupon cease to act for all parties.
10 - Avoiding a conflict between a client's and a practitioner's own interest
A practitioner must not, in any dealings with a client -
• allow the interests of the practitioner or an associate of the practitioner to conflict with those of the client;
• exercise any undue influence intended to dispose the client to benefit the practitioner in excess of the practitioner's fair remuneration for the legal services provided to the client;
A practitioner must not accept instructions to act for a person in any proceedings or transaction affecting or related to any legal or equitable right or entitlement or interest in property, or continue to act for a person engaged in such proceedings or transaction when the practitioner is, or becomes, aware that the person's interest in the proceedings or transaction is, or would be, in conflict with the practitioner's own interest or the interest of an associate
11 - Receiving a benefit under a will or other instrument
12 - Practitioner and client - Borrowing transactions
38.Referral fees - Taking unfair advantage of potential clients - Commissions
In the conduct or promotion of a practitioner's practice, the practitioner must not act for a person from whom the solicitor will provide or will receive a fee.
3. Fiduciary duty
A fiduciary has a positive obligation to act in good faith for the benefit of another and a negative obligation not to profit from the relationship.
• Riley
Law Society of New South Wales v Harvey (1976) 2 NSWLR 15
Clients lent money to three companies where the solicitor was a director and shareholder of. The court held that the solicitor was guilty of improper conduct as he had mixed his clients’ affairs with his own, had grossly preferred his interests to those of his clients and had failed to advise his clients to seek independent legal advice.
A conflict of interest which is avoidable, and ought to be avoided, is that which arises from a deliberate proposal of the solicitor that his client deal with him. … The price of being a member of an honourable profession, whose duty to his client ought not to be prejudiced in any degree, is that a solicitor is denied the freedom to take the benefit of any opportunity to deal with persons whom he has accepted as clients. Therefore he ought neither to promote, suggest, nor encourage a client to deal with him, but rather should take all reasonable steps positively to avoid dealing directly, or indirectly, with his client.
Law Society of New South Wales v Moulton [1981] 2 NSWLR 736
Case dealing with the misconduct of a solicitor who conducted business dealings with his clients. There, the solicitor borrowed money from his clients at a lower rate than he would otherwise have obtained if he had borrowed from a finance company. The security given by the solicitor was inadequate to justify the loan, and the solicitor failed to give full disclosure of the security given to the clients.
In cases such as the present one, it is essential to remember, indeed to emphasize, that a solicitor stands in a fiduciary relationship to his clients.
Clark Boyce
Acted for both parties obtaining a loan and third party mortgage, no conflict when informed consent obtained, but must be carefully documented.
4. Solicitors'/advocates' immunity
• Riley
Donellan v Watson (1990) 21 NSWLR 335
The immunity from litigation is not co-extensive between the role of barrister acting as an advocate and solicitor acting as an advocate, for the reasons given –
[a] solicitor enters into a binding contract wíth the client which may either expressly or by necessary implication limit the solicitor's authority as the agent of the client, in the conduct of the litigation .... For example, a solicitor ... is bound to take reasonable care to properly instruct competent counsel ...
[A] solicitor who briefs himself [or herself] may be liable in negligence of briefing an
incompetent advocate although not liable in negligence as advocate.
D’Orta-Ekenaike v Victorian Legal Aid [2005] HCA (12 March 2005)
Affirmed the common law in Australia as stated in Giannarelli v Wraith. The court also held that a solicitor is entitled to common law immunity from suit in respect of acts or omissions which, if done by an advocate, would be within the scope of the advocate’s common law immunity
Giannarelli v Wraith (1988) 165 CLR 543
Confirms rule in Rondell v Worsley using test in Rees
This immunity from suit extends to work done by the advocate outside court which leads to a decision, and includes solicitors acting as advocates
5. The retainer
• Rule 1
Make the retainer in writing or solicitor may be liable. As when it is a one on one argument the court prefers the version of the client to that of the solicitor.
Whatever is contained in the retainer the solicitor must complete the work.
Express or implied
• Riley
6. Regulation of Solicitors
(a) Law Society's statement of ethics
The true profession of law is based on an ideal of honourable service. Riley, NSW Solicitors Manual
We acknowledge the role of our profession in serving our community in the administration of justice. We recognize that the law should protect the rights and freedoms of members of society. We understand that we are responsible to our community to observe high standards of conduct and behaviour when we perform our duties to the courts, our clients and our fellow practitioners.
Our conduct and behaviour should reflect the character we aspire to have as a profession.
This means that as individuals engaged in the profession and as a profession:
• We primarily serve the interests of justice.
• We act competently and diligently in the service of our clients.
• We advance our clients' interests above our own.
• We act confidentially and in the protection of all client information.
• We act together for the mutual benefit of our profession.
• We avoid any conflict of interest and duties.
• We observe strictly our duty to the Court of which we are officers to ensure the proper and efficient administration of justice.
We seek to maintain the highest standards of integrity, honesty and fairness in all our dealings.
- Serve competently
- Communicate clearly
- Treat with respect
- Act fairly, honestly and diligently
- Pursue ideal service that transcends self interest
- Work with colleagues to uphold professional standards
- Develop excellent professional skills
- Act frankly and fairly in court
- Be trustworthy
- Keep clients affairs confidential as required by law
- Maintain and defend the rights of the individual
- Avoid any conflict of interest
(b) Control of unqualified persons
LPA s 14 Prohibition on engaging in legal practice when not entitled: A person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner. This does not apply to:
- legal practice engaged in under the authority of a law of this jurisdiction or of the Commonwealth,
- Incorporated legal practices and multi-disciplinary partnerships
- the practice of foreign law by an Australian-registered foreign lawyer
- legal practice engaged in by a complying community legal centre,
- conveyancing work carried out in accordance with a licence
- work performed by a land agent
- the drawing of instruments by an officer or employee in the service of the Crown
- legal practice of a kind prescribed by the regulations.
- a person who as an employee provides legal services to his or her employer
LPA s 15 Prohibition on representing or advertising entitlement to engage in legal practice when not entitled
LPA s 16 Presumptions about taking or using certain names, titles or descriptions specified in regulations. If you use the following tack ons:
lawyer, legal practitioner, barrister, solicitor, attorney, counsel, Queen’s Counsel, King’s Counsel, Her Majesty’s Counsel, His Majesty’s Counsel, Senior Counsel
- it gives rise to the rebuttable presumption that the person represented that they are entitled to engage in legal practice
(c) Trust accounts
Trust Money means money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice, and includes:
(a) money received by the practice on account of legal costs in advance of providing the services, and
(b) controlled money received by the practice, and
(c) transit money received by the practice, and
(d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person.
The term legal services is defined in section 4 of the Act to mean work done, or business transacted, in the ordinary course of legal practice. The last part of the definition, “in the ordinary course of legal practice”, is intended to invoke the common law meaning on what defines the practice of a legal practitioner. The definition does not render a service a legal service simply because it is provided by a legal practitioner or by a law practice. The service must also be provided in “the ordinary course of legal practice”. In other words, if the law practice is not providing a legal service, the money received should not be deposited into the general trust account.
There are five types of trust money, they are as follows:
1. Controlled money is money received or held by the law practice in respect of which the practice has a written direction to deposit the money in an account (other than a general trust account) over which the practice has or will have exclusive control.
2. Transit money – money received (other than cash) by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice.
3. Power money – money received (other than cash) by a law practice subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person. The power to the practice or associate may be exercisable by:
(a) the practice alone, or
(b) an associate of the practice alone (otherwise than in a private and personal capacity), or
(c) the practice or an associate of the practice jointly or severally, or jointly and severally, with either or both of the following:
(i) one or more associates of the practice,
(ii) the person, or one or more nominees of the person, for whom or on whose behalf the money may or is to be dealt with under the power.
4. Written direction money – money received (other than cash) by a law practice in respect of which the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account.
5. General trust money – any trust money received by the law practice that does not satisfy the above definitions
A further subset of trust money is referred to as the “Investment of Trust Money”. The requirements for the investment of trust money are as follows:
• the money must first be entrusted to or held by the law practice (in the above five types of trust money) in the ordinary course of legal practice, and primarily in connection with the provision of legal services to or at the direction of the client, and
• the investment is or is to be made in the ordinary course of legal practice and for the ancillary purpose of maintaining or enhancing the value of the money or property pending completion of the matter or further stages of the matter or pending payment or delivery of the money or property to or
• at the direction of the client,
• a written direction is obtained from the client directing the investment to be made.
When a law practice receives cash in a transaction valued at AUD $10,000 or more, it is required by the Financial Transactions Reports Act 1988 to report the transaction.
Legal Profession Act 2004, Chapter 3
244. Money involved in financial services or investments
Money that is entrusted to or held by a law practice for or in connection with a financial service provided in circumstances where the practice is required to hold an Australian financial services licence covering the provision of the service or in circumstances where the practice provides the service as a representative of another person who carries on a financial services business is not trust money for the purposes of this Act.
245. Determinations about status of money
The Council may determine that the money is or is not trust money.
246. Application of Part to law practices and trust money
Generally applies to practices whether or not trust money was received inside or outside jurisdiction.
247. Protocols for determining where trust money is received
248. When money is received
A law practice receives money when the practice obtains possession or control of it directly, or the practice obtains possession or control of it indirectly as a result of its delivery to an associate of the practice, or the practice, or an associate of the practice (otherwise than in a private and personal capacity), is given a power to deal with the money for or on behalf of another person.
249. Discharge by legal practitioner associate of obligations of law practice
• the establishment of a trust account,
• the maintenance of a trust account,
• the payment of trust money into and out of a trust account and other dealings with trust money,
• the maintenance of trust records,
• engaging an external examiner to examine trust records,
• the payment of an amount into an ADI account as referred to in section 283 (Statutory deposits),
• an action of a kind prescribed by the regulations.
250. Liability of principals of law practice
Principles are jointly and severally liable
251. Former practices, principals and associates
Former principles are jointly and severally liable for the time they were there
252. Barristers not to receive trust money
A barrister is not, in the course of practising as a barrister, to receive trust money
253. Maintenance of general trust account
A law practice that receives trust money must maintain a general trust account in this jurisdiction and this general trust account must be established and maintained in accordance with the regulations. The practice can maintain more than one general trust account
254. Certain trust money to be deposited in general trust account
Subject to section 258A, a law practice must deposit the money in a general trust account of the practice ASAP unless:
• the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or
• the money is controlled money, or
• the money is transit money, or
• the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person.
255. Holding, disbursing and accounting for trust money
A law practice must hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and disburse the trust money only in accordance with a direction given by the person
The direction by the person on whose behalf the money is held does not have to be in writing, however it is considered prudent practice that the law practice develop suitable office procedures.
255A. Manner of withdrawal of trust money from general trust account
A law practice must not withdraw trust money from a general trust account otherwise than by cheque or electronic funds transfer.
256. Controlled money
The law practice must maintain a controlled money account and must not disburse the money except in accordance with the written direction mentioned in that subsection, or a later written direction given by or on behalf of the person on whose behalf the money was received.
256A. Manner of withdrawal of controlled money from controlled money account
A law practice must not withdraw controlled money from a controlled money account otherwise than by cheque or electronic funds transfer.
257. Transit money
Subject to section 258A, a law practice that has received transit money must pay or deliver the money as required by the instructions relating to the money within the period (if any) specified in the instructions, or subject to paragraph (a), as soon as practicable after it is received. The law practice must account for the money as required by the regulations.
It must be noted that transit money received in cash must be deposited into the general trust account of the law practice or an existing controlled money account before the money is otherwise dealt with in accordance with the instructions relating to the money
258. Trust money subject to specific powers
258A. Trust money received in the form of cash
General trust money: A law practice must deposit general trust money received in the form of cash in a general trust account of the practice unless instructed to do otherwise.
Controlled money received in the form of cash must be deposited in a controlled money account in accordance with section 256.
Transit money A law practice must deposit transit money received in the form of cash in a general trust account of the practice before the money is otherwise dealt with in accordance with the instructions relating to the money.
Trust money subject of a power A law practice must deposit trust money that is received in the form of cash and is the subject of a power in a general trust account (or a controlled money account in the case of controlled money) of the practice before the money is otherwise dealt with in accordance with the power.
General trust money means trust money, other than:
(a) controlled money, and
(b) transit money, and
(c) money that is the subject of a power.
259. Protection of trust money
Money standing to the credit of a trust account maintained by a law practice is not available for the payment of debts of the practice or any of its associates nor is it liable to be attached or taken in execution for satisfying a judgment against the practice or any of its associates.
260. Intermixing money
A law practice must not, otherwise than as permitted by subsection (2), mix trust money with other money. Sub section (2) provides that a law practice is permitted to mix trust money with other money to the extent only that is authorised by the Law Society.
261. Dealing with trust money: legal costs and unclaimed money
A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account of the practice for a person:
• exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practice,
• withdraw money for payment to the practice’s account for legal costs owing to the practice if the relevant procedures or requirements prescribed by this Act and the regulations are complied with,
• after deducting any legal costs properly owing to the practice, deal with the balance as unclaimed money under section 266 (Unclaimed money).
262. Deficiency in trust account
An Australian legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes (which includes be responsible for):
• a deficiency (either non inclusion or exclusion) in any trust account or trust ledger account, or
• a failure to pay or deliver any trust money.
263. Reporting certain irregularities and suspected irregularities
The practitioner or associate must inform the Law Society Council and corresponding authority where:
• If a legal practitioner associate of a law practice becomes aware that there is an irregularity in any of the practice’s trust accounts or trust ledger accounts OR
• An Australian legal practitioner believes on reasonable grounds that there is an irregularity in connection with the receipt, recording or disbursement of any trust money received by a law practice
There is no liability for a defamatory complaint. For example if a trust account cheque bounces must report it.
264. Keeping trust records
A law practice must keep in permanent form trust records in relation to trust money received by the practice:
• in accordance with the regulations, and
• in a way that at all times discloses the true position in relation to trust money
• in a way that enables the trust records to be investigated or externally examined
• for a period determined in accordance with the regulations (7 years).
265. False names
A law practice must not knowingly receive money or record receipt of money in the practice’s trust records under a false name and if a person is commonly known by more than one name, the practice must ensure that the practice’s trust records record all names by which the person is known.
266. Unclaimed money
If a law practice holding money in a trust account cannot find the person on whose behalf the money is held or a person authorised to receive it, the practice may:
• pay the money to the Treasurer for credit to the Consolidated Fund, and
• provide the Treasurer with such information as the Treasurer requires in relation to the money and the person on whose behalf the money was held by the practice.
If a law practice pays money to the Treasurer under subsection (1), the practice is relieved from any further liability in relation to the money.
The Treasurer must pay money deposited under this section to a person who satisfies the Treasurer as to his or her entitlement to the money.
Bridges
Partner stole and used monies. The Partner convinced Bridges that everything could be fixed so Bridges did nothing. Guilty of professional misconduct and struck off
Jones
How should one view conduct amounting to financial dishonesty. Need for reliability and integrity in the handling of trust funds.
(d) Regulations
• Riley
(e) External Intervention
Legal Profession Act 2004, Chapter 5
External intervention is the appointment of a supervisor, manager or receiver to a law practice and the exercise of powers and functions of those persons in relation to a practice.
s.611 LPA External intervention ensures that an appropriate range of options is available for intervention in the business and professional affairs of law practices and Australian-registered foreign lawyers for the purpose of protecting the interests of:
(a) the general public, and
(b) clients, and
(c) lawyers, including the owners and employees of law practices, so far as their interests are not inconsistent with those of the general public and clients.
Supervisor: Appointment of a supervisor is the least intrusive form of intervention. The intervention gives the supervisor the powers and duties of the practice in relation to trust money including powers to receive trust money entrusted to the practice and to open and close trust accounts. This form of intervention can enable issues to be addressed without the need to take professional and operational responsibility for the practice.
Manager: A manager for a law practice may carry on the practice and may do all things that the practice or a legal practitioner associate of the practice might lawfully have done, including but not limited to the following s626:
(a) transacting any urgent business of the practice,
(b) transacting, with the approval of any or all of the existing clients of the practice, any business on their behalf, including:
(i) commencing, continuing, defending or settling any proceedings, and
(ii) receiving, retaining and disposing of property,
(c) accepting instructions from new clients and transacting any business on their behalf, including:
(i) commencing, continuing, defending or settling any proceedings, and
(ii) receiving, retaining and disposing of regulated property,
(d) charging and recovering legal costs, including legal costs for work in progress at the time of the appointment of the manager,
(e) entering into, executing or performing any agreement,
(f) dealing with trust money in accordance with this Act and the regulations,
(g) winding up the affairs of the practice.
Can not trace or recover property. Manager walks into the shoes of the practitioner and is allowed to run trust accounts and deal with files.
Receiver: The role of a receiver for a law practice is: to be the receiver of regulated property of the practice, and to wind up and terminate the affairs of the practice s633. For the purpose of winding up the affairs of the law practice and in the interests of the practice’s clients, the Supreme Court may, by order, authorise: the receiver to carry on the legal practice engaged in by the law practice, if the receiver is an Australian legal practitioner who holds an unrestricted practising certificate the person authorised to carry on the legal practice engaged in by a law practice has all the powers of a manager under this Part and is taken to have been appointed as manager for the law practice.
A receiver is an officer of the court and can only be appointed by an order of the court. It is expensive and can employ a solicitor to act as a receiver. A receiver can trace and recover property
External intervention may take place in relation to a law practice in any of the following circumstances (s.615 LPA):
(a) where a legal practitioner associate involved in the practice:
(i) has died, or
(ii) ceases to be an Australian legal practitioner, or
(iii) has become an insolvent under administration, or
(iv) is in prison,
(b) in the case of a firm-where the partnership has been wound up or dissolved,
(c) in the case of an incorporated legal practice-where the corporation concerned:
(i) ceases to be an incorporated legal practice, or
(ii) is being or has been wound up, or
(iii) has been deregistered or dissolved,
(d) in any case-where the Law Society Council forms a belief on reasonable grounds that the practice or an associate of the law practice:
(i) is not dealing adequately with trust money or trust property or is not properly attending to the affairs of the practice, or
(ii) has committed a serious irregularity, or a serious irregularity has occurred, in relation to trust money or trust property or the affairs of the practice, or
(iii) has failed properly to account in a timely , manner to any person for trust money or trust property received by the practice for or on behalf of that person, or
(iv) has failed properly to make a payment of trust money or a transfer of trust property when required to do so by a person entitled to that money or property or entitled to give a direction for payment or transfer, or
(v) is in breach of the regulations or legal profession rules with the result that the record-keeping for the practice's trust account is inadequate, or
(vi) has been or is likely to be convicted of an offence relating to trust moneyor trust property, or
(vii) is the subject of a complaint relating to trust money or trust property received by the practice, or
(viii) has failed to comply with any requirement of an investigator or external examiner appointed under this Act, or
(ix) has ceased to be engaged in legal practice without making provision for properly dealing with trust money or trust property received by the practice or for properly winding up the affairs of the practice, or
(e) where any other proper cause exists in relation to the practice.
When the Council becomes aware of circumstances referred to in s.615 LPA and decides, having regard to the interests of clients and other matters it considers appropriate,
The Law Society Council may determine (s.616(2) LPA):
(a) to appoint a supervisor of trust money received by the law practice, if the Council is of the opinion:
(i) that external intervention is required because of issues relating to the practice's trust accounts, and
(ii) that it is not appropriate that the provision of legal services by the practice be wound up and terminated because of those issues, or
(b) to appoint a manager for the law practice, if the Council is of the opinion:
(i) that the practice is or may be a viable business concern, and
(ii) that, for this to occur, there, is, a need for an independent person to be appointed to take over professional and operational responsibility for the practice, or
(c) to apply for the appointment of a receiver for the law practice, if the Council is of the opinion:
(i) that the appointment is necessary to protect the interests of clients in relation to trust money or trust property, or
(ii) that it may be appropriate that the provision of legal services by the practice be wound up and terminated."
The Bar association may:
This Chapter applies in respect of the law practice of a barrister subject to the following modifications:
(a) a reference to the Law Society Council is to be read as a reference to the Bar Council,
(b) Parts 5.3 (Supervisors) and 5.5 (Receivers) do not apply in respect of a law practice of a barrister,
(c) the powers of the manager for a law practice of a barrister include power to reallocate or return briefs.
(f) Issues of codes: best practice for client care, conveyancing
• Riley
(g) Solicitors and other lawyers
In all of their dealings with other practitioners, practitioners should act with honesty, fairness and courtesy, and adhere faithfully to their undertakings, in order to transact lawfully and competently the business which they undertake for their clients in a manner that is consistent with the public interest.
Solicitors Rules, rr 25-31
26. Undertakings
A practitioner must honour the undertaking so given strictly in accordance with its terms, and within the time promised, or, if no precise time limit is specified, within a reasonable time.
27. [Undertakings]
A practitioner must not give to another practitioner an undertaking compliance with which
requires the co-operation of a third party.
28. [Undertakings]
A practitioner must not, in the course of the practitioner's practice, seek from another practitioner or that practitioner's employee, an undertaking, compliance with which would require the co-operation of a third party who is not a party to the undertaking.
29. Taking over a matter from another practitioner
Where a practitioner's retainer is terminated before the completion of the client's business to which it relates, and the client instructs another practitioner to take over the conduct of the client's business, the following rules shall apply, subject to any orders which may be made by the Supreme Court in respect of the delivery of documents pursuant to Section 728 of the Legal Profession Act 2004.
30. Transfer of a practitioner's practice
When a practitioner intends to transfer to another practitioner the whole or part of the practitioner's practice, including clients' work in progress, and to put the other practitioner in possession of the documents held by the practitioner on behalf of clients, the practitioner must give to each client, fourteen (14) days (or such other period as may be reasonable in the circumstances), before the practitioner delivers possession of the practice to the practitioner acquiring it, notice in writing:
31. Communicating with another practitioner's client
A practitioner who is acting on behalf of a party in any matter must not communicate in connection with that matter directly with any other party for whom, to the practitioner's knowledge, another practitioner is currently acting, unless-
• notice of the practitioner's intention to communicate with the other party, in default of a reply from the other practitioner, has been given to that practitioner, who has failed, after a reasonable time, to reply;
• the communication is made for the sole purpose of informing the other party that the practitioner has been unable to obtain a reply from that party's practitioner, and requests that party to contact the practitioner; and
• the practitioner, thereafter, notifies the other practitioner of the communication.
• Riley
(h) Solicitors and third parties
Practitioners should, in the course of their practice, conduct their dealings with other members of the community, and the affairs of their clients which affect the rights of others, according to the same principles of honesty and fairness which are required in relations with the courts and other lawyers and in a manner that is consistent with the public interest.
Solicitors Rules, rr 32-36
32.Contracting for services
A practitioner who deals with a third party on behalf of a client for the purpose of obtaining some service in respect of the client's business, must inform the third party when the service is requested, that the practitioner will accept personal liability for payment of the fees to be charged for the service or, if the practitioner is not to accept personal liability, the practitioner must inform the third party of the arrangements intended to be made for payment of the fees.
33.Undertakings
A practitioner who, in the course of providing legal services to a client, and for the purposes of the client's business, communicates with a third party orally, or in writing, in terms which, expressly, or by necessary implication, constitute an undertaking on the part of the practitioner to ensure the performance of some action or obligation, in circumstances where it might reasonably be expected that the third party will rely on it, must honour the undertaking so given strictly in accordance with its terms, and within the time promised (if any) or within a reasonable time.
34. Communications
A practitioner must not, in any communication with another person on behalf of a client:
• represent to that person that anything is true which the practitioner knows, or reasonably believes, is untrue; or
• make any statement that is calculated to mislead or intimidate the other person, and which grossly exceeds the legitimate assertion of the rights or entitlement of the practitioner's client; or
• threaten the institution of criminal proceedings against the other person in default of the person's satisfying a concurrent civil liability to the practitioner's client; or
• demand the payment of any costs to the practitioner in the absence of any existing liability therefore owed by the person to the practitioner's client.
35. Debt collection or mercantile agencies
A practitioner must not allow the practitioner's business name or stationery to be used by a debt collection, or mercantile, agent in a manner that is likely to mislead the public.
36. Practitioner members of local government councils
A practitioner must not act for a client in any dealing between that client and a local Council,
of which the practitioner is a member, unless the relevant dealing:
36.1 involves a non-contentious matter of a relatively minor nature; or
36.2 is one within a class of dealings which the Council of the Law Society has declared to be exempt from this Rule; or
36.3 is declared by the Law Society Council to be exempt from this Rule upon the Application of the practitioner.
• Riley
(i) Solicitor's liability for acts of partner
s250 Legal Profession Act 2004. That section provides that any provision contained in the Act which imposes an obligation on a law practice imposes the same obligation on the principals of the law practice jointly and severally (per s7 LPA the definition of principal includes partners). That the provision imposes an obligation on the principals jointly and severally has the effect of rendering other ‘innocent’ partners guilty of another partner’s offence and, where that partner is guilty of professional misconduct, so too are the other ‘innocent’ partners.
Re Mayes and the Legal Practitioners Act (1974) 1 NSWLR 19
where the Court of Appeal found that the appellant had been put on notice that there were happenings which called for him to check the trust account ledgers and, in particular, if he had looked in the account to which the money had wrongly been transferred, he would have seen irregularities there which would have disclosed his partner's defalcations. Importantly, and in contrast to Re Hodgekiss, the Court of Appeal held that “Wilful misconduct can be established by evidence that a person acts with reckless carelessness, not caring what the results of such carelessness may be.”
In this case junior partner reported and was not struck off
Bridges v Law Society of New South Wales (1983) 2 NSWLR,
Was struck off for acts of partner. Where the onus was reinforced on ‘innocent’ partners to check the conduct of the firm’s trust account records rather than accept the verbal assurances of the other partner that it could be fixed, duty to report.
(j) Duty to report offences/bankruptcy
The difference between whether a person is a fit and proper person to hold a practising certificate and whether they are fit and proper to stay on the roll is a question only of degree. In New South Wales Bar Association v Murphy [2002] NSWCA 138 the difference ‘may not be great in many cases’, but should not be overlooked. The difference is that an order to strike the lawyer off the roll should be made only where, at the time when the decision is made, the decision maker is satisfied of the likelihood that the lawyer will be unfit to practise for the indefinite future.
NSW Bar Association v Cummins (2001) 52 NSWLR 279
No tax returns for years and years – struck off
If the [decision maker] is of the view that a person is presently unfit to practice, but after a particular period of time will be once again fit to practice, then suspension for that period of time is the appropriate order. Suspension is achieved by orders under [the relevant statute]. Removal from the roll is appropriate only when a legal practitioner is unfit to practice, and suspension for a particular period is not appropriate. The legal regulator is entitled to rely on the presumption of continuance to discharge the burden of proof which remains on it, and the lawyer is required to adduce evidence if he or she needs to rebut the presumption. Once it shown at the time to not be fit and proper then decision maker can rely on that and it is up to the applicant to show how things have changed.
NSW Bar Association v Murphy (2001) 52 NSWLR 279
Failed business venture no dishonesty involved it just failed – not struck off.
NSW Bar Association v Somosi [2001] NSWSC 285
Conduct not occurring in the course of professional practice may demonstrate unfitness if it amounts to incompatibility with the personal qualities essential for the conduct of practice. There may not even have been any criminal conviction with respect to that conduct. This is particularly so where the conduct over a long period shows systematic non-compliance with legal and civic obligations
65 defines show cause event, to mean:
becoming bankrupt or being served with notice of a creditor’s petition
presentation (as a debtor) of a declaration to the Official Receiver
applying to take the benefit of any law for the relief of bankrupt or insolvent debtors,
conviction for a serious offence or a tax offence, whether or not:
(i) the offence was committed in or outside this jurisdiction, or
(ii) the offence was committed while the person was engaging in legal practice
(iii) other persons are prohibited from disclosing the identity of the offender.
serious offence, which means an offence whether committed in or outside NSW that is anindictable offence against a law of the Commonwealth or any jurisdiction, s4 LPA
tax offence, which means any offence under the Taxation Administration Act 1953, s 3(1) LPA
Convictions
Conviction is defined in s 11 of the LPA 2004. A reference in the LPA to a conviction includes a finding of guilt, or the acceptance of a guilty plea, whether or not a conviction is recorded. Subsections (2) and (3) deal with the quashing of a conviction.
Legal Profession Act 2004, Chapter 2, Part 2.4, Division 7 - Special powers in relation to local practising certificates-show cause events
66. Applicant for local practising certificate-show cause event
An applicant is to provide to the appropriate Council a written statement about a show cause event which has happened and explaining why, despite the show cause event, the applicant considers himself or herself to be a fit and proper person to hold a practising certificate: s 66(2). That statement must be provided as part of the application: s 66(2). Contravention of s 66(2) is professional misconduct: s 66(3)
67. Holder of local practising certificate-show cause event
Requires the holder of a local practising certificate to provide Council with both:
(a) written notice that a show cause event happened, within seven days of the happening of the event; and
(b) a written statement explaining why, despite the show cause event, the person considers himself or herself to be a fit and proper person to hold a local practising certificate, within 28 days after the happening of the event (not the giving of notice under s 67(2)(a)). The holder of a practising certificate now has 28 days after the happening of the event to give Council the s 67(2)(b) statement.
Contravention of s 67(2) is professional misconduct: s 67(3).
68. Investigation and consideration of show cause event
On “becoming aware” of the happening of a show cause event in relation to an applicant or a holder, Council must investigate, and within the required period determine, whether the applicant or holder is a fit and proper person to hold a local practising certificate.
Within 28 days of becoming aware of the happening of a show cause event, Council must give notice in writing to the applicant or holder dealing with four matters:
• if Council has not received a statement under s 66 or 67 in relation to the show cause event, requiring the applicant or holder to provide the required statement, and
• informing the applicant or holder that determination in relation to the matter is required to be made under Division 7,
• informing the applicant or holder of the required period in relation to determination of the matter (and that the applicant or holder will be notified of any extension of the period) and
• informing the applicant or holder of the effect of the automatic suspension provisions in s 70 in the event of the matter not being determined by the Council or the Commissioner within the required period.
Required period is defined in s 68(5) as the period of three months commencing on the earliest of:
• the date on which Council receives a written statement under s 66 or 67 in relation to the show cause event; or
• the date on which Council issues a notice under s 68(2) to the applicant or holder.
The period may be extended to four months by the Commissioner.
Section 68(3) of the LPA 2004 provides that a Council must determine the matter by:
• deciding that the applicant or holder is a fit and proper person to hold a local practising certificate;
• deciding that the applicant or holder is not a fit and proper person to hold a local practising certificate; or
• deciding that the applicant or holder is a fit and proper person to hold a practising certificate but that it is appropriate to impose conditions on the applicant’s or holder’s local practising certificate for a specified period.
Subsection (4) provides that in investigating and determining a matter under s 68 Council is not limited to investigating and making its determination on the basis of just the show cause event, and must have regard to the facts and circumstances that surround, arise in connection with, relate to or give rise to the show cause event concerned.
69. Power to renew practising certificate or defer action in special circumstances
Allows the Council to renew a holder’s local practising certificate when the end of the financial year for the current practising certificate is imminent and Council has not yet made an s 68 determination, without preventing Council from subsequently cancelling or suspending the practising certificate under Division 7.
70. No decision in required period-suspension of practising certificate and referral to Commissioner
Section 70 of the LPA 2004 provides that if Council has not determined a show cause matter under s 68 within the required period:
• the Commissioner must take over determination of the matter from the Council, and
• if the matter concerns the holder of a local practising certificate, the local practising certificate of that person is suspended.
Unless the Tribunal orders its removal, the statutory suspension under s 70(1)(b) remains in force until the Commissioner decides that the holder is a fit and proper person to hold a local practising certificate
A holder whose local practising certificate is suspended under s 70(1)(b) may make an application to the Tribunal to remove the suspension under s 70(3).
71. Commissioner taking over determination of matter
72. Council to implement decisions under this Division
Requires that Council give effect to a decision that the applicant or holder is not fit and proper person to hold a local practising certificate by refusing the grant of a local practising certificate or immediately cancelling or suspending the holder’s local practising certificate.
If Council decides under s 68(3)(c) that it is appropriate to impose conditions, Council must given effect to that decision by imposing the conditions, under s 72(3). Where the Commissioner decides that it is appropriate to impose conditions, Council must give effect to the decision under subs (4), by imposing such of those conditions as Council considers to be appropriate after consultation with the Commissioner. If
73. Failure to comply with conditions imposed under this Division
If the holder of a local practising certificate contravenes without reasonable excuse a condition of the practising certificate imposed under this Division the contravention is professional misconduct, and the appropriate Council may, by written notice given to the holder, cancel or suspend the local practising certificate.
74. Restriction on making further applications
Allows a Council or the Commissioner who determines that an applicant or holder is not a fit and proper person to hold a local practising certificate to decide also that the applicant or holder is not entitled to apply for a grant of the local practising certificate for a specified period not exceeding five years.
75. Review of decisions by Tribunal
Provides for a right of review by the Tribunal for an applicant or holder dissatisfied with a decision of a Council or the Commissioner under Division 7. The person asserting their fitness has the onus of establishing that they are a fit and proper person under s 75(3)(a). There are other procedural and evidentiary provisions in s 75(3).
An application to the Tribunal for a review of a decision referred to in s 72 does not of itself affect the operation of the decision: s 72(9).
The Tribunal may make any order it considers appropriate on a review under s 75, including:
• an order directing Council to grant or refuse to grant an application for a local practising certificate,
• an order directing Council to cancel or suspend a local practising certificate for a specified period, or to reinstate a local practising certificate that has been cancelled or suspended,
• an order that an applicant or holder is not entitled to apply for the grant of a local practising certificate for a specified period not exceeding five years,
• an order directing Council to impose conditions on a local practising certificate for a specified period, or to vary or revoke, or vary the period for which Council imposed conditions.
Section 75(5) provides that the Tribunal may not order the imposition of conditions without first taking submissions from Council as to the appropriateness of the proposed conditions
Section 729A provides that an order or other decision made by the Tribunal under the LPA 2004 may be appealed to the Supreme Court, rather than to an Appeal Panel of the Tribunal. Leave is required for an appeal against an interlocutory decision and a decision made with the consent of the parties or as to costs.
76. Parties to Tribunal proceedings
Section 76 provides for those who are entitled to appear at a hearing on a review under s 75 - any party who appears other than as a witness is taken to be a party to the proceedings.
77. Relationship of this Division with Chapters 4 and 6
However, s 77(2) expressly provides that nothing in Division 7 prevents a complaint being made under Chapter 4 about a show cause matter. Accordingly, a complaint of professional misconduct could be made in relation to a failure to provide a show cause statement under s 66 or 67 at all. That is failure to notify a show cause event is professional misconduct.