Paddy Oliver's view on how Incorporated Legal Practices will be impacted by the new Legal Profession Uniform Law

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ILP Forum
Incorporated Legal Practices &
Legal Profession Uniform Law
2nd September 2014
Paddy Oliver
Managing Director
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2. ILP Regulatory Structure Post 2015
Subject to
• Corporations Act, 2001
• Legal Profession Uniform Law 2014
• Uniform Rules
• Competition & Consumer Act 2010
Regulated by
• Legal Services Council
• Designated Local Regulatory Authority
• Victorian Legal Services Board & Commissioner
• Supreme Court of Victoria or NSW
• ASIC
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3. Definition of Law Practice & Law Firm
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§ Law practice means—
• (a) a sole practitioner; or
• (b) a law firm; or
• (c) a community legal service; or
• (d) an incorporated legal practice (ILP); or
• (e) an unincorporated legal practice (ULP);
§ Law firm means a partnership consisting only of:
• (a) Australian legal practitioners; or
• (b) one or more Australian legal practitioners and one or
more Australian-registered foreign lawyers.
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Definition of ILP #1
§ Sect 6 - Definition of Incorporated Legal Practice
§ A corporation which satisfies the following criteria:
§ (a) (i) - it is a company within Corporations Act; or
§ (ii) - corporation, or a corporation of a kind approved under Sect
114 (Approved Business Structures) or specified in the Rules;
§ (b) it has given notice under section 104 that it intends to engage
in legal practice in Australia and that notice is still operative;
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Definition of ILP #2
• (c) the legal services it provides or proposes to provide are
not limited to either or both of the following services:
• (i) in-house legal services for the corporation or a related
entity;
• (ii) services that are not legally required to be provided by
an Australian legal practitioner and that are provided by an
officer or employee who is not an Australian legal
practitioner
• (d) it is not excluded by the Uniform Rules from being an ILP
• Does not include a community legal service
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6. Definition of Unincorporated Legal Practice
§ ULP means an unincorporated body or group that satisfies the
following criteria—
§ (a) it is—
• (i) a partnership; or
• (ii) an unincorporated body or group, or an unincorporated
body or group of a kind, approved by the Council under
section 114 or specified in the Uniform Rules for the
purposes of this definition…..
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§ but does not include—
§ (e) a law firm; or
§ (f) a community legal service; or
§ (g) an incorporated legal practice
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7. Approved Business Structures
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§ S114 - Approval of Business Structures
§ Council may approve:
• (a) a corporation, or a kind of corporation, for the purposes
of the definition of ILP; or
• (b) an unincorporated body or group, or a kind of
unincorporated body or group, for the purposes of the
definition of ULP.
§ S115 - Rules may make provision with respect to any aspect
of ILPs & ULPs, so far as concerns the provision of legal
services or matters that affect or may affect the provision of
legal services.
§ Comment - S115 - Appropriate management systems by the
back door?
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8. Qualified / Unqualified Entities
§ Qualified entity means (a) an Australian legal practitioner; or
(b) a law practice…..
§ S 10
§ (1) An entity must not engage in legal practice in this
jurisdiction, unless it is a qualified entity.
§ Penalty: 250 units or imprisonment for 2 years, or both.
§ (2) An entity is not entitled to recover any amount, and must
repay any amount received, in respect of anything the entity
did in contravention of subsection (1). Any amount so received
may be recovered as a debt by the person who paid it.
§ (3) Exemptions…..
§ Comment - until s104 notice given a corporation is an
unqualified entity, not an ILP, therefore cannot recover legal
costs.
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Principal of a Law Practice
§ Principal of a law practice is an Australian legal practitioner who
§ (d) In the case of an ILP or an ULP—
§ (i) holds an Australian practising certificate authorising the holder
to engage in legal practice as a principal of a law practice; and
§ (ii) is
• (A) if the law practice is a company within the meaning of the
Corporations Act—a validly appointed director; or
• (B) if the law practice is a partnership—a partner; or
• (C) if the law practice is neither—in a relationship with the law
practice that is of a kind approved by the Council under
section 40 or specified in the Uniform Rules for the purposes
of this definition.
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10. Authorised Principal of a Law Practice
§ Authorised Principal - a principal who is authorised by his or
her Australian practising certificate to supervise others.
§ Note - S 47(6) provides that an Australian practising certificate
authorises the holder to supervise legal practice by others,
unless the certificate is subject to a condition requiring the
holder to engage in supervised legal practice or a condition to
the effect that the holder may not supervise legal practice by
others.
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Part 3.6 - ILPs & ULPs
§S103 - A law practice to which this Division applies is entitled to
engage in legal practice in this jurisdiction, and may also
provide other services.
§S104 Notice of intention
§(1) If an entity intends to engage in legal practice in this
jurisdiction as an ILP or ULP, it must give the DLRA a notice of
that intention within the period specified in the Uniform Rules.
§(2) An entity must not engage in legal practice in this jurisdiction
as an ILP or ULP if it has not given the designated local
regulatory authority the notice required under subsection (1).
§Civil penalty: 50 penalty units.
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Part 3.6 - ILPs & ULPs
§S104 Notice of intention continued
§(3) If an ILP or ULP applies ceases to engage in legal practice
in this jurisdiction, it must give the DLRA a notice of that fact
within the period specified in the Uniform Rules.
§Civil penalty: 50 penalty units.
§(6) A notice given by an entity under subsection (1) operates
until it gives notice under subsection (3).
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13. ILP Must Have an Authorised Principal
§ S 105 Principals
§ An ILP or ULP must have at least one authorised principal.
§ S 106 ILP or ULP without a principal
§ (1) An ILP or ULP contravenes this section if it does not have
any authorised principals for a period exceeding 7 days.
§ Civil penalty: 50 penalty units.
§ (2) If an ILP or ULP ceases to have any authorised principals,
the law practice must notify the DLRA within 7 days.
§ Civil penalty: 50 penalty units.
§ (3) An ILP or ULP must not provide legal services in this
jurisdiction during any period it is non-compliant with relevant
requirements under this section.
§ Penalty 250 penalty units
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14. Professional Indemnity Insurance
§ S 212 An ILP must not engage in legal practice in this
jurisdiction unless the ILP itself holds an approved insurance
policy for this jurisdiction and the policy covers the legal
practice in which it is engaged.
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Disclosure Obligations
§S 107 Disclosure obligations
§(1) This section applies if a person engages an ILP or ULP to
provide services that the person might reasonably assume to
be legal services and the law practice provides both legal
services and other services.
§(2) The law practice must, in accordance with the Uniform
Rules, make a disclosure to the person informing the person—
• (a) whether the services are legal services; and
• (b) of any other matters specified in the Uniform Rules for
the purposes of this section.
§(3) If a proper disclosure has not been made under this
section, the standard of care owed by the law practice in
respect of the service is the standard that would be applicable
if the service were a legal service that had been provided by an
Australian legal practitioner.
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Other Issues
§ S108 - DLRA can intervene in external administration
proceedings under Corps Act (displacement provision)
§ S109 - ILP subject to receivership under LPUL & external
administration under Corps Act application to Supreme Court
regarding dual appointment (displacement provision)
§ S110 - ILP subject to receivership under LPUL and also
external administration under other legislation
§ S111 Extension of vicarious liability relating to failure to
account, pay or deliver and dishonesty to ILP
§ Phoenix-ing of ILPs - LPUL silent
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Compliance Audit
§S256 (1) The DLRA may conduct, or appoint a suitably qualified
person to conduct, an audit of the compliance of a law practice
with this Law, the Uniform Rules and other applicable professional
obligations if the DLRA considers there are reasonable grounds to
do so, based on—
• (a) the conduct of the law practice or one or more of its
associates; or
• (b) a complaint against the law practice or one or more of its
associates.
§(2) The appointment of a suitably qualified person may be made
generally, or in relation to a particular law practice, or in relation to
a particular compliance audit.
§(3) A report of a compliance audit is to be provided to the law
practice concerned and may be provided to the DLRA.
§Note - Chapter 7 applies to a compliance audit.
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18. Management Systems Direction
§S 256 (1) The DLRA may give a management system direction
to a law practice if the authority considers it reasonable to do
so after the conduct of any examination, investigation or audit
referred to in Chapter 7.
§(2) A management system direction is a direction to a law
practice or class of law practices—
• (a) to ensure that appropriate management systems are
implemented and maintained to enable the provision of
legal services by the law practice, or by a law practice of
that class, in accordance with this Law, the Uniform Rules
and other professional obligations; and
• (b) to provide periodic reports to the DLRA on the systems
and on compliance with the systems.
§(3) A law practice must comply with a direction given to it.
§Link to S115?
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19. Uniform Rules for Legal Services
§ S 259 The rules may make provision with respect to:
§ (a) the provision of legal services by law practices or
particular categories of law practices; and
§ (b) the provision of other services by law practices in
circumstances where a conflict of interest relating to the
provision of legal services may arise and the imposition of
additional duties and obligations in those circumstances; and
§ (c) requirements for law practices in or in connection with
providing legal and other services referred to in paragraph (a)
or (b).
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20. Chapter 7 Investigatory Powers
§ S 368 (1) The objective of this Chapter is to set out powers
that are exercisable in connection with—
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• (a) trust records examinations; and
• (b) trust records investigations; and
• (c) compliance audits; and
• (d) complaint investigations.
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21. Investigatory Powers & ILPs
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§S 382(1) This Part applies to:
• (a) trust records investigations; and
• (b) compliance audits; and
• (c) complaint investigations:
§Conducted in relation to ILPs.
§S 383 - Examination of Persons - Exercise same power as
those conferred on ASIC by Div 2 of Part 3 of ASIC Act
§S 384 - Inspection of Books - Exercise the same powers as
those conferred on ASIC by sections 30(1), 34 and 37 to 39 of
the ASIC Act.
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Chapter 3 - Legal Practice
§ S30 The objectives of this Chapter are—
§ (a) to enable the provision of legal services through a range of
business structures; and
§ (b) to ensure that any particular type of business structure
does not hinder a law practice and the legal practitioners
within it from complying with this Law, the Uniform Rules and
the other professional obligations of Australian legal
practitioners; and
§ (c) to ensure that clients of law practices are adequately
protected regardless of the business structure through which a
law practice provides legal services; and
§ (d) to regulate the provision of legal services through
community legal services.
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Major Changes
§ Definition of law firm
§ Duties / responsibilities placed on LPDs now placed upon all
law practice principals.
§ No explicit requirement for ILPs to implement appropriate
management systems.
§ Management systems direction only after audit
§ Audit now conditional on trigger factors
• Conduct and / or Complaint
§ No power to audit “management of provision of legal
services…(including the supervision of officers &
employees…)”
§ Doubt that conduct equates to management
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Paddy Oliver
LL.B., M.Litt., M.B.A., GAICD
Managing Director
tel
03 9029 1632
mob
0431 174 124
email
poliver@lexcel.com.au
web
www.lexcel.com.au
twitter @lexcelconsult
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