The Society s submission. in response to the. Legal Practitioners (Miscellaneous) Amendment Bill 2012

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2 The Society s submission in response to the 4 May 2012 S:\Data\Admin\RPridmore\Legal Profession Bill\ 2012 Amendment Bill\D LP Amendment Bill Final.doc

3 2 Preamble: The Law Society of South Australia ( the Society ) was founded in Its continued existence is enshrined in Part 2 of Legal Practitioners Act 1981 ( the Act ) and it is the peak body representing the legal profession in this State. It currently has approximately 3,500 members. The Society welcomes the opportunity to make submissions in respect of the Legal Practitioners (Miscellaneous) Amendment Bill (the Bill). Introduction: The Bill proposes a number of selective changes, mainly affecting: 1 Terminology and definitions (Part 2 Section 5) 2 Company legal practices (section 16(2)) 3 Practising certificates (Part 3 Division 2A Amending, suspending or cancelling) 4 Costs disclosure and adjudication (Part 3 Division 8) 5 Community Legal Centres (Part 3 Division 3B) It also seeks to introduce the following new concepts: 6 Practising certificates Show Cause Events (Part 3 Division 2B) and immediate suspension in public interest (Part 3 Division 2C). 7 Legal Conduct Commissioner (Part 6 Division 2). 8 Professional Mentoring Agreement (Part 6 Division 8). However it has not adopted any national uniform provisions relating to a number of matters such as: 9 Trust money or regulation of trust money; 10 Registration of foreign lawyers in this jurisdiction; 11 Multi Disciplinary Partnerships; 12 External intervention re appointment of a receiver: 13 Investigatory powers. The Society urges the Attorney General to consider the Bill further and to seek where possible to achieve national uniformity. We address certain specific issues further: S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

4 3 A New Part 3 Divisions 2A, 2B and 2C Amending, suspending or cancelling a practising certificate Some of the provisions within Divisions 2A, 2B and 2C of the Bill cause concern as to their operation. Currently, the Society on delegation from the Supreme Court pursuant to section 52A of the Act exercises the functions conferred within Part 3 Division 2 (practising certificates) with the exception of sections 17A(6) and 17A(7) (appealing a decision of LPEAC or the Board of Examiners). Under the proposed section 20AC the grounds for amending, suspending or cancelling a practising certificate are: (a) the holder of the certificate is not a fit and proper person to hold the certificate; (b) the holder of the certificate does not have, or no longer has, professional indemnity insurance that complies with this Act in relation to the certificate; (c) if a condition of the certificate is that the holder of the certificate is or has been limited to legal practice specified in the certificate the holder of the certificate is engaging in legal practice that the holder is not entitled to engage in under this Act. In relation to (b) above the Act currently has a provision at section 19(1)(b) which does not appear to have been repealed and which states: 19 Insurance requirements (1) Where a scheme under section 52 is in force requiring legal practitioners to be insured against liabilities that may arise in the course of, or in relation to, legal practice.(b) if, at any time during the term of a practising certificate so issued or renewed, the holder of the certificate ceases to be insured against such liabilities as required by the scheme, the practising certificate will be taken to be suspended until the holder of the certificate obtains such insurance. Section 19(1)(b) is mandatory in its operation. The proposed section 20AC(b) would appear to provide for a desirable level of flexibility. The Society supports this but queries the intended interaction between the existing section 19(1)(b) and the proposed section 20AC. The Rules of the Legal Practitioners Education and Admission Council 2004 already contain a provision for the Legal Practitioners Education and Admission Council (LPEAC)/Board of Examiners to suspend or cancel a practising certificate where a practitioner has failed to comply with a condition (see Rule 3A.4). It is not clear whether the new section 20AC (c) is intended to replace this and vest the power in the Supreme Court. S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

5 4 Where the Supreme Court will be required to make such determination based on an application from the Society (e.g. section 20AD(1)), it would be illogical to then refer the power to amend, suspend or cancel a practising certificate on the grounds of section 20AC(b) and (c) back to the Society. The involvement of the Society, LPEAC and the Supreme Court needs to be clarified. The proposed Division 2A does not appear to empower the Supreme Court to amend or cancel a practising certificate to rectify an administrative error. We recommend the inclusion of such a provision. The provisions of the proposed Divisions 2A and 2C appear to contain powers requiring quasi judicial determinations (e.g. sections 20AC(a) and 20AJ(1)) as well as administrative powers (e.g. sections 20AC(b) and (c), 20AE, 20AF, 20AJ(2) and (5), and 20AK). There would need to be some consideration as to which powers could be delegated the Society and which ones should be retained by the Supreme Court. This will require a total review of all the powers currently delegated to the Society under Rule 14 of the Supreme Court Admission Rules If it is intended that there will be no assignment of the Supreme Court s powers or functions to the Society, then there needs to be adequate provision requiring the Supreme Court to notify the Society where the Court has decided to: (a) (b) (c) Amend, suspend or cancel a practising certificate under section 20AD(3); or Immediately suspend a practising certificate under section 20AJ(2); or Revoke an amendment, suspension or cancellation under section 20AF(2) or section 20AJ(5). B Other practising certificates There is no provision for different categories of practising certificates nor is there any requirement for lawyers practising in government or within corporations to hold practising certificates. One other matter that we raise at this time is the concept of Volunteer Practising Certificates. It is widely known that existing services provided by Community Legal Centres and legal aid are unable to meet growing demand, especially in civil matters, so there is an increasing need to find innovative ways to assist the marginalised and disadvantaged as well as charitable and not for profit bodies in the community. Whilst we note that there is a lower fee for the renewal of low fee practising certificates, this may still be an impediment to the very useful contribution by retired and other non practising lawyers from renewal of their practising certificates simply to perform volunteer work including to enable Community Legal Centres to meet latent demand for legal services for the growing number of clients who cannot afford private legal fees. It may also enable government and corporate lawyers to practise as S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

6 5 volunteers in circumstances where restrictions on their practising certificate might otherwise prevent this (subject to their employer s agreement of course). As well as providing very valuable pro bono services to the community, pro bono work is also a good way for retired lawyers and other lawyers who have stopped working for various reasons to find purpose in their retirement from the profession, keep their skills up to date, maintain contacts within professional circles and create new contacts within the community. By removing barriers to retired and other lawyers acting on a pro bono basis, the community can tap into the expertise of a pool of willing volunteers whose experience and skills would otherwise simply atrophy. C Legal Practitioners Fidelity Fund new section 57(4) The Bill renames the Legal Practitioners Guarantee Fund as the Legal Practitioners Fidelity Fund. Its functions remain basically the same as under the Act, however these functions differ from those stipulated under existing national and interstate provisions. There is a logical reason for this because in South Australia the Fund is used for a variety of purposes other than just meeting claims and associated costs. In Victoria and New South Wales there are two separate funds the Fidelity Fund and a Public Purpose Fund. Unlike South Australia, the Fidelity Fund is only used for meeting claims and associated costs and the Public Purpose Fund is used for other purposes such as making payments to Legal Aid Fund (and the Fidelity Fund), meeting costs incurred by the Society Council, Legal Services Board and the Legal Services Commissioner in carry out their functions, and meeting costs in relation to external interventions. A similar regime exists in Queensland, the difference being that the Public Purpose Fund is instead called the Legal Practitioner Interest on Trust Accounts Fund. The Society supports the maintenance of the current position in South Australia. We note the proposed section 64A and support its inclusion. It is unclear from the Bill whether the Society is expected to fund the additional regulatory requirements under the new Part 3 provisions or whether there should be a further amendment to section 57(4) to enable the Society to seek funding for these matters from the Fidelity Fund. The Society submits that the Fund is the appropriate source of this funding. D Trust Money The current definition of trust money as contained in section 5(1) and (4) of the Act is adequate in that the definition is broad enough to capture most situations. However, it would be beneficial to define what an "investment is and what a single client trust account is because practitioners usually have difficulties distinguishing between the two and that often results in them not complying with their recording obligations. An alternative, and a more desirable outcome, would be to adopt the concept of controlled money which is currently used in other jurisdictions and contemplated under the Draft National Law. This concept would help to ensure that all money that S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

7 6 comes under a practitioner s control is properly accounted for since the handling and recording requirements of controlled money are more stringent. Therefore, in order to move closer to national uniformity, it would be more desirable to adopt the entire trust account and trust money provisions contained in the Draft National Law than to adopt only parts of them. This is the Society s preferred option. We attach herewith a spreadsheet which identifies the current position in South Australia as well as those that exist nationally. If it is intended that there is to be no change to the trust accounting provisions at all at this stage, then the Society requests the following amendments (appearing in bold) to the current sections 31(9) and 53(11) of the Act for sake of clarity and practicality: Section 31(9) A legal practitioner who contravenes subsections (1) and (3) is (apart from any penalty incurred under subsection (8)) liable to pay the Society interest on the amount of those trust moneys at the prescribed rate for the period of the default. Section 53(11) If the withholding or withdrawal of money is not justified, or exceeds an amount that could be reasonably justified, the legal practitioner is personally liable to pay to the Society, for the credit of the statutory interest account, interest on the amount withheld or withdrawn, or the amount of the excess, (as the case requires), at the prescribed rate from the date of the withholding or withdrawal until the amount on deposit in the combined trust account is restored to the level required by this section. The reasons for these changes are set out in the second column of pages 10 and 19 of the attached spreadsheet. E Costs The Society does not oppose the general thrust of the costs provisions in the Bill, as set out in Division 8. It accepts the rationale of the changes as largely adopting the substance of the provisions of the 2004 uniform national legislation, subject to some variations to take account of South Australian practices and acknowledges the desirability of a greater uniformity between the costs rules of the States. The Society notes that the legislation does increase the level of disclosure as to costs required by solicitors, but does not object to this. Insofar as the amendments require the Society to draft appropriate disclosure instruments, the Society is happy to do this. Indeed, prior to the introduction of the Bill the Society was in the process of preparing a precedent retainer agreement, and launching a campaign to educate solicitors as to their costing disclosure obligations (see the article "Lawyers Costs: When are they fair and reasonable" appearing in the February and March 2012 issue of the Law Society Bulletin). S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

8 7 However, there are some particular areas of the Bill where the Society believes that drafting changes should be made. In part, this is because the Bill was based upon the original 2004 national legislation which has itself been amended in some States to take account of practical problems which have been found to arise in its implementation. The Society submits that South Australia should take advantage of the experience of other States, to make appropriate proactive amendments to the Bill to avoid these problems occurring in South Australia. Timing of implementation The disciplinary provisions of the legislation will affect only that small minority of practitioners who become subject to disciplinary proceedings, and will not require a considerable change in solicitors' working practises, so there is no reason why they should not come into effect promptly on the enactment of the Bill. However, the position is otherwise with regard to the costs provisions. These will require an extensive reworking of law firm procedures. All law firms will have to redraft their retainer agreements to ensure that they comply with the Bill, and there will also have to be changes in matters such as the form of bills that are sent out and enforcement procedures when bills are not paid. It is the intention of the Society to mount a major publicity campaign to make solicitors aware of the changes and of their responsibility to make sure that their conduct complies with the new legislation. This will involve the drafting of a new precedent retainer agreement compliant with the new legislation, publicity in the Society Bulletin and elsewhere, and the holding of one or more continuing education sessions to educate practitioners. The Society submits that it is desirable to enable sufficient time to be given to educate practitioners as to compliance with the new rules, and unless sufficient time is allowed for this there will be a risk that many firms, particularly smaller or country practitioners, may not be prepared for the legislation when it comes in force, leading to considerable teething problems. For these reasons, the Society requests that it be provided that the costs provisions (only) of the legislation not come into force until six months after the Bill is enacted. The Society's view is that six months would be a reasonable period for it to properly educate the profession as to the increased disclosure obligations that they will be assuming under the new legislation. Proposed Section 42ZA(1) The proposed section 42ZA(1) provides that the Supreme Court may order a costs agreement to be set aside if it "is satisfied that the agreement is not just or reasonable". This replaces the current test under section 42(7) the Legal Practitioners Act which states that the agreement may be set aside if the Supreme Court is not satisfied that it is "fair and reasonable". The "fair and reasonable" terminology has been held by the Supreme Court (see McNamara v Kasmeridis (2007) 97 SASR 129) to encapsulate the common law test which required that a solicitor's costs agreement be both procedurally fair and substantively reasonable. There are several centuries of learning on this test and it well understood. Further, it is a robust test, which has led to many solicitors' fee S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

9 8 agreements being set aside for insufficient disclosure (as in McNamara v Kasmeridis itself). To change the wording from "fair and reasonable" to "just or reasonable" will give rise to an issue as to whether the change in terminology is intended to effect a substantive change in the law. To begin with, it is difficult to see why the word "or" is used rather than the previous "and". It is presumably not intended that an agreement can be allowed if it is reasonable but unjust, or just but unreasonable, but the use of "or" rather than "and" could lead to such an argument. More significantly, in the absence of an articulated reason why "just" is both different to and preferable to fair, the Society sees no reason why a well established test should have its terminology changed so that there will be doubt for a while (presumably until the matter is resolved by a Full Court decision) as to whether the test has substantively changed. It is noteworthy that in Victoria, where the 2004 legislation originally provided for a test of "just, fair and reasonable" by amending legislation in 2008, the word "just" was deleted so as to return the test to the traditional fair and reasonable one (see section 53 of the Victorian Legal Profession Amendment Act 2007, amending section of the original legislation). The Society understands that this was due to concerns about the uncertainty of the new test and a desire to make it clear that it had not been intended to change the wellestablished traditional test. Given that need has been seen in a jurisdiction where this change has been made to return to the old test, the Society suggests that in section 42ZA the words "just or reasonable" should be replaced by "fair and reasonable". The proposed Section 42ZC(2) The proposed section 42ZC(2) provides that a bill or its covering letter must be signed by a legal practitioner before being sent out. This did appear in the original 2004 legislation and this proved to give rise to practical problems. Many sole practitioners found that when they went on leave from the office (perhaps for an overseas trip) they were not able to settle bills by telephone with the clerk running the office in their absence, and have them signed by the clerk as was previously allowable. Thus, until they could physically come into the office, it was not possible for bills to go out. This caused cash flow problems for small practices when the solicitor was on leave from the office for a month or so (such as over the Christmas holidays). The problems with this led in Victoria to section 54 of the Legal Profession Amendment Act 2007, which provided that a bill or cover letter may be signed by a legal practitioner or by an employee of the legal practice. To avoid the problems which have arisen in Victoria, the legislation should be amended to this affect. Possible duplication The Bill proposes a dual jurisdiction model by which the Supreme Court can adjudicate under section 42ZA, but the Commissioner can deal with costs disputes under section 77O providing they are less than $10, (It is noted in passing that this is less than the $25,000 limit in other states). However, the legislation does contemplate that a client who has elected to have a matter dealt with by the Commission, and who has lost, may then bring fresh proceedings in the Supreme Court. The Victorian legislation (see S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

10 9 section and 4.2.7(4)(b)) provides that a client has to elect which remedy to seek, and cannot pursue, for example, a remedy before the Commissioner and then go to the Supreme Court anew. However, this is contemplated by the current Bill (see section 42ZS(4) and (5)). Given that the Commission's jurisdiction is limited to disputes for under $10,000.00, it is unclear whether an absolute right should be given to have the matter thrashed out in two tribunals. The Society would not oppose a provision that provided that an appeal might be made from the Commissioner's determination to the Supreme Court, with leave of the Supreme Court, to allow for the occasional situation in which the Commissioner might have to make a ruling on an important disputed point of law. Own motion stays The proposed section 42ZB(3) does not allow a Court or a Tribunal before proceedings are brought in contravention of section 42ZB(1) to stay proceedings of their own motion, but only on the application of a party. The legislation in other States does enable a Court or a Tribunal to stay on its own application. It is submitted that such a jurisdiction should exist, as there may be cases where a party is unable to bring an application (perhaps because they are for example missing or mentally incompetent). It is submitted that a Court in which legal proceedings to recover costs have been brought which is concerned that the proceedings have been brought in breach of section 42ZB should be able to stay on its own accord. This is consistent with the general rule that a Court can of its own motion raise a point as to illegality which is apparent on the face of the pleadings. F Community Legal Centres The Society notes that the Aboriginal Legal Rights Movement ( ALRM ) has made a submission on this topic. Their submission suggests that further amendments be made and the Society supports these submissions. G Professional Indemnity Insurance The Society notes that Lawguard has made a submission seeking an amendment to section 52(5)(c) of the Act. The Society supports this submission. With the emergence of firms with offices in more than one State or Territory, it is important that the South Australian Scheme be able to offer insurance cover to legal practices associated with South Australian practitioners. This is an important aspect of ensuring that so far as practicable those firms/practitioners who practice on the national stage do so with a minimum of complexity. H Business Structures The Society is extremely disappointed that the Bill does not seek to adopt existing legislation in other jurisdictions relating to business structures. For reference, we attach a schedule which identifies the relevant provisions as they exist/are proposed across the country. S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

11 10 As a minimum, we would ask that the provisions which exist in NSW, Victoria and Queensland be adopted. They have now operated for between 5 to 8 years without any reported concerns. There is no plausible reason why practitioners in South Australia should be at a competitive disadvantage when quoting/tendering for work when compared with their interstate counterparts. Further, there is no plausible reason why South Australian firms should not be able to adopt a nationally uniform business structure. The Society notes that you have received a number of submissions on this topic from a diverse range of interested parties supporting the introduction of alternate business structures. This demonstrates the interest in this issue, not only locally but also nationally. I Unsatisfactory professional conduct and professional misconduct We note the proposed definitions and support them and in doing so we note that they achieve national uniformity. J Legal Conduct Commissioner The Society notes the content of the proposed Division 2. To date we have not received any adverse feedback from our Members to this concept. We do however make the following observations, which are of a technical nature: (a) The proposed section 77K(1)(g) states that the Commissioner may make an order imposing specified conditions on the practising certificate. However there is no provision requiring the Commissioner to notify the Society when such order is made. Currently matters affecting a practitioner s practising certificate have been delegated by the Supreme Court pursuant to s 52A and Rule 14 of the Supreme Court Admission Rules 1999 ( the Rules ) to the Society. These provisions state: 52A Rules of Supreme Court may assign functions or powers (1) The Supreme Court may, by rules of court, assign any functions or powers conferred on or vested in it under this Part (a) to a specified person or body; or (b) to a person occupying a specified office or position. 14. Assignment of Functions and Powers Pursuant to section 52A of the Act, the functions and powers of the Supreme Court: (a) under Division 2 of Part 3 of the Act (other than those conferred by section 17A(6) and (7) of the Act) and Divisions 4 and 5 of Part 3 of the Act are assigned to the Law Society. S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

12 11 where Part 3 Division 2 relates to practising certificates (excluding s 17A(6) and (7) appealing a decision of LPEAC or the Board of Examiners). Part 3 Division 4 relates to provisions regulating legal practice by companies. Part 3 Division 5 relates to Trust Account and Audit. Since there are no proposed changes to s 52A or the Rules, the new s 77K should be amended to require the Commissioner to notify the Society when he/she has made an order affecting a practitioner s practising certificate. This should apply, as a general rule, to any other like provision in Divisions 2A, 2B and 2C. (b) In relation to the proposed sections 77K(3)(c) and (4)(d), clarification is required as to who will bear the cost of the medical examination, counselling service or rehabilitation program the Commissioner or the legal practitioner whose conduct is under investigation. (c) The proposed section 77N is a positive change to the current position because at the moment there is no requirement for the Board to provide any written reasons to the Society in response to matters reported to the Board pursuant to the current s76(1a) by the Society where the Board has determined that there is no evidence of unsatisfactory or unprofessional conduct. (d) We query the basis for including in the proposed section 89B (c)(iv) sections (A) and (C), which relate to supervisors and managers. Traditionally the appointment of a manager to a legal practice or a supervisor to the practice s trust account pursuant to sections 45 and 44 of the Act (respectively) were made from a regulatory rather than a disciplinary perspective. These appointments are not intended to punish practitioners but rather to assist them in winding up their practice in time of need and also to protect client interests. In the past the appointments were made because the practitioner had died or was suffering from a medical condition or, due to financial hardship, was unable to properly attend to the practice. If the appointments are intended to be disciplinary they we fear that the Society may face resistant and lack of cooperation from the practitioner/practice under such appointment. If these appointments are still intended to be regulatory, then (A) and (C) should be removed from subsection (c)(iv). However, if they are intended to be disciplinary, then (A) and (C) should be amended to reflect sections 44 and 45 of the Act, as suggested below. (A) a supervisor to the trust account of the practitioner s practice pursuant to section 44; S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

13 12 (C) a manager to the practitioner s practice pursuant to section 45; (e) We query the purpose of the proposed section 89(G), particularly given that it goes to the issue of whether or not the practitioner is a fit and proper person to practise the profession of law. K Professional mentoring agreements The Society welcomes this initiative and supports the concept as currently proposed. L Society s right of audience Conclusion Section 13 of the Act permits the Society to appear before any court, commission or tribunal in certain circumstances. During the course of two recent interventions, the question of whether or not the Society has a right to appear in matters of general public importance was raised. The Society asks that the existing section 13 be amended to remove this doubt and to expressly the Society with this power. We thank you for the opportunity to comment and ask that you consider to, where possible, move South Australia to even closer uniformity with interstate practice. S:\Data\Admin\RPridmore\Legal Profession Bill\2012 Amendment Bill\D LP Amendment Bill Final.doc

14 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts TRUST MONEY AND TRUST ACCOUNTS Comments The proposed Bill 2012 has not made any amendment to Part 3 Division 5 Trust Account and Audits of the current Legal Practitioners Act 1981 ( the Act ). The trust accounting regime under the Model Bill 2007, Draft National Law and interstate Legal Profession Acts are slightly different to the regime in South Australia in that they have all adopted the concept of controlled money. In order to achieve national consistency the preferred option is to adopt the entire trust accounting provisions under the Draft National Law. However, given that South Australia has a different statutory deposit regime (Legal Practitioners Combined Trust Account) to the rest of the country, the Model Bill provisions may be a better option. The alternative option is to amend only the problematic provisions in the current Act and incorporate some useful provisions from the national laws. The table below represents the alternative option. Obviously any amendments affecting the regulations would need to be addressed accordingly in the regulations. Division 5 Trust accounts and audit Terminology/Definitions 30A Interpretation (1) Except as otherwise provided, in this Division legal practitioner means (a) a local legal practitioner; or (b) an interstate legal practitioner who has established an office in this State; or (c) a person who would be a legal practitioner described in paragraph (a) or (b) but for the person's failure to renew his or her practising certificate or interstate practising certificate. [Section 4(6)] law practice means (a) a legal practitioner who is a sole practitioner; or (b) a firm of legal practitioners; or (c) an incorporated legal practitioner; or (d) a community legal centre; Part 2 relating to Trust Money and Trust Account refers to the following terms: law practice means (a) an Australian legal practitioner who is a sole practitioner; or (b) a law firm; or (c) a multi-disciplinary partnership; or (d) an incorporated legal practice; or (e) a community legal centre; The same terms are used but the definitions are slightly different, as shown below. law practice means: (a) a sole practitioner; or (b) a law firm; or (c) a community legal service; or (d) an incorporated legal practice; or (e) an unincorporated legal practice. The same terms are used but the definitions are slightly different between the states. (2) A reference in this Division to trust money received by a legal practitioner includes, in the case of a local legal practitioner, trust money received outside of the State (other than trust money that the practitioner pays into a trust account or otherwise deals with in accordance with the law of another State). where sole practitioner means a legal practitioner who practises the profession of the law on his or her own account; The term principal is not defined. where sole practitioner means an Australian legal practitioner who engages in legal practice on his or her own account; A principal of a law practice is an Australian legal practitioner who is (a) a sole practitioner (in the case of a law practice constituted by the practitioner); or where sole practitioner means an Australian legal practitioner who engages in legal practice on his or her own account; A principal of a law practice is an Australian legal practitioner who: (a) in the case of a sole practitioner is the sole practitioner; or (b) a partner in the law practice (in the case of a law firm); or (b) in the case of a law firm is a partner in the firm; or (c) a legal practitioner director in the law practice (in the case of an incorporated legal practice); or (c) in the case of a community legal service is a supervising legal practitioner of the service referred to in section 3.8.2; or (d) a legal practitioner partner in the law practice (in the case of multi-disciplinary partnerships). (d) in the case of an incorporated legal practice or an unincorporated legal practice: where An Australian legal practitioner is an Australian lawyer who holds a current local practising certificate or a current interstate practising certificate; and (i) holds an Australian practising certificate authorising the holder to engage in legal practice as a principal of a law practice; and Page 1 of 19

15 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts (ii) is: (A) if the law practice is a company within the meaning of the Corporations Act a validly appointed director of the company; or (B) if the law practice is a partnership a partner in the partnership; or (C) if the law practice is neither has a relationship with the law practice that is of a kind approved by the Board or specified in the National Rules for the purposes of this definition. where Australian legal practitioner means an Australian lawyer who holds a current Australian practising certificate. Australian practising certificate means a practising certificate granted to an Australian lawyer under Part 3.3 of this Law as applied by the Legal Profession National Law Act of this jurisdiction or any other jurisdiction. The term associate is not defined An associate of a law practice is (a) an Australian legal practitioner who is (i) a sole practitioner (in the case of a law practice constituted by the practitioner); or (ii) a partner in the law practice (in the case of a law firm); or (iii) a legal practitioner director in the law practice (in the case of an incorporated legal practice); or (iv) a legal practitioner partner in the law practice (in the case of a multidisciplinary partnership); or (v) an employee of, or consultant to, the law practice; or (b) an agent of the law practice who is not an Australian legal practitioner; or (c) an employee of the law practice who is not an Australian legal practitioner; or (d) an Australian-registered foreign lawyer who is a partner in the law practice; or An associate of a law practice means a person who is one or more of the following: (a) a principal of the law practice; (b) a partner, director, officer, employee or agent of the law practice; (c) an Australian legal practitioner who is a consultant to the law practice; (d) a person who shares the receipts, revenue or other income arising from the law practice. Page 2 of 19

16 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts (e) a person (not being an Australian legal practitioner) who is a partner in a multidisciplinary partnership; or (f) an Australian-registered foreign lawyer who has a relationship with the law practice, being a relationship that is of a class prescribed by the regulations. Trust money 5 Interpretation (1) trust money means money received by a legal practitioner to which the practitioner is not wholly entitled both at law and in equity, but does not include money received by a practitioner in the course of mortgage financing; (4) A reference in this Act to trust money received by a legal practitioner includes a reference to (a) money coming under the direct control of the legal practitioner, whether or not by the exercise of an express power or authority or by operation of law; and (b) money paid on the advice of the legal practitioner to a person in a prescribed relationship with the legal practitioner, but only if the money comes under the indirect control of the legal practitioner through the prescribed relationship or otherwise; and No change to the definition of trust money. Proposal In the event that controlled money is adopted, the definition of trust money should be amended to reflect the Model Bill. Accordingly the terms controlled money, transit money and money subject to specific powers as well as sections 193 and 194 of the Model Bill should also be adopted. Slightly different to the definition in s 192 which states 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; Similarities Transit money is analogous to direct payments under the Legal Practitioners Regulation 20. Equivalent to definition in s Equivalent to definition in NSW s 243, VIC s and QLD s 237 (c) money in relation to which the legal practitioner (whether directly or through a person in a prescribed relationship with the legal practitioner) has a power of disposal exercisable jointly and severally with the person on whose behalf it was received or a nominee of the person. (5) For the purposes of subsection (4), a person will be taken to be in a prescribed relationship with a legal practitioner if the person is (a) a partner of the legal practitioner (whether or not the person is a legal practitioner); or (b) an employee or agent of the legal practitioner, or a director of the legal practitioner (being a body corporate); or (c) a body corporate, or a member of a body corporate, partnership, syndicate or joint venture, in which the legal practitioner or a transit money means money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice; Money subject to specific powers is similar to trust money referred to under s 5(4)(a) of the LPA (SA). Differences Trust money includes controlled money. controlled money means money received or held by a 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; Note See section 207(6), which prevents pooling of controlled money. Page 3 of 19

17 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts person referred to in paragraph (a), (b) or (f) has a beneficial interest; or (d) a co-trustee of the legal practitioner; or The Model Bill contains the following additional, provisions regarding trust money: No equivalent provision. No equivalent provision (e) a related body corporate (within the meaning of the Corporations Act 2001 of the Commonwealth) of a person referred to in a preceding paragraph that is a body corporate; or (f) the legal practitioner's spouse or domestic partner or a child, grandchild, sibling, parent or grandparent of the legal practitioner or of the legal practitioner's spouse or domestic partner; or (g) a person of a class prescribed by the regulations. 193 Money granted or provided under contract to community legal centre Money granted, or provided under contract, to a community legal centre to enable the centre to deliver legal services to the community or a section of the community is not trust money or controlled money for the purposes of this Act. 194 Money involved in financial services or investments (1) Money that is entrusted to or held by a law practice for or in connection with (a) a financial service provided by the practice or an associate of the practice in circumstances where the practice or associate is required to hold an Australian financial services licence covering the provision of the service (whether or not such a licence is held at any relevant time); or (b) a financial service provided by the practice or an associate of the practice in circumstances where the practice or associate provides the service as a representative of another person who carries on a financial services business (whether or not the practice or associate is an authorised representative at any relevant time), is not trust money for the purposes of this Act. (2) Without limiting the operation of subsection (1), money that is entrusted to or held by a law practice for or in connection with (a) a managed investment scheme; or (b) mortgage financing, undertaken by the practice is not trust money for the purposes of this Act. (3) Without limiting the operation of subsections (1) and (2), money that is entrusted to or held by a law practice for investment purposes, whether on its own account or as agent, is not trust money for the purposes of this Act, unless Unlike the Model Bill, s deals with the meaning of trust money in the following manner Meaning of trust money (1) For the purposes of this Law, trust money is money entrusted to a law practice in the course of or in connection with the provision of legal services by the law practice, and includes: (a) money received by the law practice on account of legal costs in advance of providing the services; and (b) controlled money received by the law practice; and (c) transit money received by the law practice; and (d) money received by the law practice, that is the subject of a power exercisable by the law practice or an associate of the law practice, to deal with the money for or on behalf of another person. (2) However, trust money does not include: (a) money received and held by a barrister, on account of legal costs for legal services, in advance of the provision by the barrister of the legal services (and see section (2)); or [This provision should not be adopted in SA] (b) money entrusted to or held by a law practice for or in connection with: (i) a managed investment scheme; or (ii) mortgage financing; undertaken by the law practice; or (c) money received by a law practice for NSW s 244, VIC s and QLD s 238 are equivalent to s 194 of the Model Bill. NSW also contains the following additional provision: Section 246 (4) Money received for costs not trust money Money received in the course of or in connection with the provision of legal services by a law practice for or on behalf of another person for the payment of costs due to the practice (including costs that have been awarded by a court, tribunal or other body that has power to award costs), is not trust money for the purposes of this Act. Page 4 of 19

18 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts (a) the money was entrusted to or held by the practice (i) in the ordinary course of legal practice; and (ii) primarily in connection with the provision of legal services to or at the direction of the client; and legal services that have been provided and in respect of which a bill has been given to the client; or (d) money received by a law practice for or in connection with a financial service it provides in circumstances where the practice or an associate of the law practice: (b) the investment is or is to be made (4) In this section (i) in the ordinary course of legal practice; and (ii) for the ancillary purpose of maintaining or enhancing the value of the money 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. Australian financial services, authorised representative, financial service and financial services business have the same meaning as in Chapter 7 of the Corporations Act 2001 of the Commonwealth. (i) is required to hold an Australian financial services licence covering the provision of the service; or (ii) provides the financial service as a representative of another person who carries on a financial services business; or (e) money received by a law practice for investment purposes unless: (i) the law practice received the money in the ordinary course of legal practice and primarily in connection with the provision of legal services at the direction of the client; and (ii) 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; or (f) money declared by the National Rules not to be trust money. Proposal It would be useful to adopt this provision since the Professional Standards Section is often required to determine whether or not money received by a practitioner is trust money. This provision would validate the Section s role. 195 Determinations about status of money (1) This section applies to money received by a law practice if the Society considers that there is doubt or a dispute as to whether the money is trust money. (2) The Society may determine that the money is or is not trust money. Similar to s Difference Under s the National Legal Services Commissioner, as opposed to the Society, makes the determination about the status of trust money. NSW s 245, VIC s and QLD s 239 are equivalent to s 195 of the Model Bill. (3) The Society may revoke or modify a determination under this section. (4) While a determination under this section is in force that money is trust money, the money is taken to be trust money for the purposes of this Act. (5) While a determination under this section is in force that money is not trust money, the money is taken not to be trust money for the purposes of this Act. Page 5 of 19

19 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts (6) This section has effect subject to a decision of a court made in relation to the money concerned. Proposal For sake of clarity, it would be useful to adopt this provision. 198 When money is received (2) For the purposes of this Act, a law practice receives money when (a) the practice obtains possession or control of it directly; or Similar to s NSW - s 248, VIC s and QLD s 242 are equivalent to s 198 of the Model Bill. (b) the practice obtains possession or control of it indirectly as a result of its delivery to an associate of the practice; or (c) 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. (3) For the purposes of this Act, a law practice or associate is taken to have received money if the money is available to the practice or associate by means of an instrument or other way of authorising an ADI to credit or debit an amount to an account with the ADI, including, for example, an electronic funds transfer, credit card transaction or telegraphic transfer. For sake of clarity, it would be useful to adopt this provision. 202 Barristers not to receive trust money A barrister is not, in the course of practising as a barrister, to receive trust money. Equivalent to s Equivalent to NSW s 252 and QLD s 246 but QLD has the following additional provision (2) Subsection (1) does not (a) prevent a barrister receiving money in payment of legal services that the barrister has performed; and (b) limit the bar association s power to make legal profession rules in relation to banking arrangements for fees received in advance by a barrister. Page 6 of 19

20 LEGAL PRACTITIONERS ACT 1981, MODEL LEGAL PROFESSION BILL 2007, DRAFT LEGAL PROFESSION NATIONAL LAW DEC 2010 AND LEGAL PROFESSION ACTS IN NSW, VIC & QLD Model Legal Profession Bill 2007 Draft Legal Profession National Law Legal Profession Acts Trust Account trust account means an account maintained at an ADI by a legal practitioner under Part 3 Comments The term trust account under the LPA (SA) is the same as a general trust account but there is no requirement that the trust account must be maintained by an approved ADI. Proposal In the event that controlled money is adopted, the definitions of general trust account and controlled money account should also be included. The Model Bill makes the following distinctions: trust account means an account maintained by a law practice with an approved ADI to hold trust money; general trust account means an account maintained by a law practice with an approved ADI for the holding of trust money received by the practice, other than controlled money or transit money; controlled money account means an account maintained by a law practice with an ADI for the holding of controlled money received by the practice; The same terms and definitions are used. The same terms and definitions are used. 31 Disposition of trust money (1) Subject to subsection (2), a legal practitioner must, as soon as practicable after receipt of any trust money in the course of practice, deposit the money in a trust account and must not withdraw or permit it to be withdrawn except as authorised by this Part. Proposal In the event that controlled money is adopted, s 204 should be included to differentiate between the treatment of general trust money and controlled money. Equivalent to s Certain trust money to be deposited in general trust account (1) Subject to section 211, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless Section is similar to s 204(1) of the Model Bill. NSW s 254(1), VIC s (1) and QLD s 248(1) are similar to s 204(1) of the Model Bill. (a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account; or (b) the money is controlled money; or (c) the money is transit money; or (d) 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. (2) Where at or before the time that a legal practitioner receives trust money the practitioner is given a written direction by the person entitled to the money to dispose of it in a manner specified in the direction, it is lawful for the legal practitioner to act in accordance with that direction. (2) Subject to section 211, a law practice that has received money that is the subject of a written direction mentioned in subsection (1)(a) must deal with the money in accordance with the direction (a) within the period (if any) specified in the direction; or Section is similar to s 204(2) of the Model Bill. Similar to NSW s 254(2), VIC s (2) and QLD s 248(2) are similar to s 204(2) of the Model Bill. (b) subject to paragraph (a), as soon as practicable after it is received. Page 7 of 19