Information kit for Multi-disciplinary partnerships ( MDPs ) Version 6.0 28-06-2011 Practice support
The (the Society ) has prepared this information kit to assist legal practitioners in understanding the laws regulating legal practices forming partnerships with other businesses in Queensland. The purpose of this document is to provide general guidance - it is not intended to be comprehensive or constitute legal, structuring, financial, tax or duty advice. The Society accepts no responsibility for the accuracy of any of the information or opinions contained in this information kit, or for any loss flowing from its use. You should obtain your own legal and financial advice about the contents of this document, including whether you should form an MDP. Guide to trust money and trust accounts Version 1.0 28-06-2011 page 2
Table of Contents 1. Commentary on Legal Profession Act 2007 (Qld) ( LPA ), Chapter 2, Part 2.7, Divisions 1, 8 & 9 and Legal Profession Regulation 2007 (Qld) ( LPR ), Part 2.7...4 1.1 Introduction... 4 1.2 Nature of an MDP (s.144)... 4 1.3 Other definitions (s.110 and schedule 2)... 4 1.4 Conduct of MDPs (s.145)... 4 1.5 Notice (s.146)... 5 1.6 Obligations of legal practitioner partners (s.147 and 148)... 5 1.7 Actions of non-alp partner (s.149)... 6 1.8 Obligations and privileges of ALP partners/employees (s.150)... 7 1.9 Conflicts of interest (s.151)... 7 1.10 Disclosure obligations (s.152 and 153)... 7 1.11 Application of legal profession rules (s.154)... 8 1.12 Advertising (s.155)... 8 1.13 Sharing of receipts (s.156)... 8 1.14 Disqualified persons (s.157)... 8 1.15 Prohibition on partnership with particular non-alp partner (s.158)... 9 1.16 Undue influence (s.159)... 9 1.17 Practitioners obligations not affected (s.160)... 9 2. Frequently Asked Questions... 10 Guide to trust money and trust accounts Version 1.0 28-06-2011 page 3
1. Commentary on Legal Profession Act 2007 (Qld) ( LPA ), Chapter 2, Part 2.7, Divisions 1, 8 & 9 and Legal Profession Regulation 2007 (Qld) ( LPR ), Part 2.7 1.1 Introduction The provisions of chapter 2, part 6 of the Legal Profession Act 2004 (Qld) never commenced. They have been amended and form chapter 2, part 2.7, divisions 1, 8 and 9 of the Legal Profession Act 2007 (Qld) (the LPA ), which commenced on 1 July 2007. As a result, partnerships may now provide legal services in conjunction with non-legal services in Queensland (by way of a multi-disciplinary partnership ( MDP )). This is one part of the process of creating a national legal market in Australia. 1.2 Nature of an MDP (s.144) An MDP is a partnership between one or more Australian legal practitioners ( ALPs ) and one or more persons who are not ALPs, if the partnership business includes the provision of legal services in Queensland as well as other services (s.144(1)). However, a partnership of only one or more ALPs and one or more Australian-registered foreign lawyers is not an MDP (s.144(2)). There is nothing in the legislation to prevent an ALP from forming an MDP with a corporation. However, given that a partnership is the relation which subsists between persons carrying on a business in common with a view of profit (s.5(1) of the Partnership Act 1891 (Qld) underlining added), it would be prudent to consider whether the corporation would therefore be engaging in legal practice and accordingly be an incorporated legal practice (and therefore also have to comply with divisions 2-7 of part 2.7). 1.3 Other definitions (s.110 and schedule 2) Certain terms are defined for the purposes of part 2.7 of the LPA (s.110). Of particular note is the term legal practitioner partner ( LPP ), which is defined as a partner of an MDP who is an ALP holding a principal practising certificate. Other defined terms are contained in schedule 2 to the LPA. 1.4 Conduct of MDPs (s.145) An ALP may be in partnership with a person who is not an ALP, regardless of whether the partnership business includes the provision of legal services (s.145(1),(2)). A regulation may prohibit an ALP from being in partnership with a person providing a specified service or conducting a specified business, if the partnership business includes the provision of legal services (s.145(3)). However, no such regulation has yet been made under this subsection. All practitioners should note that s.24 of the LPR prohibits a law practice from providing legal services to a person relating to a transaction if the practice has provided services, as a PAMDA licensee or interstate real estate agent, to the person for the transaction. (Note: the term PAMDA licensee is defined in s.24(7) of the LPA, and the term interstate real estate agent is defined in s.24(3) of the LPR.) Guide to trust money and trust accounts Version 1.0 28-06-2011 page 4
1.5 Notice (s.146) Before an ALP starts providing legal services in Queensland as a partner in an MDP, the practitioner must give notice to the Society of his/her intention to do so. The notice must be in QLS Form 27 (LPA) - Notice of Intention by Australian Legal Practitioner to Provide Legal Services as a Partner in a Multi-disciplinary Partnership, which is available on the Society s website (http://www.qls.com.au/content/lwp/wcm/connect/qls/for+the+profession/ Law+Practice+Structures/Multi-disciplinary+Partnerships). A failure to give the notice is an offence. There is no prescribed time frame for giving this notice (except that it must be given before providing legal services in Queensland). The Society s view is that a fresh notice must be given whenever the partnership is reconstituted or the ALP starts providing legal services for another MDP. We are also of the view that a partner in an MDP who has given an equivalent notice interstate must still give notice to the Society in QLS Form 27 (LPA) before providing legal services in Queensland. (In contrast, other interstate-registered ALPs are entitled to practice in Queensland without notifying the Society.) Practitioners would be aware that further notice requirements are contained in s.18a of the Administration Rule 2005 (Qld). Firstly, a holder of a practising certificate who intends to enter into a new partnership, or dissolve an existing partnership, must notify the Society before this occurs. Secondly, a holder of a Queensland practising certificate must notify the Society of any changes to the information shown on the practising certificate application/renewal form, or any amended details subsequently notified, within 7 days of the changes occurring. There is no prescribed form for these notices. 1.6 Obligations of legal practitioner partners (s.147 and 148) As outlined in paragraph 1.3 above, an LPP is defined as a partner of an MDP who is an ALP and holds a principal practising certificate (s.110). Each LPP is, for the purposes of the LPA, responsible for the management of the legal services provided by the MDP in Queensland (s.147(1)). Each LPP must ensure that appropriate management systems are implemented and kept to enable the provision of legal services by the MDP: under the professional obligations of ALPs and other obligations under the LPA; and so that the obligations of LPPs, and ALPs employed by the MDP, are not affected by other partners and employees (s.147(2)). The professional obligations of an ALP are defined as including duties to the Supreme Court, obligations in connection with conflicts of interest, duties to clients (including disclosure), and ethical rules the ALP must observe (s.110). The term appropriate management systems is not defined in the LPA. However, the view of the Society and the Legal Services Commission ( LSC ) is that the following 10 areas of sound legal practice (known as the 10 commandments ) need to be addressed to ensure that an MDP has appropriate management systems in place: 1.6.1 negligence (providing for competent work practices); 1.6.2 communication (providing for effective, timely and courteous communication); 1.6.3 delay (providing for timely review, delivery and follow up of legal services); 1.6.4 liens/file transfers (providing for timely resolution of document/file transfers); 1.6.5 cost disclosure/billing practices/termination of retainer (providing for shared understanding and appropriate documentation on commencement and termination of retainer, along with appropriate billing practices during the retainer); Guide to trust money and trust accounts Version 1.0 28-06-2011 page 5
1.6.6 conflict of interests (providing for timely identification and resolution of conflicts of interests, including when acting for both parties or acting against previous clients, as well as potential conflicts which may arise in relationships with debt collectors and mercantile agencies, or conducting another business, referral fees and commissions etc); 1.6.7 records management (minimising the likelihood of loss or destruction of correspondence and documents through appropriate document retention, filing, archiving etc and providing for compliance with requirements regarding registers of files, safe custody, financial interests); 1.6.8 undertakings/orders etc (providing for undertakings to be given, monitoring of compliance and timely compliance with notices, orders, rulings, directions or other requirements of regulatory authorities such as the LSC and courts); 1.6.9 supervision of practice and staff (providing for compliance with statutory obligations covering licence and practising certificate conditions, employment of persons and providing for proper quality assurance of work outputs and performance of legal, paralegal and non-legal staff involved in the delivery of legal services); and 1.6.10 trust account regulations (providing for compliance with the Trust Accounts Act 1973 (Qld); chapter 3, part 3.3, division 2 of the LPA; and proper accounting procedures). If you would like more information about appropriate management systems, the Society ran a course on this topic on 1 June 2007. The course materials, speakers papers and DVD are available for purchase from the Society. Enquiries may also be made of Giles Watson, the QLS Legal Practice Consultant, on (07) 3842 5853. Each of the following is capable of constituting unsatisfactory professional conduct or professional misconduct by an LPP: unsatisfactory professional conduct or professional misconduct of an ALP employed by the MDP (s.148(1)(a)); conduct of a non-alp partner that adversely affects the provision of legal services by the MDP (s.148(1)(b)); and the unsuitability of a non-alp partner to be a member of a partnership that provides legal services (s.148(1)(c)). A regulation may provide that a breach of a provision of a regulation is capable of constituting unsatisfactory professional conduct or professional misconduct by an LPP (s.161(3)(b)) (although none has been made at this time). An LPP must ensure that all reasonable action available to him/her is taken to deal with any unsatisfactory professional conduct or professional misconduct of an ALP employed by the MDP (s.148(2)). See also: paragraph 1.10 below regarding disclosure obligations; and paragraph 1.12 below regarding advertising. 1.7 Actions of non-alp partner (s.149) A partner of an MDP who is not an ALP does not contravene the LPA merely because: 1.7.1 the partnership business includes the provision of legal services; 1.7.2 the partner receives a fee/gain/reward for business of the partnership that is the business of an ALP; Guide to trust money and trust accounts Version 1.0 28-06-2011 page 6
1.7.3 the partner holds out/advertises/represents himself/herself as a member of a partnership where the partnership business includes the provision of legal services; and/or 1.7.4 the partner shares the receipts of business of the partnership that is the business of an ALP. This is subject to any other provision that expressly applies to a non-alp partner of an MDP. 1.8 Obligations and privileges of ALP partners/employees (s.150) An ALP who provides legal services in the capacity of a partner/employee of an MDP: 1.8.1 is not excused from complying with the professional or legal obligations of an ALP; and 1.8.2 does not lose the professional privileges of an ALP (s.150(1)). As regards the term professional obligations, see paragraph 1.6 above. The term professional privileges is not defined in the LPA. The law relating to client legal privilege, or other legal professional privilege is not affected by the fact that an ALP is acting in the capacity of partner/employee of an MDP (s.150(2)). See also paragraph 1.10 below regarding disclosure obligations. 1.9 Conflicts of interest (s.151) This section applies for the application of any law or the legal profession rules relating to conflicts of interest in relation to the conduct of an ALP who is an LPP or employee of an MDP (s.151(1)). The interests of the MDP or any partner of the MDP are also taken to be those of the ALP concerned, in addition to any other interests of the practitioner (s.151(1)). LPPs need to be vigilant in implementing and keeping appropriate management systems to identify and deal with such imputed conflicts. Legal profession rules may provide for additional duties and obligations in connection with conflicts of interest arising out the conduct of an MDP (s.151(2)). However, no such rule has been made at this time. 1.10 Disclosure obligations (s.152 and 153) If a person engages an MDP to provide services that he/she/it might reasonably assume to be legal services, then each LPP, and any ALP employee who provides the services on behalf of the MDP, must ensure that the client is given a written disclosure notice: 1.10.1 setting out the services to be provided; 1.10.2 stating whether all the legal services will be provided by an ALP (and if not, identifying which of them will not be provided by an ALP, and stating the status/qualifications of the person who will provide the legal services); and 1.10.3 stating that the LPA applies to the provision of legal services, but not non-legal services (s.152(1),(2),(3)). A failure to comply with this section is an offence (s.153(2)). If such disclosure is not made, then the standard of care owed by the MDP in relation to the service is the standard that would apply if it had been provided by an ALP (s.153). Guide to trust money and trust accounts Version 1.0 28-06-2011 page 7
1.11 Application of legal profession rules (s.154) The Legal Profession (Solicitors) Rule 2007 (Qld) (the Conduct Rule ) applies to an LPP, or an ALP employed by an MDP, in the same way it applies to any other ALP (unless the rule provides otherwise). The Conduct Rule commenced on 1 July 2007 (replacing both the Legal Profession (Solicitors) Rule 2006 (Qld) and the Solicitor s Handbook). 1.12 Advertising (s.155) Restrictions on advertising by ALPs also apply to advertising by MDPs about the provision of legal services (s.155(1)), unless MDPs are expressly excluded (s.155(4)). For the purposes of disciplinary proceedings, an advertisement about the provision of legal services is taken to have been authorised by each LPP (s.155(3)). Such restrictions include the following: 1.12.1 S.66 of the Personal Injuries Proceedings Act 2002 (Qld), which restricts advertising of personal injury services (see the guidelines on the LSC s website at http://www.lsc.qld. gov.au/policies.htm for more information). 1.12.2 R.36 of the Conduct Rule, which provides as follows: 36. A solicitor must not advertise the solicitor s expertise or practice if that advertising:- 36.1 is false; 36.2 is misleading or deceptive, or likely to mislead or deceive; 36.3 is vulgar, sensational, or otherwise as would bring or be likely to bring a court, the solicitor, another solicitor or the legal profession into disrepute; 36.4 uses the words accredited specialist or a derivative of those words, including the associated post-nominals, unless the solicitor is an accredited specialist, in which case the accredited specialist must use those words, or a derivative of those words, including the associated post-nominals, in compliance with the agreement entered into by the accredited specialist with the Queensland Law Society concerning the use of those words, or derivates of those words, and the associated post-nominals; 36.5 uses the accredited specialist logo (reproduced below) except as permitted by the agreement entered into by the accredited specialist with the Queensland Law Society concerning use of the logo. The Accredited Specialist logo: 1.13 Sharing of receipts (s.156) Nothing in the LPA prevents an LPP, or an ALP employee, from sharing with a non-alp partner receipts, revenue or other income arising from the provision of legal services (except that they must not be shared with a disqualified person see paragraph 1.14 below). 1.14 Disqualified persons (s.157) Disqualified person is defined in schedule 2 to the LPA as, inter alia, a person whose name has been removed from and not restored to an Australian roll; whose practising certificate is cancelled/suspended; who has been refused a renewal of a practising certificate and has not since been granted one; who is the subject of an order prohibiting a law practice from employing him/her; who is the subject of an order prohibiting an ALP from being his/her Guide to trust money and trust accounts Version 1.0 28-06-2011 page 8
partner in a business including the ALP s practice; and/or who has been prohibited under s.158 from being a partner of any ALP in relation to any business that includes the provision of legal services. An LPP must not knowingly: 1.14.1 be a partner of a disqualified person in an MDP; 1.14.2 share with a disqualified person the receipts, revenue or other income arising from the provision of legal services by the MDP; or 1.14.3 employ or pay a disqualified person in connection with the provision of legal services by the MDP. 1.15 Prohibition on partnership with particular non-alp partner (s.158) This section applies to a person who is not an ALP, and is/was a partner of an ALP (s.158(1)). The Supreme Court may prohibit an ALP from being a partner of such a person in relation to a business that includes the provision of legal services, if: 1.15.1 the person is not a fit and proper person to be a partner; 1.15.2 the person has been found guilty of conduct that would be unsatisfactory professional conduct or professional misconduct if the person were an ALP; or 1.15.3 for a corporation the corporation has been disqualified from providing legal services in Queensland under s.132 of the LPA (banning of incorporated legal practices see paragraph 1.18 of the information kit on incorporated legal practices), or there are grounds for disqualifying the corporation from doing so (s.158(2)). A regulation may provide for the publication and notification of orders made under this section (s.158(5)). S.13 of the LPR has been made for this purpose. 1.16 Undue influence (s.159) It is an offence to cause or induce (or attempt to cause or induce): 1.16.1 an LPP of an MDP; or 1.16.2 an employee of an MDP who provides legal services and is an ALP, to contravene the LPA or the person s professional obligations as an ALP. As regards the term professional obligations, see paragraph 1.6 above. It appears that this section is aimed at ensuring non-alp partners do not attempt to interfere in the discharge of an ALP s professional obligations. 1.17 Practitioners obligations not affected (s.160) Except as provided by part 2.7, none of its provisions affect any statutory obligation imposed on an LPP, or an ALP employed by an MDP, in his/her capacity as an ALP. Guide to trust money and trust accounts Version 1.0 28-06-2011 page 9
2. Frequently Asked Questions Q. What are the advantages of engaging in legal practice as an MDP? A. The advantages include: broader knowledge/skill base from non-lawyers with complementary skills, resulting in less risk and better quality service; the convenience for clients of a one stop shop ; the ability of lawyers to form partnerships with corporations; cost savings as economies of scale reduce staff, rent and other overheads; a ready source of work from complementary business(es); ability to reward non-alp staff (eg. accountants) by offering them partnership; ability to attract staff with complementary skills (eg. rain-makers and relationship builders) by offering them partnership; and less scope for communication error than where different entities are involved in a project. Q. What are the disadvantages of engaging in legal practice as an MDP? A. The disadvantages include: possible difficulty for non-alp partners and employees in understanding the professional and ethical obligations of ALPs; and pressure from non-alp partners to run the MDP on a more commercial basis, which could possibly conflict with the professional and ethical obligations of the LPPs and employees who are ALPs; and possible confusion about whether legal professional privilege applies when legal services are mixed with non-legal services. Q. What services does my professional indemnity insurance cover? A. Clause 2.3 of the Solicitors Professional Indemnity Insurance Certificate of Insurance for 2007-2008 states Provided further that where the law practice is an ILP or a MDP, the assured shall be indemnified only against civil liability arising exclusively from the provision of legal services and shall not be indemnified against any liability arising from the provision of advice or other services which consist of or include non-legal advice or services. The Indemnity Rule is available on the Society s website (at http://www.qls.com.au/content/ lwp/wcm/connect/qls/for+the+profession/rules+%26+guidelines+%26+accreditation/ Legislation+and+Rules). The master policy and certificate of insurance for 2007-2008 are also available on our homepage (qls.com.au) under What s New?. Q. Are there any restrictions on how I may structure my law practice? A. The Society s view is that your law practice must be structured so it falls within the definition of law practice in schedule 2 of the LPA. For further information, see the Law Practice Structures page on our website (at www.qls.com.au under For the Profession ). Q. Who can I contact at the Society for further information about MDPs? A. Enquiries may be made of Giles Watson, the QLS Legal Practice Consultant, on (07) 3842 5853. Guide to trust money and trust accounts Version 1.0 28-06-2011 page 10
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