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Only use solicitors certificates that comply with rule 11
We regularly receive calls from practitioners raising issues about a lender, usually a bank, with the most common being the use of solicitors’ certificates which do not comply with rule 11 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015.
Practitioners asked to sign solicitors’ certificates evidencing advice to proposed signatories about loans, mortgages and guarantees should refer the lender to rule 11 and section 39 of the Uniform Law and only sign a certificate that complies with rule 11.
Section 39 provides that:
A person must not cause or induce or attempt to cause or induce a law practice or a legal practitioner associate of a law practice to contravene this Law, the Uniform Rules or other professional obligations.
Requesting a practitioner provide a certificate which does not comply with rule 11, is caught by section 39. Up to 100 penalty units may be imposed for a breach of this section.
High Court decision underlines vulnerability of financial agreements
The recent High Court case of Thorne v Kennedy  HCA 49 further illustrates why family law financial agreements are fraught with risk. In that case, the plurality comprising Kiefel CJ, Bell, Gageler, Keane and Edelman JJ held two substantially identical financial agreements voidable due to undue influence and unconscionable conduct.
The parties met online and the wife, an Eastern European woman, moved from the Middle East to Australia to marry. The husband was a 67-year old property developer who had substantial assets and was divorced with three adult children.
The wife received independent legal advice from an accredited family law specialist that the first agreement was ‘entirely inappropriate’ and she should not sign it. Despite that emphatic advice, she signed the agreement four days before the wedding at the husband’s insistence. He said the wedding would not go ahead if she failed to sign the agreement. By that time, the wife’s family had travelled to Australia for the wedding.
The wife then signed the second agreement in similar terms a month after the wedding, despite again being urged by her lawyer not to sign it.
The plurality upheld the primary judge’s findings that ‘every bargaining chip and every power was in (the husband’s) hands’ and the wife was powerless to act in any way other than to sign the agreements. If the relationship ended she would not be entitled to remain in Australia and she had little to return to overseas.
Notably, the plurality found the primary judge was correct to consider that a party signing a financial agreement where its terms were grossly unreasonable can be an indicium of undue influence.
This case serves as a reminder that financial agreements can be vulnerable to challenge even where both parties received independent legal advice. Further information on the risks of preparing financial agreements can be found in LPLC’s practice risk guide Focusing on family law.
Cost estimates | Client brochure
Many clients have never retained a lawyer before and do not know how to work effectively with them or understand what a cost estimate is. This lack of understanding sometimes contributes to claims against law firms that could have been avoided or minimised if there had been better communication between the firm and the client about working together and how cost estimates are set and why they change.
To help practitioners manage their clients’ expectations as well as explain both the client’s and lawyer’s roles and obligations in the relationship LPLC has developed a sample information brochure on cost estimates to illustrate how estimates could be explained. It describes what costs estimates are, how they are calculated, what affects the estimates and how they will be kept informed about them.
LPLC has also developed a brochure Working together – roles and obligations. It outlines what the law firm will do when acting for a client including when they will stop acting for a client. It also explains the law firm’s expectations of the client including at the first appointment, follow up appointments and during the course of the matter.
The information is available in a Microsoft Word version so firms can tailor the wording to suit their needs and insert their own branding. Firms are also welcome to use the sample brochure if they so wish.
The brochures can be included in introductory information sent to the client, given to them in the initial contact, loaded on to the firm’s website and available in reception.
LPLC encourages firms to invest time into thinking creatively about ways to better communicate with their clients with a view to better managing the relationship and retainer with their clients.
Deputy takes the helm
The Legal Practitioners’ Liability Committee welcomes its new CEO.
Justin Toohey took over as CEO of the LPLC on 1 January following the retirement of Miranda Milne, who had held the role since 1996. Previously deputy CEO and head of claims since 2005, he is committed to strengthening LPLC’s relationships with all its stakeholders. “I look forward to taking LPLC into this next stage of its development,” Mr Toohey said.
“I want to ensure LPLC continues to lead the way in providing comprehensive professional indemnity insurance and risk management services to Victorian solicitors and barristers as well as most of Australia’s large national law firms.
“Conducting a legal practice these days is challenging. It is a buyer’s market and clients are increasingly demanding that firms unbundle their legal services and only do limited scope work. But the client’s expectation nevertheless remains that the lawyer is fully responsible for any mishaps.
“Throw into this environment the skills required to run a legal practice such as matter project management, cost budgeting and digital technology and we see practitioners juggling many competing demands.
“LPLC is also an important voice of the profession – in recent times we have taken active leadership in relation to the introduction of electronic conveyancing, verification of identity and development of a practice management course for new principals. More challenges lie in responding to class actions and litigation funders, looming anti-money laundering reforms and ever-increasing cyber security risks.”
Mr Toohey is a professional indemnity lawyer who combines more than 30 years’ experience in both private legal practice and at senior executive level with member-based insurance schemes at LPLC and at IBL Ltd for the Australian Institute of Architects.
“Before joining LPLC I served as a panel solicitor to LPLC during my days in private legal practice,” he said. “And this gives me intimate knowledge of how the organisation functions from different perspectives.”
With this knowledge, Mr Toohey is well aware of the support LPLC provides to the profession.
“I started my legal career in 1986 and grew up with LPLC. I still remember a near scrape with a claim when I was a young practitioner. An abiding memory is the support given to me by the committee to defend an unfounded allegation. It made a big impression on me and is something I have always kept in mind in my interactions with practitioners when doing panel legal work for LPLC and later as the head of Claims.
“Every year LPLC receives 450 to 550 notifications of claims and circumstances from practitioners. Hundreds of others contact us to discuss a troublesome matter or situation. Often these inquiries raise complex professional ethics dimensions and practitioners can be in high states of stress and vulnerability.
“The frontline claims and risk management assistance provided by LPLC’s experienced solicitors and support staff is highly valued, particularly by sole practitioners and small firms with less support networks than those working in large firms. The value of an empathetic ear and clear, direct advice cannot be underestimated.”
Mr Toohey is keen to expand LPLC’s program of visiting law firms in their own business environments. There is high growth in the number of sole practitioners opening up new legal practices, from a diversity of ethnic backgrounds.
“This is bringing different cultural norms into our legal marketplace, while at the same time increasing competition between firms for the same fee income. It is a breeding ground for practitioners to risk dabbling beyond their areas of expertise and increasing their exposure to professional risk, and we want to reinforce these potential risks as well as how to avoid or at least minimise a claim,” he said.
Among Mr Toohey’s key achievements at LPLC to date are the successful implementation of barristers into the LPLC scheme since 2005; the leadership of LPLC’s high class claims management team; and the development of strong and effective working relationships with large and small firms.
“We will continue to reciprocate the profession’s enormous goodwill towards LPLC and be open and available to work with all our stakeholders in supporting and protecting the profession.”
LPLC chair and Russell Kennedy principal John Corcoran welcomes the appointment.
“I’m confident that with Justin at the helm, LPLC will continue to deliver a secure and comprehensive insurance scheme for the legal profession, and for the benefit of consumers of legal services,” Mr Corcoran said.
“I look forward to working with Justin as I am sure our insured firms and practitioners as well as our reinsurers and other key service providers will be.”