The provisions for external intervention are in Chapter 6 of the Legal Profession Uniform Law (Uniform Law) to ensure that an appropriate range of options is available for intervention in the business and professional affairs of law practices for the purpose of protecting the interests of the general public; clients of the law practices; and the law practices and others, including the owners and employees of law practices, so far as their interests are not inconsistent with those of the general public and clients.
For these purposes, the Law Society of NSW Council may, where the circumstances warrant, resolve to appoint an External Intervener to a law practice, being a Supervisor of trust money, Manager or Receiver. Each External Intervener has a different role and it will depend on what action needs to be taken to achieve the objects of the Chapter as to which External Intervener is appointed in any particular case. These circumstances can arise through a number of events including the death or incapacity and the suspension or cancellation of the practising certificate of the sole principal of a law practice.
Supervisor of trust money
A supervisor of trust money of a law practice has the powers and other functions of the law practice in relation to the trust money. The law practice continues to provide legal services under the supervision of the principal practitioner, however, following service of a Notice of Appointment of a Supervisor of trust money, the bank at which the law practice trust account is operated must ensure that no funds are withdrawn or transferred from a trust account of the law practice unless the withdrawal or transfer is made by cheque or other instrument drawn on that account and signed by the supervisor or a nominee of the supervisor. Such an appointment arises where the Council has been satisfied that the standard in which trust monies were being dealt with by the law practice fell below the standards required by the Uniform Law and the Rules.
A manager for a law practice may carry on the law practice and may do all things that the law practice or a legal practitioner associate of the law practice might lawfully have done. In the event of an appointment of a manager, a legal practitioner associate of the practice who is specified or referred to in the notice must not participate in the affairs of the practice except under the direct supervision of the manager. Again, if the law practice, the subject of the appointment, conducts a trust account, then following service of the Notice of Appointment, the bank at which the law practice trust account is operated must ensure that no funds are withdrawn or transferred from a trust account of the law practice unless the withdrawal or transfer is made by cheque or other instrument drawn on that account and signed by the manager or a nominee of the manager.
The appointment of a manager would normally follow the death or incapacity of a sole principal where no succession arrangements had been put in place or where the practising certificate of the sole principal of the law practice has been suspended or cancelled or where it had expired without being renewed. Succession planning is discussed elsewhere on this website via the Career Hub. Whilst a manager has the authority under the Uniform Law to carry on the law practice, in most cases the appointment of a manager will result in the winding up of the law practice. Whilst the Uniform Law requires a manager to liaise with the executor of the estate of a deceased sole principal of a law practice, it would be rare that a manager would be able to facilitate a sale of the law practice for the benefit of the estate as the interest of the clients must take priority and cannot be prejudiced by the delay that would necessarily be incurred in the administration of the deceased’s estate.
The role of a receiver for a law practice is to be the receiver of regulated property of the law practice and to wind up and terminate the affairs of the law practice. After service on a law practice of a notice of the appointment of a receiver for the law practice and until the appointment is terminated, a legal practitioner associate of the law practice who is specified or referred to in the notice must not participate in the affairs of the practice. The appointment of a receiver is made by the Supreme Court upon application by the Law Society Council where the Council has resolved that grounds exist warranting the appointment. Those grounds exist usually where there has been a misappropriation of trust monies.
Fees, costs and expenses
The fees, costs and expenses of an external intervener are payable in accordance with the Legal Profession Uniform General Rules 2015 and payable by and recoverable from the law practice concerned. As a result, it is usually not a financially viable alternative to succession planning discussed above.
The Uniform Law also makes provision for the protection of external interveners in the performance of their functions and for the confidentiality of the affairs of the clients, This coverage of external intervention is intended as an outline only and should not be relied upon as advice on the law and rules as they apply to external intervention.