Running your practice FAQs
The following questions and answers - covering Files, Incorporation of legal practices, and Miscellaneous FAQs - are a general guide only and are not exhaustive. They are not a substitute for thorough research having regard to the relevant facts and current law. Care should be taken to check the current law including whether any case has been appealed or overruled.
The Law Society on behalf of itself and its employees, disclaims any liability for direct, indirect or consequential loss arising in connection with the use of the content of these questions and answers.
Handing over a current file to another solicitor
Where a practitioner's retainer is terminated before the completion of the client's business to which it relates and the client instructs another practitioner to take over the conduct of the client's business reference should be made to the Revised Professional Conduct and Practice Rules. The relevant Rules are 8 and 29.
Rule 8 outlines the basis upon which a practitioner holds a client's documents. However, there is much more to consider when considering the destruction of a file and this is the subject of comments in a later FAQ. Rule 29 deals with a handover procedure.
To assist with the handover procedure the Society has prepared a Tripartite Deed (March 2011). If the solicitor's costs are not paid or their payment is not satisfactorily secured, consideration might be given to an application to the Supreme Court pursuant to Section 728 of the Legal Profession Act 2004 (LPA 2004). You should also be aware of Section 595 LPA 2004, which deals with pre-complaint powers where a client is denied access to documents.
Normally, a file consists of at least two parts:
- The solicitor's part should be retained by the solicitor. However if the solicitor is contemplating releasing a copy of the solicitor's part to the client the solicitor should first consider consulting his or her professional indemnity insurer.
- To the extent possible the solicitor should keep a copy of the client's part at the solicitor's expense and should provide the original to the client. See Riley Solicitors Manual paragraph 3175.10
It is possible that there is material on a file that belongs to someone other than the solicitor or the client and when released to the appropriate person, where possible a copy should be kept at the solicitor's expense.
Commentary can be found in Riley Solicitors' Manual, commencing paragraph 3145.
Handing over a current workers compensation matter
When the applicant worker changes solicitors during the course of a workers compensation matter then it should be noted that Section 116 of the Workplace Injury Management and Workers Compensation Act 1998 provides:
"116 Solicitor/client costs in compensation proceedings
(cf former s.122)
(1) The legal representative or agent of a person claiming compensation under this Act is not entitled
(a) to recover from the person any costs in respect of the claim, or
(b) to claim a lien in respect of those costs on, or deduct those costs from, the sum awarded or agreed as compensation,
unless those costs are awarded by the Compensation Court ..."
Following the amendments, commencing on 01 January 2002, to the Workplace Injury Management and Workers Compensation Act 1998 Section 116 applies "… only in respect of existing claim matters." (See Section 111A).
However, see the definition of "existing claim" and "existing claim matter" in Sections 4 and 250 of the Workplace Injury Management and Workers Compensation Act 1998.
Section 343 of the Workplace Injury Management and Workers Compensation Act 1998, which commenced on 01 January 2002 provides:
"343 Restrictions on recovery of solicitor/client costs
(1) The legal representative or agent of a person in respect of a claim made or to be made by the person:
(a) is not entitled to recover from the person any costs in respect of the claim unless those costs are awarded by the Commission, and
(b) is not entitled to claim a lien in respect of those costs on, or deduct those costs from, the sum awarded, ordered or agreed as compensation unless those costs are awarded by the Commission …"
The prohibition does not apply to documents on the file. A lien can be claimed over a file. See the case of Stegnajaic v Coshott (unreported) Court of Appeal decision 1986.
However, as the former solicitor cannot claim costs, including disbursements, from the client in a Workers Compensation matter, the former solicitor should, despite any entitlement under Rules 8 and 29 of the Revised Professional Conduct and Practice Rules, facilitate the hand-over of the file to the present solicitor.
Being mindful of the constraints that apply, the Law Society's Tripartite Agreement might be adapted for use in such matters.
See also Riley Solicitors Manual paragraph 18,065.5.
Does a lien apply to all papers and documents a solicitor holds or only the files where costs remain unpaid?
A retaining lien or general lien permits solicitors to retain until their costs and charges as solicitors are paid certain property belonging to a client that has lawfully been received by a solicitor in their capacity as solicitor for the client. The lien can extend to costs apart from those owing in respect of the items held.
See Riley Solicitors Manual paragraphs 18,000.5 and 18,000.10 and also Quick on Costs paragraph 7.1190.
However, there are limitations and exceptions to the above.
As to moneys in an account held on a client's behalf, see Riley Solicitors Manual paragraph 18,015.10 and Law of Costs by G. E. Dal Pont paragraph 26.19.
Section 261 Legal Profession Act 2004 provides:
"(1) A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account of the practice for a person:
(a) exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practitioner …"
However, whilst the quantum of the lien is stated in Section 261 Legal Profession Act 2004 the money available for a lien requires detailed consideration. Contrast the provisions of Section 261 with the repealed provisions of Section 61(3)(d) of the Legal Profession Act 1987, which provided:
"(3) This section:
(d) does not prevent a solicitor from exercising a general retaining lien for unpaid costs and disbursements in respect of money in a trust account or a controlled money account (other than money received subject to an express direction by the client with respect to the purposes for which the money is to be applied), and….."
This was in keeping with the common law position that a lien cannot be claimed in respect of documents delivered or moneys paid to a solicitor for a specific purpose. See Riley Solicitors Manual paragraph 18,030.
Until such time as there is a decision on this aspect of Section 261 Legal Profession Act 2004 the safer view would be to treat any lien being claimed pursuant to Section 261 Legal Profession Act 2004 as being limited by the common law position shown in the repealed Section 61(3)(d) Legal Profession Act 1987
A retaining or general lien is to be distinguished from a particular lien or fruits of the action lien see Riley Solicitors Manual, paragraph 19,000.
There is further material on liens in the following publications:
- Quick on Costs - Thomson Law Book Co;
- Law of Costs by G. E .Dal Pont;
- Cordery on Solicitors - 9th Edition, Lexis Nexis Butterworths;
- Riley Solicitors Manual
How long must a solicitor retain a file after a matter is completed?
There is an article in the Law Society Journal, May 2006 at page 44 headed 'Storage of files and documents'. It is essential that you read this article. However, BUT NOT SO AS TO REDUCE ANY TIMES shown in the Law Society Journal article, the following should be considered in conjunction with that article:
The following Revised Professional Conduct and Practice Rules.
Rule 8 - Ownership of Clients' documents - Termination of retainer. Also see Riley commencing paragraph 3145
Rule 13 - File register
Rule 16 - Inspection of register
Clause 86 - Legal Profession Regulation 2005. Register of powers and estates in relation to trust money
Clause 177 - Legal Profession Regulation 2005. Advice on and handling of documents. This clause was preceded by clause 142A Legal Profession Regulation 2002 which clause commenced on 15 November 2002. This Regulation contains a prohibition on a practitioner giving advice on, or otherwise dealing with, a document in a manner that will result in the document being unavailable or unusable for the purpose of certain legal proceedings.
- Consider all taxation aspects
- Consider all corporations law aspects
- Review any office policy on destruction regularly
- Comments relating to the keeping of material in relation to the preparation of wills can be found in publications including, but not limited to, the Wills Probate and Administration Service NSW by Mason and Handler and Hutley's Australian Wills Precedents
- Consider your practice and whether or not there are reasons for keeping material longer than usual, for example, including but not limited to, clause 167 Legal Profession Regulation 2005 in respect of the retention of documents in relation to Mortgage Practices and Managed Investment Schemes
- Consider any other reason why documents should be kept, for example, any other relevant legislation
- Check each file carefully for documents that should not be destroyed, for example, wills, certificates of title, and any other important documents and deal with them appropriately
- Keep infants/minors' files for at least 7 years after they reach majority
- See clauses 63, 77, 89 and 90 Legal Profession Regulation 2005 and related provisions of the Legal Profession Act 2004 in relation to trust accounts and controlled moneys
- Give careful consideration before acting
- See Section 643 Legal Profession Act 2004 - in relation to receivers, and Section 675 Legal Profession Act 2004 in relation to a trust account investigation, trust account examination, complaint investigation or compliance audit and evidence of a contravention
- A point to be emphasised in relation to Rule 8 is that the Rule does not in itself give a solicitor the right to destroy the file. As it includes material that belongs to a client no one except the client can authorise its destruction. You should have an agreement in place with your client in relation to the destruction of material
This answer does not exhaustively cover this subject.
What documents in a file belong to the client?
This matter is the subject of Revised Professional Conduct and Practice Rule 8 and is dealt with in Riley Solicitors Manual commencing at paragraph 3145.
If a solicitor gives the file to a client, is the solicitor obliged to retain a copy of the file?
Normally, a file consists of at least two parts.
Firstly, the solicitor's part. This should be retained by the solicitor. However if the solicitor is contemplating releasing a copy of the solicitor's part to the client the solicitor should first consider consulting his or her professional indemnity insurer.
Secondly, the client's part. To the extent possible the solicitor should keep a copy at the solicitor's expense and should provide the original to the client.
See commentary in Riley Solicitors Manual paragraph 3175.10
It is possible that there is material on a file that belongs to someone other than the solicitor or the client, and when released to the appropriate person, where possible a copy should be kept at the solicitor's expense.
What is the position regarding the file of a completed matter when the solicitor has acted on joint instructions?
Unless a signed authority is provided by all the clients in the matter the file must not be handed to one of the clients. Each client is entitled to either inspect the file or, alternatively, at the client's expense (subject to disclosure and agreement), be provided with a copy of the file, keeping in mind the above comments in relation to ownership of the various parts of the file. Caution should be exercised that each client is entitled to the material requested. Consider if a client should receive independent advice before providing any such authority.
Can a solicitor charge a retrieval fee for a file in storage?
This matter is the subject of Rule 8 of the Revised Professional Conduct and Practice Rules and such a charge cannot be made otherwise than in accordance with Rule 8.
Rule 8.2.2 provides:
A practitioner is not entitled to recover from the client any costs for storage of documents as required by this Rule and is not entitled to charge any costs for retrieval from storage as requested by or on behalf of the client unless such costs have been disclosed to the client pursuant to the disclosure requirements set out in Part 3.2 of the Legal Profession Act 2004 or with the informed consent of the client.
Rule 8.2.3 provides:
'Costs' in this Rule includes fees, charges, disbursements, expenses and remuneration.
Can a solicitor’s practice be incorporated?
Yes. It had been possible to incorporate a solicitor corporation under Part 10A of the Legal Profession Act 1987 in NSW since March 1991. A new regulatory regime for incorporated legal practices was established in July 2001 under the Legal Profession Amendment (Incorporated Legal Practices) Act 2000. The provisions of the Legal Profession Act 2004, which concern incorporated legal practices are in effect very similar, reinforcing the policy established by the 2001 amendments to the Legal Profession Act 1987, of regulating and imposing obligations on actual legal practitioners while at the same time freeing-up the business structures under which they operate.
Further enquiries regarding incorporation should be directed to the Law Society's Regulatory Compliance Support Unit.
What is a penalty unit that is referred to in NSW Acts?
Section 17 of the Crimes (Sentencing Procedure) Act 1999 provides:
"17 Penalty Units Unless the contrary intention appears, a reference in any Act or statutory rule to a number of penalty units (whether fractional or whole) is taken to be a reference to an amount of money equal to the amount obtained by multiplying $110 by that number of penalty units."
Care should be taken in each case to determine whether or not the contrary intention appears and it would be prudent to check each time when considering the amount of a penalty whether or not Section 17 has been varied.
Can a solicitor communicate with another solicitor's client?
Usually, no. However, Rule 31 of the Revised Professional Conduct and Practice Rules permits very limited communications in the circumstances shown in that Rule.
What can be done about undue delay in the delivery of judgments?
This is dealt with in the Law Society Journal, April 2002, page 38. However, there has been a variation in relation to the delivery of judgments protocol in respect of the Federal Magistrates Court, details of which are shown in the Law Society Journal February 2006, page 31 and Monday Briefs Issue 69, 23 January 2006.
The Law Society Journal April 2002 page 38 states:
"Some of the protocols do not mention time standards for delays. However, a period of over 3 months from the date that the judgment was due seems to the Litigation Law and Practice Committee an appropriate standard to apply in those protocols where time standards are not mentioned…"
Are there any litigation lending schemes now available?
There are no Government lending schemes or Law Society supported schemes.
Litigation funding in Australia is the subject of a Discussion Paper by the Standing Committee of Attorneys General, May 2006 and is also the subject of a number of articles in the following editions of the Law Society Journal:
- March 1999, page 73
- May 2000, page 68,
- December 2005, page 66
- March 2006, page 40
- October 2006, page 53
- November 2006, page 6
Litigation funding is also the subject of Revised Professional Conduct and Practice Rule 7.
Practitioners should exercise extreme caution when considering litigation funding, including all their Duties and should be mindful not to adversely affect client legal professional privilege.
Some comment on solicitors' Duties can be found in Riley Solicitors Manual.
Can a Writ of Execution be levied against land?
Yes, unless the amount outstanding under the judgment is less than the jurisdictional limit of the Local Court when sitting in its Small Claims Division. See Civil Procedure Act section 106(5)
As at 04 January 2007 the jurisdictional limit was $10,000, see Local Courts Act 1982 section 4(1).
Such a writ is dealt with in the Civil Procedure Act 2005, Real Property Act 1900 and the Uniform Civil Procedure Rules 2005. A short commentary can be found under the heading "WRITS" in the publication "1001 Conveyancing Answers NSW" by Russell Cocks, Paul Gibney and Tony Cahill.
In what circumstances can a solicitor terminate a retainer?
Termination of a retainer is the subject of Rule 5 of the Revised Professional Conduct and Practice Rules which includes:
"5.1 A practitioner must complete the work or legal service required by the practitioner's retainer, unless -
5.1.1 the practitioner and the practitioner's client have otherwise agreed;
5.1.2 the practitioner is discharged from the retainer by the client; or
5.1.3 the practitioner terminates the retainer for just cause, and on reasonable notice to the client …"
The Rules contains very specific requirements in relation to instructions in respect of acting in relation to a criminal offence in the Supreme Court or the District Court and in relation to a practitioner who is acting for a legally assisted client. Practitioners should read Revised Professional Conduct and Practice Rules 6A and 6B in conjunction with Rule 5. A detailed commentary in relation to Rule 5 can be found in Riley Solicitors' Manual commencing at paragraph 3145. A short commentary can be found in Ritchie's Uniform Civil Procedure NSW paragraph 7.29.5.
Practitioners should be aware of any time limit that applies to providing notice of the change in relation to any matter that is the subject of any court or like proceedings and should be alert to the difficulties that can arise.
Can a garnishee order be executed against money in a solicitor's trust account?
There is no total prohibition. Generally, money held by the debtor's solicitor for a specific purpose cannot be garnisheed. Commentary, including cases, can be found in:
- Civil Claims Practice, by Jackson and Byron - 2nd Edition, Law Book Company Ltd, Paragraph 10.2660
- Ritchie's Uniform Civil Procedure (NSW) - see the commentary in relation to Section 117 of the Civil Procedure Act 2005, commencing page 2799
- District Court Practice by E.J. O'Grady, paragraph 255
- Quick on Costs, paragraph 7.1251
- Law of Costs by G E Dal Pont, paragraph 26.22
Also there is some comment on garnishee of a solicitor's trust account in:
- Phillipa Power & Associates v Primorise, Couper, Cronin Rudkin  2 QdR 266; BC 9700271;
- Firth v Centrelink (2002) 55 NSWLR 451;  NSWSC 564; BC 200203753
Care should be taken to determine the law in any jurisdiction outside NSW and whether or not any case referred to has been appealed or overruled.
However, Section 259 Legal Profession Act 2004 provides:
"Protection of trust funds
(1) Money standing to the credit of a trust account maintained by a law practice is not available for the payment of debts of the practice, or any of its associates.
(2) Money standing to the credit of a trust account maintained by a law practice is not liable to be attached or taken in execution for satisfying a judgment against the practice or any of its associates
(3) This section does not apply to money to which a law practice or associate is entitled."
Section 261 Legal Profession Act 2004 provides:
"Dealing with trust money: legal costs and unclaimed money
(1) A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account of the practice for a person:
(a) exercise a lien, including a general retained lien for the amount of legal costs reasonably due and owing by the person to the practitioner, …"
However, see the commentary on liens earlier in these FAQs.
If a lien is claimed by a solicitor over money held in trust, the subject of a garnishee order, the matter will have to be dealt with by the Court.