legislation and policy

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Review of the Legal Profession Act Final Report

Business Associations



The Act permits solicitors to enter into partnerships with other professionals (multi-disciplinary partnerships), subject to restrictions in the Solicitors’ Rules, and to incorporate, subject to restrictions. Both MDPs and solicitor-corporations must be controlled by solicitors. The Act does not restrict the power of barristers to form partnerships or to incorporate but the Barristers’ Rules prevent barristers from practising in partnership with any other person.

Questions have been raised as to whether the restrictions on the business associations of solicitors and barristers are anti-competitive and can be justified in the public interest. However, a relaxation of the current restrictions could create difficulties for insurers and consideration would need to be given to matters such as conflicts of interest, legal professional privilege and client confidentiality.



The Bar Association put forward a number of arguments in support of the sole practice rule. The rule ensured the independence of barristers and their availability to clients and prevented agreements being made as to fees or other matters between practitioners, which might have an anti-competitive effect.

The Bar Association also stated that the cab rank rule was incompatible with partnership, incorporation or employment, because a barrister who practised within such a structure would be constrained by the demands of the partnership, corporation or employer.

The Bar Association also argued that the sole practice rule reduced overheads, minimised the risk of conflicts of interest and promoted competition.

Mr Cutler was of the view that the market should prevail and that barristers should be permitted to practise with other professionals.

The ACCC indicated that it was aware of the arguments for and against the sole practice rule but had not yet undertaken a detailed study of the issue. The ACCC did note that the ethical and conduct rules of the Bar did protect the public interest, but indicated that it had yet to settle a view.


The issue of incorporation of solicitors’ practices, with limited liability, and the rules governing multi-disciplinary practices were addressed in detail by the Law Society, the ACCC, and Mr Cutler. There was general support for reform.

The Law Society, and the ACCC generally supported the approach which had been recommended by the Legal Profession Advisory Council, for legal practitioners to be permitted to organise their practices in any commercial manner, including as a sole trader, a partnership, or a Corporations Law company, and enjoy the advantages of such structures, including limited liability.

1. Multi-disciplinary partnerships

The ACCC and Mr Cutler were of the view that the rules governing MDPs which require that solicitors hold at least half of the shares should be removed in order to ensure a more responsive legal services market. MDPs could only provide effective competition if they were allowed to practice under the commercial framework chosen by their participants. The ACCC recommended that while the provisions of the Act, Regulations and Rules governing trust accounts should apply to the solicitor members of multi-disciplinary partnerships, other members of MDPs should not be bound by those rules. Nevertheless, if other professionals within MDPs were not required to provide adequate protection to consumers, the interests of clients of MDPs could be compromised, because they might not be aware of the professional rules and protection applying to each service provider. In order to address this potential problem, the ACCC indicated that it might support the application of legal profession rules to other professionals.

In order to promote consumer protection the ACCC recommended that members of MDPs be required to make disclosures about their accountability to clients.

The ACCC recommended that MDPs should be prohibited from requiring solicitor members to do anything which might make them breach their duties to the court, clients, or professional and ethical rules. While the Law Society did not regard conflicts of interest as a significant issue, it suggested that special rules could be made to govern potential conflicts. Both approaches would ensure that the professional independence of lawyers is protected. The ACCC recommended that members of MDPs be required to disclose to clients conditions and potential problems concerning legal professional privilege which might arise in MDPs. However, the Law Society identified as a risk that MDPs would seek to characterise all communications as caught by privilege and recommended that it be made clear that the privilege extended only to solicitor and barrister communications with clients. It is suggested that this matter would need to be addressed by legislation.

The Law Society favoured further consideration of the rule requiring solicitor control of MDPs. However, the Law Society expressed concern that non-solicitor principals of MDPs might seek to provide legal services, and recommended that a definition of legal services be included in the Act to ensure that only solicitors could provide those services within MDPs. The Law Society also indicated that consideration would need to be given to the means of ensuring that solicitors within MDPs were insured and contributed to the Fidelity Fund.

2. Incorporation of solicitors’ practices

Consistent with the approach taken to the role of solicitors within MDPs, the Law Society, Mr Cutler and the ACCC took the view that the business structure of a solicitor would not interfere with the solicitors’ ethical and professional obligations, as long as appropriate safeguards were in place. The ACCC supported the position adopted by the LPAC, that consumers should be protected from the consequences of negligence by insurance, rather than unlimited liability. The advantage of this approach is that clients can be aware of the full extent of the cover held by a solicitor. Unlimited liability is meaningful only if a solicitor holds substantial assets.

Both the Law Society and the ACCC also supported limited liability being extended to any act of a solicitor who was a director or an employee of a corporation. It is noted that the Law Society has arranged for a scheme to be approved under the Professional Standards Act 1994. In exchange for meeting the conditions of the scheme, which include risk management practices, solicitors members are able to invoke the limited liability offered by the scheme.

As noted above, the LPAC was of the view that there was no justification for the sole object of a corporation providing legal services to be the provision of legal services, or for a majority of directors to be solicitors. Mr Cutler shared this view. The ACCC appeared to support this position, and endorsed a model in which individual practitioners would be responsible for compliance with the professional and ethical rules.

The Law Society agreed that the constitution of a corporation providing legal services should not be restricted, but indicated that its position as to the number of directors required to be solicitors was not settled. The Law Society was of the view, however, that membership should be confined to natural persons who are fit and proper persons and that non-solicitor shareholders should not hold more that one third of the votes.


10.1 Are prohibitions on barristers practising with other professionals warranted?
Do they promote, or hamper, the efficient and competitive provision of advocacy services?

      Respondents to the review have not identified anti-competitive effects flowing from the sole practice rule. However, it is recommended that this issue be considered further following consideration by the ACCC of the rule in New South Wales and other jurisdictions.

10.2 Should solicitors or barristers be permitted to become members of multi-disciplinary partnerships? What restrictions (if any) should be placed on such partnerships?
      Solicitors should continue to be permitted to become members of MDPs, but the current rule requiring a majority of solicitor members should be repealed.
      Solicitors practising within MDPs should practise on a level playing field with other solicitors and clients should receive at least the same level of protection.
      Provision should be made to ensure that the ethical and professional duties of solicitor members of MDPs and corporations cannot be disturbed by the requirements of other members of the partnership or corporation.
      Disclosure should be made to clients of a MDP as to whether the services are provided by solicitor or a non-solicitor member.
      Solicitor members of MDPs and corporations should be permitted to obtain professional indemnity insurance and fidelity insurance in common with other members of the MDP or corporation, provided that the minimum terms of the insurance comply with guidelines set by the Attorney General.

10.3 Should solicitors or barristers be permitted to form incorporated practices under the Corporations Law? Should the objects and membership of such practices be restricted? Should such practices be required to have a majority of directors who hold practising certificates?
      Solicitors or barristers should be permitted to form incorporated practices under the Corporations Law. The objects and membership of such practices should not be restricted but, as noted above, clear provision should be made to ensure that solicitors’ professional and ethical obligations are maintained and insurance and fidelity cover is at least as favourable to clients as in the case of other solicitors.

10.4 Appropriate consumer safeguards should be included in any scheme to allow solicitors to form companies, and in particular, companies should be required to hold professional indemnity insurance at levels approved by Government. The conditions placed on solicitors who are members of the scheme established by the Law Society under the Professional Standards Act 1994 might provide the basis for such a scheme.
      Practices should not be subject to a requirement that a majority of directors hold practising certificates. Regulation should continue to be directed to individual solicitors and barristers, not the structure they adopt for practice.

10.5 How can compliance with the ethical and professional rules of solicitors and barristers be reconciled with participation by members of the profession in MDPs and companies?
      It may be necessary for the Act or professional rules to make provision to ensure that the professional and ethical obligations of solicitors are not compromised by their choice of business structure. The regulatory scheme should also to ensure that consumers are aware of the different obligations of service providers within MDPs and corporations, and to clarify the application of legal professional privilege to these entities.

      Consideration should be given to restricting the membership of incorporated practices and limiting the number of non-solicitors who have voting rights.

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most recently updated 26 April 1999