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More incorporated practices please: NSW LSC

More incorporated practices please: NSW LSC

DESPITE THE failure of a third of the original incorporated legal practices (ILPs) set up in New South Wales, the head of the state’s legal complaints watchdog expects more national firms to…

DESPITE THE failure of a third of the original incorporated legal practices (ILPs) set up in New South Wales, the head of the state’s legal complaints watchdog expects more national firms to incorporate in the near future — a move he thinks will improve ethical standards.

NSW Legal Services Commissioner, Steve Mark, said legislation introducing the national profession reforms should be in place around the country by the middle of this year.

He said large commercial law firms have been prevented from incorporating as they tend to be financially merged in Australia-wide partnerships. “The removal of this barrier via the enactment of identical legislation in all Australian jurisdictions will, I believe, make incorporation an attractive option to many of the larger national firms.”

In The Annual Report 2004/2005, by the Office of the Legal Services Commissioner, it is suggested that the failure of 100 of the initial 300 ILPs was due to a range of factors, including lack of planning, an incomplete understanding of the requirements of incorporation and “an erroneous belief that incorporation is a panacea for those traditionally structured firms experiencing cashflow problems”.

He said while it wouldn’t suit all law firms, he would like to see more practices incorporate. Counter to initial concerns, ILPs not only haven’t led to a rise in complaints received about lawyers, but his office receives realtively fewer complaints about them than traditional practices.

“When we allowed incorporation, I was highly sceptical of incorporation because I considered the fact that it could result in an increased amount of corporatisation of law and give the profit motive an even greater prominence in law,” he told Lawyers Weekly.

“I was concerned about conflict of interest in multidisciplinary practices. We are the only jurisdiction in the common law world which allows for the existence, let alone the incorporation, of multidisciplinary practices.”

The reasons for the low level of complaints were “subtle”, he said, but in part due to the tougher legislative requirements for solicitor/directors of ILPs.

The Legal Profession Act 2004, as did its predecessor, requires solicitor/directors of ILPs to ensure that the incorporated legal practice has “appropriate management systems”.

“There is no such requirement in a non-incorporated legal practice,” Mark said. “Now that’s very subtle because what it actually does, is it entrenches the ethical duties of a lawyer into a management system.”

He said what was an appropriate management system wasn’t defined. But the introduction by his office, working with the NSW Law Society, Law Cover and the College of Law, of 10 benchmark objectives for ILPs, known as the “ten commandments”, had helped to ensure ILPs were meeting their ethical obligations.

“The ten commandments represent a systemisation of ethical conduct. Each of [them] refers to a behaviour or set of behaviours and, if followed, the result is ethical conduct.”

Mark said a large number of the now 452 ILPs are small practices or sole practitioners. “In this way, we are contributing to and witnessing the continual development of professional ethics in an area, small practices, that has traditionally been the source of complaints.”

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