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Dealing with the unexpected


Cite as: (2008) 82(4) LIJ, p. 26

The LIV is taking a less intrusive and more cost-effective approach towards the legal practices of solicitors who have died or are seriously ill.

When a sole practitioner dies, their next of kin not only has to deal with grief but also the stress of an unsupervised law practice and all that entails – including anxious clients and uncertain employees.

The LIV has staff dedicated to dealing with such predicaments who help steer the grieving and distracted family members on the most effective path for the legal practice.

“The last thing the widow or widower needs is to worry about the legal practice, its clients and staff when organising a funeral and making other arrangements ...”, LIV Professional Standards general manager Harold Cottee said.

As part of his role, Mr Cottee oversees the LIV’s External Intervention section which undertakes work on behalf of the Legal Services Board (LSB).

The LSB has the power under the Legal Profession Act 2004 to impose external intervention on legal practices. This can involve appointing a supervisor of the trust money of the law practice, appointing a manager of the law practice or applying to the Supreme Court for the appointment of a receiver.

Mr Cottee said the LIV directed its efforts at trying to identify the most appropriate level of external intervention that may be required.

During 2007, the LIV began a less intrusive and more cost-effective approach to dealing with the law practices of deceased or seriously ill solicitors, involving six practices, to date, across Victoria.

“In the past a receiver who was a solicitor would be appointed and would then run the law practice,” Mr Cottee said.

“The problems with that was the possible sale of the practice was made more complicated, the family of the deceased person always had a few issues about what was being done, and the employees and clients didn’t know where they stood.

“Receiverships, indeed any form of external intervention, are also expensive and if there is another way of doing it, we should be doing it.”

Now the LIV sends in senior litigation solicitor Jenny Giavris and External Interventions manager and accountant Saskia Machette to determine if external intervention can be avoided, and then to instigate steps to keep the firm operational.

“They don’t actually run the legal practice at all,” Mr Cottee said. “They will not receive trust money and they won’t handle client matters.

“We try to help to preserve the value of the practice so it can be sold.

“It is even more of an issue when a lawyer has got a serious disease. We can help them keep the practice going and get other people involved but not run it as such, and help them to sell it.”

Ms Giavris said sometimes receivership could not be avoided.

“If a sole practitioner/principal of the firm has passed away and there is no executor, there’s no administrator, there is no next of kin – there is no choice,” she said.

“But if that is not the case, if we do have an executor/an administrator, then we can certainly make suggestions as to how the matter can proceed without external intervention.”

Ms Giavris said her role involved practice management, identifying current client matters and the status of files.

Some client files might be sent to another law firm, or another solicitor may be organised to come in and work on cases.

Ms Machette said she focused on the money side, looking at the trust account and reconciling it up to the date of the death.

“I look at whether or not there are any urgent matters where we need to access those funds in the interim while we are sorting out what will happen with the practice,” Ms Machette said.

The aim was to act quickly and to have strategies in place within a couple of weeks of the LIV being notified.

In one instance, Mr Cottee said the LIV staff’s work was completed in six days, and they left behind a functioning legal practice, with employee solicitors, ready for sale.

The LIV staff don’t get involved in the sale of the practice, other than to offer suggestions on the process.

Mr Cottee said there were a number of steps solicitors could adopt to help minimise potentially intrusive and expensive external intervention if they died or became seriously ill.

“One of the problems we have is a lot of solicitors aren’t prepared,” he said.

“[For instance], they should have a will, but frequently they don’t even have a will.”

Potential headaches could also be avoided if a solicitor nominated a colleague who was willing to acquire or continue running the practice until it could be sold.

“If someone comes in on the recommendation of either the deceased solicitor or the unhealthy one, the clients tend to be quite happy about that. They think if he or she likes him they have got to be OK,” Mr Cottee said.

“If they address issues, such as having a will or seeing if there is an alternative person who they would like to come into the practice in the event that they were of poor health or had died, everyone would be better off.”

The LIV is happy to help members with any of the issues raised in this article. For more information contact LIV External Intervention on ph 9607 9512.

Setting a scene

Every intervention is different and presents different challenges. The following is an example of how the LIV’s involvement can unfold.

A 54-year-old sole principal of a suburban legal firm dies suddenly from a heart attack.

A family member contacts the LIV and requests assistance.

Within 24 hours, two members of the LIV’s External Intervention section meet the deceased’s spouse to discuss the estate’s options.

Most discussions and communications are subsequently carried out with the estate’s solicitor.

The LIV staff determine the trust accounts are in order and external intervention can be avoided.

The widow wants to preserve the “good will” of the practice and sell the business.

The will left by the deceased has appointed a non-legal executor, so letters of administration ad colligenda bona are sought from the Supreme Court to appoint another solicitor as principal of the firm without ownership.

Meanwhile, the LIV staff attend to three cases needing urgent attention and which need to be transferred to another solicitor. The staff obtain permission from the estate to contact the clients.

Within a week of the death, a new principal is in place. The LIV staff do not actively get involved in the sale of the practice but suggest ideas such as contacting a broker or other local practitioners in the area.

Two weeks after the solicitor’s death, the practice is operational and the LIV staff have completed most of their role.

The LIV sends a letter to the principal detailing their responsibilities, and seeking undertakings to the Legal Services Board that they comply with the Legal Profession Act 2004 and Regulations.

The law practice is eventually sold to an employee solicitor.

Preparing for the unexpected: ill health, death, incapacity

Ten steps practitioners can take to minimise potentially intrusive and expensive external intervention and to preserve the value of their legal practice.

1 Hold a current will which addresses succession planning. Include in the will, or at least record and advise others, who could be approached to acquire or continue running the practice until it is sold.

2 Consider an enduring power of attorney in favour of another legal practitioner specific to the continuing running or sale of the law practice during illness/incapacity.

3 Maintain a current client list and deeds register.

4 Maintain a detailed diary noting all upcoming matters such as settlements, court dates, conferences, appointments, etc.

5 Maintain a current register of interests which lists all current appointments and anticipated appointments (for example, executor, director etc.)

6 Ensure compliance with trust account Act and Regulations obligations, and keep all trust records in the one place.

7 Ensure a record of all trust and other bank account signatories is maintained. Where possible consider an alternative signatory.

8 Any records held on a computer should be able to be accessed in the event of a practitioner’s inability to do so.

9 Maintain a record of the location of all client documents, files and deeds.

10 Maintain completed client files and trust records in accordance with the Act and Regulations (seven years). Ensure the final letter to the client advises the due date for destruction of the file. Ensure that eligible files are sent for destruction on a regular basis.


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