Sole practitioners, sole principals of incorporated legal practices and sole principals of unincorporated legal practices are particularly vulnerable to disruption if they are suddenly unable to manage their law practice. The Law Society of NSW strongly recommends that practitioners develop a contingency plan in the event of unforeseen circumstances.
In response to their vulnerability as sole principals in these circumstances, the Law Society urges sole principals to nominate another legal practitioner as their Personal Representative and an Alternate (Nominated Personal Representative and Alternate).
The Personal Representative would be responsible for conducting, and, if necessary, disposing of, their law practice if the sole practitioner is unable to do so. The Alternate will become the sole practitioner’s Nominated Personal Representative if the initial Nominated Personal Representative is unable to act as Principal of the firm for whatever reason.
The Nominated Personal Representative (or Alternate) would either be appointed as the Principal of the firm, or be appointed as Manager under section s334 of the Legal Profession Uniform Law (NSW) (the Uniform Law), subject to approval by the Law Society as to their suitability.
The Law Society has developed a check list to assist sole principals to plan ahead in the event of unforeseen circumstances.
While the Law Society is not bound by the sole principal’s nomination, it will firstly contact the Nominated Personal Representative in the event of the sole principal’s illness, injury, or death. The Law Society will give preferential consideration to appointing the sole principal’s nominated Personal Representative or Alternate rather than the appointment of a person nominated by the Law Society.
The Law Society will only appoint a manager of its choosing if the sole principal’s nominated Personal Representative (or Alternate) are both unable to act or if it considers that they are both inappropriate for appointment.
Where a nomination is made, remuneration will be left to be determined between the sole principal and their nominee(s).
As part of the contingency planning, sole principals are strongly encouraged to enter into a remuneration agreement with their Nominated Personal Representative (or Alternate) prior to nominating the Personal Representative. In determining appropriate remuneration, consideration should be given to any benefit the Personal Representative may derive from taking over the law practice.
Running/disposing of the sole principal’s practice
It is important that sole principals work with their nominees in advance to define precisely what their wishes are in terms of running the practice, and/or disposing of the law practice. The Law Society is developing guidelines that will assist Personal Representatives to manage the practice in a way that minimises costs.
A sole principal’s Nominated Personal Representative and Alternate must have the relevant qualifications and the capacity to run the sole principal’s practice. They must have:
- a good working knowledge of the sole principal’s area of practice
- hold a principal’s practising certificate
- be authorised to receive trust money, and
- be able to step into the sole principal’s role at short notice.
The Nominated Personal Representative will, whether as a manager appointed by the Law Society or as the Principal of the practice, have full authority to run the law practice, including managing the trust account, in accordance with the Uniform Law. Obviously, the interest of clients will be paramount.
Verification of nominee
When a Nominated Personal Representative (or Alternate) is required to take control of a sole principal’s law practice, the Law Society’s Professional Standards Department (PSD) will verify that the Nominated Personal Representative (or Alternate) is:
- able to manage the law practice
- appropriately qualified, having regard to their professional experience, and
- fit and proper persons to be appointed.
If satisfied of these matters, PSD will then either consult with the sole practitioner or their representative to have the Nominated Personal Representative appointed as Principal. If this option is not viable, PSD will recommend to the Council of the Law Society (the Council) to appoint the sole principal’s Nominated Personal Representative (or Alternate), as Manager of their law practice under s334 of the Uniform Law.
If no appropriate appointment can be made
If neither the sole principal’s Nominated Personal Representative (or Alternate) can be appointed by the Council to take control of the sole principal’s law practice, the Council may be required to commence an external intervention at the expense of the sole principal’s law practice, the sole principal, and/or the sole principal’s estate.
Similarly, if sole principals do not have this kind of contingency plan in place and they are suddenly unable to manage their practice due to illness, injury or death, it may be necessary for the Law Society to appoint a Manager of its own nomination under s334 of the Uniform Law. The appointment of a person unfamiliar with the law practice could be disruptive, cause delay in the handling and resolution of matters, and generate significant costs for the sole principal, their law practice and/or estate. Where possible and appropriate however, the Law Society will attempt to select a geographically local Manager to the law practice.