- Multi-disciplinary practices (‘MDP’) are a relatively new type of law practice structure where solicitors and non-solicitors offer clients a ‘one stop shop’ to buy a number of professional services.
- The application of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 gives rise to unique issues in an MDP.
- In the context of MDPs, there are important operational issues and questions surrounding the application of ethical rules, management of conflicts and informed consent, and success fee arrangements.
As the structures by which legal services are delivered to clients evolve and change, the Uniform Law permits a relatively new type of unincorporated legal structure known colloquially as a Multi-Disciplinary Practice (‘MDP’).
The MDP structure allows solicitors to come together with non-solicitors and offer clients a ‘one stop shop’ for a number of professional services. The most common combinations are law firms offering tax, consulting and forensic services, or accounting firms offering legal services. The MDP structure enables the sharing of profits, risk and information with non-solicitors. At the time of writing there are over 30 MDPs in New South Wales.
The application of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (‘Conduct Rules’) gives rise to unique issues in an MDP given the combination of legal and non-legal practices.
A key issue in the debate around enabling a solicitor to practise in a MDP has been whether the ethical standards and professional obligations of the solicitor would be compromised, either by virtue of a lack of independence or conflicting commercial priorities.
Rule 4 of the Conduct Rules, which provides for the fundamental ethical duties of a solicitor, applies at an individual level and states:
‘4.1 A solicitor must also:
4.1.1 act in the best interests of a client in any matter in which the solicitor represents the client,
4.1.2 be honest and courteous in all dealings in the course of legal practice,
4.1.3 deliver legal services competently, diligently and as promptly as reasonably possible,
4.1.4 avoid any compromise to their integrity and professional independence, and
4.1.5 comply with these Rules and the law.’
The practice management and operating systems of an MDP must not compromise the ability of the individual solicitor to provide legal services in accordance with the solicitor’s obligations under the Conduct Rules and the law generally. Compliance with these obligations must not be prejudiced by the activities of other non-legal practitioners in the MDP.
- to comply with confidentiality obligations, access to legal advice provided by the solicitor must be limited and may need to be segregated from other members of the MDP;
- risk assessments should be undertaken to ensure issues affecting the provision of legal services (such as the possibility of conflicts under Rules 10, 11, and 12 of the Conduct Rules, issues of legal professional privilege, and the sharing of premises) are identified; and trust accounts are maintained in a manner consistent with solicitor’s obligations.
Academic commentary surrounding the structure of an MDP has focused on the application of the solicitors’ ethical rules and a solicitor’s independence in an MDP. References have been made to the MDP having ‘control’ over the solicitors, resulting in the ethics of solicitors ‘being compromised’. However, provided operational issues of independence are properly considered, there is no reason why a solicitor practising as part of an MDP cannot comply with the Conduct Rules.
For example, in an MDP consisting of solicitors and other professional service providers, different codes of professional conduct may apply. Does one ethical code have supremacy over the other when there is a conflict between the two? The solicitor must comply with the Conduct Rules and cannot adopt a different or (what may be regarded as) lower standard. For example, solicitors have a duty of frankness to the court pursuant to Rule 19 of the Conduct Rules. This may create issues if a client of the MDP is involved in litigation and does not wish to make a disclosure to the court. Non-lawyers in the MDP may not be bound by such an obligation and might seek to accommodate the client and bring pressure to bear on the solicitor. Similarly, the obligations under Rule 31 regarding inadvertent disclosure may give rise to tension when such a disclosure could provide a commercial advantage to a client of the MDP.
In the following examples, the role of the solicitor and his or her relationship to the recipient of the advice suggest that the ‘fundamental’ duty in Rule 4.1.4 of the Conduct Rules may not be able to be satisfied.
Example 1 – A solicitor partner of an MDP advising a non-solicitor partner on their personal legal issues.
There are competing fiduciary duties where the solicitor partner gives advice to the non-legal partner – i.e. the fiduciary duty to other members of the partnership and the fiduciary duty of a legal practitioner to a client. Partner-to-partner advice may give rise to issues of independence and conflict given those competing duties.
Example 2 – The provision of legal advice by a solicitor partner in the MDP on debenture deeds, where the solicitor is opining on personal liability of a non-legal partner in the MDP acting in a personal capacity as a receiver.
In this example Rules 4.1.4 and 12 of the Conduct Rules would need to be reviewed to ensure there was no breach of the need for independence and to avoid any conflict with the solicitor’s own interest as a partner in the MDP.
Conflicts and informed consent
Rule 11 of the Conduct Rules allows for informed consent when a solicitor and a law practice are faced with management of conflicts when acting for concurrent clients.
In an MDP, it may not simply be the provision of concurrent services in a transaction between a buyer and seller giving rise to a conflict. Transactions such as mergers and acquisitions can be far more complicated in an MDP environment.
For example, consider a transaction where the MDP acts as Lead Advisor to the vendor and has a significant contingency fee at stake. Does the provision of informed consent permit the provision of legal advice by the MDP to a purchaser? Does it make a difference if there is no contingency fee payable to the Lead Advisor?
Rule 11.3 of the Conduct Rules, which deals with managing conflicts of duties concerning current clients, if read alone, would indicate such concurrent advice is permissible.
However, the Conduct Rules supplement the other general law obligations of solicitors. In this example, the MDP would need to consider the fiduciary duties and the negotiation process involved where the vendor is seeking the highest price and the purchaser the lowest, and determine whether the conflict can be addressed by the provision of informed consent by each of the concurrent clients. There is a variety of factors that may be examined to make this assessment, including whether other legal advisors are involved (e.g. a client’s inhouse counsel), the commercial sophistication and experience of the clients, the addition of another MDP partner who is independent to the matter with an oversight role, the scope of the legal engagement (it may be a minor role), and the significance or otherwise of the client to the firm and/or the team.
Rule 12, which establishes the framework to address potential conflicts concerning a solicitor’s own interest, would also have application given the contingency fee payable to the MDP.
Success & Uplift Fee Arrangements
Part of the convenience offered by an MDP to clients is the ability to have a variety of services provided under one roof. This is particularly useful in transactions requiring combinations of professional advice such as legal, tax, accounting, and mergers and acquisitions.
In some capital markets transactions, such as equity raisings, it is common for a success fee to be payable, determined by the level of the raise. If the client is not ‘sophisticated’, i.e. does not have the characteristics of a commercial or government client pursuant to section 170 of the Legal Profession Uniform Law (NSW) (‘the Act’) and is receiving a combination of services from the MDP under one engagement letter with both legal and non-legal deliverables, can a success fee (assuming it is permissible) be calculated across all services or does any success/uplift fee pertaining to the legal deliverable need to be separately disclosed or notified?
The success/uplift fee applicable to the legal services, and in particular the basis of its calculation, should be disclosed separately alongside other disclosure requirements pursuant to s 182 of the Act. The uplift fee payable cannot be ‘bundled’ and issued as part of one aggregated invoice by the MDP.
The manner of delivery of legal services will continue to evolve and each solicitor and the regulators will need to ensure that the fundamental ethics and integrity of our profession are preserved. Whilst change is inevitable, ethical obligations remain. The Ethics Committee of the Law Society is available to assist solicitors to navigate these issues (www.lawsociety.com.au/practising-law-in-NSW/ethics-and-compliance/ethics/committee-guidance).