Western Australia - Legal Profession Uniform Law update




Western Australia previously intended joining the Legal Profession Uniform Law (LPUL) from 1 July 2020 alongside New South Wales and Victoria, who have been members of the scheme since July 2015. The WA Attorney General the Hon John Quigley MLA has announced a delay: WA will not join the scheme before 1 January 2021. There are clear benefits to having national legislation: state-based systems leave in place duplicated sets of acts and regulations adding needless complexity and stifling innovation, competition and efficiency. Despite the delay, it is perhaps timely that WA bookkeepers take a moment to review the key differences and ensure practices they are associated with will be ready for the changes, and benefits, of the national legislation.


Reduction of need for certain paper records


Under the Legal Profession General Uniform Rules (LPGUR) and unlike the more prescriptive Legal Profession Regulation 2009, provided the monthly trust bank reconciliation and trust trial balance are reproducible there is no requirement to maintain a paper copy. WA law practices, particularly those who adopt a cloud solution or who maintain careful and regularly-tested backup protocols, will benefit from reduced compliance procedures.


Non-trust money


Law practices need to carefully determine if money received is in fact trust money. Trust monies are always connected to an ongoing legal matter being conducted by a practice. Monies that are received for payment of an invoice previously provided to a client cannot be held to be trust monies, as they are the property of the firm. Monies entrusted to a law practice in connection to a managed investment scheme or for mortgage financing are also not trust monies. If a law practice holds a financial services licence or provides investment advice for a fee, such monies received for the specific purpose of earning investment income are not trust monies and under the LPUL are defined as such. A critical issue regarding non-trust monies is that where a loss occurs no claim against the fidelity fund may be made in respect of such monies.


Legal costs and disclosure


Costs disclosure differs according to the estimate provided. If the initial estimate varies during the course of the matter, there is an obligation to keep the client informed.


· For costs of $750 or less excluding GST, no disclosure is required

· For $751 through $3,000 a simplified form is available from www.legalservicescouncil.org.au

· For legal costs of $3,001 or greater, full disclosure is required


Firms will need to ensure their invoicing practices are compatible with the LPUL. Bills may be lump sum or itemised, with clients having the right to ask for an itemised invoice. If not made prior, a request for an itemised bill must be made within 30 days of receiving the lump sum bill. If unpaid for at least 30 days interest may be charged at a rate no more than 2% above the current Reserve Bank cash rate. All invoices must be accompanied by a notification of client’s rights which include how an invoice may be disputed.


Withdrawal of trust money for legal costs


Under Rule 42 of the LPUGR, trust money may be withdrawn seven business days after a client is provided with an invoice relating to the money provided there is no objection lodged. Invoices should ‘refer to the proposed withdrawal’ where the intention is to withdraw funds from trust in satisfaction of a bill. Where a client expressly authorises earlier withdrawal, that remains permissible.


Authority to operate trust accounts


Each July practices need to notify their Law Society or Law Institute (VIC) of all associates and practitioners authorised to sign cheques or effect withdrawals from a general trust account operated by that practice.


Provision of trust receipts is mandatory under the LPUGR, rather than required ‘on demand’. Previously, only a firm principal or authorised associate could be liable for a deficiency in a trust account. The scope has been increased to include all persons working for a practice, therefore bookkeepers and administration staff have increased responsibility under the LPUL.


Expanded definition of Regulated Property


Cloud-based practice management systems will provide additional benefits for firms when complying with Reg 93 of the LPUGR – the requirement to maintain a Register of Files Opened. Subclause (e) of this regulation requires that practitioners record ‘the location of any regulated property relating to the matter’. ‘Regulated property’ is quite broad, being defined as trust money, trust property or the interest and dividends derived from same. However it also includes documents and records that are stored by a law practice on behalf of a client. If those documents are stored in the cloud, that is on a server remote from the law practice’s business location, firms may simply list their primary registered business address as the default location when satisfying this requirement.


Direction to maintain a management system


The power of a local authority (law society or institute) to direct a practice to implement a management system has been increased. Law firms must now ensure they are operating systems that enable compliance with the regulations.


Interest on trust monies


Similar to the law societies of NSW & VIC, the Law Society of WA administers a Public Purposes Trust whose objectives are to advance the education of the community with regards the law and to improve the access of the public to legal services. As part of the adoption of the LPUL, the Law Society Public Purposes Trust 1985 will be repealed. However Part 12 of WA’s incoming legislation will require Banks and financial institutions in WA are required to pay to the Trust and to the Law Society the sum of interest earned on trust moneys held by them on behalf of law practices. The scheme operates so that 51% of the accrued interest on trust funds is paid to the Legal Contribution Trust and the remainder of the money to the Law Society, who will hold and apply any amounts received in accordance with the Public Purposes Trust Deed.


Other obligations


The Legal Profession Uniform Law and Legal Profession Uniform General Rules also make changes to other aspects of profession regulation including the issuance of practising certificates, professional indemnity insurance and dispute resolution and professional discipline. Western Australian firms should consider these aspects carefully and seek further guidance from the Law Society if required.


Although the announced six-month delay is perhaps inconvenient, it allows WA practices further time to ensure adequate systems are in place to ensure compliance with the Legal Profession Uniform Law. The Legal Accounting Forum welcomes comments and queries from practices who may require help.

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