Regulatory issues in the performance of conveyancing services for legal practitioners (Scenario 1)

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Conveyancers are seeing business opportunities in the provision of conveyancing services to legal practitioners. Before entering into any such arrangement, however, there are range of factors that conveyancers should consider, such as the potential legal implications for their business, whether the arrangements will permit regulatory and legislative requirements to be met, and what, if any, professional indemnity insurance policy issues are involved. In this article, we consider two scenarios in respect of their potential legal implications.

Scenario 1

A licensed conveyancer—who is not an employee of a legal practice—is asked by a law firm to perform residential conveyancing for one of the firm’s clients. The conveyancer performs the services at their own offices and invoices the law firm rather than the law firm’s client. The law firm then bills their client on the law firm’s letterhead. The contract for sale and all the correspondence—with the practitioner acting on the other side of the conveyance and with the client—are transmitted with or on the law firm’s letterhead. The client assumes that their conveyancing has been carried out by the law firm, unaware that the work has in fact been performed by an independent and separately licensed conveyancer.

Scenario 1 gives rise to several potentially concerning issues. Legal advice has been sought regarding these issues as they pertain to current legislative frameworks and is summarised below in terms of the intent of the legislation and the potential issues.

Conveyancers Licensing Act 2003 (CLA) – Section 4

Intent

Prohibits a person from conducting “a conveyancing business for fee or reward” unless that person is the holder of a licence (“Conveyancing business” is defined in the Act to mean any business in the course of which conveyancing work is carried out for fee or reward).

Issue

NSW Fair Trading might consider that the conveyancer is not conducting a conveyancing business for fee or reward but instead performing conveyancing services for a law firm in return for an agreed fee.

CLA – Section 7(2)

Intent

A conveyancer is not permitted “to do anything, or allow anything to be done, that is calculated to imply that the licensee is qualified to act as a solicitor.”

Issue

If a conveyancer uses a lawyer’s letterhead, contact details, etc., in ways suggesting that their conveyancing work is done by a law firm rather than by a separate licensed conveyancer, the Commissioner for NSW Fair Trading might consider them to be in breach of Section 7(2).

CLA Section 26

Intent

Prohibits a licensed conveyancer from sharing “the receipts of a conveyancing business” with someone who is not a licensee or who has not been approved by NSW Fair Trading.

Issue

If the scenario included any arrangement whereby conveyancing fees were shared between the licensed conveyancer and the law firm, there is likely to be a breach of Section 26.

CLA Section 27

Intent

Prohibits a licensed conveyancer from being in partnership with any person other than a licensee or a person who is approved by the Secretary of the Commissioner for NSW Fair Trading.

Issue

If the arrangement between the licensed conveyancer and the legal practice (as documented) is one of partnership, Section 27 would be breached unless the lawyers are approved under Section 27 to be in partnership with the conveyancer.

CLA Section 36

Intent

Obliges a licensed conveyancer to disclose to a client the basis of the cost for conveyancing work to be carried out for the client by the licensee.

Issue

If work of a type outlined in the scenario above is carried out by the licensed conveyancer yet there is no disclosure by the conveyancer to the client and all of the fee structures are arranged via the legal practice, the conveyancer will likely fall foul of Section 36.

CLA Division 2 of Part 5

Intent

Requires trust money to be placed into a trust account of the licensee’s conveyancing business. While there might be an argument as to whether received moneys were in fact received by the legal firm or by the conveyancer, legislative provisions concerning receipt and use of trust money are seriously and strictly enforced and any non-compliance is likely to be construed against the conveyancer.

Issue

If a licensed conveyancer in the course of the scenario above receives money from a conveyancing client who is in fact a client of the legal practice rather than of the conveyancer, Section 53(b) obliges the licensee of the conveyancing business that has received money into its trust account to disburse the money as “the person” directs, i.e. not as the conveyancer might be directed by the legal practice.

CLA Section 132

Intent

Permits disciplinary action to be taken against any person or licensee for contravention of any provision of the Act or the Regulations.

Issue

Section 133 empowers the Secretary of the Commissioner for NSW Fair Trading (in disciplinary action) to caution or reprimand a licensee, require the licensee to give an undertaking, impose a monetary penalty on a licensee, or suspend or cancel their licence.

Schedule 3 of the Conveyancing Licensing Regulations 2015 – Rules of Conduct

Intent

Rule 2(1) requires licensees to act honestly, fairly and professionally.

Rule 2(2) obliges a licensee not to misinform or otherwise mislead.

Rules 10 and 11 oblige licensees to confirm oral instructions in writing.

Rule 17 prohibits a licensee from including “any matter (including any statement, slogan or logo) on stationery or business cards used in connection with conveyancing work that the licensee knows or should know is false or misleading.”

Issues

Acting in a way suggesting that one is employed by a law practice when that is not the case would be considered misleading conduct.

In the scenario above, the licensee would be obliged to confirm oral instructions—using the licensee’s letterhead—and to make written records of instructions received. If instead the licensee used a legal practice’s letterhead or its email details, thereby giving the impression that the licensee was operating under the auspices of the legal firm or was an employee of the legal firm, the licensee would be in breach of Rule 2 (1&2) a Rule 17.

Australian Consumer Law Section 18

Intent

Prohibits persons in trade or commerce from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.

Issue

In the above scenario, there would be a breach of Section 18 by both the licensed conveyancer and the proprietors of the legal practice.

Professional indemnity insurance policy issues

Issues

The above scenario might bring policy issues, such as non-disclosure, into play were a negligence claim to be brought against the licensed conveyancer as opposed to being brought against the law firm.

The above scenario would probably result in claims being made against both the licensed conveyancer and the legal practice.

Most judges would consider that a licensed conveyancer had engaged in dishonest conduct had they deliberately allowed a client to form the impression that they were an employee of, or operated under the auspices of, a legal practice when this was not in fact the case.

Other provisions of a professional indemnity insurance policy might also come into play. Most professional indemnity policies provide indemnity to the individual concerned where a claim arises from the provision of professional services by that individual to a client. It might be argued by the insurer that, in the above scenario, the individual is not in fact providing conveyancing services for the benefit of the individual’s client but is instead performing those services for a third party (the legal practice) for a fee.

Resolving the issues

If a licensed conveyancer is considering entering into arrangements similar to those described in the scenario above, it is recommended that they

  • seek legal advice before doing so
  • structure the arrangement so that the work
    • is referred to the conveyancer’s business, allowing the conveyancer to use their own letterheads, email details, etc., and
    • can be billed to the client directly
  • do not hold out to clients of a legal practice that they are an employee of the law firm since doing so is
  • dishonest and would breach the Act and Regulations, and
  • may significantly affect professional indemnity insurance coverage
  • do not receive any moneys that would be considered trust money; rather, require the legal practice to receive such moneys into its trust account.

Furthermore, if the legal practice wished to enter into some form of fee sharing or referral arrangement, conveyancers should specifically refer that arrangement—even if only anonymously in the first instance—to the Commissioner for NSW Fair Trading to seek approval. Such approval would most likely be conditional upon full disclosure of the arrangements to the client by both the legal practice and the licensed conveyancer.


Peter Moran is a partner in the insurance team at Colin Biggers & Paisley and has over 30 years extensive experience in insurance and commercial litigation.