The adoption of the Australian Solicitors’ Conduct Rules in New South Wales on 1 January 2014 may have an impact on the provision of debt collection services by law firms to clients and may impact upon other business practises conducted by solicitors.
New South Wales incorporated the Australian Solicitors’ Conduct Rules (ASCR) into the NSW Professional Conduct and Practice Rules (Solicitor Rules), with the Solicitor Rules on 1 January 2014. One of the amendments made in the Solicitor Rules, in comparison with the previous rules, is rule 22.4. Rule 22.4 expands the “no contact rule” to include dealings a solicitor may have with a party who may be represented or indemnified by an insurance company. The rule states:
“A solicitor must not confer or deal with any party represented by or to the knowledge of the solicitor indemnified by an insurer, unless the party and the insurer have signified willingness to that course.”
The former rules (advocacy rule A.54, now incorporated in rule 33) only prohibited dealings with another solicitor’s client.
Essentially, the rule appears to prevent a solicitor from conferring or dealing with another party who:
- is represented by; or
- to the knowledge of the solicitor is indemnified by an insurer1.
As rule 22.4 falls within the section of the Solicitor Rules entitled “Advocacy and litigation”, with the broad definition of the terms “party”2 ,“matter”3 and case4; and the removal of former rule 23, the rule may apply to pre-litigation dealings as well as litigated matters.
As a result of r 22.4, it is possible that solicitors, when seeking to make recoveries on behalf of clients, will be required to make a determination whether the anticipated defendant is represented or indemnified by an insurer. Whilst this may be clear in circumstances where the client can provide the name of an insurer and claim number, it may become more difficult to assess in circumstances where, for example:
- the alleged insurer has not responded to previous demands made by the client;
- incomplete information has been provided by the client;
- the insurer only provides partial indemnity;
- there is a reservation of rights with respect to indemnity but the insurer asserts some form of representation; or
- there is partial indemnity or representation and the party and insurer disagree who contact is to be made with.
Conversely, from a customer relationship perspective, the rule is likely to satisfy insurance companies as solicitors will likely be required to forward demands along with any pre-litigation “genuine steps” (where applicable) to the opposing party’s solicitor rather than the opposing party themselves. This will no doubt avoid uncomfortable calls from insurer clients where demands are received by them from solicitors.
As a breach of the Solicitors Rules may constitute unsatisfactory professional conduct or professional misconduct, and may give rise to disciplinary action.
Solicitors and insurers would be well advised to review their internal processes to ensure compliance with the rules – no doubt, the most common breach of this rule is likely to occur in high turnover, low quantum claims which are dealt with by junior or inexperienced practitioners.
1 What constitutes an insurer for the purposes of the Solicitor Rules is not defined; however, “Insurance Company” is defined in the Glossary as “any entity, whether statutory or otherwise, which indemnifies persons against civil claims”.
2 “party” includes each one of the persons or corporations who or which is jointly a party to any matter.
3 “matter” means any legal service the subject of an engagement or required to be provided by the solicitor or the solicitor’s law practice to fulfil an engagement and includes services provided for:
(a) a case;
(b) a dealing between parties that may affect, create or be related to a right, entitlement or interest in property of any kind; or
(c) advice on the law.
4 “case” means:
(a) the court proceedings for which the solicitor is engaged; or
(b) the dispute in which the solicitor is advising.
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