37. Supervision of legal services

1. A solicitor with designated responsibility for a matter must exercise reasonable supervision over solicitors and all other employees engaged in the provision of the legal services for that matter.

Commentary

37.1 Introduction

'Reasonable supervision' is not defined in the ASCR. Guidance from a risk management and professional standards perspective is offered in the Queensland Law Society's Guide to appropriate management systems. A lack of supervision that may amount to professional misconduct or unsatisfactory professional conduct may occur where:

• the lawyer is aware, or ought reasonably to be aware, of factors that may suggest to a reasonable person that greater supervision is required: Bridges v Law Society of New South Wales [1983] 2 NSWLR 361;
• the solicitor failed to discharge his personal obligations with respect to the operation of his firm’s trust account and to discover his partner's misappropriation of trust funds: Re Mayes [1974] 1 NSWLR 19;
• a solicitor simply accepts assurances from staff that everything is in order: Council of the Queensland Law Society Inc v Cummings [2004] QCA 138, in which the solicitor, 'foolishly accepted' assurances that his conveyancing section was adequately dealing with the trust accounts. The acceptance of those assurances is not an immunisation from professional responsibility: Law Society of New South Wales v McNamara (1980) 47 NSWLR 72;
• in Cheney v Queensland Law Society Incorporated [2001] QSC 338, the solicitor's trust account had been overdrawn, trust money was paid into the office account without authority, and money credited to one client was appropriated to another. There was also a shortfall in the trust account of $9,399.50. All of this was attributable to the solicitor's husband, who had the daily responsibility for maintaining the trust account and who had mismanaged it and had stolen moneys. The solicitor had a suspicion that her husband was not keeping the accounts scrupulously, but was not aware of his dishonesty. The Law Society suspended the solicitor's practising certificate, but the solicitor appealed. Chesterman J believed that the solicitor might not be entitled to a practising certificate as a principal, but could hold one on condition she only work as an employed solicitor (where she would not be responsible for trust moneys). This would ensure that the public remained protected, while the solicitor could still earn an income. However, he agreed with the Law Society that even a conditional practising certificate should not be issued while the shortfall in the trust account was not reimbursed. 'To allow her to practice [sic], even as an employee, without her having made good the losses suffered by her clients by reason of her lack of responsibility would … "send the wrong signal" to the community and the profession.' Reimbursement was said to be forthcoming, but had not happened more than three months after the hearing. At that point, Chesterman J upheld the suspension and dismissed the appeal.

Consequences. In addition to disciplinary action, solicitors may be vicariously liability for the employees' actions. In Lloyd v Grace Smith & Co [1912] AC 716, a firm of solicitors was held vicariously liable to a client defrauded by the firm's managing clerk, who was acting within the scope of his authority by transacting conveyances on behalf of clients. It was irrelevant that the fraud was perpetrated for the clerk's benefit. These principles were applied by Brennan J in National Commercial Banking Corp of Australia Ltd v Batty (1986) 160 CLR 251, 276.⁸⁸ Refer to Rule 5.

88 The principles have recently been applied in Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd & Anor [2013] QCA 220.