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NEWS |
Council's Practice Direction 3 of 2009: Use of Debt Collectors for the Recovery of Legal Fees and Expenses
| 1. | This Practice Direction
takes effect on 7 July 2009 and applies to all advocates and solicitors
and law practices. |
| 2. | The Council takes
cognizance of instances where law practices engaged the services of debt
collectors to recover outstanding legal fees. In one recent case, a former
client of a law practice lodged a complaint of such an incident, which
was raised to the Council. |
| 3. | For the purposes
of this Practice Direction, the term 'debt collector' means any person
engaged in any business of collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts owed or due or asserted
to be owed or due to another. |
| 4. | Unlike a number
of other jurisdictions, there appears to be a paucity of legislation and
guidelines in Singapore dealing specifically with the conduct of debt
collectors. The use of debt collectors by advocates and solicitors and
law practices raises a number of potential issues: |
| 4.1 | There is a potential for the
use of abusive, deceptive, and unfair debt collection practices by debt
collectors. Unlike practising advocates and solicitors, debt collectors
are not bound by prescribed professional standards of conduct and owe
no fiduciary or other special duties. |
| 4.2 | In certain circumstances, the
remuneration arrangement for debt collectors may breach the existing rules
relating to fee sharing and the payment of commissions under Rule 39 of
the Legal Profession (Professional Conduct) Rules. |
| 4.3 | The use of debt collectors to
recover outstanding legal fees and expenses may also breach the duties
of confidentiality of an advocate and solicitor, as well as derogate from
the dignity of the legal profession and adversely affect the standing
and perception of the legal profession in the eyes of the public. |
| 4.4 | Advocates and solicitors, as
officers of the Court, should bear in mind that they owe fiduciary obligations
to their clients and that the Courts are the ultimate arbiters of the
recovery of any legal fees and expenses. It would therefore be improper
for advocates and solicitors and law practices to recover their fees and
expenses by adopting a method used by some creditors in ordinary creditor/debtor
relationships. |
| 5. | In view of the above, the Council takes the position that advocates and solicitors and law practices are not to engage, directly or indirectly, the services of debt collectors to recover outstanding legal fees and expenses. |
Date: 30 June 2009
The Council of the Law Society of Singapore