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From the CEO: Banks threaten withdrawal

Every Issue

Cite as: (2005) 79(4) LIJ, p. 6

Opposition by banks is jeopardising professional standards legislation.

Victorian solicitors are within months of being able to cap their liabilities.

However, one of the few obstacles in the way of an effective nationally consistent professional standards scheme is the opposition of the Australian Bankers Association (ABA).

I urge state and territory governments to persuade the ABA to remove its objections to enable the full benefits of the scheme to flow through to all professions.

Professional standards legislation was passed by the Victorian Parliament in 2003 in response to Heads of Treasury meetings in 2002 and 2003, which discussed ways of dealing with insurance reform.

This legislation enables a professional association, such as the Law Institute of Victoria (LIV), to make an application to the Professional Standards Council for approval of a professional standards scheme. If the scheme is approved, then members of the association can cap their liability at a predetermined amount.

The ABA has long opposed the introduction of such schemes. Its thoughts were well-known by the federal, state and territory governments at the time that the state and territory finance ministers were debating the introduction of professional standards legislation.

In the full knowledge of the ABA’s opposition, all governments have implemented this legislation and it is hard to understand the ABA’s continuing opposition.

The banks had originally argued that the schemes were inflexible and set restrictive caps. This concern has been taken into account by the Victorian legislation and subsequently by the other states.

There is now a discretion given to the occupational association to apply a higher cap for a particular client or for a particular work type. This provision is aimed at specifically providing flexibility to consumers of professional services and is clearly a response to the banks’ concerns.

In the history of state and commonwealth relations, there has not always been agreement on a particular legislative approach.

Consensus is usually achieved after considerable discussion and debate and where there is a very sound outcome to be achieved. The objection of the ABA should be disregarded and state and territory governments should now move swiftly to complete the implementation.

They should send a clear message that this legislation has overwhelming support and will be implemented despite the attempt by banks to frustrate this.

Across the country, state and territory governments have either introduced or are committed to introducing professional standards legislation in broadly similar terms to the Victorian professional standards legislation.

In anticipation of the legislation, these governments have been working to establish a national Professional Standards Council to approve and supervise professional standards schemes and administer the legislation.

This has been a slow process as the various governments have had to agree on the composition and funding of the Professional Standards Council. However, they now appear to be close to agreement and it was hoped that the Standing Committee of Attorneys-General in March would sign off on the agreement and professional associations around the country would be able to lodge schemes for approval.

Once the Professional Standards Council is established, the LIV will seek approval for the establishment of a professional standards scheme for Victorian solicitors.

The scheme’s features will include a cap on liability which is tied to the size of the firm.

For sole practitioners to firms with fewer than three principals, the cap is $1.5 million. It then increases by $500,000 for each principal up to a maximum of $10 million with discretion to increase the cap beyond this level on the application of a firm in relation to a particular client, either in all cases or in any specified case or class of case.

The scheme also incorporates a program for claims monitoring, risk management strategies and continuing professional development.

This legislation has a broad public interest in working to raise the standards of professional service providers in this country and ensure that all professional service providers have adequate insurance cover.

This long process must be brought quickly to a conclusion.

John Cain


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