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From the CEO : Better protection for consumers

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Cite as: (2003) 77(10) LIJ, p.6

Professional standards legislation means better protection for consumers and a limit to liability for the legal profession.

Previously in this column, (June 2003 LIJ, page 6) I reported on the Victorian government’s proposal to introduce professional standards legislation. It is hoped that the state government’s move to introduce this legislation will coincide with moves by other state governments to introduce mirror legislation and the federal government’s amendments to the Trade Practices Act. It is expected that the Victorian government’s legislation will be in the Parliament early this month.

The introduction of professional standards legislation will represent a significant change in liability of professionals, as they will have the opportunity to cap their liability in accordance with an approved professional standards scheme.

The legislation will establish a Victorian Professional Standards Council (VPSC), which will be responsible for supervising and approving professional standards schemes.

The scheme’s underlying principles are to facilitate improvements in occupational standards of professionals and to offer a protection to consumers by improved standards. The trade-off for agreeing to improved occupational standards within a profession is to limit or cap liability.

Historically, members of professions have not been able to limit or cap their liability. The unlimited personal liability has always been a feature of conducting legal practice.

Once the VPSC has been established, it is open to a professional association on behalf of its members to apply for approval of a professional standards scheme. It is expected that the Law Institute Council will support such an application being made on behalf of its members. It is also expected that many other professional associations will apply for scheme approvals.

An Institute scheme would cover all members in private practice who hold a current practising certificate, who have appropriate insurance cover and have applied for membership of the scheme. It would prescribe the level of insurance cover required and, if the New South Wales model is followed, the level of cover would be scaled depending on the number of partners in the firm.

The minimum level of cover required under the New South Wales lawyers’ scheme is $1.5 million, which covers sole practitioners or firms with not more than three principals. The maximum amount of liability then increases by $500,000 per principal, up to a maximum of 20 principals. Firms that have 20 or more principals are required to carry $10 million. There is also a provision that enables a firm to nominate an amount greater than $10 million, but not exceeding a maximum amount of $50 million.

Scheme members would be required to ensure that all documents given to clients or other material that promotes or advertises the member’s business, including all correspondence, carry a prescribed statement indicating that the liability is limited by the scheme. In New South Wales, the wording required is “Liability limited by the solicitors scheme approved by the Professional Standards Act”. Members are not permitted to contract out of the scheme’s provisions.

When considering the application for approval of a scheme to cover Institute members, it is expected that the VPSC would take into account some, or all, of the following:

  • The rules of practice of the legal profession will, from 2003, require mandatory continuing professional development.
  • The Legal Practitioners Liability Committee offers risk management advice and education as does the Institute’s professional development department.
  • The legal profession in Victoria has well-developed professional practice and conduct rules.
  • The legal profession has a stringent complaint and discipline procedure established under the Legal Practice Act 1996.
  • The profession has trust account inspections and audits.
  • The Institute offers counselling and advice services to members.

If the VPSC is satisfied that the proposed scheme meets the requirements of the Act, it would be approved and Institute members would then be eligible for membership and have access to capped liability.

It should be noted that the scheme does not apply to any action arising from a personal injury. These claims are specifically excluded.

On the assumption that the legislation goes through the Victorian Parliament in this session, then it is likely that the VPSC would be established in early 2004 and shortly after the Institute would make application for approval of a scheme for the benefit of its members. However, approval may take some months and not be given until late 2004.

John Cain


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