Legal Professional Standards Scheme - Law Institute of Victoria

Under clause 2.1, the Scheme applies to all LIV members who are:

2.1.1	full members who– hold a current Australian Practising Certificate are not excluded under clause 2.2, and have not been exempted from participation by the LIV
2.1.2	incorporated legal practices
2.1.3	all officers of incorporated legal practices, partners and employees of persons to whom the Scheme applies provided they are LIV members, and prescribed persons – see sections 20, 21 and 22 of the Professional Standards Act 2003
2.1.4	all persons to whom clause 2.1.1 applied when the act or omission giving rise to the relevant cause of action arose
2.1.5	all corporations to whom clause 2.1.2 applied when the act or omission giving rise to the relevant cause of action arose

Who is not eligible to participate in the Scheme?

See clause 2.2 of the Scheme:

corporate legal practitioners are automatically excluded
from 1 July 2016, government lawyers will also be ineligible to participate in the Scheme.

What occupational liability is covered by the Scheme?

Clause 3.1, the Scheme limits the occupational liability of a participating member:

for damages arising from a single claim
founded on an act or omission relating to the provision of legal services.

Section 4 of the Professional Standards Act 2003 defines occupational liability as:

civil liability arising (in tort, contract or otherwise) directly or vicariously
from anything done or omitted to be done by a member of an occupational association
acting in the performance of his or her occupation.

What occupational liability is not covered by the Scheme?

The Scheme does not provide absolute protection from occupational liability. Clause 3.1.3 of the Scheme excludes damages arising from:

death of, or personal injury to, a person
any negligence or other fault in acting in a personal injury claim
a breach of trust, fraud or dishonesty, or subject of proceedings under s110 of the Transfer of Land Act 1958.

The Scheme does not limit your liability in relation to a relevant claim made by a client to whom you have not provided the disclosure statement – see sections 30(2) and 35 of the Professional Standards Act 2003.

What monetary ceilings apply to the limitation of liability under the Scheme?

Clause 3.3 of the Scheme fixes the applicable monetary ceilings as follows:

Class	Description	Monetary ceiling
1	Participating members in a law practice which had, at the time of the relevant cause of action: 20 or fewer principals, and $10 million or less in total annual fee income in the financial year.	$1.5 million
2	Participating members in an incorporated legal practice which had, at the time of the relevant cause of action: 20 or fewer principals, and $10 million or less in total annual fee income in the financial year.	$1.5 million
3	Participating members in a law practice which had, at the time of the relevant cause of action: more than 20 principals, or more than $10 million in total annual fee income in the financial year.	$10 million
4	Participating members in an incorporated legal practice which had, at the time of the relevant cause of action: more than 20 principals, or more than $10 million in total annual fee income in the financial year.	$10 million

Can I apply for a higher limitation of liability cap?

Yes. The LIV has discretionary authority, upon application by a Scheme participant, to specify a higher maximum liability cap than would otherwise apply – see clause 4 of the Scheme.

Assessing liability caps requires a combination of actuarial, legal and professional expertise. Therefore, to enable the LIV to properly exercise the discretion, it will have regard to a range of information about the law practice and the basis for the higher cap application, including:

the law practice’s insurance claims data
the law practice’s existing risk management framework
evidence of the law practice’s insurance or sufficient business assets to meet the higher cap, in the event of a successful claim
whether the higher cap is intended to apply to all of the law practice’s clients and transactions, or a subset of clients or transactions
the period of time that the higher cap will be in place
other relevant information.

To apply for a higher maximum liability cap under the Scheme, please complete an Application for a higher cap 2016/17 and, attaching all relevant evidence in support, return it to compliance@liv.asn.au.

What has changed in the new Scheme?

The new Scheme differs from the previous Scheme in three ways:

name change – all schemes approved by the Professional Standards Councils after 14 February 2014 are to be known as Professional Standards Schemes
government lawyers are excluded – see clause 2.2; as with the current Scheme, corporate legal practitioners continue to be ineligible to participate in the new Scheme
the Cover of Excellence® logo cannot be used after 30 June 2016.

Do all firm members have to participate to be able to rely on the Scheme?

Yes. The Scheme operates on a one-in, all-in basis to limit liability in the event of a claim involving issues of contributory or vicarious liability. Therefore, to enable your firm to rely on the Scheme, all lawyers with an Australian practising certificate in the law practice must be participating members. If the firm is an incorporated legal practice, it is also required to be a participating member.

Can I choose not to participate in the Scheme?

Section 30(6) of the Professional Standards Act 2003 provides that a person to whom a scheme applies cannot choose not to be subject to the scheme, except in accordance with any exemption provisions included in the scheme.

Clause 2.3 of the Scheme permits a person or incorporated legal practice to whom the Scheme applies to make application to the LIV to be exempt from participation in the Scheme.

To enable the LIV to properly exercise its discretion, it will have regard to a range of matters, including:

the need to safeguard the integrity of the Scheme for participating members and uphold the LIV's commitment to improving professional standards which enhance consumer protection
the basis for the application for exemption, including any hardship that may be caused, and any evidence in support
the size and nature of the firm's practice
the law practice's insurance claims data
the law practice's existing professional standards systems and risk management practices
other relevant information.

If you seek exemption from Scheme participation, please make a written request to compliance@liv.asn.au, addressing the above factors and attaching all relevant evidence in support.

Do I have to disclose my limited liability status to clients?

Yes. To rely on the Scheme, section 35 of the Professional Standards Act 2003 requires participating members to ensure that all documents given to current and prospective clients disclose their limited liability status. Failure to comply with this requirement carries a penalty of 50 penalty units and jeopardises your ability to rely on the Scheme in the event of a relevant claim.

The Professional Standards Regulations 2007 prescribes that the disclosure statement be in the following form:

“Liability limited by a scheme approved under Professional Standards Legislation”, and
printed in a size not less than Times New Roman in 8 point.

As well as being a compliance requirement, use of the disclosure statement is also an effective marketing tool that advertises your participation in the Scheme to clients, and identifies your commitment to meeting high standards of professionalism and consumer protection.

What documents do I need to include in the disclosure statement?

With the exception of business cards, the disclosure statement must appear on all materials that are, or could be, given to a current or prospective client – see section 35 of the Professional Standards Act 2003.

In its disclosure fact sheet, the Professional Standards Councils direct that the disclosure statement should appear on:

letterhead and letters signed by the law practice or on its behalf
emails
fax cover sheets
documents, including written advice, memorandum of fees and invoices, and other documents produced for clients which are not accompanied by a covering letter containing the disclosure statement
newsletters and other publications
websites.

The disclosure fact sheet suggests that it is not necessary to include the disclosure statement on:

advertisements in print media, directory listings and similar forms of promotion
social media networks, blogs, etc. that are accessed voluntarily by consumers, rather than being given, or caused to be given, by you or your firm to a client or prospective client.

What compliance obligations does the Scheme place on participating members?

All participating members play a vital role in ensuring the Scheme’s requirements are met, including by:

adhering to professional standards under the Uniform Law and Rules
participating in active risk management and standards improvement
reporting insurance and claims activity
meeting disclosure obligations

Visit the Scheme Compliance Requirements page for more information.

Do I have to provide a copy of the Scheme to my clients?

Yes, if a client or prospective client requests a copy.

Failure to provide a copy of the Scheme upon request is a breach of the Act, carrying a penalty of 50 penalty units – see section 35(4) of the Professional Standards Act 2003.

What do I do if a new lawyer joins my firm or my firm structure changes?

To ensure your firm is able to rely on the Scheme, all eligible lawyers must be participating members. Therefore, if a new lawyer starts at your law practice:

contact membership@liv.asn.au, to confirm if they are an LIV member and current Scheme participant
as applicable, complete the following forms and return them to membership@liv.asn.au, with the requisite payments:
- LIV membership application form
- 2016/17 Scheme participation (new & renewing participants) form.

If the structure of your law practice changes, contact membership@liv.asn.au to advise of the exact changes and obtain advice about Scheme participation.

What is the LIV’s role in administering the Scheme?

The Professional Standards Councils' approval of the Scheme recognises that the LIV is:

a member association with capacity for self-regulation
committed to supporting our members to achieve high standards of professionalism.

The Scheme is a legal instrument that requires the LIV to monitor, enforce and improve the professional standards of participating members to enhance consumer protection for users of legal services. The Professional Standards Councils oversee the LIV’s Scheme self-regulatory functions via the Professional Standards Improvement Program.

What compliance monitoring of Scheme participants does the LIV undertake?

Section 40(1) of the Professional Standards Act 2003 permits the LIV to undertake an audit of the compliance of Scheme participants at any time.

Currently, the LIV requires participating members to complete an annual declaration of compliance with Scheme their requirements and undertakes follow-up of members who declare non-compliance. The annual declaration forms are sent to participating members at the start of each calendar year.

The LIV is currently reviewing its Scheme compliance monitoring and enforcement activities and will advise participating members of any changes.

What judicial consideration of the professional standards legislation has occurred?

Professional Standards Scheme

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