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Department of Justice of 31 Report on the Statutory Review of the Professional Standards Act 2003 (Vic) CONFIDENTIAL

Report on the

Statutory Review of the

Professional Standards Act 2003 (Vic)

Prepared by: Civil Law Policy, Department of Justice September 2010


FOREWORD

Section 58 of the Professional Standards Act 2003 (Vic) (the Act), requires me as the Victorian Attorney-General to undertake a review of the policy objectives of the Act. The underlying philosophy of the Act is that in exchange for minimum insurance requirements, enhanced risk management and complaints and discipline procedures, members of a professional or occupational association may receive the benefit of capped liability. The Department of Justice has advised that a detailed review of the policy objectives would be of limited value at this time, as many Victorian professional standards schemes have only been in operation for a short time and consequently there is an absence of sufficient information and data on the operation of the schemes and their broader effect. The Office of Professional Standards Councils has advised the Department that it is currently undertaking a research project aimed at obtaining an in-depth understanding and assessment of any effects of professional standards legislation on occupational standards of professionals and protection of consumers of the services provided by professionals. As the research project will provide a much more accurate analysis of the functioning of professional standards legislation nationally, the Department’s review has focused on the experiences of occupational groups which have schemes in place under the regime. This Report analyses each of the objectives of the Act to determine whether they continue to be valid and appropriate and whether the terms of the Act remain appropriate for securing those objectives in the context of the current professional standards regime. The results of the review of the Act are contained in this Report. The Victorian Government accepts in principle the six recommendations outlined in this Report but will also consider any recommended changes to the Act in light of information or findings provided at a national level.

Rob Hulls MP Attorney-General, Victoria

Department of Justice of 31 Review of the Professional Standards Act 2003 (Vic) CONFIDENTIAL

CONTENTS

Executive summary and recommendations……………………... page 4 1. Introduction………………………………………………….page 6 1.1 Scope of review

1.2 Review process 2. Overview of the operation of professional standards schemes ………………………………………… page 8

3. Objectives of legislation…………………………………… page10 3.1 Legislative statement of objectives

3.2 Creation of schemes to limit the civil liability of professionals and others

3.3 Improvement of occupational standards 3.4 Protection of consumers 3.5 Establishment of the Professional Standards Council 4. The role of the Secretariat…………………………………. page 17 5. Other ……………………………………………………….. page 18

5.1 Section 5(1)(b) of the Act – Liability of Australian legal practitioners acting in a personal injury claim 5.2 Definition of occupational association (Section 4 of the Act) 5.3 Section 15 – Commencement of schemes

Appendix A – Organisations which made submissions to the Review ……………………………………….page 23 Appendix B – Schemes currently in force under the Act ……….page 24


EXECUTIVE SUMMARY AND RECOMMENDATIONS Victoria enacted the Professional Standards Act 2003 (Vic) (the Act) as part of the tort law reform package passed by the Victorian Parliament in response to the national insurance crisis of 2001-2002. The objectives of the Act are to improve professional service standards and limit the occupational liability of professionals in certain circumstances. It was intended that the legislation would help stabilise professional indemnity insurance premiums for service providers. In return for conferring a benefit of capped liability for members of participating professional associations, the Act is also intended to protect consumer interests through requirements for members to hold satisfactory levels of insurance, implement risk management strategies and to establish complaints and disciplinary procedures. The cap on liability does not apply to liability for damages arising out of the death of, or personal injury to a person, any negligence or other fault of a legal practitioner in acting for a client in a personal injury claim, breach of trust, or fraud or dishonesty. The Victorian Government is required to undertake a review of the Professional Standards Act 2003 (Vic) (the Act) pursuant to section 58 of the Act.

Section 58 of the Act provides that: (1) The Minister is to review this Act to determine whether the policy

objectives of this Act remain valid and whether the terms of this Act remain appropriate for securing those objectives.

(2) The review is to be undertaken as soon as possible after the period of 6

years from the day on which this Act receives the Royal Assent. (3) A report of the outcome of the review is to be tabled in each House of

Parliament within 12 months after the end of the period of 6 years.

The Act commenced on 2 December 2003. Therefore, the Report of the outcome of the review is required to be tabled before 2 December 2010. The Department of Justice Victoria has undertaken a review of the Act in accordance with the review requirements under section 58 of the Act. This Report is the result of that review process. The Report analyses each of the objectives of the Act to determine whether they continue to be valid and appropriate and whether the terms of the Act remain appropriate for securing those objectives in the context of the current professional standards regime. The Report also analyses the following additional issues, which have been raised in submissions to the review:

• to repeal section 5(1)(b) of the Act which states that the Act does not apply to liability for damages arising from any negligence or other fault of an


Australian legal practitioner (within the meaning of the Legal Profession Act 2004) in acting for a client in a personal injury claim.

• to broaden the definition of “occupational association” in section 4 of the Act

to consider the multi-disciplinary nature of associations. • to repeal section 15(1)(a) of the Act which states that a scheme published in

the Government Gazette with the authorisation of the Minister commences on such day 2 months or more after the date of its publication as may be specified in the scheme.

The recommendations made by the Report are as follows: Recommendation 1 That no changes be made to the current objects of the Professional Standards Act 2003 (Vic), as they continue to be valid and appropriate. Recommendation 2 That in principle, the Victorian Government consider extending the statutory role of the Professional Standards Council to provide guidance or advice to occupational associations about the operation of the Professional Standards Act 2003 (Vic) or an occupational association scheme. Recommendation 3 That the Secretariat to the Professional Standards Council continue its current role. Recommendation 4 That the Victorian Government only consider the repeal of section 5(1)(b) of the Professional Standards Act 2003 (Vic) (which excludes capped liability applying to legal practitioners acting in personal injury matters), provided there is compelling evidence for repealing the provision and for reaching a nationally consistent position on this issue. Recommendation 5 That the Victorian Government review the definition of “occupational association” as contained in section 4 of the Professional Standards Act 2003 (Vic). Recommendation 6 That the Victorian Government consider the repeal of section 15(1)(a) of the Professional Standards Act 2003 (Vic) which governs the commencement of schemes.


1. INTRODUCTION 1.1 Scope of Review 1.1.1 The Victorian Government is required to undertake a review of the

Professional Standards Act 2003 (Vic) (the Act) pursuant to section 58 of the Act.

1.1.2 Section 58 of the Act provides that:

(1) The Minister is to review this Act to determine whether the policy

objectives of this Act remain valid and whether the terms of this Act remain appropriate for securing those objectives.

(2) The review is to be undertaken as soon as possible after the period of 6 years from the day on which this Act receives the Royal Assent. (3) A report of the outcome of the review is to be tabled in each House

of Parliament within 12 months after the end of the period of 6 years.

1.1.3 The Act commenced on 2 December 2003. Therefore the Report of the

outcome of the review is required to be tabled before 2 December 2010. 1.1.4 The Department of Justice (the Department) believes that a detailed review of

the policy objectives at this time is not possible as most Victorian schemes have only been in operation for a short time. Given the absence of sufficient information and data on the operation of the schemes and their broader effect, a detailed review of the underlying policy objectives seems premature.

1.1.5 The Department has been advised by the Office of Professional Standards

Councils that it is currently undertaking a research project over a two year period, aimed at obtaining an in-depth understanding and assessment of any effects of professional standards legislation on occupational standards of professionals and protection of consumers of the services provided by professionals.

1.1.6 The research project will focus on six specific areas which include:

• identifying and understanding the take-up and membership of schemes across occupational associations;

• an assessment of the trends in insurance claims profile across occupational associations;

• an assessment of the trends in complaints and discipline profile across occupational associations;

• outlining past/existing improvements in risk management tools across occupational associations;

• exploring how the insurance market, economic environment, professional industry/environment and regulatory changes over time have influenced the effectiveness/impact of the professional standards legislation; and

• discovering perceptions and attitudes of key groups in relation to professional standards legislation and councils.


1.1.7 As the research project would provide a much more accurate analysis of the functioning of professional standards legislation, the Department proposed a limited review of the Act, which focuses on the experiences of occupational groups which have schemes in place under the regime.

1.2 Review Process 1.2.1 The review of the Act has been conducted by the Department. In June 2010,

the Department released a Discussion Paper, which formed the basis of the consultation process for the review. The Discussion Paper was designed to assist stakeholders in the process of preparing submissions in relation to the review.

1.2.2 The Discussion Paper was circulated to central agencies of the Victorian

Government, the Professional Standards Council (the Council), occupational associations that currently have professional standards schemes in operation and other stakeholders who have expressed interest in professional standards.

1.2.3 The review requested stakeholders to provide submissions on specific

issues concerning the operation of the Act, which would assist Victoria in its preliminary analysis of whether the objectives of the Act remain valid and whether the terms of the Act remain appropriate for securing those objectives.

1.2.4 The Department proposed that stakeholders consider the following issues:

• Are the types of occupational liability covered by the Act appropriate?

• Should the Act be extended to cover other types of occupational liability?

• Do the procedures for approving schemes provide for adequate consultation and accountability?

• Are the policy objectives of the Act still valid? • Are the terms of the Act appropriate for securing those objectives? • Is there a need for legislative clarification or modification of the

objectives? • Are the functions assigned to the Council under the appropriate?

Are there other areas where the Council should be acting? • Is the Council working effectively? • Have there been any difficulties with the administration of the Act

in practice? 1.2.5 Appendix A to this Discussion Paper provides a list of organisations

that made a submission in relation to the Review.


2. OVERVIEW OF THE OPERATION OF PROFESSIONAL STANDARDS SCHEMES 2.1 Under the Act, an occupational association may apply to the Council, which is

established by the Act, for approval of a scheme to limit liability. The Act does not apply to all types of occupational liability and excludes for example, liability for damages for personal injury, breach of trust, fraud or dishonesty.

2.2 Either an occupational association or the Council may prepare a scheme.

Before approving a scheme, the Council must publish a notice in a major newspaper regarding the scheme, consider any comments or submissions received, and conduct a public hearing if this is considered

necessary. Once the Council approves a scheme, the scheme is submitted to the Minister who may authorise the publication of the scheme in the Victoria Government Gazette. A scheme does not come into effect until two months after it has been gazetted. The Supreme Court may disallow a scheme if it does not comply with the Act. Schemes are also subject to disallowance by Parliament.

2.3 A scheme may apply to all members of an occupational association or to

classes of members. An occupational association may exempt a person from the scheme.

2.4 An approved scheme operates to cap the occupational liability of its members.

The scheme only affects the liability of a participant for damages arising from a single cause of action to the extent to which the liability results in damages in excess of the statutory prescribed amount of $500,000. However, many of the schemes under the Act may impose a higher cap on a discretionary basis. The cap may vary for different classes of persons within an occupational association or for different kinds of work. Members of a scheme are required to have adequate insurance cover, and occupational associations are required to maintain systems for handling complaints and disciplining members, to implement a risk management program, and ensure that members comply with requirements of the scheme.

2.5 Under the Act, the Council is responsible for supervising the preparation and

approval of schemes for limiting the occupational liability of a member of the relevant association.

2.6 An occupational association will usually be responsible for developing a

scheme in consultation with the Council. As well as limiting professional liability a scheme must address the level of compulsory professional indemnity insurance and risk management standards, including complaints and disciplinary systems.

2.7 The development of a scheme by an occupational association is voluntary. Different professional and occupational associations or groups are responsible for determining whether they wish to participate in professional standards by applying to the Council to register a scheme.


2.8 Under the Act, a scheme will limit liability by reference to insurance arrangements, business assets or a combination of business assets and insurance arrangements. A court may enter judgment against each defendant for not more than that amount. However this limitation on liability will only apply for any cause of action based on an act or omission that has occurred while the scheme is in force.

2.9 The reason for imposing restrictions on the power of the court to damages for purely economic loss is to promote the objects of the Act, namely, to limit the civil liability of members of occupational associations and create appropriate incentives for such persons to promote the interests of consumers by adopting rigorous risk management strategies and be subjected to a complaints and disciplinary code administered by the relevant occupational association. 2.10 Therefore, liability as set out in a scheme, will not be limited where the

member has at no stage before the relevant act or omission, given or caused to be given to the client a document disclosing that the member is party to a scheme or otherwise so informed the client.

2.11 Schemes approved under the Act were not individually reviewed as part of

the review process. Given the voluntary nature of the regime, occupational associations are not required to register schemes and their members are not required to join schemes even when they are registered. 2.12 Appendix B to this Discussion Paper provides a list of schemes currently in

force under the Act. 2.13 Several schemes are intended to apply in Victoria, as well as in New South

Wales, the Australian Capital Territory, the Northern Territory, Queensland and Western Australia, under the mutual recognition provisions of the professional standards legislation in each jurisdiction. The mutual recognition amendments were passed in 2008 following agreement by the Standing Committee of Attorneys-General.

2.14 The purpose of the mutual recognition amendments is to allow members of occupational associations covered by a professional standards scheme in one jurisdiction to practise their trade or profession in another jurisdiction

whilst enjoying the cover of their scheme in that other jurisdiction. The model does not provide for the automatic recognition of interstate schemes but sets out a process that must be followed before an interstate scheme takes effect in another jurisdiction. The process is similar to the process set out in the Act for notification, approval and publication of Victorian schemes.


3. OBJECTIVES OF LEGISLATION

3.1 Legislative Statement of Objectives 3.1.1 The objectives of the Act reflect the underlying policy objectives of the

professional standards regime. 3.1.2 According to section 4 of the Act, the legislative objects of the Act are:

(a) to enable the creation of schemes to limit the civil liability

of professionals and others; and (b) to facilitate the improvement of occupational standards of

professionals and others; and

(c) to protect the consumers of the services provided by professionals and others; and (d) to establish the Professional Standards Council to supervise the preparation and approval of schemes and to assist in the improvement of occupational standards and protection of consumers.

3.1.3 Section 58 of the Act requires an assessment as to whether the

objectives continue to be valid. This Report will examine each of the objectives stated in section 4 of the Act in turn.


3.2 Creation of schemes to limit the civil liability of professionals and others

3.2.1 The first objective of the Act is to enable the creation of schemes to

limit the civil liability of professionals and others. 3.2.2 An examination of this objective should be undertaken in the context of

the background to the introduction of the Act. 3.2.3 Victoria enacted the Act as part of the tort law reform package passed

by the Victorian Parliament as part of a national response to the insurance crisis of 2001-2002.

3.2.4 In 2002, Commonwealth, State and Territory governments jointly agreed to

examine and review the law of negligence. A Review of the Law of Negligence was finalised by a panel established by the Commonwealth Government and chaired by Justice David Ipp (the Ipp Report). The Ipp Report contained 61 recommendations to reform the law of negligence. Most of the recommendations were implemented and resulted in amendments to the Wrongs Act 1958 (Vic).

3.2.5 The tort law reforms were introduced in three tranches from 2002-2003. The

Wrongs and Limitations of Actions Act (Insurance Reform) Act 2003 introduced proportionate liability for economic loss, thresholds and procedures for personal injury claims and new limitation periods for personal injury claims. The Wrongs and Other Acts (Laws of Negligence) Act 2003 introduced amendments to negligence and contributory negligence, thresholds, mental harm and liability for public authorities.

3.2.6 Specific reforms were adopted with the objective of improving professional

service standards and limiting the occupational liability of professionals in certain circumstances. These formed the basis of the Act and were aimed at helping stabilise professional indemnity insurance premiums for service providers. In return for conferring a benefit of capped liability for members of participating professional associations, the Act was also intended to protect consumer interests through requirements for members to hold satisfactory levels of insurance, implement risk management strategies and to establish complaints and disciplinary procedures.

3.2.7 The Act forms part of the Victorian Government’s response to concerns about

the availability and affordability of professional indemnity insurance. 3.2.8 The underlying philosophy of professional standards legislation is that in

exchange for minimum insurance requirements, enhanced risk management and complaints and discipline procedures, members of a professional or occupational association may receive the benefit of capped liability. The cap on liability does not apply to liability for damages arising out of the death of or personal injury to a person, any negligence or other fault of a legal practitioner in acting for a client in a personal injury claim, breach of trust, or fraud or dishonesty.


3.2.9 The Act establishes a mechanism for the approval and gazettal of occupational schemes, which encompass these elements. It also establishes the Council, which oversees the professional standards regime and is responsible for the approval of occupational schemes.

3.2.10 All of the respondents to the review are of the view that the problems which

led to the introduction of the Act in Victoria and in other jurisdictions were significant enough to warrant legislative intervention. Respondents are also of the view that legislative intervention continues to be justified.

3.2.11 In the past there have been concerns about the cost and availability of

insurance in the marketplace. Factors impacting on current cost and availability of insurance are varied and complex. Economic indicators demonstrate that premiums are counter cyclical, that is, when the economy is booming this results in increased insurance company profits and therefore premiums are more than likely to decrease. To the contrary, when the economy is not progressing, profits decrease and subsequently premiums rise.

3.2.12 At this stage it is unclear whether the capping of liability has had an impact on

limiting increases in insurance premiums for professionals who are members of schemes under the Act.

3.2.13 However, the Institute of Chartered Accountants in Australia (ICAA) note in

their submission that since the introduction of the Act, the professional indemnity insurance market has markedly improved. While ICAA attribute this improvement partly to the cyclical nature of the professional indemnity insurance market, they do however acknowledge that anecdotal evidence indicates the reforms have played an important part, “especially in deferring a hardening of the professional indemnity market expected as a lagged effect of the global economic downturn”.

3.2.14 Similarly, Engineers Australia states in its submission that while it expects

that being a member of the Scheme will enable better access to insurance in times of a hard market and on better terms, they do not expect to see improvements in insurance costs and cover in the short term given that the Scheme has only recently commenced.

3.2.15 Professional standards legislation was enacted in response to the insurance

crisis between 2000 and 2002 where a downturn in the global insurance market, further precipitated by events such as the September 11 2001 terrorist attacks and more locally the collapse of the HIH Insurance Group in Australia, caused significant difficulties for individuals and businesses seeking public liability and professional indemnity insurance cover. Members of professional associations with professional standards schemes approved under the Act have the benefit of having their liability capped where a claim is brought against them in connection with their occupation. Although there is not yet sufficient data to firmly conclude that the scheme has itself stabilised the professional indemnity insurance market, the market has been relatively stable and the objectives of the legislation remain valid and appropriate.


3.3 Improvement of occupational standards 3.3.1 The second objective of the Act is to facilitate the improvement of

occupational standards of professionals and others. 3.3.2 Part 4 of the Act requires an occupational association that wishes its members

to be brought under the Act to develop risk management strategies. Further to this, Part 4 also requires an occupational association to report annually as to the implementation and monitoring of its risk management strategies.

3.3.3 This corollary requirement for professionals benefiting from a liability cap is

the obligation to develop and adhere to risk management strategies. 3.3.4 Consumer interests are protected and occupational standards are improved by

a range of tailored risk management strategies which may include: codes of practice, codes of ethics, quality management, claims monitoring and review, voluntary mediation services and continuing professional education. Adopting such risk management strategies should result in enhanced professional practices and reduced claims.

3.3.5 In its submission Consult Australia assert that the greater transparency of risk

management under the professional standards regime not only benefits consumers but also assists in encouraging insurers to recognise that professions and other occupational groups that have schemes are better insurance risks.

3.3.6 Part 5 of the Act enables the adoption by an occupational association of a

Model Code set out in Schedule 1 of the Act or with additions, omissions or other modifications approved by the Council. The Model Code contains provisions concerning the making and resolution of complaints against members of occupational associations and the taking of disciplinary measures against members.

3.3.7 A complaints and disciplinary structure provides a more efficient and cost-

effective system of dealing with consumer concerns rather than resorting to civil litigation. It also provides an opportunity for associations to identify poor practices of its members prior to any loss occurring.

3.3.8 The success of any risk management strategy also depends upon an effective

complaint and disciplinary system. Such a system provides a more efficient and cost effective way of dealing with consumer concerns, rather than resorting to civil litigation.

3.3.9 It is clear that central to the development of a scheme is the necessity to

maintain and improve professional standards and to ensure that this translates into a certain level and quality of professional services provided to consumers. It is therefore fair to conclude that this objective as outlined in the Act remains valid and appropriate and should be retained in its current form.


3.4 Protection of consumers 3.4.1 The third objective of the Act is to protect consumers of services provided by

professionals and others. 3.4.2 Prior to the introduction of the professional standards regime, consumers who

were awarded damages were not always in a position to recover damages due to professionals having no insurance and/or insufficient insurance cover or not having adequate assets to cover the amount of damages.

3.4.3 The Act sought to promote widespread insurance coverage by mandating that

occupational associations require their members to obtain insurance cover to prescribed requirements and/or standards. This would ensure that in the event of a claim against a professional service provider, adequate assets would be available to compensate a successful claimant for loss incurred.

3.4.4 The professional standards regime protects consumers by making insurance

compulsory for professionals who are members of occupational schemes. This provides that in the event that claims arise, insurance cover will adequately compensate plaintiffs.

3.4.5 The Act also requires occupational associations that have a scheme approved

under the Act to ensure they have procedures in place for handling consumer complaints. Furthermore the Act also requires occupational associations to have procedures for disciplining members and the Act contains a Model Complaints and Discipline Code which associations may choose to adopt.

3.4.6 In its submission Consult Australia acknowledge the importance of this

objective and the continued importance of this objective of the Act: “the underlying rationale for professional standards legislation is to better protect consumers of professional services and the community generally by improving professional standards and risk management practices and providing greater safeguards for consumers by improving the availability and affordability of PI insurance”.

3.4.7 It is evident that encouraging professionals to acquire satisfactory

insurance cover and to ensure that proper mechanisms for resolving consumer complaints about professional services are in place, will only continue to further protect consumers and their interests. This objective as outlined in the Act remains valid and appropriate and should be retained in its current form.


3.5 Establishment of the Professional Standards Council 3.5.1 The fourth objective of the Act is to establish the Council to supervise the

preparation and approval of schemes and to assist in the improvement of occupational standards and protection of consumers.

3.5.2 Under the Act, the Council is responsible for supervising the preparation and

approval of schemes for limiting the occupational liability of a member of the relevant association.

3.5.3 The Council was constituted under State and Territory professional standards

legislation. There are eight Councils - one Council sitting for each Australian state and territory. The Councils consist of the same 11 members, nominated by each state and territory and the Commonwealth Government.

3.5.4 Under the intergovernmental Professional Standards Agreement 2005

Victoria is required to appoint members to the Victorian Professional Standards Council, in accordance with the mutual appointments process set out under the Agreement.

3.5.5 Under the Agreement, New South Wales and Victoria are each entitled to

nominate two of the total 11 members constituting each State and Territory Council while other jurisdictions nominate one member each. The purpose of this arrangement is to ensure that each State and Territory Council retains the same level of experience in members and a nationally consistent approach to administering professional standards schemes across Australia.

3.5.6 The Council is an independent body of part-time members appointed by the

Attorney-General for a period of up to three years. Appointments to the Council are based on an individual’s skills, qualifications, experience and ability to contribute to the work of the Council. The membership of the Council is drawn from business, government, professional bodies and employee organisations.

3.5.7 The functions of the Council are set out in Part 6, Division 3 of the Act. The

Council is responsible for:

• determining applications by occupational associations for professional standards schemes;

• advising the Attorney General about occupational standards; • monitoring compliance by occupational associations with their risk

management strategies; and • publishing information and conducting forums to assist occupational

associations to improve the standards of their members. 3.5.8 The Law Institute of Victoria noted that while the functions assigned to the

Council are primarily set out in section 46 of the Act, the Act does not enable the Council to provide guidance or advice to occupational associations about the operation of the Act or an occupational association scheme. The Law Institute of Victoria suggested that consideration should be given to extending the Council’s role in that it should be afforded specific statutory authority to provide general guidance to occupational associations regarding the operation of the Act and schemes.


3.5.9 In the context of the Council’s role in approving occupational schemes, while

the Law Institute of Victoria consider the procedures for approving schemes provide for adequate consultation and accountability, they do however suggest that the Act should enable expedited approval of “non material” amendments which are to correct typographical errors, or which have no effect on the rights of the consumer.

3.5.10 In order for the professional standards regime to operate effectively and satisfactorily, it is essential a body exists in order to administer the Act. The role of the Council is central in supervising the preparation and application of schemes and in assisting the improvement of occupational standards and ensuring consumer protection. This objective as outlined in the Act remains valid and appropriate and should be retained in its current form.

Recommendation 2 That in principle, the Victorian Government consider extending the statutory role of the Professional Standards Council to provide guidance or advice to occupational associations about the operation of the Professional Standards Act 2003 (Vic) or an occupational association scheme.

Recommendation 1 That no changes be made to the current objects of the Professional Standards Act 2003 (Vic), as they continue to be valid and appropriate.


4. THE ROLE OF THE SECRETARIAT

4.1 Section 52B of the Act permits the Council to enter into an agreement with an entity for the provision of services of an administrative nature in support of the functions of the Council. The Council has entered into an agreement with the secretariat established by the New South Wales Department of Justice and Attorney-General for the provision of administrative support. The Council receives the benefit of the considerable expertise developed within the secretariat which has provided secretariat and support services to the New South Wales Department of Justice and Attorney-General since 1995.

4.2 The secretariat supports the Council by providing the following services to the

Council: • act as the public contact office of the Council and provide administrative

services to the Council including receiving, acknowledging and as instructed by the Council, responding to all correspondence on behalf of the Council

• maintain the website providing information about the Council and other information relating to the legislation

• assist the Council regarding the approval, renewal, amendment or revocation of schemes

• assist the Council with the on-going monitoring and administration of schemes

• provide administrative, book-keeping and record-keeping services to the Council

• assist the Council to carry out any Ministerial direction and to discharge any other duties arising under the legislation

• support the information gathering, advisory and educational functions of the Council

• keep sufficient records to enable the Council to prepare the financial and annual reports required under the legislation and

• facilitate the Council's role and function under section 46A of the legislation by providing common secretariat support to other Councils constituted under corresponding legislation in other jurisdictions.

4.3 The secretariat co-operates with the Department to ensure efficient

administration of the Act.

Recommendation 3 That the Secretariat to the Professional Standards Council continue its current role.


5. OTHER 5.1 Section 5(1)(b) of the Act – Liability of Australian legal practitioners

acting in a personal injury claim 5.1.1 Section 5(1)(b) of the Act states that:

(1) This Act does not apply to liability for damages arising from any of the following-

……….. (b) any negligence or other fault of an Australian legal practitioner (within the meaning of the Legal Profession Act 2004) in acting for a client in a personal injury claim.

5.1.2 The Government received submissions from various professional associations

requesting that section 5(1)(b) of the Act be repealed. The repeal of this clause would allow capped liability to apply to legal practitioners acting in personal injury matters. Most have sought the repeal of this provision for consistency with New South Wales (NSW) and Western Australia (WA).

5.1.3 The Victorian Act, when passed by Parliament in November 2003, largely

replicated the NSW and WA Professional Standards Acts. At the time the Victorian Act was passed, the NSW Act contained the equivalent exclusion provision with respect to legal practitioners acting in personal injury matters.

5.1.4 At the time the Victorian Government adopted a policy to strike a reasonable

balance when implementing the tort law reforms between measures aimed at ameliorating the effects of the then insurance crisis and protecting the rights of certain classes of claimants.

5.1.5 The Victorian Act was part of a national commitment by jurisdictions to pass

consistent professional standards legislation as part of the tort law reforms in response to the insurance crisis. Furthermore, it was intended that such legislation would address the consequences of unlimited liability while ensuring that the interests of consumers were protected. As a result, the majority of provisions in the NSW Act were enacted in Victoria.

5.1.6 Although NSW and WA have since repealed the equivalent provision, the

policy position on the issue as reflected in the Victorian Act is consistent with the majority of jurisdictions.

5.1.7 Comments put to the Government in favour of repealing section 5(1)(b) of the

Act included:

(a) Repealing section 5(1)(b) is in the public interest because it would extend to the clients who have a claim against their legal practitioner the security and benefits of appropriate levels of compulsory indemnity insurance and risk management protection.

(b) Repealing section 5(1)(b) is in the public interest because it would

benefit legal practitioners acting for clients (and also their clients) in personal injury claims through education and the requirement under a professional standards scheme for preventative risk management and risk reduction strategies.


(c) Not repealing section 5(1)(b) may expose legal practitioners working in the area of personal injuries to higher insurance premiums because they are unable to access the capping of occupational liability through a professional standards scheme. As a result, higher insurance premiums could lead to an increase in legal costs for clients involved in personal injury matters.

(d) Section 5(1)(b) may operate as a disincentive for some legal

practitioners to undertake legal work in the area of personal injuries and this would not serve the public interest as it may restrict access to justice.

5.1.8 The Government has reviewed these comments and considers these can be

addressed as follows:

(a) An Australian legal practitioner who intends to engage in legal practice in Victoria, before commencing practice, is required to maintain professional indemnity insurance (PII) cover for the primary layer of $2 million with the Legal Practitioners’ Liability Committee (LPLC) pursuant to section 3.5.2 of the Legal Profession Act 2004. Furthermore, it is noted that the average claim against a lawyer is significantly below the maximum cover provided by the LPLC under the Legal Profession Act. No evidence has been put to Government to suggest that Victorian-based practitioners in this area of law have been less likely to obtain insurance cover or maintain adequate levels of cover as a result of section 5(1)(b).

The legal profession is well placed, amongst other regulated professions, with rules in place for legal practitioners, during each year of practice, to adhere to requirements under the Continuing Professional Development (CPD) program. The CPD program provides an opportunity for legal practitioners to further their knowledge and skills including knowledge of preventative risk management and risk reduction strategies, business and practice management and ethics. While practitioners are encouraged to undertake risk management and risk reduction strategies as a matter of prudent practice regardless of the area of law in which they practise, there is insufficient evidence to suggest that there is a significant problem with the quality of service provided by practitioners in the personal injury field, occasioning client claims against those practitioners.

(b) The Department has communicated with the LPLC with regard to

insurance premiums. The LPLC have confirmed that insurance premiums do not vary from one area of legal practice to another. Rather premiums differ based on risk rating bands, which take into consideration the number of practitioners and the level of these practitioners within a firm. Therefore, on this basis the retention of section 5(1)(b) would not expose legal practitioners working in the area of personal injury to higher insurance premiums.


(c) There are currently a number of law firms and barristers who undertake personal injury work without the benefit of capped liability cover.

The 2008-2009 Annual Report of the Legal Services Commissioner reported that in the last financial year 79 of a total 2057 complaints (or approximately 4% of claims) against practitioners were related to personal injury matters. This is in stark contrast to: 464 complaints in family law matters; 184 complaints in conveyancing matters; and 232 complaints in probate and estate matters. Based on the available evidence (at the time of preparing this Report the only available data was that contained in the 2008/2009 Annual Report of the Legal Services Commissioner), it does not appear that section 5(1)(b) poses access to justice concerns in the area of personal injury representation.

5.1.9 On the issue of whether it is desirable for section 5(1)(b) to be repealed purely

on the basis of achieving consistency with the corresponding NSW and WA Acts, the Government notes that the retention of section 5(1)(b) of the Victorian Act reflects the statutory position in the majority of States and Territories.

5.1.10 Accordingly, there is no reason at this stage to repeal section 5(1)(b) of the

Professional Standards Act 2003 (Vic) in the absence of compelling evidence and purely for achieving consistency with the legislation in NSW and WA.

Recommendation 4 That the Victorian Government only consider the repeal of section 5(1)(b) of the Professional Standards Act 2003 (Vic) (which excludes capped liability applying to legal practitioners acting in personal injury matters), provided there is compelling evidence for repealing the provision and for reaching a nationally consistent position on this issue.


5.2 Definition of occupational association (Section 4 of the Act) 5.2.1 Section 4 of the Act defines an “occupational association” as follows:

occupational association means a body corporate –

(a) which represents the interests of persons who are members of the same occupational group; and (b) the membership of which is limited principally to members of that occupational group.

5.2.2 Section 4 of the Act further defines an “occupational group” to include a

professional group and a trade group.

5.2.3 The definition of “occupational group” in the Victorian Act focuses on the activities of members of the same professional group and the professional services, which relate to the particular professional knowledge and expertise of that specific professional group.

5.2.4 Some of the submissions suggest that Victoria should adopt the definition of

occupational association in the professional standards legislation of New South Wales, Northern Territory, Western Australia and Queensland. These jurisdictions define “Occupational Association” as follows:

occupational association" means a body corporate:

(a) which represents the interests of persons who are members of the same occupational group or related occupational groups, and (b) the membership of which is limited principally to members of that occupational group or those occupational groups.

5.2.5 In its submission Consult Australia expresses concerns that the current

definition of occupational association in the Act does not consider professional organisations which offer multidisciplinary services with a wide range of professionals with varying areas of expertise.

5.2.6 The Department notes the changing structure of businesses and organisations

into multi-disciplinary practices in which members of more than one profession or occupation provide a combination of services for clients. It is clear that multi-disciplinary practices offer a wider range of choice to consumers by way of combining existing professional services and by subsequently creating new ones.

5.2.7 The Department thinks that the current definition of “occupational

association” in section 4 of the Act could be broadened to include multi-disciplinary practices subject to the availability of appropriate insurance cover for multi-disciplinary practices.

Recommendation 5 That the Victorian Government review the definition of “occupational association” as contained in section 4 of the Professional Standards Act 2003 (Vic).


5.3 Section 15 – Commencement of schemes 5.3.1 Section 15(1) of the Act states that:

(1) A scheme published in the Government Gazette with the authorisation of the Minister commences -

(a) on such day 2 months or more after the date of its publication as may be specified in the scheme; or (b) if no such day is specified – 2 months after the date of its publication.

5.3.2 Section 15(1)(a) was included in the Act to provide a further opportunity for

any person to make a comment or submission concerning the scheme even after the public consultation period had concluded.

5.3.3 Tasmania’s professional standards legislation also contains a similar

commencement provision to Victoria. 5.3.4 The commencement provision in the legislation of other jurisdictions provides

that :

1) A scheme published in the Gazette with the authorisation of the Minister commences:

(a) on such day subsequent to the date of its publication as may be specified in the scheme, or (b) if no such day is specified-2 months after the date of its publication.

5.3.5 Some of the submissions recommend that section 15(1)(a) of the Victorian

Act should be amended to reflect the commencement provision contained in the professional standards legislation in other jurisdictions. In its submission the Professional Standards Council stated that this amendment is not only necessary for the sake of consistent professional standards legislation across all jurisdictions but also as mutual recognition is becoming more common in scheme applications

5.3.6 While aiming to be nationally consistent, State and Territory professional

standards legislation is not uniform legislation. Accordingly, there are differences in the way certain provisions are enacted from jurisdiction to jurisdiction and these reflect State or Territory-specific policy decisions that were taken over the scope and application of the legislation at the time of development and implementation.

5.3.7 The Department acknowledges the importance of consistent legislation central

to national regimes and will consider the repeal of section 15(1)(a) of the Victorian Act, in light of the suggestions made.

Recommendation 6 That the Victorian Government consider the repeal of section 15(1)(a) of the Professional Standards Act 2003 (Vic) which governs the commencement of schemes.


APPENDIX A Organisations which made submissions to the Review

1. Engineers Australia

2. Law Institute of Victoria 3. Consult Australia 4. National Institute of Accountants 5. The Institute of Chartered Accountants in Australia 6. Liability Reform Steering Group 7. Professional Standards Council


Appendix B Schemes currently in force under the Act

Scheme Name

Maximum amount of liability

All Members or Class? Exemptions Granted?

$1,000,000. The Scheme confers on the PSOA a discretionary authority to specify, on application, a higher maximum amount of liability not exceeding $10,000,000.

For members whose total annual fee income for the most recent financial year is less than $2,500,000.

The scheme applies to all members of the PSOA. There is no provision in the scheme for exemption.


For members whose total annual fee income for the most recent financial year is $2,500,000 or more, but is less than $5,000,000.


Professional Surveyors’ Occupational Association Scheme (PSOA) *


For members whose total annual fee income for the most recent financial year is $5,000,000 or more.


Australian Computer Society Scheme (ACS) *

$1,500,000 The Scheme confers on the ACS a discretionary authority to specify, on application, a higher maximum amount of liability not exceeding $10,000,000.

The scheme will apply to those members of the ACS who have attained Certified Computer Professional status. Such members are required by the ACS to undertake approved continuing, occupational education programs, participate in risk management planning,

The scheme applies to all members of the ACS who have attained Certified Computer Professional status. There is no provision in the scheme for exemption.


and comply with the ACS’s professional indemnity insurance standards.

Victorian Bar Inc Amending Scheme **

$2,000,000 (The Scheme confers on the Victorian Bar Inc discretionary authority to increase the higher maximum amount of liability than would otherwise apply under the Scheme)

Specific Class The Scheme only applies to a specified class of persons within the Victorian Bar, specifically members: (a) who hold current practising certificates issued by the Victorian legal Services Board or the Victorian Bar; (b)who are admitted to membership of the Instrument by resolution of the Victorian Bar Council; and (c)whose names remain on the Instrument Register maintained by the Victorian Bar.

The scheme applies to a specified class of persons within the Victorian Bar. There is no provision in the scheme for exemption.

$2,000,000 Participating members who were at the relevant time in a Law Practice consisting of up to and including 20 Principals and where the Law Practice generated Total Annual Fee Income for the Financial Year at the Relevant Time up to and including $10 million.

The scheme will apply to those members of the Law Institute of Victoria (LIV) who hold a current Australian Practising Certificate, other than Corporate Legal Practitioners. A member to whom the scheme applies may apply to the LIV for an exemption from the scheme.

Law Institute of Victoria Scheme **

$10,000,000 Participating Members who were at the Relevant Time in a Law Practice consisting of greater than 20 Principals; or Participating Members who were at the Relevant Time in a Law Practice where the Law Practice generated Total Annual Fee Income for the Financial Year a the Relevant Time greater than $10 million.

The scheme will apply to those members of the Law Institute of Victoria (LIV) who hold a current Australian Practising Certificate, other than Corporate Legal Practitioners. A member to whom the scheme applies may apply to the LIV for an exemption from the scheme.


Category A $1,500,000 (The Scheme confers on Engineers Australia discretionary authority to increase the higher maximum amount of liability than would otherwise apply under the Scheme to an amount not exceeding $20 million)

Category A member” means a person who is a member of Engineers Australia to whom the scheme applies and who is: (a) a body corporate whose total annual fee income for the most recent financial year is less than $1million; (b) an individual who is a member of a partnership, where the total annual fee income of such partnership for the most recent financial year is less than $1million; or (c) a sole trader whose total annual fee income for the most recent financial year is less than $1 million.

The scheme applies to a class of members of the Institution of Engineers Australia, namely the Engineering Science and Technology Professional Standards Society. Effectively, the scheme applies to members of the Association who: (a) have chartered status or are registered on the National Engineers Register, (b) have an approved risk management plan in place for the member's practice and a process to annually review compliance with the risk management plan, (c) adhere to the code of ethics, (d) maintain at all times the required level of insurance as set by the Association, (e) comply with the continuing professional development policy of the Association, and (f) comply with other requirements determined and published from time to time by the Association.

Engineers Australia Scheme **

Category B $4,000,000 (The Scheme confers on Engineers Australia discretionary authority to increase the higher maximum amount of liability than would otherwise apply under the Scheme to an amount not exceeding $20 million)

Category B member” means a person who is a member of Engineers Australia to whom the scheme applies and who is: (a) a body corporate whose total annual fee income for the most recent financial year is $1 million or more, but is less than $3 million; (b) an individual who is a member of a partnership, where the total annual fee income of such partnership for the most recent financial year is $1 million or more, but is less than $3 million; or

The scheme applies to a class of members of the Institution of Engineers Australia, namely the Engineering Science and Technology Professional Standards Society. Effectively, the scheme applies to members of the Association who: (a) have chartered status or are registered on the National Engineers Register, (b) have an approved risk management plan in place for the member's practice and a process to annually review compliance with the risk management plan, (c) adhere to the code of ethics, (d) maintain at all times the required level of insurance as


(c) a sole trader whose total annual fee income for the most recent financial year is $1million or more, but is less than $3 million.

set by the Association, (e) comply with the continuing professional development policy of the Association, and (f) comply with other requirements determined and published from time to time by the Association.

Category C $8,000,000 (The Scheme confers on Engineers Australia discretionary authority to increase the higher maximum amount of liability than would otherwise apply under the Scheme to an amount not exceeding $20 million)

Category C member” means a person who is a member of Engineers Australia to whom the scheme applies and who is: (a) a body corporate whose total annual fee income for the most recent financial year is $3 million or more, but is less than $10 million; (b) an individual who is a member of a partnership, where the total annual fee income of such partnership for the most recent financial year is $3 million or more, but is less than $10 million; or (c) a sole trader whose total annual fee income for the most recent financial year is $3 million or more, but is less than $10 million.

The scheme applies to a class of members of the Institution of Engineers Australia, namely the Engineering Science and Technology Professional Standards Society. Effectively, the scheme applies to members of the Association who: (a) have chartered status or are registered on the National Engineers Register, (b) have an approved risk management plan in place for the member's practice and a process to annually review compliance with the risk management plan, (c) adhere to the code of ethics, (d) maintain at all times the required level of insurance as set by the Association, (e) comply with the continuing professional development policy of the Association, and (f) comply with other requirements determined and published from time to time by the Association.

Category D $20,000,000

Category D member means a person who is a member of Engineers Australia to whom the scheme applies and who is: (a) a body corporate whose total annual fee income for the most recent financial year is $10 million or more, but is less than $20 million;

The scheme applies to a class of members of the Institution of Engineers Australia, namely the Engineering Science and Technology Professional Standards Society. Effectively, the scheme applies to members of the Association who: (a) have chartered status or are registered on the National Engineers Register, (b) have an approved risk management plan in place for the


(b) an individual who is a member of a partnership, where the total annual fee income of such partnership for the most recent financial year is $10 million or more, but is less than $20 million; or (c) a sole trader whose total annual fee income for the most recent financial year is $10 million or more, but is less than $20 million.

member's practice and a process to annually review compliance with the risk management plan, (c) adhere to the code of ethics, (d) maintain at all times the required level of insurance as set by the Association, (e) comply with the continuing professional development policy of the Association, and (f) comply with other requirements determined and published from time to time by the Association.

Category 1 $75,000,000

Category 1 services means: (a) all services required by Australian law to be provided only by a registered company auditor; (b) all other services provided by a registered company auditor in his or her capacity as auditor; (c) all services the deliverables from which: (i) will be used in determining the nature, timing and extent of audit procedures in the context of an audit of a financial report; or (ii) will be incorporated into the financial report of an entity; or (iii) are required by or regulation to be with a regulator (excluding signed b a tax agent).

The CPA Scheme applies to participating members, being those CPA Australia members who hold a current Public Practice Certificate issued by CPA Australia and affiliate members of CPA Australia other than financial services licensees and all practice entity members other than financial services licensees and to all persons to whom the Scheme applied at the time of the relevant act or omission on which a cause of action for damages for occupational liability is founded. No person to whom the Scheme applies may choose not to be subject to the Scheme, provided that CPA Australia may, on application by a person, exempt the person from the Scheme if CPA Australia is satisfied that he or she would suffer financial hardship in obtaining professional indemnity insurance to any of the categories.

CPA Australia Limited Scheme **

Category 2

Category 2 services means:

The CPA Scheme applies to participating members, being those CPA Australia members who hold a current Public


$20,000,000

(a) services to which Chapter 5 or Chapter 5A of the Corporations Act 2001 (Cth) applies; (b) services provided pursuant to section 233(2) of the Corporations Act 2001 (Cth); (c) services to which the Bankruptcy Act 1966 (Cth) applies; or (d) services arising out of any court appointed liquidation or receivership.

Practice Certificate issued by CPA Australia and affiliate members of CPA Australia other than financial services licensees and all practice entity members other than financial services licensees and to all persons to whom the Scheme applied at the time of the relevant act or omission on which a cause of action for damages for occupational liability is founded. No person to whom the Scheme applies may choose not to be subject to the Scheme, provided that CPA Australia may, on application by a person, exempt the person from the Scheme if CPA Australia is satisfied that he or she would suffer financial hardship in obtaining professional indemnity insurance to any of the categories.

Category 3 $20,000,000

Category 3 services means any services provided by a participant in the performance of his, her or its occupation, which are not Category 1, Category 2 or financial planning services.

The CPA Scheme applies to participating members, being those CPA Australia members who hold a current Public Practice Certificate issued by CPA Australia and affiliate members of CPA Australia other than financial services licensees and all practice entity members other than financial services licensees and to all persons to whom the Scheme applied at the time of the relevant act or omission on which a cause of action for damages for occupational liability is founded. No person to whom the Scheme applies may choose not to be subject to the Scheme, provided that CPA Australia may, on application by a person, exempt the person from the Scheme if CPA Australia is satisfied that he or she would suffer financial hardship in obtaining professional indemnity insurance to any of the categories.

Institute of Chartered Accountants in Australia Scheme **

Category 1 $75,000,000

Category 1 services means: (a)all services required by Australian law to be provided only by a registered company auditor; (b)all other services provided by a registered company auditor in his or her

The eligible members of the proposed Institute Scheme will be: - Members of the Institute holding Certificates of Public Practice (CPP) other than financial services licensees. - Affiliate members of the Institute.


capacity as auditor; (c)all services the deliverables from which: (i)will be used in determining the nature, timing and extent of audit procedures in the context of an audit of a financial report; or (ii)will be incorporated into the financial report of an entity; or (iii)are required by law or regulation to be filed with a regulator (excluding returns signed by a registered tax agent);

- Practice entity members of the Institute Chartered Accountant employees of members with CPP Partners of the CPP holder who are not eligible for membership of the Institute.

Category 2 $20,000,000

Category 2 services” means: (a)services to which Chapter 5 or Chapter 5A of the Corporations Act applies;

(b)services provided pursuant to s.233(2) of the Corporations Act; (c)services to which the Bankruptcy Act 1966 applies; (d)services arising out of any court appointed liquidation or receivership

The eligible members of the proposed Institute Scheme will be: - Members of the Institute holding Certificates of Public Practice (CPP) other than financial services licensees. - Affiliate members of the Institute. - Practice entity members of the Institute Chartered Accountant employees of members with CPP Partners of the CPP holder who are not eligible for membership of the Institute.

Category 3 $20,000,000

Category 3 services means any services provided by a participant in the performance of his, her or its occupation, which are not Category 1 or Category 2 services.

The eligible members of the proposed Institute Scheme will be: - Members of the Institute holding Certificates of Public Practice (CPP) other than financial services licensees. - Affiliate members of the Institute. - Practice entity members of the Institute Chartered Accountant employees of members with CPP Partners of the CPP holder who are not eligible for


membership of the Institute

New South Wales Bar Association Scheme (NSWBA)***

$ 1,500,000 The scheme will apply to all members of the Bar Association who hold a NSW barrister’s practising certificate issued by the Bar Association and who have professional indemnity insurance that complies with the standard approved by the NSW Attorney General under the Legal Profession Act 2004 (NSW).

The scheme applies to all members of the NSWBA. There is no provision in the scheme for exemption.

* The Scheme is intended to apply in Victoria (as well as in New South Wales, the Australian Capital Territory, the Northern Territory and Queensland) under the mutual recognition provisions of the Professional Standards Legislation in each jurisdiction. The purpose of the mutual recognition amendments is to allow members of occupational associations covered by a professional standards scheme in one

jurisdiction to practise their trade or profession in another jurisdiction whilst enjoying the cover of their scheme in that other jurisdiction ** A scheme approved by the Victorian Professional Standards Council pursuant to the Professional Standards Act 2003 (Vic). *** The Scheme is intended to apply in Victoria (as well as in New South Wales, the Australian Capital Territory, the Northern Territory,

Western Australia and Queensland) under the mutual recognition provisions of the Professional Standards Legislation in each jurisdiction. The purpose of the mutual recognition amendments is to allow members of occupational associations covered by a professional standards scheme in one jurisdiction to practise their trade or profession in another jurisdiction whilst enjoying the cover of their scheme in that other jurisdiction

Note : The Australian Property Institute Valuers Limited Scheme (APIV) will commence operation later in 2010. The APIV scheme is intended to apply in Victoria (as well as in New South Wales, the Australian Capital Territory, the Northern Territory, Western Australia and Queensland) under the mutual recognition provisions of the Professional Standards Legislation in each jurisdiction.

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