LEGAL PRACTITIONERS (MISCELLANEOUS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 16 May 2013.)

The Hon. A. BRESSINGTON (16:52): I rise to speak to the Legal Practitioners (Miscellaneous) Amendment Bill. The impetus behind this bill is not new and has been discussed at length previously. I would like to make some comments on this particular bill but do not intend to speak to all the issues that were raised the last time we debated the legal profession bill in this chamber.

There remains no doubt for me that reformation of current legal practices needs to occur and that this bill goes some way to achieving those necessary changes. There certainly are provisions within this bill which signal positive change for the legal profession, or at least for those who are consumers of legal services, including conduct provisions which allow mentoring of practitioners who are infirmed or struggling with the obligations of their legal practice and the inclusion of a definition of 'unsatisfactory professional conduct' and 'professional misconduct' from which new changes to disciplinary measures flow.

From what I have heard, the profession has welcomed these necessary and prudent changes, which is mirrored in other jurisdictions. There is some comfort for us as a parliament to look to the success of other states which have implemented similar systems. However, I know of some constituents who remain unconvinced that these modifications will bring any measurable change. The results of these changes, whether good or bad, remain to be seen.

The guarantee fund, which will soon become the fidelity fund, received a great deal of attention during the last debate. I do not wish to revisit all that was said during that time, but there are two main changes with the fidelity fund as I see it. Firstly, there is some reprieve as to when proceedings must be brought by clients with a claim against the fund. Currently, a person is required to attempt all possible avenues to recover their money, regardless of the potential success of the matter. From my briefings, that means that no matter how trivial or unlikely the success of the claim would be, the claimant would be compelled to pursue litigation before a claim against the guarantee fund would be granted.

This clause is clearly burdensome, with the potential to cause even greater hardship and stress upon those who have already been victimised by the system. Under the proposed bill a claimant is not required to pursue matters in circumstances where an ordinarily prudent self-funded litigant would not. I believe that is a sensible change in theory. However, we shall see whether the change brings any real benefit.

The second change that has been made to the guarantee fund is that hardship clauses have been included, that is, payment in advance will be granted in instances where a claim is likely to be paid and payment is warranted to alleviate hardship. This is something that is met with industry support. My office has heard several stories of financial loss, including foreclosures of properties, resulting from the freezing of funds by the Law Society during the Magarey Farlam defalcation. Whilst there would need to be a certain level of due diligence with an investigation conducted prior to any payment from the fidelity fund, there is a much greater potential for such losses to be avoided.

Obviously this is not a fail-safe approach, but it is certainly a better system than we currently have in operation. Ideally, there would be further consultation and consideration given to the way in which to best operate this fund. My office received several briefings where the concept of the fidelity fund being a fund of first resort was discussed. I note that the member for Heysen in the other place gave an impassioned speech about the value and need of a fund of first resort. Certainly there can be many arguments for a fund of first resort, arguments to which I am sympathetic. On the advice I have received, it may not even be possible for subrogation to occur if a first resort fund was implemented. It would therefore be almost impossible for any amount paid out to be recovered from those committing the crime.

With regard to the Magarey Farlam victims, I have been reliably informed that, regardless of whether a fund of first resort or a fund of last resort was in place, due to the nature of the accounting practices conducted by the fraudster, judicial scrutiny was necessary and unavoidable. That is, even if the fidelity fund was a fund of first resort during the time of Magarey Farlam, those involved who had been stolen from and who had not would have undergone legal action. This is because the accountant frequently engaged in acts whereby he skimmed amounts from a client's ledger to top up another ledger as and when necessary to avoid questions being asked. Therefore, whilst a ledger may have recorded an accurate amount of money at the time of inspection, only forensic review would have shown where the money had been shuffled in and out of the account previously.

I have been further assured that the widening of the definition of 'trust accounts' allows certain moneys to be caught, which previously were not. For example, one of the main reasons the Magarey Farlam fraud went unnoticed for such a long period of time was because the money had been transferred out of the secure trust fund and put into a company for the purpose of investment. Accordingly, this fell outside the definition of 'trust money' and was therefore not part of the audit process. A widening of the definition of 'trust money' now allows for audits to extend to money controlled by the firm, and therefore fraudulent actions have a greater chance of being identified sooner.

As I have said, I recognise that there is most certainly some merit in the argument that the fidelity fund be a fund of first resort; however, there is also merit in the fact that it may not legally be possible within our current framework. I am sympathetic to the situation. However, I am also aware that there is a lack of political will to restructure the system beyond what is being currently proposed. I am confident that these proposed changes are better than what is currently in operation, and I am conscious, however, of the fact that more changes are necessary. It will be interesting to see what comes out of the continuing saga that is the national legal reform.

Another area which concerns me is an area on which I spoke in 2007. During debate I raised the issue as to when a natural person can be considered to be practising law. Whilst it is important that people do not hold themselves out to be a legal professional or engage in behaviours which are restricted to qualified and certified legal practitioners, I still remain concerned about the potential for an advocate who assists someone in a tribunal, or the like, being held to be engaging in legal practice. In 2007 I said:

During the government briefing provided to my research officer it was clearly stated that, for example, where a person may assist or even represent a family member in a case before, say, the Residential Tenancies Tribunal, the Administrative Appeals Tribunal or similar forums where a legal practitioner is not required, the advocate—in the words of the person who provided the briefing—will not be immune from possibly facing a charge of giving legal advice.

I understand that a person in a tribunal may at times engage in what could be classified as legal advice even though they are not qualified to do so. This could be from a simple action such as giving an opinion or interpretation of the law as they know it. There appears to be a safeguard in place so that this provision will only apply where the person is engaging in legal practice for a fee or reward. I am satisfied that a charge against a person is necessary in instances where someone intentionally and either negligently or recklessly acts outside of their qualifications and/or certifications providing legal services for a fee or reward. However, as I said in my previous speech:

...what of a person who is assisting another in the Family Law Court and the person assisting is making telephone calls, photocopying documents and travelling to court hearings and being reimbursed for those costs. Will that constitute a fee for service?

Given the nature of the provisions within the act, legal practice could be read to mean actual preparation of legal documents or representation. One would hope that any payment of costs in this example would be treated as disbursements or a recompense for outlay and would be considered separate from legal practice, thereby not attracting a charge.

However, arguably, legal practice and solicitor fees do include these said services, so it is not entirely clear as to what is or is not going to be covered by this provision. I do hope the charges are only laid as and when necessary and that it is not arbitrarily applied to those people who give an opinion which could constitute legal advice and recover their outgoing costs.

Will the government give an assurance this provision is only intended to capture those who are engaging in legal practice for fee or reward, but does not include such practices as a layperson may provide to assist and support the person immediately involved in the tribunal, such as making telephone calls, photocopying or otherwise?

There are other issues which have been raised in my office pertaining to the costs disclosure, trust accounting and introduction of incorporated legal practices (also known as ILPs). Effectively the concern relates to compliance costs and the time associated with compliance. These factors favour the medium to large enterprises, whilst are much less favourable to the smaller legal practice.

On one hand, I have been advised that the compliance requirements are similar to what is already found in the solicitors' rules and have simply been transferred into this bill. To date there has been no significant issue of hardship for practitioners in meeting the standards; however compliance, coupled with the introduction of ILPs, has been hailed by others as the costly impractical which will lead to the obliteration of small practices and sole practitioners.

It is concerning that decisions we make in this place continue to hamper the ability of smaller businesses, be it legal or otherwise, to continually grow and financially develop. As the opposition stated in the media only last week, some 264 businesses became insolvent in the March quarter. We certainly do not want this trend to continue further.

I would like to place several questions on the record for the minister and ask that I have a response prior to moving to the committee stage of the bill.

1. What extent does the minister anticipate that these compliance changes and introduction of ILPs will have on continuing practice should these changes be passed, and what evidence is the minister relying on to support this position?

2. How have similar changes affected legal practitioners in other jurisdictions?

3. What feedback, if any, has the government received from small businesses and sole practitioners in relation to these changes?

The appointment of the commissioner and members of the tribunal (specifically the introduction of laypersons) as a consumer voice has certainly been given significant discussion time by those briefing me.

I am aware that the Law Society does not support the introduction of the consumer voice for reasons that they have made clear. I have also been informed that, should South Australia not implement this change, we would be out of line with all the other states. Some argue that having a consumer voice would increase transparency and accountability within a fraternity which has self-regulated for way too long. Others argue that the introduction of the layperson is mere tokenism and may not be effective. A further argument has been that the whole tribunal should be laypeople so that we do not have a situation of Caesar judging Caesar. It is not hard to see merit in any of these arguments.

Whilst there have been some changes to the bill that indicate a positive move forward, there are certainly areas which should be considered further, and I look forward to these discussions on this bill during the committee stage.

Debate adjourned on motion of Hon. J.S.L. Dawkins.