LEGAL PRACTITIONERS (MISCELLANEOUS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 4 June 2013.)

The Hon. J.A. DARLEY (17:12): I rise to speak on the Legal Practitioners (Miscellaneous) Amendment Bill. The bill seeks to improve the regulation of South Australia's legal profession and in so doing provide greater harmonisation with other Australian jurisdictions. It incorporates many aspects of the 2007 Legal Professional Bill, which became deadlocked and lapsed during the last parliament. These include amendments relating to disciplinary issues, cost disclosure, trust accounts, incorporated legal practices, community legal centres and practising certificates.

The new disciplinary system includes the abolition of the Legal Practitioners Conduct Board, which is to be replaced with a legal profession conduct commissioner, who will have increased powers, the enactment of a mentoring and early intervention system aimed at dealing with early signs of trouble in legal practices, as well as the enactment of new procedures for the Supreme Court to deal with practitioners who pose an immediate risk to the public.

The bill replaces the current definitions of 'unsatisfactory conduct' and 'unprofessional conduct' with those definitions from the 2007 bill, which are broader in scope and consistent with other jurisdictions and indeed the new national law, which is under discussion. As mentioned by the Hon. Stephen Wade in his contribution, there are concerns that, despite best intentions, the bill fails to adequately address the community's concerns about the regulation of the legal profession in South Australia, especially as a result of the Magarey Farlam case and the McGee case.

In relation to the McGee case, the new definition of 'professional misconduct' captures a wider range of conduct through the introduction of a fit and proper person test. The conduct itself need not be connected with the practitioner's practice, and need not be criminal in nature in order to amount to misconduct. This is certainly a very welcome move. That being said, given its apparent prospective nature, it does very little to address the McGee case itself and the ongoing concerns of Di Gilchrist regarding the death of her husband, Ian Humphrey. I accept the difficulties and, indeed, the reluctance in introducing retrospective legislation; however, in this instance, it is a very bitter pill to swallow.

There are questions still remaining over the government's decision to completely remove the involvement of laypersons from the disciplinary system. I understand the Hon. Stephen Wade will be moving amendments regarding this issue, which I intend to consider very carefully.

In relation to the Magarey Farlam case, where do I start? As members are aware, the law firm collapsed when $4.5 million of clients' money went missing between 1998 and 2005. The Magarey Farlam case resulted in four Supreme Court actions and a 21-month freeze over all 250 clients' assets, including those of the 208 clients who were not defrauded.

I am advised that the total compensation claim from former clients was some $6 million. The additional $1.5 million in claims was said to include losses which arose as a result of the decision to freeze the assets of the firm. In addition to the $6 million, clients also sought compensation from the fund for approximately $1.2 million in legal costs.

According to documents prepared by the Law Society and previously tabled in this parliament, between 2006 and 2007, the manager and supervisor appointed to administer Magarey Farlam also included costs of approximately $1.9 million. Those costs were paid from the guarantee fund. Whilst the total amount of the legal and court costs is not known, it is said to be substantially more and perhaps even double that of the $4.5 million that was initially stolen by one of the firm's former employees. I think the Hon. Robert Lawson QC, a former member of this place, put it best when he said, and I quote:

This unfortunate episode in the history of the legal profession in SA is a shame to the Law Society and the legal profession and to the government, which provided no leadership.

Given the history of the Magarey Farlam affair, it is of little surprise that many of its victims felt and continued to feel let down by the legal profession in South Australia. All of us would have no doubt received correspondence and perhaps met with some of those innocent victims in relation to their ongoing concerns about the regulation of the legal profession in South Australia. I am sure we are all familiar with Mr Chris Snow, who has taken a personal interest in this bill and dedicated a great deal of time to following the various debates that have taken place, both at a state and national level, after having been personally involved in the Magarey Farlam case.

In South Australia, publicity surrounding this matter appears to have been somewhat limited to the fraudulent behaviour of the former employee of the firm. Despite having been the topic of hot discussion amongst the legal fraternity not only in this jurisdiction but Australia-wide, the wider South Australian community seems to have little knowledge of the story that unfolded following the revelation of the missing money, particularly in the context of the bills that have been subsequently introduced into this parliament.

There is little doubt that some of the victims feel that their concerns have not been adequately addressed. Many of the amendments that we are dealing with in this bill relate directly to the Magarey Farlam case. The guarantee fund or fidelity fund, as the government is proposing it now be named, is a perfect example. The 2007 bill failed largely due to the fact that the government would not accept amendments that proposed to make the fund one of first resort.

I commend the member for Heysen (Isobel Redmond), from the other place, for maintaining her stance on this issue. I agree wholeheartedly that, when a person puts money into a solicitor's trust account, they do so in good faith and with the expectation that they should be able to have access to that money when necessary.

If that money goes missing through no fault of their own, that person should be able to recover it from the fund without having to endure what the Magarey Farlam victims were confronted with. The fact that no other jurisdiction has a fund of first resort is no excuse. I am sure, if we took a poll of the average person in the street, there would be no question about whether the fund should be one of first or last resort. During the 2008 debate, the then shadow attorney-general stated:

We had an opportunity in this legislation to correct what has clearly been something that is very wrong. It has been evidenced by a massive case in this state, and we should have taken the opportunity to address it but, sadly, we are not doing so. I think that particularly the Law Society, in supporting the current and proposed mechanism, should hang its head in shame for diminishing the practice of law in this state.

Five years later, here we are again with the same opportunity and the government has again opted to ignore it. Instead we are saying to innocent victims once again that they must explore every other avenue including the firm in question, the firm's bank, the firm's auditors and ultimately the courts, in order to get their money back. If all that fails, then they can make a claim against the guarantee fund.

I do not think any client would willingly deposit money into a solicitor's trust account if they knew from the outset that this is their only option, even with the financial hardship provisions that the government is proposing. The suggestion that an individual be forced to demonstrate that they are experiencing financial hardship before they can get their hands on their own money is nonsense. Let us not forget that this is the fund that is predominantly made up of money earned from clients' funds. The fact that we ought to be looking at a better system is supported by the damning opinion of Justice Debelle who, during the Magarey Farlam case, stated:

One has the deplorable state of affairs that costs are continually being incurred to a point where, rather like Bleak House, by the time costs are paid, what is going to be left for these people who innocently suffer from the fall of another? There must be a better system.

Although this bill introduces some reforms in this area, it does not go far enough. To make matters worse, to date there has been no forum or inquiry where victims have had the opportunity to have their say on these matters and there has been limited consultation and feedback beyond the legal fraternity about some of the outdated provisions of the bill. I will therefore be proposing that the bill be referred to the Legislative Review Committee for inquiry. I move:

Leave out all the words after 'That' and insert 'the bill will be withdrawn and referred to the Legislative Review Committee for its report and recommendations.'

Debate adjourned on motion of Hon. K.J. Maher.