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House of Assembly - Fifty-First Parliament, Second Session (51-2)
2008-02-27 Daily Xml
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LEGAL PROFESSION BILL

Final Stages

The Legislative Council agreed to the bill with the amendments indicated by the following schedule, to which amendments the Legislative Council desires the concurrence of the House of Assembly:

No. 1. Clause 301, page 155, after line 31—

Clause 301(4)—after paragraph (n)—Insert:

(na) the costs of exercising a right or remedy subrogated to the Society under section 322;

No. 2. Clause 301, page 156, lines 1 and 2—

Clause 301(7)—Delete subclause (7)

No. 3. Clause 313, page 161, line 10—

Clause 313(1)—Delete 'all claims to which the notice relates is—' and substitute:

any particular claim to which the notice relates is 30 per cent

No. 4. Clause 313, page 161, lines 11 and 12—

Clause 313(1)(a) and (b)—Delete paragraphs (a) and (b)

No. 5. Clause 313, page 161, line 15—

Clause 313(1)—Delete 'claims' and substitute:

claim

No. 6. Clause 319, page 163, lines 17 to 19—

Clause 319(1)—Delete ', unless the Society considers that special circumstances exist warranting a reduction in the amount of costs or warranting a determination that no amount should be paid for costs'

No. 7. Clause 319, page 163, line 23—

Clause 319(3)—After 'guarantee fund' insert:

on a party and party basis

No. 8. Clause 321, page 164, lines 1 to 5—

Clause 321(c) and (d)—Delete paragraphs (c) and (d)

No. 9. Clause 321, page 164, lines 7 to 9—

Clause 321(2)—Delete subclause (2)

No. 10. Clause 322, page 164, lines 19 to 21—

Clause 322(3)—Delete subclause (3)

No. 11. Clause 326, page 165, lines 30 to 36—

Clause 326(3)—Delete subclause (3)

No. 12. Clause 327, page 166, lines 17 to 23—

Clause 327(3)—Delete subclause (3)

No. 13. Clause 331, page 168, lines 8 to 10—

Clause 331(2)—Delete subclause (2) and substitute:

(2) A levy is to be of such amount as the Society determines and may differ according to factors determined by the Society.

No. 14. Clause 331, page 168, line 11—

Clause 331(3)—Delete 'Attorney General' and substitute:

Society

No. 15. Clause 331, page 168, after line 18—

Clause 331—After subclause (4) insert:

(5) However, a levy may not be imposed under this section without the written authorisation of the Attorney-General.

No. 16. New clause, page 249, after line 34—

After clause 513 insert:

513A—Rules of Supreme Court may assign functions or powers

(1) The Supreme Court may, by rules of court, assign to a specified person or body, or to a person occupying a specified office or position, any functions or powers conferred on or vested in it under—

(a) Chapter 2 Part 4 or 5; or

(b) Part 1 of this Chapter; or

(c) any other provision of this Act prescribed by regulation for the purposes of this section.

(2) The rules of the Supreme Court may specify that an assignment of functions or powers under this section is subject to conditions and limitations.

(3) A decision made by a person or body acting in accordance with an assignment of functions or powers under this section may, subject to the rules of the Supreme Court, be appealed against to the Supreme Court by the person in relation to whom the decision was made.

(4) On such an appeal, the Supreme Court—

(a) may confirm, vary or reverse the decision; and

(b) may make any consequential or ancillary order.

(5) If a person or body makes a decision in accordance with an assignment of functions or powers under this section that is adverse to the person in relation to whom the decision was made, the person or body must, as soon as practicable, give an information notice to the person.

No. 17. Schedule 1, page 253, lines 14 to 17—

Schedule 1, clause 13(1)(b)—Delete paragraph (b) and substitute:

(b) a claim in respect of a default (within the meaning of that Part) occurring before the commencement of this clause if the claim had not been determined under Part 5 of the repealed Act before the commencement of this clause.

Consideration in committee.

The Hon. M.J. ATKINSON: I move:

That the amendments be disagreed to.

These amendments were foreshadowed by the member for Heysen during debate on the Legal Profession Bill in this place. The effect of them is to take hostage the national uniform Legal Profession Bill (because, as the member for Heysen claimed, there was nothing in it for suburban lawyers) and to graft onto it retrospective amendments to affect the outcome of the Magarey Farlam defalcation. I have every sympathy for people who have lost money in the Magarey Farlam defalcation.

Mrs Redmond interjecting:

The Hon. M.J. ATKINSON: The member for Heysen says, 'Let them have their money back.' Who is going to pay? Who is going to be Father Christmas?

Mrs Redmond interjecting:

The Hon. M.J. ATKINSON: The member for Heysen and the Liberal Party are happy for the fund—if not the fund, then the taxpayers of South Australia and the lawyers of South Australia—to pay out people who have lost money owing to the Magarey Farlam defalcation. The Liberal Party position is that the people who might be held responsible for the theft (the crime) should be left free: whether it be the auditors; whether it be the partners of Magarey Farlam; whether it be the partners' insurers; or whether it be the banks who accepted very dubious instruments and paid out on them. The Labor Party, the Labor government, is prepared to make amendments, even retrospective amendments, whereby the burden is cast on the Law Society to show that a reasonable, prudent, self-funded litigant would chase the partners, their insurers, the auditors and the banks.

We are offering this as part of the Legal Profession Bill. But let me be quite plain. If these Father Christmas amendments prevail then I will simply lay aside the Legal Profession Bill and we will remain a legal backwater in South Australia, and that is just what the member for Heysen wants. Magarey Farlam is a way, a pretext, for the member for Heysen to defeat a bill that she would not otherwise have had the numbers to defeat. By tacking on the Magarey Farlam business to the Legal Profession Bill, the member for Heysen achieves what would not have been achievable before her object, and that is the laying aside of the Legal Profession Bill.

I will be writing to lawyers who work for all the major firms in South Australia, those who have interstate branches and affiliates, and showing them exactly what the member for Heysen is trying to do and what she has said about this bill. But make no mistake: if these amendments prevail I will lay the bill aside.

Mrs REDMOND: I utterly reject what the Attorney has just asserted, that I have some secondary agenda about defeating this bill. I recognise that the Law Society, and therefore the profession, wants the introduction of multi-disciplinary partnerships and incorporated legal practices. And so in spite of any personal misgivings I might have about it I am happy for that part of the bill to progress. That is, after all, the major thrust and intention of this bill. What I am concerned about is the nonsense in relation to the guarantee fund, that was set up many years ago. That guarantee fund was clearly set up because solicitors had in their individual trust accounts moneys that they held on behalf of clients.

Notionally, of course, interest earned on that money would belong to those clients, but because of the pooling of the money into the trust account held by the solicitor it was impossible for solicitors to actually pay the clients the money that they would otherwise have been entitled to. So, a system was developed whereby, instead of the banks simply not paying interest on trust accounts, the funds would be concentrated into a combined trust account and that would earn interest that could be put to good purpose.

In particular what it could do was create the guarantee fund. What was the guarantee fund created for? Precisely to address the sort of problem that the Magarey Farlam clients now face, that is, that if there is a defalcation against the trust account by someone in a firm, more commonly, I would have thought, a solicitor, but in the Magarey Farlam case an accountant, but if there is a defalcation then there is a guarantee fund, a nice pool of money created out of the interest earned on clients' money, and that was going to be available to make good the defalcation.

That was set up so long ago that no doubt at the time they set it up it would have appeared to be a ridiculous amount of money to put into the guarantee fund, to allow it to grow, with all of the interest simply accumulating over year after year after year into the guarantee fund. It would have meant that the guarantee fund was so big that it would never be called upon. In fact, if he looks at these comments made by the Hon. Robert Lawson in the other place, the Attorney will see that, year after year, amounts like $10,000 and $30,000 were all taken out of the fund.

So, what did they do to address this? Rather than let it sit there and simply accumulate into a vast pool that clearly was not going to be used, they put a limit on it, which at the time would have seemed like amazing amounts of money. For example, $20 million back when they put that limit on it would have seemed like an extraordinary amount of money, far more than anyone could ever contemplate was going to be needed to meet any possible defalcations against the fund. They also put a 5 per cent limit on the amount so that any one claim would have been limited to $1 million—which, again at the time, would have seemed a massive amount. At the time those things were put in place, that would have been fine. All these years later, we now have a situation where the clients of Magarey Farlam have had this defalcation perpetrated against them.

Anyone in the community would expect that if their money is in a solicitor's trust account it is in just about the safest place it could be; but what the Attorney proposes is that it not be so safe. The people in Magarey Farlam, or indeed any subsequent defalcation, are faced with a situation whereby instead of being able to go to the guarantee fund and make good their loss and be done with it (as should be the case), the Attorney wants the poor victims (who are just innocent people whose money is held in trust in a solicitor's trust account) to be forced to spend sometimes hundreds of thousands of dollars and wait years—potentially the rest of their lives—trying to get money back which is clearly their own money. That is simply unreasonable. I make no complaint about the fact that there will be a new system, national registration, multidisciplinary practices and incorporated legal practices.

The Hon. M.J. Atkinson: You told us you didn't like it.

Mrs REDMOND: I have no qualms about saying that I do not like it. I do not like the idea of Woolworths law and, pardon the pun, Coles law. I have no problem about the concept, but I really have a difficulty, and I am bemused as to why the legal profession, of all professions, would be inviting that in when all the other professions, such as the optometrists and pharmacists, are agitating with members of parliament to prevent Woolworths and Coles taking over their particular occupations. We already have the supermarkets, the petrol stations, the liquor stores and inevitably other things rolling in, but, no, that is fine. If the legal profession wants to invite them in, that is fine; it is not up to me to try to stop them. That is not my agenda. The Attorney keeps asserting that it is my agenda. It is absolutely not my agenda.

I accept that if that is what the profession wants and it is inviting it in, fine, let it have it, but we need to have a sensible outcome in relation to this guarantee fund. The guarantee fund is precisely set up for the benefit of the people who have a fraud perpetrated against them by a law firm. It is for that exact purpose. The common sense of it is, surely, that anyone who is the victim of such a fraud should be able to go to that guarantee fund, satisfy the fund as to the amount they have lost, have that repaid and the guarantee fund can go and chase whoever is responsible. The Attorney's assertion that in some way I want to let those people go free is a nonsense, but it should not be up to the innocent victims to chase them any more than it should up to the victims of a crime to prosecute the offender: it should be up to the guarantee fund to go after them.

That is where the Attorney completely misrepresents what I am saying. I do not for one moment say that those people should be left free, but if one looks at the Magarey Farlam situation one can see that what we already have are people in their 80s whose life savings have been taken by a fraud perpetrated by an accountant to a law firm and who have already spent over $100,000 and several years of their lives trying to get their own money back having to fight the Attorney-General for the right even to recover the costs (in addition to what they have already lost), and they are still at least three years away from a trial of their matter. They may well be dead by the time they get their matter resolved. That is simply unfair. The purpose of the guarantee fund is precisely what I am trying to reinstitute by making these amendments.

I put it to the Attorney that it is simply unreasonable of him to assert that, in some way, there is an agenda of getting rid of the whole bill. There simply is not. The case is clear that the guarantee fund is not operating fairly; it is not doing what it was put in place to do. As the Attorney is aware, the way in which it is structured is that we have two-thirds of the moneys from the trust accounts of individual lawyers put into the combined trust account. That money clearly cannot be touched because it belongs to the clients. The interest earned on that combined amount is a significant amount of money, but what we have done is to structure it so that once the bucket of the guarantee fund reaches the limit it is now at (which is about $20 million), any money paid into it every year actually ends up going to the Legal Services Commission.

The Hon. M.J. Atkinson: And what is wrong with that?

Mrs REDMOND: Because it spills over so that the fund is not allowed to grow in terms of where our current finances are, and therein lies the difficulty. The fund should have been allowed to grow, and one of our amendments is to allow the fund to grow to a more appropriate level. The limit on people's claims should have been allowed to grow into something more commensurate with today's financial circumstances. It should clearly be a fund of first resort.

Finally, I make the point that the fund would be less debilitated by a claim operating under the system that I propose because of the enormous costs that are involved in the way it is being run at the moment. The Law Society has spent a fortune trying to stop these people getting their own money back, and, now that there is case law asserting their right to get the money by way of costs, as well as the money they are owed, that means that the fund—which could have paid out $4.5 million to settle the whole thing straight away—faces having to pay out $8 million to settle the whole thing straight away. That is a nonsense.

Pretty soon the costs will outweigh the amount that would have been in issue in the first place. For those reasons, I assert quite strongly that, first, the Attorney has misrepresented my position in relation to this matter; but, more importantly, it is imperative upon this parliament to correct the problem and make appropriate arrangements for the guarantee fund for the future of the legal profession in this state.

Mr HANNA: I am indebted to my parliamentary colleague, the member for Heysen, for setting out the facts surrounding the creation of the guarantee fund and the way in which it has been used over the years. This issue, of course, came up when the bill was originally being debated in the House of Assembly. I was disappointed then and, upon thinking about it more, I am even more disappointed now that the opportunity has been forgone to resolve completely a series of anomalies surrounding the guarantee fund. I am a little disappointed that the Law Society has been so quick to go along with the national agenda for this legal profession reform and the government's agenda for reform that it has overlooked the possibility of reforming this area of its concerns.

The guarantee fund, as the member for Heysen said, is there to protect those who have been the subject of defalcation of some kind. The Magarey Farlam example, in my mind, is the perfect case where the fund should pay out. It is a unique set of circumstances in that it is such a large claim upon the fund, but, nonetheless, the principle is that those people should be paid out because the money they deposited in the trust account should be returned to them. They are without fault. I might also add that the solicitors of the firm at the time, including the managing solicitor Mr Mark Mudri, were without fault.

The Hon. M.J. Atkinson: How do you know that?

Mr HANNA: The firm has an honourable history. The defalcation occurred as a result of the actions of an employee of the firm who was not a solicitor. The opportunity forgone relates to cleaning up the funding arrangements of the guarantee fund and also of the Legal Services Commission. It seems to me that that money, which in a real sense is the clients' money, ought to go for some purpose directly to their benefit or the benefit of clients, particularly if they are the subject of a defalcation. Indirectly this benefits the profession because it means that if people do put their money into a solicitor's trust account they can be extremely confident that, if there is a problem not of their own making, they eventually will get that money back.

The Legal Services Commission is a separate issue and it should be the subject of adequate government funding. It should be funded out of Treasury in the same way that the bulk of state and commonwealth Treasury funds the Legal Services Commission; for that matter, I would add that the Aboriginal Legal Rights Movement should be put in the same lot as well and adequately funded.

One could debate that the amounts spent on education for lawyers and the investigation of trust accounts, and so on, should be paid by the Law Society; in other words, ultimately coming from the pockets of lawyers themselves. There is a degree of client benefit perhaps in that, and perhaps there is a case for some of that money to come out of the guarantee fund, but the point is that the deliberations that took place when the fund was set up could not have foreseen how the fund would have grown and how a case such as Magarey Farlam would have arisen.

The occasion of a review of the legal profession and its rules, in my mind, is the perfect opportunity to review the guarantee fund, its purpose and where the interest money from trust accounts should go. It is disappointing that the government has seen fit to ignore that for the sake of national uniformity. In my mind, other states could learn from our example if we were to pursue this issue.

In a sense that is background, because the battle on that front was lost when the bill was debated in the House of Assembly, but we do have this specific set of provisions relating to the guarantee fund, which, if passed, would be of benefit to Magarey Farlam clients. Having said that, it is easy to understand that I support the amendments made by the Legislative Council. I am only too happy to agree to them so far as they apply to the guarantee fund and the provision of an opportunity for Magarey Farlam clients to get their money back in an efficacious manner.

The Hon. M.J. ATKINSON: It is telling that the member for Mitchell says that the partners of Magarey Farlam were not at fault. That is a very interesting remark.

Mr Hanna: You know better, do you?

The Hon. M.J. ATKINSON: Well, the member for Mitchell is saying, 'There is no need to test it. Trust me, they are innocent. They are without fault.' That is an interesting remark to make, because it is of a piece with the position that the member for Mitchell is taking; that is, the guarantee fund should play Father Christmas and there is no point going after anyone else because they did not do anything wrong.

Mr Hanna interjecting:

The Hon. M.J. ATKINSON: But the member for Mitchell has already prejudged whether or not they are at fault. The whole idea is: let the collective fund bear the 100 per cent burden. Let me ask the members for Mitchell and Heysen a question: is there an authority in the guarantee fund—in the rules that establish it—to allow it to take litigation against other people? Have they in their amendments addressed their mind to whether the guarantee fund has authority to do what they say? Since it was the members for Mitchell and Heysen who designed this particular camel, I would have thought they would turn their mind to that.

Mr Hanna: We welcome your improvement.

The Hon. M.J. ATKINSON: Thank you; you are most gracious. I ask the member for Heysen: how many victims of theft can recover from a fund? Is this a new principle?

Mrs Redmond interjecting:

The Hon. M.J. ATKINSON: What, their stolen car? Their stolen cash?

Mrs Redmond interjecting:

The Hon. M.J. ATKINSON: No, that is right; it does not. Thank you. The member for Heysen says the purpose of the guarantee fund is what I am trying to reinstate. If it was the purpose of the guarantee fund, you would not have to reinstate it; it would be there already. It is a logical fallacy.

When this was last debated in the house, the members for Davenport and Enfield, one on either side of the house, asked me whether I would be willing to support the principle that, if a reasonable, prudent, self-funded litigant would not pursue the partners, their insurers, the auditors or the banks because it would take too long, because it would cost too much, because the amount of money involved would be disproportionately low compared to the cost of recovery, it would be all right for me to change the rules so that they could access the guarantee fund, and I went away and I said yes.

However, as soon as I said yes, the member for Heysen decided to up the ante and, instead of accepting that sensible compromise that I accepted and offered in another place, the member for Heysen wants a 100 per cent victory. What the member for Heysen says is that, in all circumstances, even if a reasonable, prudent, self-funded litigant would bring action to recover their money against the partners, their insurers, the auditors and the banks, 'No, take it out of the collective fund. Let's play Father Christmas.'

Mr Hanna: Let the fund chase them later.

The Hon. M.J. ATKINSON: That is right—and when the fund runs out, let's chase the lawyers who were not involved, and then let's chase the taxpayers. When you are in opposition, like the member for Heysen, or when you are an Independent, a crossbencher, like the member for Mitchell, you can play merry hell with taxpayers' funds: it is one of the pleasures of the job. You can play merry hell with a guarantee fund, and you can bring in rules that will make sure that it is dissipated within a few short years.

I have offered a more than reasonable compromise, a more than reasonable ransom, in response to the member for Heysen's taking the Legal Profession Bill hostage. I have made a reasonable offer, which we are willing to backdate for the benefit of Magarey Farlam claimants. But let the world know that the member for Heysen has thrown this back in my face and said, 'You will do it my way or the highway,' with the result that the Legal Profession Bill will be withdrawn—laid aside—and the Magarey Farlam claimants will not get the improvements that the parliamentary Labor Party has designed for them.

Mr HANNA: The Attorney seems to overlook today how the Victims of Crime Fund works. If people are bashed and are going to receive compensation, they do not have to go and sue the accused person directly. They can wait for the prosecution to go to trial. That will lead to a conviction and, at that point, the state will assist the injured person to recover from the fund. The fund, of course, can then recover from the accused person. Why can it not work in this way too?

The committee divided on the motion:

AYES (26)

Atkinson, M.J. (teller) Bedford, F.E. Bignell, L.W.
Caica, P. Ciccarello, V. Conlon, P.F.
Foley, K.O. Fox, C.C. Geraghty, R.K.
Hill, J.D. Kenyon, T.R. Key, S.W.
Koutsantonis, T. Lomax-Smith, J.D. Maywald, K.A.
McEwen, R.J. O'Brien, M.F. Rankine, J.M.
Rann, M.D. Rau, J.R. Simmons, L.A.
Snelling, J.J. Stevens, L. Weatherill, J.W.
White, P.L. Wright, M.J.

NOES (14)

Chapman, V.A. Evans, I.F. Goldsworthy, M.R.
Griffiths, S.P. Gunn, G.M. Hanna, K.
McFetridge, D. Pederick, A.S. Penfold, E.M.
Pengilly, M. Pisoni, D.G. Redmond, I.M. (teller)
Venning, I.H. Williams, M.R.

PAIRS (4)

Portolesi, G. Kerin, R.G.
Piccolo, T. Hamilton-Smith, M.L.J.


Majority of 12 for the ayes.

Motion thus carried.

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