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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
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LEGAL PRACTITIONERS (MISCELLANEOUS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 19 March 2013.)

Ms CHAPMAN (Bragg—Deputy Leader of the Opposition) (12:23): I rise to speak on the Legal Practitioners (Miscellaneous) Amendment Bill 2013. Again, this is a piece of legislation that has had a very long gestation period. Members might recall that recently we had a motion in the parliament where concern was expressed about a particular legal practitioner and his involvement in the death of a cyclist, now nearly 10 years ago. There was, I think, strident criticism, at least from this side of the house, in relation to the government's failure to address a number of the consequences of that action (apart from the tragic death of the cyclist) in a legal sense to help ensure that in the future we can avoid a recurrence of this type of incident.

The cry from this side of the house was that it was important that the government not only advance reform to deal with that issue but also tidy up a number of aspects that the legal profession across the nation were calling for. Although the government finally introduced this bill a few weeks ago, it is important to note that the draft for consultation had been out for some time. On 13 March 2012, a draft bill was tabled.

That is a new initiative of this government, I think, where it is sent out for consultation—sometimes the government does it and sometimes it does not. The second one was sent out to a select number of stakeholders, such as the Law Society and other relevant bodies, for further revision. I should disclose, as this is a bill that will affect the legal profession, that I am a legal practitioner and have previously been a longstanding member of the Law Society of South Australia, and I remain a member of the South Australian Bar Association.

The reform of the legal profession in its regulatory environment has been under discussion, and drafts have been submitted over the last 10 years or so. In fact, the entire time I have been here in parliament, and also during the period I was shadow attorney-general on behalf of the opposition, I have kept an interest in it for obvious reasons. The then attorney—and now, indeed, our Speaker—had a number of discussions about the progress of the national reform.

There were a number of issues that ultimately culminated in the then attorney-general—and 'spitting the dummy' would be a light way of describing it—walking away from the bill altogether, which I think was disappointing behaviour. It was also disappointing because a number of aspects that I think should have been dealt with have remained unresolved.

Really, this bill reflects only part of what has been on the agenda over the last 10 years, and to some degree I think that in South Australia the profession has missed out on some opportunities which could have been dealt with earlier. Similarly, there are some protections for the consumers of legal services, who directly or indirectly are most people in South Australia, who have been left exposed.

The first round of reform was adopted throughout Australia, except in South Australia, which I think was a direct result of the behaviour of the then attorney-general. However, due to concerns about the Guarantee Fund following the Magarey Farlam defalcation, the South Australian bill was not supported by the Liberal Party. That failed and, as I say, the attorney took his bat and ball and went home. We then saw that some of the proposals from the 2007 bill were included in the bill which was tabled last year and which is now in its final form before us, including reforms to trust accounts, lawyer disciplinary action, cost disclosure, incorporated legal practices, community legal centres and practising certificates.

The second round of reform towards a national legal profession has also failed, in that only Victoria, New South Wales and the Northern Territory are currently pursuing a uniform approach. The national model law we have had under discussion for the last decade has not actually yet been tabled, so we are not entirely sure whether what we are about to receive in respect of certain aspects that I have outlined will be consistent with the national model, if it ever sees the light of day, but I make that point.

Notwithstanding that, as an opposition, we have viewed the bill and will be supporting it. There will be some inconsistencies that I will be raising at the committee stage, so perhaps those who are listening intently to this debate could follow that up. Perhaps the Attorney could provide to the house where these provisions are consistent with the national model, which we do not yet have, and what variations have been made to the national law provisions and why. I think we need to have some understanding of that before the final passage of this bill from this house.

I will first address one of the most public issues which this bill seeks to remedy. Hopefully it will support some restoration for the public in the legal profession generally but there is no question that, as a result of what is commonly known as the McGee case, there has been repeated comment and outcry from members of the public about the behaviour of the legal profession. I have to say that even though I am a legal practitioner myself, sometimes it is most unfortunate when the behaviour of one reflects poorly on others.

It does not matter what profession, trade or enterprise people are in, they can hold their head high as to be conducting themselves in a professional manner and with a level of integrity and the like, but there will always be some bad apples. We need to be making laws in here that ensure we eradicate the bad apples as often as possible. Of course, in this instance, we are talking about the legal profession, so I will get back to the issue.

The current definitions for unsatisfactory conduct and unprofessional conduct by a lawyer are proposed to be replaced with broader definitions of unsatisfactory professional conduct and professional misconduct. The new definitions are taken from the 2007 bill and are consistent with the interstate definitions in the proposed national law as best we understand it. What this simply means is that it is not just enough to attract some ultimate disciplinary action. If one misbehaves in a way that is directly related to one's legal practice, it could encompass other behaviour that may be other criminal behaviour or other non-criminal behaviour.

It is a difficult area to go into because it raises questions about whether the conduct of a medical practitioner or a doctor or an accountant, people who are held in some regard and who are providing advice, needs to have certain standards of integrity and behaviour where it might be blurred with some moral standards of behaviour. One example I can think of in practice is when a legal practitioner—in fact, someone in this instance who had actually elevated to a status at the judicial level—had become involved in a case in which I was representing a party. I mention it because the offending behaviour in that instance which people would see as being irresponsible at least, I think, and inappropriate was his failure to make any financial provision for his children and, even under orders that he was to make payments by a court, there had been a failure to do so.

It was not illegal. There are certain remedies which can be taken to enforce that obligation, but there is a moral question of whether someone should be in a position of trust and certainly in a position (as in this instance) where they are a legal practitioner and also carrying on judicial duties and whether, in fact, they should be allowed to hold high office and a practising certificate when, on the face of it, they failed a basic social expectation, namely, to provide for their family.

So it does raise questions: should we be dealing with someone who is a legal practitioner whose moral conduct might not be up to the standard of others? They might be regular attendees at sex shops and participate in an activity which many people in the community would not support. It may not be illegal, but it may be seen as a standard that is inappropriate.

So it always raises the question when we go into this area of 'Well, it is not just your professional standards that we are looking at here; it is not within the context of your direct relationship with what you are doing in your capacity as legal practitioner—your competence in administering advice, or representation, or the charges that you make—we are actually going to expand this into other non-criminal behaviour which we see as reflecting on your capacity to have the privilege of continuing to be able to have a practising certificate.'

So this expansion of the definition does, as I say, raise some issues. It came, I think, in a timely manner to ensure that we do something to deal with the legal practitioner in the McGee case. Members would know that we had a royal commission inquiry into that whole incident, and I am not going to traverse that.

In short, there was a general concern by the public that someone who was a legal practitioner, knowing or deemed to have known what their obligations were in law, avoided the scrutiny of legal processes—in particular post the accident—by leaving the scene at which a person had lost their life and potentially avoided the detection of alcohol in their blood. Therefore, there were direct legal consequences arising from that.

The aspect that we understand is that this bill differs from the draft national law provisions in three key respects. One is: the bill proposes under section 70 that 'conduct capable of constituting unsatisfactory professional conduct or professional misconduct' does not have a clause that makes it clear that the conduct can come within the act, whether or not the contravention is punishable by way of conviction or pecuniary penalty order.

Second, in terms of legal costs, the bill refers to 'charging of excessive legal costs', whereas the national law has a lower bar charging more than a fair and reasonable amount for legal costs in connection with the practise of the law. Thirdly, under the bill, misconduct can include 'failing to comply with terms of a professional mentoring agreement entered into with the Society'.

We are not certain as to why there should be this differentiation. It does raise some questions about whether that will cause some confusion—be lighter or harsher in its application of what we would have had—so I will be looking to the government to identify some explanation of those matters in committee.

The other aspect of this reform in dealing with unprofessional or unsatisfactory conduct is that the bill proposes to replace the Legal Practitioners Conduct Board with a legal profession conduct commissioner, who is a practitioner. Only two of the seven members are required not to be lawyers. As members may well be aware, we have a Legal Practitioners Conduct Board at present; we also have a Legal Practitioners Disciplinary Tribunal. There is no proposal in this bill to remove them. They operate and they include legal practitioners, so we have a two-tiered system to the extent of complaints in this area and how they are managed.

Members might recall that, as an opposition, we were critical of the current Attorney-General in his failure to refer the McGee case to the Legal Practitioners Disciplinary Tribunal, which he had power to do, after the Legal Practitioners Conduct Board had declined to make any determination from which action would follow. The Attorney-General's response was that he was restricted by the terms of definition, part of which we are attempting to remedy here today. We certainly did not agree with that, but we raised this question of why, then, it would take so long to get on with trying to remedy it. In any event, this bill proposes to replace the board with a commissioner.

The commissioner is to be given significant investigative powers. They include having access to documents and the power to compel a person in control of a document to provide them; the power to compel a person to assist in an investigation of a complaint in a specified manner; the ability to enter premises and, under limited circumstances, residential premises without a warrant; and the power to search premises, examine anything on site, take copies of documents, take possession of any relevant material, including computers, and use equipment on the premises, such as a photocopier.

There will be a very significant penalty of up to $50,000 if someone is found guilty of obstructing an investigator without reasonable excuse. A person is compelled to comply with a request even if it would incriminate them. However, the incriminating evidence obtained is not admissible in evidence against a person other than in a disciplinary proceeding or proceedings for offences under the act.

I mention the submissions that we—and, no doubt, the government—have received. It is fair to say that there are a number of people who were very vocal, both in correspondence and submissions and in publications, including The Australian newspaper, during the last 10 years, some of whom were victims, or relatives or friends of persons who had been victims, of inappropriate conduct of legal practitioners, no less those who were the victims in the Magarey Farlam case.

As a general principle, in a moment I will come to how it is proposed to deal with the Fidelity Fund under this legislation, but one advocate in particular, Mr Chris Snow, who has presented to me and no doubt many other members of the parliament, has also provided a significant amount of material on this whole question of what should be the structure of the bodies for the purposes of dealing with professional misconduct.

Mr Snow, for example, has presented a quite significant and powerful argument that there should be something even more independent, rather than simply moving from a board to a commissioner. He takes the view that we should be following the England and Wales legal regulatory system, which provides for lay-controlled members on those entities.

I think it is fair to say that the English system has a role that is certainly greater than just covering legal practitioner disciplinary matters. Their structure has a much greater involvement in policy development and other aspects, so I suppose the question of the complexity of what they do in England being supplanted here to provide for disciplinary matters of legal practitioners could equally be argued to be quite a complex structure and certainly a very much more expensive one, in the absence of there being any demonstrable need for that. I think it is fair to say that Mr Snow and others would claim that the whole Magarey Farlam defalcation and the consequences of that case are exactly why we need to have an independent lay-controlled system like there is in England, but I will come to the particulars of that case shortly.

On balance, we the opposition have considered all of these matters and we think that there needs to be a tightening of this. The commissioner is one way of doing it. It may well be that the commissioner could be aided by having a consumer panel in some way being available to provide advice to it and being able to have some capacity to make statements on the regulation of the legal profession—that may well be of assistance to any future commissioner when this bill passes. We are certainly open to consideration of aspects such as that and, in particular, to consult, again, with legal and consumer stakeholders as to how opportunities could be introduced to enhance that.

I refer to the fidelity fund. We currently have under the Legal Practitioners Act a guarantee fund. It is a fund which was established, in short, from the proceeds of interest on clients' money held in legal practitioners' trust accounts. Decades ago, it was decided that it was unfair for legal practitioners or banks to get the windfall benefit of interest on money that was sitting in legal practitioners' trust accounts. Again, for the purposes of the record here, I should perhaps just explain that, commonly, legal practitioners and solicitors firms have trust accounts and, historically, they were probably used a lot more than they are today.

Historically, very large sums of money and many transactions went through bank accounts and solicitors' trust accounts in preparation for settlements on the sale and purchase of property, for example. Funds were placed in trust accounts to secure payments to others in litigation, to secure legal costs that were to be incurred and to secure witness fees and professional fees and council fees in the course of their litigation or in the course of the management of their case. Legal practitioners sometimes received into the trust account monies that were to be administered to some charity or some body that was to receive it, and there were significant monies at the time when people's deceased estates were administered.

I mean, there were multiple different reasons why solicitors had, and still have, trust accounts to be able to receive those moneys. In fact, in the old days, even I recall occasions where moneys would be paid to a legal practitioner for their favourite political party and the appropriate funds, under instruction, were dispensed to support that organisation, along with charities and other benevolent organisations. So, things have somewhat changed.

One of the things, certainly in my time in legal practice, that was evident was that when bank fees became the latest way that banks could charge people money on transactions, it made it very expensive for people to transfer money from one account to another, so obviously a prudent client and/or their legal adviser would give them advice to say, 'Well, look, if you place the money in this trust account and it is then paid out there will be transaction fees, there will be costs associated with doing that and so we might find another way that we could secure the funds for whatever purpose they were intended, but not actually put them through the trust account.'

Another aspect was the considerable amount of paperwork that needed to be done to record the proper administration for trust accounts and that each transaction would need to be carefully checked. There were new registers that were imposed for ancillary documents that went with those. You had to keep a register of interest and documents. There were so many more procedures that were to apply, not the least of which was the enhanced auditing procedures that were required of solicitors' trust accounts. So, over the years, for different reasons, trust accounts became less and less fashionable for the diversity of uses that they previously had. Nevertheless, they were still an important instrument as an available secure place for people to have their funds held.

Getting back to the initial concern, which was that there was a universal belief that the person who had the funds in the trust account who was not entitled to have the interest on it should not provide a circumstance where the bank and/or a legal practitioner should get the benefit of the interest earned on these moneys, so these moneys (the interest on these funds) were transferred by the bank to a guarantee fund. It was determined that that money would be available for provision of support and refund of those who had been the victim of a loss of funds in solicitors' trust accounts and some other defalcations.

It should also be remembered that this was in the day when there was no compulsory legal professional insurance required. That itself has had another history where now (and has been for some time) a legal practitioner who has an annual practising certificate is denied the right to have a practising certificate if they do not have professional indemnity insurance and it must, of course, reach certain thresholds in relation to the insurance that is made available, in particular the level at which they are insured. Like a number of professional organisations, there has been considerable work done by the Law Society over the years to secure the best available premiums and so on.

In the advent of having compulsory professional indemnity insurance and the laws that have developed with that over the last 30 years, it takes into account that people do have some relief with an insurance back-up to it if a legal practitioner acts in a manner in which they, as a client, have a compensatable entitlement as a result of a legal practitioner acting incompetently in some way or another. There are restrictions on access to those moneys in the event that the legal practitioner has actually broken the law, so other ways of trying to ensure against that had to be looked at. When I say 'ensure', I do not mean insurance in the sense of buying a premium, but to provide some remedy or relief, and this is one of the ways that has historically provided some support.

The aspect of the Magarey Farlam case, though, is that we ought to be reminding ourselves in the course of this debate that there were considerable moneys stolen from a trust account in the legal firm of Magarey Farlam. The funds in the trust account, obviously, were legitimately owned by a number of clients and there was a reasonable expectation on their behalf that the money would be safe. The funds were not stolen by a legal practitioner. That is the first complication in this case—there were a number. They were actually stolen by an accountant who worked in the firm.

Questions raised in that case included the competency or otherwise, or responsibility or lack of responsibility of the legal practitioners, in particular, the senior members of the legal firm. This is a legal firm that wound up shortly after this horrible case, and there were questions about whether they had failed to keep an eye on things. There were issues raised about the Law Society as a watchdog and the setting of a number of the rules in respect of trust accounts—the operation of trust accounts and the auditing of them—and their competency to ensure that things are properly checked.

It needs to be borne in mind that there are some situations where, within the framework of a client and legal practitioner, the clients may be the victim of conduct by a legal practitioner which is unlawful and they are a victim of theft the same as anyone else, whether or not they are a lawyer. That is, people can steal from others. People take money under false pretences and do all sorts of ghastly things and we have lots of laws against that, but it does not stop breaches of this nature in itself.

Sadly, the fact of life is that just making it against the law does not mean people stop doing it. I think most people do take notice of what the law is and do not break the law knowingly, but there will always be those who do, irrespective of it being against the law and irrespective, even, of the extent of the penalty.

It is important to note here that, probably no matter what we do in respect of legal practitioners and their relationship with clients and protecting the clients' interests against defalcations such as this, we will never be able to eradicate completely and quarantine people from others. There will always be bad apples and some will be rotten to the core and, sadly, there will always be victims in the world. The situation here is that this guarantee fund has developed with other roles and other sources of money over a period of time. I seek leave to continue my remarks.

Leave granted; debate adjourned.


[Sitting suspended from 13:00 to 14:00]


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