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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2013-05-16 Daily Xml
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LEGAL PRACTITIONERS (MISCELLANEOUS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 15 May 2013.)

The Hon. S.G. WADE (17:35): I would like to continue the remarks I was making earlier this week in relation to the Legal Practitioners (Miscellaneous) Amendment Bill. I would now like to address the issue of the guarantee fund. The reform of the guarantee fund was one of the most contentious aspects, if not the most contentious aspect, of the Legal Profession Bill 2007. The Liberal opposition's consultation on this bill has again shown that this continues to be a contentious area. Of course, that concern has been particularly focused on the Magarey Farlam defalcation.

The guarantee fund receives income from two sources: interest from trust accounts and the practising certificate fees paid annually by lawyers. Currently, funds are allocated to meet claims for defalcation to provide legal aid through the Legal Services Commission and to maintain the legal profession regulatory regime. The reserves of the fund are capped, in that excess funds as determined by statutory formula are transferred to the Legal Services Commission. The bill proposes that the guarantee fund be renamed the 'fidelity fund' and that the outgoings be expanded to cover the expenses of the board of examiners, the Legal Practitioners Disciplinary Tribunal, and the honoraria for members of the legal practitioners education and admissions committee.

Nationally, three jurisdictions allow their respective funds to be used for regulation and three allow funds to be used for purposes such as legal aid. The bill proposes to expand the circumstances in which an individual may make a claim against the fidelity fund whilst maintaining the fund as a fund of last resort. In this respect South Australia would not be departing from the national norm, as other states maintain fidelity funds as funds of last resort.

The bill proposes to expand the entitlement to claim against the fund to include where an ordinarily prudent self-funded litigant would not take action for recovery. Further, the bill would permit the Law Society, as the administrator of the fund, to be empowered at its absolute discretion to make a recoverable advance payment to a claimant where the claimant is suffering hardship. This is similar to the provisions of the draft national model law, which proposed giving funds the discretion to pay the claimant in advance if they are satisfied that the claim is likely to be allowed and the payment is warranted to alleviate hardship.

I note that the bill's amendments will continue to prohibit claims where the loss would be covered by the professional indemnity insurance scheme. The bill does not attempt to implement the draft national model law's proposal to separate the administration of the fidelity fund from the respective law societies, in that the law provides that the 'fidelity authority must ensure that claims against the fidelity fund are determined independently, at arm's length from the legal profession'. While we are supportive of the amendments as far as they go, the Liberal opposition will continue to review the administration of the fund to ensure that it is appropriately accessible for individuals.

Our consultation on the bill revealed that many stakeholders are of the opinion that the guarantee fund lacks transparency. The Liberal opposition is concerned that the annual report to parliament only requires that the report 'state the amount of payments from the guarantee fund during the financial year and the nature of the claims in respect of which payments were made'. I note that the Law Society of South Australia's annual reports provide more detailed information on the fund; however, these annual reports are not publicly available. The Liberal opposition is of the view that, in order for the public to have confidence in the fidelity fund model, there needs to be much more transparency.

Claims and transactions need to be determined at arm's length from the Law Society. In keeping with the opposition's commitment to transparency and accountability, I will be moving amendments to the bill to ensure that the annual report to parliament contains the audited statement of accounts of the indemnity fund for the period to which the report relates. This insertion would be consistent with similar requirements in section 64 of the Land Agents Act. I look forward to further consideration of the bill in committee and support the second reading.

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

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