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Judicial consideration of Professional Standards Legislation

To date there has been little judicial consideration of the Professional Standards Legislation or of Professional Standards Schemes (schemes) approved under that legislation. However, decisions of the Supreme Court of New South Wales and the Supreme Court of Western Australia have considered limitation of damages defences under schemes. In these cases the courts have recognised that the schemes operate to limit liability of the defendants (as participating members) to the specified cap.

There have been approximately 10 recorded cases where a scheme approved under the Professional Standards Legislation has been considered. A summary of the main points raised in those cases are set out in the table below. 

Case citationConsideration of limitation of liability under schemeOccupational associationJurisdiction

Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176

Limitation of liability was pressed by the defendant solicitor. The Court found that the defendant solicitor did not hold the required insurance pursuant to cl 3.2 of the NSW Law Society scheme in order for his liability to be limited pursuant to Professional Standards Legislation.

NSW Law Society

Supreme Court NSW

Hudson Investment Group Limited v Atanaskovic and Others (2014) 311 ALR 290; [2014] NSWCA 255

Although further consideration was not given to the limitation of liability imposed by the operation of the scheme because the professional negligence claim brought against the solicitors failed at first instance and on appeal, the case demonstrated that if the Court had found that the solicitors were negligent, their liability would have been limited due to the operation of the solicitors’ scheme approved under the Professional Standards Act 1994 (NSW).

NSW Law Society

Court of Appeal NSW

Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955

The limitation of liability pleading was not pressed in final submissions, further consideration was not given to the limitation of liability imposed by the operation of the solicitors’ scheme or application of the Professional Standards Legislation.

NSW Law Society

Supreme Court NSW

Dewheath Pty Ltd v Edmunds [2013] NSWSC 553

The defendants were not granted leave to amend their Defence to plead limited liability under the CPA Australia’s scheme. The Court held that because it was raised too late in the proceedings it would significantly prejudice the plaintiff. The Court found that in the circumstances it was entirely reasonable for the plaintiff to form the view that the defendants had waived their right to rely upon such limitation of liability on the basis that in the absence of such a specific pleading, the defendants did not intend to rely on the available cap.

CPA Australia

Supreme Court NSW

Artistic Builders Pty Ltd & Anor v Nash & Ors [2011] NSWSC 350 and Artistic Builders Pty Limited & Anor v Nash & Ors [2010] NSWSC 1442

In the 2010 proceedings the Court recognised that the plaintiffs’ damages were subject to the provisions of the Professional Standards Act 1994 (NSW).

In the 2011 proceedings the unsuccessful defendants (Harris & Co) were ordered to pay part of the costs of the successful defendants (NOT Lawyers) and the limitation cap for damages under section 29 of the Professional Standards Act 1994 was held not to apply.

The Court acknowledged a "statutory cap" by reason of the interaction of ss 4 and 29 of the Professional Standards Act. However ss 29 and 4 were interpreted by the Court not to apply to the making of a direct order against the unsuccessful defendants to pay a portion (50%) of the successful defendants’ costs.

NSW Law Society

Supreme Court NSW

Pedulla v Panetta & Ors [2011] NSWSC 1386

The Court applied the limitation on liability applicable to a solicitor pursuant to the solicitors’ scheme approved under the Professional Standards Act 1994 (NSW), despite the finding of fraud on the part of co-defendant in the proceedings. The Court applied the cap following apportionment of liability between the concurrent wrongdoers.

NSW Law Society

Supreme Court NSW

Thomson & Anor v Williamson & Ors [2011] NSWSC 1630

Leave was granted to the defendant solicitors to amend their Defence to plead limitation of liability by operation of the solicitors’ scheme approved under the Professional Standards Act 1994 (NSW).

NSW Law Society

Supreme Court NSW

Allstate Explorations NL v Blake Dawson Waldron (A firm) [2010] WASC 97

Although the plaintiffs’ claim for professional negligence against the defendant law firm was dismissed, the Court did make some observations about the approach that could be taken in applying the statutory cap.

In the context of the parties having reached agreement that limitation of liability under the Professional Standards Act limits its liability for claim, interests, and costs to $10 million, the Court observed that as the limitation of damages under the scheme puts a cap on the aggregate of damages interest, and costs, attention would need to be given to quantifying the costs for which the defendant was also liable in order to determine whether, with that additional component, the plaintiffs' entitlement exceeded $10 million.

NSW Law Society

Supreme Court WA

Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No. 7] [2008] NSWSC 199

One of the defendants in the suit (PwC) pleaded limitation of liability pursuant to the Professional Standards Act 1994 (NSW) regarding a claim for costs. The plaintiffs’ submitted that there was a risk that PwC might be unable to repay costs paid to it pursuant to any interim order, if an appeal was allowed.

The Court concluded that there was no real likelihood that PwC could not repay any amount of costs paid to it pursuant to any interim order should it become necessary to do so.

Accountants Scheme

Supreme Court WA

Aesthetics Architecture Pty Limited v John Camilleri & Ors [2007] NSWSC 1129

The accountant defendant’s sought leave to amend their Defence to plead limitation of liability by operation of the accountants’ scheme under the Professional Standards Act 1994 (NSW).

The Court was not convinced that the delay in raising the defence had caused financial loss to the plaintiff, noting that high legal costs continued to be incurred by the plaintiff after it was realised such a defence might be raised. His Honour held that both parties shared some responsibility for the delay in considering the limitation of liability defence.

His Honour also placed weight on the defendants’ letterhead, which stated that: “Liability is limited by the Accountants Scheme pursuant to the NSW Professional Standards Act 1994”.

Accountants Scheme

Supreme Court WA

 
 
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Published on 13 April 2016 by the Professional Standards Councils.