Case Law Regarding Professional Standards Legislation

The defendants provided accountancy services in Victoria for the plaintiffs residing in NSW. Although notice was given under the NSW scheme, the professional activity in question, auditing, took place in Victoria and the Court held that Victoria was the applicable jurisdiction for determination of the substantive legal issues. As such, the applicable Scheme was that under the Professional Standards Act 2003 (Vic). Notice was required for the Victorian scheme to apply. The defendants were therefore unable to rely on the NSW scheme since it was not applicable, or the Victorian scheme, as the first defendant did not give disclosure in the form required by the Victorian Act.

Institute of Chartered Accountants in Australia

Supreme Court NSW

(1) Applicable scheme is that of the jurisdiction under which the substantive issues will be determined. 

(2) Where doubt exists as to the applicable scheme, give notice of scheme in form required by each relevant jurisdiction. 

The defendant attempted to submit an amended ‘Professional Standards defence’ six days before the scheduled hearing. The court held this time period did not serve as sufficient notice for the other party and no explanation was provided for the delay. The court held that if the defence had been raised earlier, the parties could have joined parties with the insurer and/or mediation may have been conducted differently. For this reason, the professional standards defence was unavailable to the defendants. 

Institute of Chartered Accountants in Australia (NSW)

Federal Court of Australia

Any reliance on a Scheme under the Professional Standards Act 1994 should be pleaded in Defence at the earliest opportunity. 

The defendant solicitor was involved in a compensation claim involving the NSW Torrens Assurance Fund. The Registrar General (RG) joined by cross-claim using s.133 of the Real Property Act 1900 (NSW) ('RPA'). The RG argued that the solicitor was not entitled to rely on the scheme due to the RG's use of s. 133 (which falls within pt. 14 of the RPA). The court rejected this argument as s.133 only allows the RG join causes of action accruing to the claimant. In this case, since the original claimants could only put forward a common law claim in negligence, the RG did not meet the s. 5(2) exception. 

NSW Law Society

Supreme Court NSW

Reliance by Registrar-General on s. 133 of the Real Property Act 1900 does not, of itself, render the Professional Standards Act 1994 inapplicable

The defendant provided accounting services. The plaintiff’s claim included an allegation of dishonest or fraudulent conduct. The parties agreed that if dishonesty was found, the damages flowing from that conduct would not be capped by the Scheme under the Professional Standards Acts (Vic) and (NSW). 

Accountants Scheme

Federal Court of Australia

Damages flowing from dishonest or fraudulent conduct will not be capped by a Scheme. 

The defendants were accountants. The Court concluded that the defendants’ policies of insurance did not cover the occupational liability in question. This being the case, liability was not limited by the professional scheme. However, since judgment was given in favour of the defendants, there was no need to apply this conclusion. 

Institute of Chartered Accountants in Australia 

Supreme Court NSW

(1) Scheme will not apply unless insurance policy meets relevant standards. 

(2) Members should ensure their insurance policies meet the relevant standards, but also that they cover all aspects of the relevant occupational liability. 

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, as the insurance policy was not sufficiently specific as to the period to which it applied.

NSW Law Society

Supreme Court NSW

(1) Scheme will not apply unless insurance policy meets relevant standards. 

(2) Members should ensure their insurance policies meet the relevant standards, but also that they cover all aspects of the relevant occupational liability. 

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, it appears likely 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

No detailed judicial consideration given to legislation or Scheme.

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

No detailed judicial consideration given to legislation or Scheme.

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. The Court also accepted that the plaintiffs would have conducted the litigation very differently had the defence been raised earlier in the proceedings.

CPA Australia

Supreme Court NSW

Any reliance on a Scheme under the Professional Standards Act 1994 should be pleaded in Defence at the earliest opportunity.

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 unsuccesful defendants to pay a portion (50%) of the succesful defendants' costs, as these were not costs, "in connection with" the award of damages made in favour of the plaintiff. 

In respect of the plaintiffs' claim, since the damages suffered exceeded the cap, the unsuccesful defendants were ordered to pay damages in the amount of the cap, inclusive of costs.

NSW Law Society

Supreme Court NSW

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

Leave was granted to the defendant to retain a late amendment to its Defence pleading limitation of liability by operation of the solicitors’ scheme approved under the Professional Standards Act 1994 (NSW).

NSW Law Society

Supreme Court NSW

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 1994 (NSW) 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

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 NSW

The accountant defendants 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”. Leave was granted to amend the Defence.

Accountants Scheme

Supreme Court NSW