Professional Standards Councils remind professionals of liability for breaches of trust, fraud or dishonesty
The work of the Parliamentary Joint Committee on Corporations and Financial Services has led to extraordinary whistleblower revelations of unethical conduct, notably in PwC and KPMG.
Recent media reporting of these matters has referred to the limitation of liability applicable to partners in these firms under their professional standards scheme.
The Professional Standards Councils are concerned that some media reports have suggested that partners involved in breaches of trust are protected from liability arising from such actions. This is incorrect.
Professional standards schemes do not apply to limit liability for damages arising from a breach of trust, fraud or dishonesty. The application of professional standards legislation to damages of that kind is explicitly excluded by section 5(1) of the Professional Standards Act 1994 (NSW) (and jurisdictional equivalents).
Any attempt to rely on a limitation of liability under a scheme will fail if the liability arises from a breach of trust, fraud or dishonesty. Insurance cover, which is a requirement under a scheme, may also be lost. These factors operate as strong incentives for ethical conduct by professionals and others.
If a professional chooses to breach the trust of their client, or act fraudulently or dishonestly, they will not be protected from liability for the breach by their professional standards scheme. They can expect to face full civil liability for their actions. They may also face disciplinary actions – including suspension, expulsion and monetary penalties – from their professional association.
All persons who provide services under a professional standards scheme, whether in large partnerships, companies, sole trading or any other structure, must act ethically and lawfully at all times.
The statement above is general in nature and should not be treated as legal advice in any given case. The Councils note that the question of liability in any given case is ultimately determined by the courts.