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Council calls for flexible capping
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Council calls for flexible capping

THE NATION’S lawyers have applauded the Professional Standards Council’s decision to overhaul the system of capped liability in New South Wales, which is expected to see ‘flexible capping’…

THE NATION’S lawyers have applauded the Professional Standards Council’s decision to overhaul the system of capped liability in New South Wales, which is expected to see ‘flexible capping’ introduced across the country.

The amendments to capped liability will mean the limit on compensation payable by the professional standards scheme, previously $50 million maximum, can now be raised in certain cases. However, the amendments are still subject to disallowance by the NSW Parliament before coming into effect.

Law Council of Australia (LCA) president John North welcomed the changes, calling it a “big breakthrough”. “Certain large firms with very big clients needed to have this flexibility to remain commercial in the market place,” North told Lawyers Weekly.

But the relevance of the scheme, legal bodies agree, is that it should apply across the board to all lawyers. All lawyers across the country should have access to flexible capping, said North, “so that people can be assured of having proper cover in place”.

“The Law Council hopes that this will become standard when we finally arrive at a true national profession,” North said.

The Law Society of NSW agreed the new scheme for its solicitors would be a model for other professional standards schemes throughout Australia.

“The flexible capping scheme recognises the need to better tailor limitations of liability to the scale of projects which are undertaken by solicitors, particularly for major clients,” said Society president John McIntyre.

“Under the previous scheme the caps only went up to $50 million which had proved to be insufficient due to the varying sizes of legal firms, particularly those who have offices throughout Australia,” he said.

Under the amendments, the Law Society would have to approve the particular cases in which liability could be increased. It will exercise its discretion to determine applications by members for a higher maximum amount of liability, which it said will “cater for the needs and expectations of both solicitors and their clients”, said McIntyre.

“Comprehensive risk management regimes and professional indemnity insurance cover up to the amount of the cap will ensure that members of the public who make a claim against solicitors who join the scheme are properly covered,” he said.

Despite concerns raised initially by the four major banks, the Law Society said that in its submission to the Professional Standards Council, the Australian Bankers Association commented that flexible capping would provide a satisfactory outcome for its members.

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