Page 5079 - Week 14 - Tuesday, 17 November 2009
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The second area of concern is that the society’s funds should not be unnecessarily exposed to claims for compensation for losses naturally arising from investigation activities. In this respect, the Law Society does not fit the common model for entry and search powers. When I presented the bill, I noted that it changes a number of provisions in a way that will, to a degree, set them apart from what we regard as standard provisions for the appointment and conduct of investigators. That is because the regulatory environment in this case is not entirely compatible with those standard provisions.
Law practices are well accustomed to allowing the Law Society access to their accounts, documents, and sometimes their premises for the purposes of programmed or ad hoc inspection. Auditing of accounts is common practice, and it is accepted that there will not be compensation for the firm’s inevitable downtime which is, of course, kept to a minimum. In this circumstance, the society is looking into the affairs and activities of its own members to ensure that the law, the rules of practice and the directions of the society are being adhered to. In such a circumstance where a private regulator is looking into matters relating to the conduct of one of its own members, it is appropriate that compensation should be limited to situations that are out of the ordinary.
This bill, therefore, makes some improvements to the operation of part 6.3 of the act relating to entry and search of premises for the purposes of investigating law practices. Law practices will be entitled to compensation only for the unlawful or unreasonable actions of investigators. As I have said, under the current provisions, once the Law Society has authorised the entry of premises, it has no control over the conduct of the investigator, provided the investigator complies with the act.
The current investigative powers in division 6.3.2 of the act may expose a licensing body to significant, possibly crippling, liability for compensation, and the lack of control of investigators, therefore, causes concern in two areas: the regulator is unable to expressly and specifically direct the activities of investigators, they may not exercise appropriate care and skill and may cause unnecessary damage or loss to legal practices. If loss is not necessary then it should not be condoned.
Whether or not an investigator complies with the act or follows the licensing body’s instruction, a person may currently claim compensation for any loss or damage. Under the act, compensation is to be paid by the Law Society or the Bar Association, depending on whether a solicitor or barrister is being investigated. As a result, there is potential for significant withdrawals from the society’s statutory interest account or the bar’s finances, which are used to assist the funding of a number of significant legal service initiatives, as I mentioned earlier, including Legal Aid and community legal services.
While the entry and search provisions are retained as a useful regulatory tool, they are amended by this bill to be more appropriate for exercise by a non-government regulator. The amendments will ensure that a regulator is able to properly control the conduct of its investigators and that the regulator’s funds are not unduly exposed to claims for compensation. The provisions in this bill are similar to those in the
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