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Recent amendments refresh the Fidelity Guarantee Fund

Since its introduction in 1930, the Legal Practitioners’ Fidelity Guarantee Fund has been a continuing initiative on the part of the legal profession to tax itself for the benefit and protection of the public.1

Indeed, the Fidelity Fund was originally put forward as a voluntary offer by the legal profession to benefit the public by compensating those who suffer pecuniary loss because of a legal practitioner’s dishonest or fraudulent default.2

In keeping with the protective nature of the fund, Queensland Law Society supported the passing of Fidelity Fund-related amendments in the Criminal Code (Consent and Mistake of Fact) and Other Legislation Amendment Act 2021.3

This piece of omnibus legislation conferred new powers on the Society to better administer and manage the fund pursuant to part 3.6 of the Legal Profession Act 2007. In particular, the amendments:4

  • provide the Society with a general power to make payments from the fund for the purpose of establishing a program or tool to assist the Society or law practices in identifying defaults
  • provide an express power to make payments from the fund for the purpose of establishing an education program for law practices to improve compliance with their trust accounting obligations
  • insert a new provision in the Legal Profession Act 2007 allowing the Society to top up historical fund claims that were limited by the statutory cap
  • provide the Society with the power to limit a claim if the Society believes the fund is likely to become insufficient if the claim were paid in full
  • insert new reporting requirements on the Society regarding, amongst other things, the amounts paid from the fund and the balance of the fund at the end of the financial year.

The amendments commenced on 1 May 2021, except for the expenditure and reporting provisions, which are set to commence on 1 July 2021.5

Expenditure from the fund

Under the previous expenditure provisions, the Society was limited in how it could administer the fund.6 The Society was largely limited to making payments from the fund for the amount of a claim, as well as any interest or legal expenses associated with that claim.7 Hence, the fund was reactive, in that it made payments from the fund after the dishonest or fraudulent defaults had occurred and after a claim had been made.

Under the new provisions, the Society has the power to develop preventative measures that are aimed at identifying defaults or compliance issues before defaults occur. The preventative measures are expected to reduce the incidence of defaults and compliance issues within firms, which will ideally limit the number of people suffering pecuniary loss from a legal practitioner’s dishonest or fraudulent default.

Statutory caps

The statutory caps on payment from the fund have been a component of the regime since its inception in 1930.8 The statutory caps have operated to limit claims that would, if paid in full, have significantly lowered the level of the fund.9

The Society also maintained a discretion pursuant to section 396 of the Legal Profession Act 2007 to pay claims in full. The application of the statutory caps has meant that some claimants have been unable to recover their full claim.

While the Society now maintains a policy position to fully compensate claimants unless there are strong policy reasons to the contrary, the Society has been unable to revisit historical claims where the statutory cap was applied.10 Hence, the recent amendments empower the Society to revisit historical claims where the statutory caps were applied and fully compensate those claimants. The top-up of claims is only now possible because the fund has reached sufficient levels to accommodate the expenditure.

Good law, good lawyers, for the public good

The recent amendments empower the Society to better administer and manage the fund for the benefit and protection of the public. While the amendments were made possible by the balance of the fund, it must be noted that it is largely through the self-sacrifice of the profession that the fund is at its current level.

It is also why the Society is in the position to top-up claimants and develop preventative programs and tools aimed at increasing compliance and reducing claims.

In this regard, the legal profession sets itself apart from most professions in its pursuit to protect and benefit the public from dishonest or fraudulent members. Indeed, the efforts made in support of these amendments underscore the profession’s ongoing duty to serve the general public, as well as the Society’s dedication towards good law, good lawyers, for the public good.

Footnotes
1 Queensland, Parliamentary Debates, Legislative Assembly, 5 December 1930, 2795-2796 (Hon. N. F. Macgroarty), parliament.qld.gov.au/documents/hansard/1930/1930_12_05_A.pdf.
2 Ibid 2795.
3 Luke Murphy, Submission No.28 to Legal Affairs and Safety Committee, ‘Report No.3, 57th Parliament – Criminal Code (Consent and Mistake of Fact) and Other Legislation Amendment Bill 2020′ (23 December 2020), parliament.qld.gov.au/documents/committees/LASC/2020/CrimCodeCandMoFOLAB2020/submissions/028.pdf.
4 Criminal Code (Consent and Mistake of Fact) and Other Legislation Amendment Act 2021 (Qld) ss24-26.
5 Ibid s2(1)-(2).
6 Legal Profession Act 2007 (Qld) s364.
7 Ibid s364.
8 Queensland, Parliamentary Debates, Legislative Assembly, 5 December 1930, 2796 (Hon. N. F. Macgroarty), parliament.qld.gov.au/documents/hansard/1930/1930_12_05_A.pdf.
9 Queensland, Parliamentary Debates, Legislative Assembly, 26 November 2020, 92 (Hon S. M. Fentiman), parliament.qld.gov.au/documents/hansard/2020/2020_11_26_WEEKLY.pdf#page=74.
10 Explanatory Note, Criminal Code (Consent and Mistake of Fact) and Other Legislation Amendment Bill 2020 4.

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One Response

  1. Excellent outcome for the fidelity fund. I spent several years on the committee and aappreciated the difficult task in fairly treating claimants.new powers will have a good impact.

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