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Treasury Legislation Amendment (Professional Standards) Bill 2004
27-04-2010 01:59 PM
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Treasury Legislation Amendment (Professional Standards) Bill 2004
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2002 - 2003
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LEGISLATION AMENDMENT (PROFESSIONAL STANDARDS) BILL 2003
(Circulated by authority of the Minister for Revenue and Assistant Treasurer,
Senator the Hon Helen Coonan)
Table of Contents
Financial Impact Statement.............................................................................................................. 2
TREASURY LEGISLATION AMENDMENT (PROFESSIONAL STANDARDS) BILL 2003
1. Professionals in every jurisdiction in Australia are currently facing difficulty in obtaining affordable professional indemnity insurance. It is essential that professionals be able to access this insurance to ensure that consumers can obtain damages in the event of negligently provided professional services.
2. The insurance industry and professionals alike have submitted to governments in all jurisdictions that Professional Standards Legislation (PSL) will ensure that professionals can obtain appropriate insurance and not be left to “go bare”.
3. In essence, PSL seeks to minimise damages claims against professionals through improved professional standards - by requiring risk management strategies, compulsory insurance cover, professional education and appropriate complaints and disciplinary mechanisms - in return for caps on the liability of professionals who are covered by PSL.
4. The requirement of risk management systems and mandatory professional indemnity insurance is of unequivocal benefit to consumers in circumstances where there would be no such surety. Currently, an unknown number of professionals are providing services without any professional indemnity insurance cover. Professionals finding indemnity insurance unaffordable or unobtainable simply “go bare”, failing to insure themselves and in some cases divorcing themselves from their assets, which is obviously undesirable from a consumer perspective. Ensuring that professionals hold insurance is the goal of PSL and provides the rationale for the amendments made by this Bill.
5. At present, PSL exists in New South Wales and Western Australia and is under consideration in other jurisdictions. It is the PSL model which has been adopted by these jurisdictions which this Bill seeks to support.
6. Establishing a cap for liability will give professionals certainty about their level of exposure and will remove the risk of personal exposure for them provided the caps are set at insurable levels. To ensure that caps are set at appropriate levels, the Professional Standards Council undertakes considerable analysis to ensure that the vast majority of consumers will not be disadvantaged as a result of capped liability.
7. The Insurance Council of Australia has stated that PSL is one of four pillars to improve the availability and affordability of professional indemnity insurance. The other three pillars are amendments to section 54 of the Insurance Contracts Act 1984 , implementing proportionate liability for economic loss and amending the Trade Practices Act 1974 (TPA).
8. The final plank in the package of reforms to address issues around professional indemnity insurance is consistent State and Territory legislation in respect of PSL.
9. National consistency on professional standards legislation is a most desirable outcome for all Australians. Accordingly, jurisdictions have been urged to progress implementation of PSL in a nationally consistent manner. In the interests of maintaining consistency, which will lead to the best outcome for all Australians in terms of accessing more affordable professional services and maintaining consistency of law reforms across Australia, it is imperative that no jurisdiction deviate from the nationally agreed position.
10. The amendments made by this Bill will establish a structure under which the Commonwealth, by prescribing State PSL schemes, can support PSL by allowing liability under the relevant Commonwealth legislative provisions to be capped.
11. The Bill does not limit liability under the Trade Practices Act or other Acts per se . Liability will only be limited when regulations prescribing schemes have been made. By retaining the power to modify schemes in the regulations, the Commonwealth retains the power to ensure that the interests of consumers are protected. It is also a goal of the Government to ensure that no State is given a preference over another, and the regulation making power conferred by this Bill will be exercised accordingly.
There is no financial impact to the Commonwealth as a result of these measures.
Insurance plays an important role in the Australian economy. It provides a mechanism for transferring and pooling the risk of financial loss to entities with the expertise to manage the risks involved.
Professional groups have traditionally dealt with their unlimited liability exposure for professional default through professional indemnity insurance, which insures against loss arising from professional services offered by the insured professional.
Australia is currently experiencing a ‘hard insurance market’ that is, a market characterised by tougher risk selection by insurers. While the Australian experience has been exacerbated by the collapse of a major domestic player in HIH (which held around 35 per cent of the professional indemnity market), globally most classes of insurance have moved into a hard market cycle in the last two years drawn especially by a world-wide downturn in investment returns and losses arising from the terrorist attacks on 11 September 2001. In the case of professional indemnity insurance, this has been compounded by major claims emerging out of the collapse of Enron and other major corporations in the United States of America and elsewhere.
Specifically, professional groups are reporting that they are experiencing extreme difficulties with the availability and cost of professional indemnity insurance. This is a result of fewer insurers offering the product, while those insurers that do are severely restricting the scope of services they are prepared to cover.
Exposing professionals to unlimited personal liability could have significant supply side ramifications if it discourages new entrants and leads to the exit of existing players in these occupations.
There is evidence to suggest that the lack of professional indemnity insurance is leading to a withdrawal of services provided by some occupational groups.
For example, the Institute of Chartered Accountants reported in a January 2003 survey of members that over half are considering to cease, or have ceased, offering services, particularly audit, because of rising insurance costs. The Association of Consulting Engineers Australia also reported in a January 2003 survey that firms are withdrawing services in areas where insurance is unavailable or unaffordable, such as pollution control, asbestos removal and air-conditioning treatment to combat legionnaires disease.
Such developments, obviously, have broad economic ramifications.
The inability of professionals to obtain liability insurance on reasonable terms becomes even more problematic in circumstances where Australian governments increasingly are requiring such cover by law. For example, the Financial Sector Reform Act 2001 obliges financial players to have ‘adequate means of compensating’ wronged consumers. This will, in effect, mean that in a large number of cases, professionals will be required to hold professional indemnity insurance.
From the data available, it is not possible to determine how many professional service providers are operating without insurance cover for a part or all of their business. Clearly, it will not be possible for consumers to access appropriate damages in the case of liability if a professional is operating without insurance or sufficient assets.
Professional groups report that the greatest impact of the lack of professional indemnity insurance is being felt by small to medium sized businesses and businesses in regional areas. Less impact is being felt by large firms who have sufficient capital to self-insure up to certain levels and insure above these levels on the international reinsurance market. This will cause an impact on competition where only larger firms can continue to provide professional services.
The primary concern for Government with the lack of appropriate insurance therefore is threefold. Firstly, many professionals may be operating without appropriate insurance cover, and divorcing themselves from assets through discretionary trusts and the like, leaving consumers unable to access appropriate damages in the case of negligence. Secondly, a contraction of supply of professional services is likely to lead to reduced competition. Finally, the withdrawal of professional services, especially in areas critical to public health and the like, will adversely impact on the wellbeing of the community.
It is likely, moreover, that most, if not all, of the generally higher costs of professional indemnity insurance will ultimately be passed on to consumers.
The objectives of the proposed action are to:
(a) protect consumers by reducing the likelihood of claims through better risk management practices, which can also be expected to lead time to lower insurance premiums than would otherwise be the case over time;
(b) protect consumers by ensuring that appropriate resources are available to meet claims in the event of liability being proved;
(c) assist professionals by minimising the number of claims against them; and
(d) assist professionals to obtain suitable cover at more reasonable premiums.
Statement of the proposed regulation and the alternatives
a. Option 1: Maintain the status quo
The Commonwealth would not directly or indirectly intervene in the professional indemnity insurance market to ensure professionals have adequate insurance cover to pay awards for damages in the event that liability is proved.
b. Option 2: Commonwealth to directly subsidise professional indemnity insurance premiums
The Commonwealth would directly intervene in the market for professional indemnity insurance to subsidise those professions experiencing difficulty in obtaining appropriate, affordable insurance.
c. Option 3: Implement proportionate liability for economic loss
One of the objectives of implementing proportionate liability for economic loss is to place downward pressure on professional indemnity insurance premiums.
Proportionate liability will overcome the ‘deep pocket’ syndrome inherent in a joint and several liability regime which often sees one party bearing full responsibility for loss or damage despite the fact that a number of parties may have contributed to the loss. Proportionate liability means that liability rests with all defendants in proportion to their contribution to the plaintiff’s loss. This is contrasted against joint and several liability where a defendant can be held liable for the total loss sustained, even if they contributed to the loss in a small way.
Under proportionate liability for economic loss, proportionate liable would only apply to loss sustained under economic heads of damages, such as loss of earning capacity. Proportionate liability would not apply to general damages, such as damages for pain, suffering, loss of amenities and loss of expectation of life.
d. Option 4: Modified standard of care
The Commonwealth is unable to directly implement this option, but can encourage states and territories to implement this option.
The Review of the Law of Negligence recommended that in cases involving an allegation of negligence on the part of a person holding himself or herself out as possessing a particular skill, the standard of reasonable care should be determined by reference to:
(a) What could reasonably be expected of a person professing that skill.
(b) The relevant circumstances at the date of the alleged negligence and not a later date.
This rule could, obviously, be applied generally to all professionals.
e. Option 5: Implement risk management procedures
The Commonwealth is unable to directly implement this option, but can encourage states and territories to implement this option.
Under this option, professionals would agree to adhere to specific risk management practices. These risk management practices could include ongoing professional education, appropriate complaints and disciplinary mechanisms and adherence to professional standards.
f. Option 6: Amend Commonwealth legislation to support any state or territory that implements professional standards legislation
New South Wales and Western Australia have enacted professional standards legislation in their Professional Standards Act 1994 (NSW) and Professional Standards Act 1997 (WA). These Acts focus on minimising claims against professionals by improving professional standards, requiring risk management strategies, compulsory insurance cover, ongoing professional education and appropriate complaints and disciplinary mechanisms, in return for limited liability.
The Commonwealth could not implement a professional standards legislation scheme, as such. However, Commonwealth support for such a scheme, by amending the Trade Practices Act 1974 , the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 , is essential to ensuring any state and territory professional standards legislation is not undermined.
The current New South Wales scheme is most likely to form the basis for any national model of professional standards legislation.
The New South Wales and Western Australian Acts have common core provisions and mutually appoint the Professional Standards Council to administer the legislation. The New South Wales Act enables an occupational association to prepare a professional standards scheme for approval by the Professional Standards Council. There are requirements for public notification of, and consultation on, proposed schemes.
In approving a scheme, the New South Wales Act requires the Council to consider public submissions, the position of persons who may be affected by capping liability, the risk management strategies of the occupational association concerned, the cost and availability of insurance, and the standards of insurance of the professional association required under the Scheme.
Risk management strategies under Schemes are those strategic systems adopted by professional bodies that are designed to systematically maintain and continuously improve the professional standards of their members. These strategies are designed to achieve the key objectives of quality and competency, ethical conduct and accountability. Schemes only affect damages that exceed the limits determined and specified in the Scheme.
Caps on liability are determined by the Council in accordance with the legislation, in consultation with the relevant professional association and having regard to the nature and amount of past claims and the need to protect consumers. Professional groups confirm that the vast majority of claims are settled within the caps and that only claims by large corporations are likely to exceed the cap.
Any reforms to implement professional standards legislation would not apply to liability for damages arising from the death of a person, personal injury, negligence by a legal practitioner in acting for a client in a personal injury claim, or damages arising from a breach of trust, fraud or dishonesty.
Any Commonwealth amendment to support professional standards legislation would also specifically exclude directors and officers of companies from accessing a cap on liability. This would be necessary to preserve the integrity of the duties of directors and officers provisions of the corporations law.
Groups likely to be affected by the proposed action include:
(a) purchasers of professional services:
(i) ‘consumer’ type purchasers; and
(ii) ‘business’ type purchasers.
(b) providers of professional services.
g. Option 1: Maintain the status quo
This option might be justified in circumstances where the Government was confident that problems in the professional indemnity insurance market were of a short-term, cyclical nature. While low investment returns on the global insurance market clearly represent a cyclical element to the current problems in the domestic market, these problems also reflect key structural factors. These include the demise of Australia’s major domestic provider in this class of insurance, HIH, and the fact that Australian society has become increasingly litigious, to the point of almost being equivalent with the United States of America.
There is a strong consensus among all Australian jurisdictions that action is needed to address these two structural issues. In essence, the challenge is to attract a higher proportion of global risk capital back in to the Australian market for liability insurance.
Relevant too is that professionals are increasingly being required by law to hold professional indemnity insurance. For example, the Financial Sector Reform Act 2001 obliges financial players to have ‘adequate means of compensating’ wronged consumers. This will, in effect, mean that in a large number of cases, professionals will be required to hold professional indemnity insurance. Obviously, this becomes problematic when such insurance is simply unattainable or beyond the financial capacity of professionals. It seems, in fact, that there is a body of legal opinion which suggests that the law, and the consumer protection it purports to offer, would be nullified in these circumstances.
h. Option 2: Commonwealth to directly subsidise professional indemnity insurance premiums
Although this option would obviously allow professionals to access affordable professional indemnity insurance, there are several factors which argue against the Commonwealth directly subsidising professional indemnity insurance premiums. In particular, it would represent a potentially inequitable cross-subsidisation between general taxpayers and the providers and users of professional services.
Government intervention in this form also runs the moral hazard risk that it could lead to rapid, significant increases in premium costs as the normal market constraints to pricing would effectively be removed or relaxed. Further, such a moral hazard response would negate the potential benefits of the option.
i. Option 3: Implement proportionate liability for economic loss
The Government has supported the implementation of proportionate liability for economic loss as part of the Corporate Law Economic Reform Program, Paper 9. The Government expects to introduce legislation to give effect to proportionate liability for economic loss in the 2003 Spring Sittings.
Support for proportionate liability for economic loss was on the grounds that while it limits the exposure of professionals to those matters for which they are personally responsible, it does not prevent other parties who have contributed to the wrongful act being liable for damages.
Moving to proportionate liability for economic loss better reflects the responsibilities of professionals to their clients.
The main benefit, from an economic perspective, of implementing proportionate liability for economic loss is that since insurers are insuring only the risk of a particular professional, and not the risk of other professionals, insurers can be more confident in insuring risk.
Under this proposal, the costs to plaintiffs of the risk of the insolvency or inability to trace defendants may be transferred from co-defendants to the plaintiff.
Proportionate liability, of itself, is not considered a sufficient policy response to address existing problems surrounding the cost and availability of professional indemnity insurance as one of the main drivers of increasing premiums is increasingly large damages awards. 
j. Option 4: Modified standard of care
The Commonwealth is unable to directly implement this recommendation. Many states and territories have implemented this or a similar recommendation, or are considering implementing this or a similar recommendation.
Implementing this option would re-balance the interests of defendants and plaintiffs, as was the general objective of the Review of the Law of Negligence .
Again, this option can be viewed as another element in an overall package of required responses.
k. Option 5: Implement risk management procedures
The Commonwealth is unable to directly implement this option.
Consultation with professional bodies has indicated that professions would be unlikely to implement adequate risk management practices, which in themselves are costly to adhere to, without the incentive of lower insurance premiums resulting from a cap on liability.
l. Option 6: Amend Commonwealth legislation to support any state or territory that implements professional standards legislation
As the Commonwealth is unable to establish professional standards legislation in its own right, any amendments to Commonwealth legislation will serve to ensure that state and territory professional standards legislation is not undermined by the operation of Commonwealth law.
Since professional standards legislation requires the professional to hold compulsory insurance cover, consumers will be able to access damages within the cap set in the event of liability being proved.
Establishing a cap for liability provides certainty for professionals about their level of exposure and removes the risk of personal exposure over insured levels provided the caps are set at insurable levels.
A November 2002 report by Trowbridge Deloitte suggested that significant premium savings could accrue to professionals from the implementation of professional standards legislation because high-level ‘catastrophe’ excess cover would not be required.
It has been noted that professional standards legislation can ‘focus the mind’ for professionals on true risk management. It has also been suggested that efforts to reduce risks (thereby reducing or avoiding claims), reducing the size of losses and reducing costs makes professional indemnity insurance more attractive to existing and new insurers.
The Professional Standards Council has indicated schemes approved under the professional standards legislation present to the insurance market an attractive pool of insurable professionals. Insurers are attracted to the market as businesses actively manage their risk through structured risk management strategies and there is greater certainty about the level of insured exposure.
The Council has demonstrated that schemes have been successful in controlling insurance costs. For example, specialist engineers’ premiums costs have fallen by 40 per cent and valuers’ premiums have reduced from 7 per cent of gross fees to about 3 per cent of gross fees in New South Wales since the introduction of professional standards legislation.
Available data supports statements that the overwhelming majority of claims are settled within the established caps; and the small proportion of claims that are not settled within the caps generally relate to claims by large corporations rather than small ‘consumer’ claims. For instance, data supplied by LawCover on 31 March 2003 stated that since 1987, there had been 20 claims against the LawCover scheme above $1.5 million.
Some professions, such as engineers and architects engaging in significant projects with large potential exposures, are unlikely to contemplate joining a professional association with a professional standards scheme due to the risk of potential global competitive disadvantage. This may lead to distortions in certain markets where some purchasers of professional services have a bias toward engaging professionals either with or without a cap on liability.
All professionals within a particular profession, with the exception of directors and officers, will be able to access a professional standards scheme. Their ability to access such a scheme will be entirely dependent on whether the professional association they belong to chooses to join a scheme.
Rather than be funded by governments, the Professional Standards Council is funded by the professional associations and their members who have registered schemes under professional standards legislation.
Currently, professional associations pay an application fee of $5,000 and an annual fee to the Professional Standards Council. The annual fee is calculated on the number of members who are covered by the scheme at a rate of $35 per member.
The Professional Standards Council has indicated that the administrative costs for professional associations in the administration of their schemes is currently about $25 per member. However, this varies according to the size and complexity of the membership and the executive body. Professional associations are also required to ensure that members comply with the requirements of the schemes.
The member has the cost of meeting obligations relating to disclosure, such as stationery. For members who have previously implemented systems such as complaints and discipline and audit, there would be little or no additional costs resulting from joining the scheme. On the other hand, there would be a cost to members if they are required to introduce such systems or increase their requirements. However, there is capacity for such professional associations to use the systems of other associations to reduce these costs.
Professional groups have proposed and supported the implementation of professional standards legislation in states and territories. They have further supported Commonwealth proposals to amend the Trade Practices Act 1974 and other relevant legislation to ensure that state and territory professional standards legislation is not undermined.
New South Wales and Western Australia have implemented professional standards legislation. Other states and territories have expressed strong support to progress nationally consistent professional standards legislation through the Ministerial meetings on insurance issues. To this end, state and territory Ministers have asked for further information on the implications and mechanisms for developing a nationally consistent approach to professional standards legislation.
The Insurance Council of Australia has argued that premium reductions experienced with the implementation of professional standards legislation have been a direct result of the adherence of professionals to risk management processes. This is a result of insurers seeing a market manage its risk well and providing benefits to those professionals.
The Commonwealth Department of Prime Minister and Cabinet, Commonwealth Department of Finance and Administration and the Commonwealth Attorney-General’s Department have been consulted.
Option 1 would not achieve the stated objectives. Although this option will have no cost on business, it will not improve the existing problems business is currently facing in obtaining affordable and appropriate insurance cover. This option could also be expected to exacerbate the problem of some businesses not having appropriate insurance or assets to cover any payment for damages in the case of liability being proved. This would obviously leave consumers of professional services in a worse position in these circumstances than they would otherwise be.
Although option 2 would achieve the dual objectives of providing protection to professionals and consumers, this would be at a significant cost to Government due to the potential cross-subsidisation between general taxpayers and the providers and users of professional services.
The Government has endorsed option 3, proportionate liability for economic loss, and expects to introduce legislation to this effect into Parliament in the Spring Sittings 2003. This option is considered to be only one element in an overall package of reforms.
The Commonwealth supports the implementation of option 4. However, the Commonwealth is unable to directly implement this option. For this reason, the Commonwealth has encouraged the states and territories to implement this, and other, recommendations of the Review of the Law of Negligence . Once again, this option is viewed as one element of a broader set of measures.
As professional bodies have indicated that no professional would adhere to risk management processes on their own, there seems little purpose in supporting option 5. Implementation of option 6 makes the implementation of option 5 redundant.
On balance, option 6 would appear to achieve the stated objectives better than any of the other options put forward. It would have a small financial cost to business, but this cost would be borne only by businesses who are registered with a professional standards scheme.
This option would also ensure that the vast majority of damages awarded for liability would be paid out in full, due to the compulsory insurance requirements. This will have the effect of providing protection for ‘consumer’ type claims, as well as many business claims for damages.
Implementation and Review
At the May 2002 Ministerial meeting on Public Liability Insurance the Commonwealth announced that the Australian Competition and Consumer Commission (ACCC) would monitor the impact of reforms implemented by all levels of government to alleviate the problems surrounding the cost and availability of public liability and professional indemnity insurance.
1. In July 2002 the Parliamentary Secretary to the Treasurer requested the ACCC to monitor costs and premiums in the professional indemnity sector of the insurance market on a 6 monthly basis over the next two years. In particular, the ACCC was asked to give consideration to the impact on insurance premiums resulting from measures taken by governments to reduce the cost of insurance premiums and to improve the data available for insurers to evaluate and price risk. To the extent possible, the ACCC’s monitoring will inform the assessment of the impact of the changes introduced by these reforms.
The Commonwealth will also enter into an inter-governmental agreement with any states and territories that implement professional standards legislation to ensure Commonwealth representation on the Professional Standards Council. This will ensure that the Commonwealth has ongoing input into the review of professional schemes and that professions comply with the requirements of the legislation.
The Professional Standards Council continually reviews caps under professional standards legislation. In reviewing the appropriate cap to set, the Council takes into account the amount of past claims, the need to protect consumers and the availability of insurance in the market. In addition, professional standards legislation is founded in state and territory law, rather than Commonwealth law. For these reasons, a formal review mechanism for consequential amendments to Commonwealth legislation in isolation from state and territory law is inappropriate.
Clause 1 - Short Title
1. This clause provides the short title by which the Act may be cited.
Clause 2 - Commencement
2. This clause provides that Schedule 1 commences on the day the Bill receives Royal Assent.
Clause 3 - Schedules
3. This clause makes it clear that the Acts specified in a Schedule are amended or repealed as set out in the Schedules, and that the Schedules may also contain other provisions.
Australian Securities and Investments Commission Act 2001
Item 1 - After subsection 12GF(1)
1. Item 1 inserts a new subsection (1A) after subsection 12GF(1). Subsection 12GF(1) provides for damages to be awarded to persons who suffer loss or damage as a result of certain contraventions of the Act, and the new subsection (1A) makes that right to damages subject to the new section 12GNA. For the purposes of clarity, item 1 also inserts a Note after the new subsection (1A), explaining the effect of section 12GNA. This makes it clear that in some circumstances, the right to damages conferred by subsection 12GF may be limited.
Item 2 - After subsection 12GM(7)
2. Item 2 inserts a new subsection (7A) after subsection 12GM(7). Subsections 12GM(1) and (2) empower the court to make compensatory orders in favour of persons who suffer loss or damage as a result of certain contraventions of the Act, and the new subsection (7A) makes that power subject to the new section 12GNA. For the purposes of clarity, item 2 also inserts a Note after the new subsection (7A), explaining the effect of section 12GNA. This makes it clear that in some circumstances, the liability of a person as a result of a compensatory order under subsections 12GM(1) and (2) may be limited.
Item 3 - After section 12GN
3. Item 3 inserts a new section 12GNA into the Act, to allow liability for misleading and deceptive conduct to be limited in certain circumstances.
4. Subsection (1) provides that a State or Territory professional standards law (which is defined in subsection (4)) will apply to also limit liability for misleading and deceptive conduct under the Australian Securities and Investments Commission Act 2001 in the same way as it limits occupational liability under the law of that State or Territory.
5. Examples of professional standards laws are the Professional Standards Act 1994 (NSW) and the Professional Standards Act 1997 (Western Australia).
6. Subsection (2) operates to restrict the limitation of liability to circumstances where schemes under the professional standards laws have been prescribed by regulations in a form applicable at the time the contravention occurred. The regulations which implement the statutory regime for capping liability will be able to modify schemes, thereby reserving to the Commonwealth the power to ensure that capping operates in the interests of the community at large.
7. The control exercisable by the Commonwealth in retaining a capacity to modify schemes is intended as a reserve power. The Professional Standards Council continually reviews caps under professional standards legislation. In reviewing the appropriate cap to set, the Council takes into account the amount of past claims, the need to protect consumers and the availability of insurance in the market. The existence of this reserve power, however, will negate (or significantly diminish) any need for intergovernmental agreements or the implementation of other mechanisms to ensure control over the operations of the Professional Standards Council.
8. Subsection (3) applies to determine choice of law issues, where uncertainty might otherwise exist as to which State or Territory law was determining the occupational liability arising out of misleading and deceptive conduct in contravention of section 12DA.
9. Subsection (4) defines a number of terms used in the section.
Corporations Act 2001
Items 4 - 8
10. Section 1041H of the Corporations Act 2001 prohibits a person, in relation to a financial product or a financial service, from engaging in conduct which is misleading or deceptive or likely to mislead or deceive. Section 1041I provides persons who suffer loss or damage as a result of a breach of section 1041H with a right to compensation.
11. Items 4 - 8, in essence, replicate the amendments described above in relation to the Australian Securities and Investments Commission Act 2001 in the context of the Corporations Act 2001 , by limiting the amount that may be recovered in certain circumstances for a contravention of section 1041H.
Trade Practices Act 1974
Items 9 - 11
12. Section 52 of the Trade Practices Act 1974 prohibits a corporation (and in some circumstances, by virtue of section 6 of the Act, an individual) from engaging in conduct which is misleading or deceptive or likely to mislead or deceive. However, as a result of section 51AF, section 52 does not apply to conduct engaged in in relation to financial services.
13. Sections 82 and 87 of the Act are similar in effect to sections 12GF and 12GN of the Australian Securities and Investments Commission Act 2001 and allow persons to be compensated where provisions of the Act are contravened.
14. Item 9 - 11, in essence, replicate the amendments described above in relation to the Australian Securities and Investments Commission Act 2001 in the context of the Trade Practices Act 1974 , by limiting the amount that may be recovered in certain circumstances for a contravention of section 52.
 Public Liability Insurance, Analysis for Meeting of Ministers 27 March 2002 , Trowbridge Consulting, 2002, pp i - ii.