EXPLANATORY STATEMENT
Select Legislative Instrument 2013 No. 149
Issued by the Parliamentary Secretary to the Treasurer
Competition and Consumer Act 2010
Competition and Consumer Amendment Regulation 2013 (No. 2)
Section 172 of the Competition and Consumer Act 2010 (the CCA) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the CCA to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the CCA.
Section 18 of the Australian Consumer Law (schedule 2 to the CCA) prohibits misleading and deceptive conduct by persons in trade or commerce. Section 236 of the Australian Consumer Law enables persons to take action to recover loss of damage caused by another person’s contravention of section 18. This broad provision has long been recognised as being a possible alternative basis to common law claims.
However, section 137 of the CCA provides that in relation to professional standards schemes prescribed by the regulations, the professional standards law of a State or Territory applies to limit occupational liability relating to an action for contravention of section 18 of the Australian Consumer Law.
Professional Standards legislation in each state and territory operates, where applicable, to limit the civil liability of professionals and others while still maintaining appropriate protection for consumers of professional services through such measures as compulsory insurance cover and complaints procedures.
Provision is made in the CCA for the prescription of state and territory schemes. The effect of prescription is to limit occupational liability of members of the scheme relating to an action for contravention of section 18 of the Australian Consumer Law, in the same way as occupational liability is limited under State and Territory laws.
The Regulation amends the Competition and Consumer Regulations 2010 to prescribe the following professional standards scheme:
• The CIRCEA Scheme, prepared by the College of Investigative and Remedial Consulting Engineers Australia.
The Commonwealth has not consulted on this regulation. The Professional Standards Council seeks the opinion of independent actuarial consultants and calls for public comment on professional standards schemes via public notification in major newspapers circulating throughout the relevant jurisdictions prior to approving schemes. Further consultation was not considered necessary.
The CCA specifies no conditions that need to be met before the power to make the new Regulations may be exercised.
Further details on the capping of civil liability for certain professionals are included in the Attachment.
The Regulations commence on 5 July, 2013.
attachment
Professional standards legislation involves the capping of civil liability for members of professional groups which apply to have schemes approved by the Professional Standards Council in their respective States or Territories (States). Members can include sole practitioners, firms and large corporations. The cap, which is intended to limit the member’s liability in respect of a single claim for economic loss, is provided in exchange for the member undertaking risk management practices, continuing professional development and holding insurance or assets up to the level of the cap. The overarching aim of professional standards schemes and liability caps is to maintain affordable levels of professional indemnity insurance, as well as to improve professional standards and consumer protection.
Professionals are provided with an incentive (capped liability) to lift their standards and better manage their risks. Consumers are intended to benefit from schemes because in the event of a claim, there is a greater prospect that they can fully recover. This is because the professional is required to hold insurance at levels that they otherwise may not have taken out in the absence of a scheme. Any additional risk management undertaken by professionals should help reduce the likelihood of a claim.
Professional standards legislation was first passed in NSW in 1994. Western Australia passed legislation in 1997. However, it was in response to the crisis in the availability and affordability of insurance in 2001-02 that national arrangements for professional standards legislation were implemented, with all remaining States and the Commonwealth passing professional standards legislation. The Commonwealth first prescribed a scheme in 2006 and, in 2007, a scheme outside NSW commenced for the first time.
Civil liability is subject to State legislation. Therefore, each State established a council to assess and approve State scheme applications. Each council has common membership and sits simultaneously, meaning that in a practical sense the councils are identified as one entity, the ‘Professional Standards Council’.
Occupational associations make an application to the Council for approval of schemes. Once approved by the Council and gazetted by the relevant State, the Council secretariat requests that the Commonwealth make regulations as required under the Commonwealth’s Competition and Consumer Act 2010 (the CCA), Corporations Act 2001 (Corporations Act) and/or Australian Securities and Investments Commission Act 2001 (ASIC Act). This has the effect of limiting liability in accordance with the State scheme for scheme members for misleading and deceptive conduct under sections 18 of the Australian Consumer Law, 1041H of the Corporations Act and/or 12DA of the ASIC Act. Most schemes require prescription under the CCA only, as the scheme members do not carry out work that falls under the Corporations Act or ASIC Act. The purpose of the Commonwealth legislation is to prevent State caps being circumvented by alternative actions.
The size and structure of the cap on liability varies from scheme to scheme. Where scheme members have broadly similar characteristics in terms of the nature of work undertaken and the potential economic loss caused, a flat cap applying to all members of the scheme may be judged to be appropriate. For occupational associations with memberships ranging from sole practitioners to large firms, who undertake work with a similarly wide variety of risks, variable caps that are dependent on firm turnover or fees charged may be applied in order to better reflect the risk profile of each member.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
Prescribes the CIRCEA Scheme, prepared by the College of Investigative and Remedial Consulting Engineers Australia, under the Competition and Consumer Regulations 2010.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.