EXPLANATORY STATEMENT
Select Legislative Instrument 2011 No. 79
Issued by authority of the Parliamentary Secretary to the Treasurer
Competition and Consumer Act 2010
Competition and Consumer Amendment Regulations 2011 (No. 1)
Section 172 of the Competition and Consumer Act 2010 (the CCA) provides, in part, that the Governor‑General may make regulations prescribing matters that are required or permitted by the CCA to be prescribed or are 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 or damage caused by another person’s contravention of section 18. This broad provision has been recognised as being a possible alternative basis to common law claims.
However, section 137 of the CCA provides that in relation to 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. The relevant State and Territory laws limit the civil liability of professionals and others, while still maintaining appropriate protection for consumers of professional services through measures such as compulsory insurance cover, continual education and training and formalised complaint procedures.
The Competition and Consumer Regulations 2010 (the Principal Regulations) currently prescribe 32 State or Territory (State) professional standards schemes. Of these schemes, 26 have associated sunset clauses which cause the prescriptions to cease to have effect after a period of two years. The sunset clauses were created in anticipation of an imminent review of the relevant policy. As this review is no longer envisaged in the near future, the sunset clauses are no longer necessary.
The new Regulations amend the Principal Regulations to remove all existing sunset clauses.
The new Regulations commence on 12 June 2011, which is one day before the earliest of the sunset clauses (13 June 2011) would have taken effect.
The new Regulations have the effect of limiting the occupational liability of members of the schemes relating to an action for contravention of section 18 of the Australian Consumer Law, in the same way as occupational liability is limited under the following relevant State and Territory laws:
- The Professional Standards Act 2003 (Vic);
- The Professional Standards Act 2004 (SA);
- The Professional Standards Act 2004 (NT);
- The Civil Law (Wrongs) Act 2002 (ACT);
- The Professional Standards Act 2004 (Qld);
- The Professional Standards Act 1997 (WA);
- The Professional Standards Act 1994 (NSW); and
- The Professional Standards Act 2005 (Tas).
Further details on the capping of civil liability for certain professionals can be found in the Attachment.
All of the schemes that are presently prescribed under the Principal Regulations were approved by the relevant Professional Standards Councils and gazetted in the relevant States before they were first prescribed. The new Regulations have been requested by the applicable associations and by the Office of the Professional Standards Councils (OPSC), and provide for these prescriptions to continue in force without time limits.
The new Regulations also correct an outdated reference in the Principal Regulations. Subregulation 8A (1) of the Principal Regulations presently refers to “paragraph 87AB (2) (a) of the Act”, a reference to the Trade Practices Act 1974 (the predecessor legislation to the CCA). The new Regulations amend this subregulation to refer to the correct paragraph of the CCA.
The CCA specifies no conditions that need to be met before the power to make the new Regulations may be exercised.
The Professional Standards Council sought the opinion of independent actuarial consultants and called for public comment on the schemes, via public notification in major newspapers circulating throughout the relevant jurisdictions, prior to approving the professional standards schemes.
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. 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 Territories (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 council is 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 the Commonwealth to make regulations as required under the Commonwealth’s Competition and Consumer Act (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.