Consumer Protection for Lawyer's Mortgage Clients at risk

	Extract from Hansard Legislative Council 18 November 1999

Ian Gilfillan Australian Democrats Member of the Legislative Council		Parliament Index 1999 Spring Session Index Browse by Subject About the SA Parliament Hansard on line

The Hon. IAN GILFILLAN: Can I give some gratuitous advice to some of my less experienced colleagues: you do not lean on the Attorney to concede. That is a recipe for contradiction and, if we follow it through, is probably an oxymoron. I would like to make a few observations. I think the process of cross- examination has been very productive if somewhat exasperating. However, I do think it is important that I put into the committee stage the Democrats' view on aspects of this first half of this bill.

I want to thank the Attorney for sending another copy of a letter dated 19 October, which he sent in response to concerns raised by my colleague the Hon. Mike Elliott on 8 September and repeated by me in my second reading contribution to this bill on 9 November. I am not sure what happened to the first copy, but I thank him for that.

Unfortunately, the Attorney's answers fall short of addressing our real concerns about the bill. As others have identified already, this is a consumer protection issue. The Attorney says that clients of lawyers who suffer loss as a result of `fiduciary or professional default' in relation to mortgage activities should not have any chance of compensation from the Solicitors' Guarantee Fund. This is because, so it is said, that clients of other mortgage brokers do not have similar protection. It is, in our view, a simple issue. Some consumers have protection: others do not. The government's response is to remove the protection from those who have it. The Democrats' response would be to provide protection for those who lack it. We cannot support taking away consumer protection from clients of lawyers unless and until there is a wider consumer protection regime in place for clients of mortgage brokers generally.

The Attorney says that this sort of protection will be provided by the commonwealth as part of the corporate law economic reform program. As I understand it, this commonwealth bill as amended by the Democrats was passed by both houses of the federal parliament in October; however, it applies only to corporations. It does not and cannot cover the activities of mortgage brokers who are operating other than as companies under the Corporations Law. Therefore, the issue of consumer protection for clients of mortgage brokers who are not companies remains a valid concern.

The Attorney-General has not suggested that there is any requirement for lawyers who are operating mortgage broking activity to do so as a company. I expect that consumers who go to a lawyer for mortgage broking services would expect, and have a right to expect, that the services thus provided, even if they are not defined as legal services, are guaranteed by a lawyers' indemnity fund, because the person providing the services is a lawyer. I admit that the previous contribution in the committee stage has covered a lot of this. It has been a very penetrating and constructive degree of question and answer.

Even if the services are not so guaranteed because the lawyer has ensured that the conduct is separated from the legal practice in the way recommended by the Law Society, the mere expectation by a client would be one of the factors that might persuade a client to go to a solicitor rather than to any other mortgage broker. In fact, it is precisely in the cases where a lawyer has not separated the activities of mortgage broking and legal advice contrary to the rules of the Law Society-in other words, where a lawyer may be prepared to bend or break the rules of his or her profession-that a consumer is likely to be most in need of protection. It is this precise situation in which the bill seeks to remove consumer protection.

We asked how many claims of this nature had ever been made on the Solicitors' Guarantee Fund. The Attorney says he has been advised that there have been none. If that is the case, I cannot understand why the government wants to ensure with this bill that the first person to ever claim such compensation for such a default will be disappointed. Consequently, the Democrats will be opposing clauses 3, 5 and 6 of this bill, the clauses which remove consumer protection for lawyers' mortgage broking clients. However, we are happy to support clause 4, as it pertains to a different matter, and I addressed that matter in my second reading contribution on 9 November.