INSTITUTE LIMITATION OF LIABILITY SCHEME

As members of the Institute of Chartered Accountants in Australia, the partners/principals of this firm are participants in an Institute scheme which limits the liability of its members.  This scheme has been approved under the Professional Standards Act (NSW) 1994/ Professional Standards Act (WA) 1997/ Professional Standards Act (Vic) 2003/ Professional Standards Act (Qld) 2004/ Professional Standards Act (SA) 2004/ Professional Standards Act (NT) 2004/Civil Law(Wrongs) Act 2002 (ACT).

Schemes submitted by the Institute have been scrutinised and approved by the Professional Standards Council and subsequently by the (State) Attorney General. (For NSW & WA) The scheme has also been approved by the Commonwealth, giving effect to the limitation on liability in relation to any claim for misleading or deceptive conduct under the Australian Consumer Law, the Corporations Act 2001 or the ASIC Act 2001.

This Professional Standards legislation (PSL), which is in place in all states and territories, enables professional bodies to establish schemes which legally limit the civil liability of their members.  In return, the members of the professional bodies are committed to achieve and maintain the appropriate level and currency of professional qualifications and experience, to adhere to a prescribed code of ethics and to maintain business assets and/or insurance to meet claims made against them to a prescribed limit, while the professional bodies are obliged to promote risk management procedures and conduct an effective process to discipline members who act contrary to professional requirements.

The Professional Standards Council was constituted as a statutory body, to consider and approve schemes presented by professional bodies and to drive the improvement of occupational standards and protection of consumers.

The Institute scheme came into effect on 8 October 2014 and is designed to:

  1. Limit the maximum liability for damages arising out of a cause of action for occupational liability (the “Limitation Amount”) which may be awarded against a person to whom the scheme applies as follows:                                           (a) Where the fee payable for the service to which the cause of action relates, being a reasonable charge for the service provided or which was failed to be provided, is less than $100,000, the Limitation Amount shall be $2,000,000          (b) Where the fee exceeds $100,000, the Limitation Amount shall be a determined as set out in the following table:

Basis for liability caps

 

Category 1 services

Audit

Category 2 services

Insolvency

Category 3 services

Other

Where fee is ≥$100k  but < $300k $5million $5million $5million
Where fee is ≥$300k but <$500k $10million $10million $10million
Where fee is ≥$500k N/A $20million $20million
Where fee is ≥$500k but <$1million $20million
Where fee is ≥$1million but <$2.5million $50million
Where fee is ≥$2.5million $75million

 

  1. Require members of the scheme to have compulsory insurance and business assets of a combined value of not less than the Limitation Amount.
  2. Adopt the Institute’s pre-existing complaints and disciplinary procedures.

Members participating in the Scheme are required to disclose that the liability of the member is limited by the Scheme on all documents that promote or advertise the person or person’s occupation, including official correspondence, given to a client or prospective client.

Effectively, the Scheme identifies participating members as being responsible professionals, subject to supervision and control by their professional body and provides that those members will have adequate resources to meet claims made against them to a specified limit.

For more information on the Scheme, contact the national office of the Institute of Chartered Accountants (1300 137 322).