Losing litigation could cost lawyers personally
Murray Deakin – a partner at Australian commercial law firm Middletons -- told Australian Legal Business Online that recent prosecutions against in-house lawyers involving actions by the Australian Securities and Investments Commission have demonstrated a lack of protection that could leave some open to significant personal loss.
Forced property sale
‘By virtue of the prohibition in section 199A of the Corporations Act any failure on their part to exercise due care and skill as a corporate legal adviser may render them liable to prosecution… with potential exposure to penalties, disqualification orders and costs,’ Mr Deakin said. ‘This is because the current law will require the company indemnitor to seek repayment of the legal costs paid under their indemnity in the event that the corporate lawyer loses the Australian Securities & Investments Commission case against them. The repayment of those legal costs may well be very substantial and may require the corporate lawyer to sell their home (if they have one) or file for bankruptcy, which may jeopardise their on-going ability to practise as a lawyer.’
The Australian Corporate Lawyers Association also advised its members to ensure they are covered appropriately, although it conceded that even professional indemnity insurance cannot guarantee complete protection.