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The administration of justice relies on solicitors acting honestly and being able to be trusted to act honestly. In New South Wales Bar Association v Cummins [2001] NSWCA 284 Spigelman CJ said “the public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the judiciary and/or the public in the performance of professional obligations by professional people.”

This emphasis on the honesty and integrity of solicitors manifests in harsh consequences for solicitors engaged in fraud and dishonesty, including financial loss which is uninsured.

The clearest cases of dishonesty, such as perjury, can lead to conviction and solicitors may expect that their knowledge of the gravity of their conduct will be taken into account as an aggravating factor in sentencing (for example R v Einfeld [2009] NSWSC 119) and disciplinary action such as striking from the rolls.

Dishonest solicitors also face significant financial risk, losing the limitation of liability protection of the Professional Standards Act Scheme (which does not apply to damages arising from fraud or dishonest) as well as jeopardising the coverage under their professional indemnity insurance policy.

The Lawcover Professional Indemnity Insurance policy (Lawcover policy) excludes cover to individual solicitors where a claim arises, directly or indirectly, from fraud or dishonesty of that solicitor. It also excludes cover for any insured solicitor who was knowingly connected with the fraudulent conduct, and cover for incorporated legal practices where the directors of that practice have the requisite dishonest state of mind. There is also a specific exclusion in the Lawcover policy for any loss arising from fraudulent dealings with trust monies by an associate of the law practice. These exclusions apply not only to the claim itself, but to the costs of defending a claim on behalf of the solicitor or practice.

It is not necessary that the dishonesty be related to gain on the part of a solicitor. Findings of dishonesty have been made against solicitors who believed that they were acting to assist a client and did not seek any benefit from a transaction. Solicitors who, for example, signed documents purporting to be a witness, when the documents were not signed in their presence. While a solicitor may have been tricked into doing a favour for a client, it is undoubtedly dishonest conduct for a solicitor to sign as witness where they did not, in fact, witness the document being executed. Those claims are excluded from professional indemnity cover and defence costs cover will not be available to defend such a claim.

There are other cases where allegations of fraud or dishonesty are made against a solicitor which are disputed. Claims that solicitors are “knowingly involved” in a client’s fraud, for example can be complex and evidence is rarely clear cut. The defence of those claims is expensive and, just as the Courts take allegations of fraud and dishonesty extremely seriously, Lawcover extends the benefit of the doubt to its insured solicitors who are facing those types of allegations. Where dishonesty is not yet proven, Lawcover will advance costs to defend the claim and work to protect the solicitors’ interests.

If, however, there is ultimately a finding that a solicitor has engaged in dishonest or fraudulent conduct, then any damages awarded against the solicitor will not be covered by the Lawcover policy.