Compensation claim examples
Below are examples of how we assess claims for compensation. These examples are based on real claims we have previously assessed. Some details have been changed to protect the privacy of the claimants.
Lisa decided to downsize from a house to an apartment after her children left home. She engaged a lawyer to act for her in the transactions. After selling her house Lisa had enough money to buy an apartment without needing any finance or a mortgage. Two weeks after Lisa moved into her apartment she received a letter from her lawyer advising her that she had been registered as the owner of the apartment, and a photocopy of the certificate of title showing that she was the owner was enclosed. The letter also stated that the law practice had created a deed packet in her name and the certificate of title would be held securely by the law practice.
Many years later Lisa received a letter from a Receiver who had been appointed to wind up the law practice. The letter included copies of the contents of her deed packet. Lisa discovered that someone had taken out a mortgage against her apartment without her knowledge, and there was no copy of the certificate of title in the packet.
Lisa made a claim for compensation against the Fidelity Fund. The claim was investigated and the investigator was able to trace the money advanced under the mortgage to the account of an employee of the law practice. The money had been withdrawn from the account in large cash amounts. Based on the investigator’s report, we confirmed Lisa’s certificate of title had been fraudulently dealt with by an employee of the law practice. We allowed the claim in full and paid Lisa the amount required to discharge the mortgage, which was the value of the trust property that Lisa had lost.
Alan was involved in an accident that meant he could no longer work. He received a compensation payout of $300,000 that was paid into his lawyer’s trust account. After using some of his payment to make renovations to his house, Alan was considering what to do with the remaining money.
Alan’s lawyer recommended a construction company that was developing a high rise complex that would return 18% interest per annum and would pay out in two years. Alan agreed, and authorised the money to be invested. The only paperwork Alan received was a letter from his lawyer acknowledging his investment in the construction company.
When Alan heard his lawyer had been arrested on fraud charges, he contacted the law practice to discover that a Receiver had been appointed. The Receiver advised Alan that there was no record of his investment and no money in trust for him. Alan made a claim against the Fidelity Fund.
After reviewing the claim, we disallowed Alan’s claim because the money was paid to the lawyer for investment purposes. We generally cannot pay compensation for money that has been given to lawyers for investment purposes unless the money is held in the ordinary course of legal practice.
We told Alan that he could complain about the lawyer to the Victorian Legal Services Commissioner. While the outcome of such a complaint may involve a penalty imposed on the lawyer, such as a suspension of the lawyer’s practising certificate or criminal charges, it may not necessarily result in a compensation order in Alan’s favour.
Claim partly allowed
Denise was the executor of her father’s will and engaged a lawyer to assist in the administration of the Estate. Early in the administration of the Estate $500,000 in cash was called into the Estate. Denise instructed her lawyer to invest the money in a cash management trust until the Estate was fully called in and ready for disbursement between the beneficiaries.
Before the Estate was called in, Denise’s lawyer died. Because the lawyer was a sole practitioner, a Receiver was appointed to the law practice. The Estate trust ledger account showed the $500,000 being paid to the cash management trust but the file contained no records of the money actually being invested. Denise made a $555,000 compensation claim, comprising the initial $500,000 and $55,000 interest that would have been earned if the money had been placed in the cash management trust.
The claim was investigated, and the Investigator found records and conducted bank traces that showed the $500,000 was transferred to her lawyer’s account with an online bookmaker. We determined that the claim should be partly allowed in the amount of $500,000 and partly disallowed in the amount of $55,000 because the compensation scheme does not compensate potential interest earnings.