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<P><A href="http://afr.com/"><IMG height=24 src="http://afr.com/images/afrlogo.gif" width=217 border=0></A></P><B><FONT face="Courier New" size=5>
<P>Government position appears to be shifting</B></FONT><SPAN style="FONT-SIZE: 18pt"><BR></SPAN><FONT face=Arial size=3>Chris Merritt<BR>14/03/2003 </P>
<P>Despite the federal government's frequent rejection of calls for capped liability for the professions, the extent of the crisis in the market for professional indemnity insurance appears to have triggered a shift in the government's position.</P>
<P>Last Friday, the Assistant Treasurer, Helen Coonan, made a telephone call to David Stephens of Professions Australia to assure him the government had "pretty much an open mind" on the topic.</P>
<P>Dr Stephens said he welcomed the views expressed by Senator Coonan during that phone call and said they were in sharp contrast to the government's previous position.</P>
<P>Correspondence obtained by <I>The Australian Financial Review</I> shows that on January 20 Senator Coonan wrote to Attorney-General Daryl Williams about representations in favour of capping that had been made by James Millar, the deputy chief executive of Ernst & Young.</P>
<P>She pointed to the difficulties associated with a capping regime and the strong state backing for proportionate liability.</P>
<P>"The government is not convinced that a capping regime for professionals is an appropriate response to the audit liability issue," Senator Coonan wrote.</P>
<P>"If an absolute cap on liability operated in conjunction with proportionate liability, a plaintiff may be required to bear a proportion of economic loss directly attributable to the actions of an auditor in excess of the cap, while the auditor receives the benefits of capped liability," she wrote.</P>
<P>On February 5, one of Senator Coonan's advisers, Amanda Goodban, wrote to Mr Millar in similar terms, as did Senator Ian Campbell on February 7.</P>
<P>Last Wednesday, a spokeswoman for Senator Coonan told the <I>AFR</I>: "The government is not convinced that a capping regime for professionals is appropriate."</P>
<P>One week earlier, commonwealth officials had told their state counterparts at a confidential meeting that Canberra was against a capping regime because it would discriminate in favour of the professions and damage the integrity of the Trade Practices Act.</P>
<P>In last September's CLERP 9 paper on corporate law reform, the government again rejected calls for a capping regime, using the now familiar form of words: "The commonwealth government remains unconvinced that a capping regime for professionals is an appropriate policy response to the audit liability issue."</P>
<P>When asked about the shift in the government's position, Senator Coonan's spokeswoman said no decision had been reached on the question of capped liability and the best summary of the government's position was contained in a letter by Senator Coonan that was published in Tuesday's <I>AFR</I>.</P></FONT><FONT size=2>
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