OGH: Bar Association Not Liable for Lost Client Funds

Apr 28, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has ruled that the Austrian Bar Association’s duty to monitor its members is not intended to protect clients.

In the original case, the plaintiff’s lawyer had not credited funds intended for her (and transferred by her then litigation opponent) to an escrow account, but rather to his law firm’s account. Subsequently, he used the money for his own purposes, and ultimately bankruptcy proceedings were opened against his assets.

The plaintiff filed a claim for damages against the Austrian Bar Association. According to the plaintiff, the Bar Association had failed to properly monitor the lawyer's compliance with his duty to keep escrow accounts for client funds.

The lower courts dismissed the action.

Likewise, the OGH did not see any justification for the following reasons:

Pursuant to Section 23 (2), second sentence, of the Austrian Lawyers' Act (Rechtsanwaltsordnung, hereinafter RAO), the Bar is responsible, among other things, for ‘monitoring compliance of the duties of its members’. OGH case law deems this monitoring duty ‘only’ as a programmatic mandate to the competent bodies of the Bar, to the enforcement of which no one has a legal claim. It is not a protective law under Section 1311 of the Austrian General Civil Code, ABGB, in benefit of lawyers’ clients.

The Bar is required to promote and represent the professional, social, and economic interests of its members. The exemplary duties as listed, in particular the duty of member monitoring, merely specify the Bar’s general duties, which suggests that the Bar’s monitoring duty is not intended to protect individual client financial interests. Moreover, neither the RAO nor the Austrian Guidelines for Practicing the Profession of Lawyer (RL-BA) contain any specific provisions regarding the Bar’s monitoring duty, such as control measures and (with some exceptions) specific legal duties that require Bar reviewing. The Bar’s general monitoring duty is also very different from its specific monitoring duty under Section 23(6) RAO in connection with escrows.

OGH 1 Ob 165/22d (27.01.2023)