Law Practitioners (Corporatisation) Amendment Bill

I move, That the Law Practitioners (Corporatisation) Amendment Bill be now read a first time. It is my intention to have the bill referred to the Justice and Electoral Committee with a standard 6-month report-back time.

This bill has been a long time in coming to its first reading. I managed to find in my files a press release dated Thursday, 19 October 2000, when the bill was first suggested by myself. That just goes to show that we have now been on this matter for over 5 years. Darren Hughes, the junior Government whip, would do well to show such tenacity towards a piece of legislation that he cares about and brings by way of a member’s bill to this House.

This bill allows law firms, which must currently practise as sole practitioners or in partnerships, to have the option of practising as a company under the Companies Act 1993. It seems that in contemporary circumstances, where liability is effectively limited in many partnerships, and law firms require equity capital for their expansion, it is important to provide options for greater flexibility in structure and ownership, consistent with the maintenance of the professional standards that have always applied to the legal profession. Accounting firms currently have the ability to practise in a corporate structure, and it is my contention, through this bill, that law firms should also enjoy such flexibility.

The bill makes amendments to the Law Practitioners Act 1982 that will permit lawyers to operate legal companies. As I said earlier, the bill is neutral as to the model that lawyers elect to use; it simply provides lawyers with another option as to the way they structure their affairs. It puts lawyers operating as companies on the same footing as lawyers practising alone or in law firms operating under the Partnership Act 1908, and it is important to note that there is no change in the ability of lawyers to continue to operate on the traditional basis. I want to make two or three points very clear about that. The first is that the directors of legal companies, but not their shareholders, will be required to hold current practising certificates and will be subject, like partners in law firms, to requirements under the Law Practitioners Act relating to matters such as trust account maintenance, professional discipline, and contributions to the solicitors fidelity guarantee fund.

The Minister of Justice, Mark Burton, has indicated to me that the Labour Party will support the referral of this matter to the select committee in the first instance, and I am grateful for that opportunity. I understand that pieces of the Lawyers and Conveyancers Bill may well supersede parts of this bill, although my view is that some of the emphasis is slightly different in that bill. I have explained to the Minister that if indeed the select committee makes a determination that one bill renders the other redundant, then at that point there would be no point in continuing with the progress of this particular bill. However, that is not a decision for me to make. Neither is it a decision, quite frankly, for the Minister to make. It is a decision for the select committee to make as it begins its deliberations, hopefully after the bill makes it to a select committee.

All the parties I have spoken to in the Chamber tonight—I have not had an opportunity to speak to representatives of the Māori Party—have indicated that they will support the passage of the bill to a select committee. Hone Harawira is now indicating that the Māori Party will also do so. That is very helpful, and I thank him. So with that unanimous support, this bill will be rushing to a select committee on a members’ evening. After only 5 years in the making, it will now speedily make its way to a select committee for a swift resolution and return to the Chamber—by which time Clayton Cosgrove will probably be 65 or 70. Let us hope that the matter moves more swiftly in the select committee than it has in my short time in politics over the 5 years since I issued the first press release on this matter.

At the time the bill was drafted, I wrote to a large number of firms and law societies, large, small, metropolitan, and provincial, to seek their views on the legislation. The result was, from memory, quite overwhelmingly supportive of this option being made available to practising law firms. On that basis, I will resume my seat and wait for the contributions from other parties in the House, which, no doubt—like the passage of this bill—will be swift from this point on.

I am pleased to confirm, on behalf of the Minister of Justice, that the Labour caucus will support the referral of the bill to the Justice and Electoral Committee. However, I am hopeful that the bill will not be required to be progressed beyond the passage of the Lawyers and Conveyancers Bill, which is No. 16 on the Order Paper. The member may not have been aware that that bill has been reported back from the select committee. I had the privilege of sitting on the Justice and Electoral Committee and having a little bit to do with the detail and some of the amendments that went through it.

I am certainly looking forward to the passage of the Lawyers and Conveyancers Bill, because it contains some very important amendments to the law that a number of people are waiting for rather impatiently—like the Council of Legal Education and various others who have a great interest in progress being made—and I do hope that those who have been somewhat dilatory in their attitude towards the passage of the bill might well rethink that.

In the meantime, because there is no provision in the current law to allow for incorporation—so this is not a position that is inconsistent with our previous decision; the law does not provide for law firms to incorporate—we will enable a bill that would allow for incorporation to proceed to select committee. But again, I am very hopeful that by the time the select committee has considered this bill the Lawyers and Conveyancers Bill will have passed through all its remaining stages.

The Lawyers and Conveyancers Bill itself deals with a workable regime for incorporated law firms. Maybe the member might like to clarify this in his right of reply, but I understand that there are two differences between his bill and the Lawyers and Conveyancers Bill—that is, lawyers actively involved in the provision of regulated services are the only ones who can be directors of the company, or hold voting shares under the Lawyers and Conveyancers Bill. Now, that is not a limitation that the member would impose. The holding of non-voting shares under the Lawyers and Conveyancers Bill extends to the relatives of those who provide regulated services, as well. So there is quite a distinction, and maybe there is room to consider those issues.

But the other issue that is probably of more concern to me, as I come from a legal background, is that, as I understand it, the member’s bill would allow multidisciplinary law firms, which is contrary to the Lawyers and Conveyancers Bill. But, again, it would be good to have a clarification in the response from the member. I have been concerned for a long time that multidisciplinary practices compose risks, as some types of occupations are quite incompatible with the professional standards that lawyers and conveyancers must comply with. I had quite a lengthy discussion about this in the select committee over the Lawyers and Conveyancers Bill. When qualified lawyers are actually operating, without a practising certificate, as employment consultants or immigration consultants, and they describe themselves as employment law specialists or immigration law specialists, they acquire the standing amongst their client base, who are in fact totally unprotected.

We have strengthened the provisions in the Lawyers and Conveyancers Bill—which is why I would encourage the National Party to get on with supporting us in getting that through the House—around those who hold themselves out to have particular standards in order to comply with certain professional bodies’ requirements, but do so by the nature of their description rather than the actuality. They certainly do not have practising certificates.

Maintaining legal professional privilege in a multidisciplinary environment is also another problem. If the member could clarify that, that certainly would be of great comfort. So the Government will support the bill’s referral to the select committee, consistent with its objective of enabling law firms to incorporate, but we do anticipate that the bill will not need to progress once the Lawyers and Conveyancers Bill is enacted—something that we urge the National Party to assist us with.

We are going to support this bill. It makes sense to me and my colleagues that lawyers should be able to form a company and operate as a company under the Companies Act 1993. We are told by people who are more acquainted with the legal profession than, certainly, I am that that could be a significant advantage. I have no doubt that the select committee will examine the bill in detail. It is a little sad that this bill is likely to be overtaken by the Lawyers and Conveyancers Bill. If I heard correctly from the honourable member who has just resumed her seat, it is likely to be overtaken in a matter of weeks, by the sounds of it. I have some sympathy for Simon Power, who has waited 5 years for this bill to get here and now it will last only about 10 minutes. But New Zealand First will certainly support the referral of this bill to the select committee.

Truly, this is magic legislation—magnificent in content, well typed, and not provoking much debate in this House because of its undoubted and intrinsic merit. But I would say this. This bill is necessary because of gross Government neglect and delay with the Lawyers and Conveyancers Bill. Those of us who have been on the Justice and Electoral Committee have suffered the tedium of sitting on that committee, doing our work, and watching the snail-pace progress of that legislation.

I see on today’s Order Paper in the Government orders of the day that the Lawyers and Conveyancers Bill sits at position 16. It is stalled by the Government, with the Committee stage yet to come. It is interesting to reflect on why that is. My own theory is that it is because it is useful for the Government to hold that legislation over the Law Society by dint of saying, in effect, that if the Law Society is quiet, the Government will give further consideration to the advancement of that legislation.

What Mr Power proposes in his Law Practitioners (Corporatisation) Amendment Bill is eminently sensible, because for a considerable period of time law firms have not had the ability to operate within a corporate model. Other stratagems have had to be resorted to, such as trading trusts and the like. Just as other professions have moved to adopt vehicles appropriate for the delivery of professional services, so too should lawyers have that opportunity. In every respect, Mr Power is to be commended for this fine piece of work.

This bill is very important legislation, and my colleague Simon Power has spent a lot of time on its preparation. As he said, the bill had its genesis some time ago. My colleague Dr Richard Worth has articulated a very full understanding of the bill, given his expertise and knowledge of such legal matters. Another learned colleague, Chris Finlayson, has decided not to take a call, so as to enable me to speak, and I certainly acknowledge that and thank him. We would like to see this bill passed before 10 o’clock. Therefore I will conclude, so that the architect of the bill can have his right of reply.

💬 Mr DEPUTY SPEAKER: Simon Power has a 5-minute right of reply.

It will not be 5 minutes. I thank the House for its support for passing this bill. I have to say it is good to have it off my shoulders; it has been a burden, actually, for 5 years!

I want to assure the Hon Lianne Dalziel that the issue she raises about multidisciplinary practices, and about others holding themselves out under legal practice umbrellas as specialising in areas of law without practising certificates, is not an intended provision of the bill. The House can rest assured that in the event I am required to appear before the select committee, I will certainly be making the point that there is no intention in the bill to allow that to occur. The bill is very definite about the fact that the same professional standards would apply as they currently do in a partnership or sole practitioner’s environment. I thank the House for its support on this bill.

Bill read a first time.

Bill referred to the Justice and Electoral Committee.

The House adjourned at 9.54 p.m.