Lawyers and Conveyancers Bill

This is resumed debate in Committee of the Lawyers and Conveyancers Bill. It is fair to say it is a bill that, certainly in terms of its progress through the House, has had a substantially delayed passage. As the Chairman commented but a short moment ago, we last looked at the legislation on 30 March 2005, with the start of the Committee stage. It is a substantial bill, to some extent because of the way it is drafted in some 11 parts. It effects major change to the legal profession—to the way legal business is done, and to issues such as the provision of complaints and disciplinary measures for the legal profession at large.

I will speak briefly, in respect of Part 1, on an issue that is concerned with the fundamental obligations of a lawyer. I pose the question of what those fundamental obligations might be. I suggest that a good starting point is one that has been picked up by the Federation of Law Societies of Canada. The federation says that lawyers should practise law ethically and competently. In particular, it says, first, that lawyers should be honest and courteous. Second, they should keep clients informed, respond promptly to phone calls and letters, and work in a timely fashion. Third, they should respect client confidences. Fourth, they should safeguard clients’ funds and property, and account for money entrusted to them. Fifth, they should maintain adequate skills to represent clients effectively. Finally—and perhaps obviously—lawyers should not act in a conflict of interest, such as improperly acting against a former client or improperly sharing a business interest with a client. Those obligations are able to be translated into action by dint of the passage of the bill, not only as a result of provisions appearing on the face of the bill, which, when enacted, will be binding on the legal profession, but also because of the ability to make practice rules in a wide range of circumstances.

In looking at issues of fundamental obligation, three questions arise. I put them as follows. First of all, what are the bounds of the rule of law? Second, what is the duty of care concept that underpins fundamental obligations? Finally, do ethical duties transcend legal obligations to the client? Time does not permit me to expound on the bounds of the rule of law, but I will say something about the duty of care.

The duty of care is a concept used in the law both to define the existence of a legal relationship and to establish a benchmark for a standard of professional care and skill. Of course, failure to meet the benchmark creates legal liability. So the concept is inextricably linked to considerations of quality. There is a need for the client to understand the advice that he or she is receiving. There is also a need for that advice to be pragmatic, in the sense that it is workable and properly related to the factual framework.

I think we all know there are some dangers, of course, in the provision of advice that is too dominated by pragmatism. It is very easy for lawyers to be drawn into meeting a client’s need for sign-off on a transaction, and not sufficiently consider the black-letter law position, or to be drawn into meeting the needs of the client by glossing the black-letter law position in a way that might have consequences for both the law firm and the client.

It is also a reality—perhaps unlike surgery—that much legal work is not subject to absolute judgments as to quality. Just to give an illustration of that, it is only for transactions where the commercial relationship between the parties breaks down that the document wording will be reviewed to determine the respective rights and interests of the parties. The vast majority of transactions are implemented without a close focus on those issues. If legal work is perceived as satisfactory, the parties rest content on that, albeit the reality may be otherwise.

And so it is that this bill clearly provides for a regime where quality systems need to be implemented and maintained.

My colleague Dr Worth has briefly outlined the legislative history of this bill so I will take that as read. I, too, wish to address some comments to clause 4, which is a new clause—it not having appeared in the current Act, the Law Practitioners Act 1982—and I particularly wish to say something about subclause (d). This clause sets out the fundamental obligations of lawyers, and on its face looks to be a reasonably anodyne clause. First, there is the obligation to uphold the rule of law and facilitate the administration of justice. No one would disagree with that. Secondly, no one could take any issue, either, with the all-important “obligation to be independent” in providing regulated services to one’s clients. Thirdly, there is the recognition that all barristers and solicitors have both “fiduciary duties and duties of care” when they carry out their tasks on behalf of clients and, fourthly, there is the obligation to protect the interests of clients—but it does not stop there—“subject to his or her overriding duties as an officer of the High Court …”.

That is something unique to the legal profession, and it has implications for that profession in a very real way that does not impact on other professionals. For example, a surgeon who is operating on a person has a very clear and overriding duty to do the best he or she can for the patient. In the case of lawyers, however, there can be conflicting duties. There is an overriding duty to the court that supervenes the duty required to be shown to the lawyers’ clients. A good example of that arises when one is making submissions to a court. The duty to the court may necessitate all relevant authorities being placed before the judge, even if those authorities are not necessarily favourable to the client. I make that statement because later in the course of this debate we will be considering clause 104, which discusses the immunities of barristers. I will be putting forward a Supplementary Order Paper to the Committee because in my opinion the twofold nature of the duty to both the client and the court has to be recognised by a change to clause 104.

Generally, the interpretation clause is reasonably straightforward. There are a couple of changes introduced by this bill that I consider to be most useful. Under the Law Practitioners Act, reference was made simply to professional misconduct. Under this bill we have two concepts—first, misconduct and, second, unsatisfactory conduct. I understand that it was the disciplinary provisions of the Law Practitioners Act that gave rise to this reform, because many of the complaints made by disgruntled clients relate not necessarily to professional misconduct but to unsatisfactory conduct. Under the present Act, the test of professional misconduct is high, and the cases that have dealt with professional misconduct have shown there is a very high threshold.

That concept of professional misconduct is repeated in clause 7, but we have this new concept of unsatisfactory conduct that addresses conduct that may fall short of the standard of competence but not quite reach the standard of professional misconduct. Those tests of misconduct and unsatisfactory conduct will flow through to other parts of the bill—which we will be considering later in the day and tomorrow—as to the way in which the Law Society’s Standards Committee will be able to deal with those problems. That is all I want to say on Part 1. I stress the importance of recognising the fundamental obligations of the practitioner and, in particular, the provision in subclause (d) of clause 4 that deals with the practitioner’s overriding duties to the court, which will need to be reflected in a change I am about to introduce. I also welcome the introduction of the terms “professional misconduct” and “unsatisfactory conduct”, which I think will go a long way to addressing the real needs of clients who complain to the Law Society about suboptimal conduct on the part of practitioners.

I move, That the question be now put.

I rise to speak in relation to Part 1 of the Lawyers and Conveyancers Bill and, having been a conveyancing lawyer for 26 years, I think I have some authority on the matter, as well. It is important to reiterate the purposes of the whole bill, the first of which is to maintain public confidence in the provision of legal and conveyancing services. That public confidence is vital in a profession where practitioners receive people’s money, their lifelong savings, to enable them to realise their Kiwi dream of purchasing a home. The second purpose is to protect those consumers, those clients of legal services, and to recognise the status of the legal profession. That is very important. As my learned colleague Mr Finlayson said, the legal profession is a very old and respected profession. It is vital that its integrity and status is maintained and not watered down, perhaps, by the introduction of a new breed of licensed conveyancers.

In general terms, this bill replaces the Law Practitioners Act. It is a bill of huge volume, and I know that its gestation period has taken some years. I was involved in the legal system when lawyers were looking at selling real estate as a knee-jerk reaction to this bill, and I can tell members that that was many years ago. I am pleased to say that, the bill having gestated for that time, I think it is now generally agreed and accepted that it is the right way to go, so it is pleasing that it is finally before Parliament.

Conveyancing, as we all know, is defined as the act of transferring the ownership of property from one person to another, and it includes deeds of assignment, leases, other assurances, and deeds of any property. It does not include the drafting of wills, in the old English legislation. Until now, of course, only solicitors could practise conveyancing; under this bill a new breed has been hatched—that of conveyancers. Part 1 provides for the various fundamental obligations of both professions, if you like. The obligations are similar for lawyers and for conveyancers, although lawyers still have the added obligation and responsibility—as well they should—to act as officers of the High Court, to uphold the rule of law, as previously mentioned, and to facilitate the administration of justice. That goes a lot further than merely the conveyancing of property.

As the corollary to those obligations, the bill defines what would constitute misconduct by both lawyers and conveyancers. A difficulty, however, is that although misconduct in relation to a lawyer is, among other things, defined as that which would reasonably be regarded by lawyers of good standing as “disgraceful or dishonourable”, in relation to a conveyancing practitioner, which is a new breed, misconduct is also defined as that which would be regarded by conveyancing practitioners of good standing as “disgraceful or dishonourable”. But, of course, we do not actually have any longstanding conveyancing practitioners as yet, let alone any who are yet of good standing. Although I appreciate that that will happen, we are setting the standard now, and it is vital that that standard dovetails with the high standards set by the New Zealand Law Society in relation to lawyers.

As members will be aware, the Law Society has well-established and very well-regarded rules of professional conduct for barristers and solicitors—in fact, those rules cover some 135 pages. Lawyers know the required standards that must be met. Conveyancing practitioners do not have that same advantage, and they must evolve such rules if they are to have any credibility, and, to go back to the purpose of the bill, if they are to inspire confidence in our conveyancing practitioners. I suggest that the rules for conveyancing practitioners should be pretty similar to those for lawyers.

One further aspect of the bill that I would like to comment on relates to the ability of law firms to incorporate, which is warmly welcomed by lawyers. That provision is very timely, considering that Mr Power’s member’s bill, having finally been drawn out of the ballot, is to the same effect. Such incorporation allows the proprietors of law firms to structure their businesses in a similar fashion to other businesses. Until now lawyers have practised in partnership, and as partners they were jointly and severally liable for the wrongdoings of their other partners—not a prudent or sensible way to structure a business. Certainly, as a commercial lawyer, I would advise clients to form incorporated companies, rather than to have that joint and several liability. But incorporation does not necessarily mean a total limited liability for lawyers. It is important that we stress and emphasise that, so that clients can still have the confidence and trust in the professionalism of their lawyers that is so necessary when lawyers are in the unique and privileged position of receiving clients’ hard-earned moneys and having to spend them in accordance with those clients’ wishes.

Lawyers cannot, in total, hide behind what is commercially known as the “corporate veil”. Lawyers, of course, can still be held to have been negligent; they will not be able to hide behind the protection of incorporation from that. There are other Acts on the statute book that the directors of companies cannot hide behind, either—the Resource Management Act is one such example. Directors can still be held liable for the negligence of their own misdeeds. So clients will still have, notwithstanding the incorporation of law firms, their normal rights against any negligent and dishonest action by a lawyer—and I know those actions are rare—or against the negligence or dishonest action of any conveyancing practitioner. Similarly, in relation to the fidelity fund, if a client loses money by reason of the theft of any money that has been entrusted to a lawyer, then, again, the lawyer cannot hide behind the corporate veil. The lawyer, or a director of the legal company, is still personally liable to repay that money to the client. So there is no hiding behind the corporate veil. But, by allowing incorporation, this bill certainly brings law firms into the 21st century. It allows lawyers to structure their affairs and to incorporate—to form a more sensible and commercial business structure.

Although I cannot agree with certain parts of the bill, there are certainly other parts that I concur with.

The question was put that the amendment set out on Supplementary Order Paper 344 in the name of Dr Richard Worth to clause 3(1)(a) and (b) be agreed to.

We note that the Committee is voting on amendments to a number of clauses. We seek leave to have the votes on the amendments, of which there are a number, to clauses 7, 7A, and 7B—which we will come to after clause 6—taken as one vote. Similarly, we seek leave to have the votes on the amendments to clauses 10A and 10B taken as one vote.

The CHAIRPERSON (Hon Clem Simich): No mention of clause 6?

No—clause 6 stands alone, so that vote would be put separately. Only—

The CHAIRPERSON (Hon Clem Simich): Clauses 7 to 7B, and 10A to 10B?

That is correct.

The CHAIRPERSON (Hon Clem Simich): Leave is sought for that course to be followed. Is there any objection?

I seek clarification. A number of amendments relate to some of those clauses, some of which are Government amendments and some of which are not. Therefore we may need differential voting on those amendments. I am a little unclear as to what the member proposes.

The Minister may have amendments; I am referring only to the amendments put forward by Dr Worth. In the case of amendments from other members, or from the Government, we would look to accommodate whatever course of action they wish to take.

The CHAIRPERSON (Hon Clem Simich): Leave has been sought for that course to be followed. Is there any objection? There appears to be none. That is the way we will proceed.

The question was put that the amendment set out on Supplementary Order Paper 344 in the name of Dr Richard Worth to omit a number of definitions from clause 6 be agreed to.

I raise a point of order, Mr Chairperson. Before the vote is put, I just ask for your indulgence. We are voting on clause 6, and the related Supplementary Order Paper, which my colleague Dr Worth and I are looking at, is 344. We have just voted on clause 6, and now you are mentioning another amendment to clause 6—am I mistaken—on Supplementary Order Paper 344.

The CHAIRPERSON (Hon Clem Simich): No. The one we just voted on—I perhaps should have read it all out, but it was a bit long—

Is it on Supplementary Order Paper 344?

The CHAIRPERSON (Hon Clem Simich): Yes.

In terms of the amendments to clause 6 mentioned there, did we vote on only part of those amendments to clause 6?

The CHAIRPERSON (Hon Clem Simich): Absolutely. It was one of the amendments to clause 6. There are further amendments to clause 6.

My apologies, Mr Chairman; I see where you are coming from. My comment earlier on in the point of order was that we treat all those amendments to clause 6 as one vote.

The CHAIRPERSON (Hon Clem Simich): I would not suggest that.

No—I am seeking leave.

The CHAIRPERSON (Hon Clem Simich): Certainly, Mr Tisch. Leave has been sought for that course to be followed—that all the amendments to clause 6 be treated as one vote. Is there any objection to that course?

All of Mr Worth’s amendments?

The CHAIRPERSON (Hon Clem Simich): Yes.

I raise a point of order, Mr Chairperson. We have already voted on one of those amendments to clause 6. I am asking whether that stands alone, and the balance of those amendments will be voted on as one question. Maybe the Clerk can help us with that interpretation.

The CHAIRPERSON (Hon Clem Simich): Yes, it will. I realise I should have actually read out the first one, which would have clarified the position. All these amendments relate to definitions. The first one related to definitions of matters relating to conveyancers and conveyancing. We have dealt with that one, so the leave relates to the remainder of those amendments to clause 6. Is that clear? There is no objection to that. We will proceed along that course.

I raise a point of order, Mr Chairperson. This is probably the right time to seek similar accommodation from the Committee for dealing with Government amendments to remaining clauses—that all amendments dealing with any particular clause be dealt with as a single question.

The CHAIRPERSON (Hon Clem Simich): Leave has been sought for that to be done. Is there any objection? There appears to be none.

The further amendments are to clause 6 and are all in the name of Dr Richard Worth. They are set out on Supplementary Order Paper 344, and they relate to the omission of certain matters.

The question was put that the remaining amendments set out on Supplementary Order Paper 344 in the name of Dr Richard Worth to clause 6 be agreed to.