Lawyers and Conveyancers Bill

I shall continue the practice I have started. Part 11 contains a range of miscellaneous provisions, but clauses 305 to 308 probably raise the most significant aspect of the part. Those clauses allow lawyers, in limited circumstances, to enter into conditional fee arrangements, known as contingency fees. The provisions will enable the lawyer and client to agree that either the entire fee, or an agreed proportion of the fee, will be payable only upon the success of the client’s matter. I believe that those provisions formalise arrangements that are made on an informal basis, in breach of Law Society rules, around the country at the moment. However, there are limits on that practice in the area of Family Court, criminal work, and immigration cases, which are, appropriately in my view, excluded from conditional fee arrangements.

A final point I want to make is that the conditional fee agreement, not being a legal contract, refers to the payment of a fee plus a premium. It is the definition of “premium” that is extremely important in the part, because the provision does not allow for the premium to be calculated as a proportion of the amount recovered, and I think that that is a very important protection. I commend Part 11 to the House.

The Minister is right to identify the provisions relating to conditional fee agreements as the area of particular interest in Part 11 of the Lawyers and Conveyancers Bill. It is a small part in terms of its number of clauses, but clearly it is the most significant part. Other parts of Part 11 primarily concern themselves with transitional provisions.

I would like to speak briefly on the topic of conditional fee agreements, and to note two things. First of all, there are definitions of the relevant provisions. The definition of “conditional fee agreement” is “an agreement under which a lawyer agrees with a client that some or all of the lawyer’s fees and expenses for the provision to that client of advocacy or litigation services in respect of a matter are payable only if the outcome of that matter is successful”. Then, there is a definition of a “premium”, which, in part, states: “Premium, in relation to a conditional fee agreement, means remuneration that a lawyer may become entitled to under the agreement in addition to a normal fee, being remuneration by way of premium that— … (d) is not calculated as a proportion of the amount recovered.”

So in the context of what passes for conditional fee agreements in various parts of the world, this is very much a Clayton’s conditional fee agreement, because conditional fee agreements are often calculated in a similar way to the Lloyd’s arrangements of “no cure, no pay”. Maybe those conditional fee agreements were seen by the officials as innovative and scary. The law has been that conditional fee arrangements are currently not offered, because of old causes of action under the common law called maintenance and champerty.

I understand that the officials were of the view that the provisions, as drafted, were not too detailed, given that the introduction of these arrangements marks a significant change to the current law, and the importance of the restriction prohibiting the charging of a proportion of the amount recovered. There should be, I would argue, support for conditional fee agreements, and the main reason for permitting those types of arrangements is that they improve access to justice for people who would otherwise find it difficult to get a lawyer.

It is the old problem reflected in the line that the courts are open to everyone, like the Ritz Hotel. In the context of what we are now talking about, that means the wealthy obviously have no difficulty in meeting the costs of a lawyer. For those who are at the bottom of the socio-economic heap, legal aid is generally available. It is those in the middle who have significant problems. That is where, I would argue, conditional fee arrangements have real merit.

The bill allows for conditional fee arrangements: a normal fee, or a normal fee plus a premium that is dependent on the matter succeeding. The premium may compensate the lawyer for the risk of not being paid at all, and for the disadvantage—which may be considerable—of not receiving payments on account that cannot be calculated as a proportion of the amount recovered. There are some exclusions. In general terms, exclusions relate to criminal, immigration, family, and judicial review proceedings. National supports the introduction of conditional fees, on the basis that these arrangements afford flexibility and choice to both clients and lawyers, and will enable people to take litigation that they might otherwise be unable to afford.

Those who are interested to read the writings of John Grisham may know that he has recently published a book called The King of Torts. It provides an insight into what goes on in the United States, where contingency fee arrangements are taken to a high level of sophistication. I am not suggesting we need go to that level of what some might call, and I have called, sophistication. But I do believe that it is appropriate to have regard to the amount of the recovery in fixing the amount of the contingency fee. I do not really understand the contrary argument, given the principle behind contingency fees.

I also suspect that, as the Minister has indicated, contingency fees on the basis I have described do exist in the market. It seems quite reasonable to me that, where the lawyer is not much interested in taking the case, an injustice may be done unless there is some premium related to the amount recovered. So as long as the lawyer makes a reasonable assessment of the outcome, the New Zealand climate—in which jury awards and punitive damages are extremely rare—makes it pretty unlikely that huge windfalls to lawyers will result. Of course lawyers are still subject, in addition, to the fee revision process.

Really, contingency fees are simply an advance economic allocation agreed between lawyer and client after due regard for risk. For my money, the conditional fee agreements as described in the legislation do not go far enough.

I endorse what both the Minister and Dr Worth have said about conditional fee agreements, so I will not waste the time of the Committee by dealing with that matter, but I do want to make a few comments about law society libraries. In particular, I want to address clauses 340 to 340D, because they contain some detailed provisions about transitional arrangements relating to the dissolution of district law societies and to what are for them important assets, mainly their libraries. On dissolution, those assets can be dealt with in various ways, including, as set out in clause 304A(2)(b), whereby they may be transferred to an incorporated society, and the incorporated society in a former law society district may be able to provide a law library. Then clause 340C(1) provides that the New Zealand Law Society may from time to time, in the period of 5 years beginning with the close of 6 months referred to in clause 340(1), contribute to the funding.

My hope is that this next 5-year period will be used as an opportunity to rationalise district law society libraries around the country, and indeed it is not before time. At the risk of being anecdotal I can say that in the early 1990s I served on the New Zealand Law Society’s library committee, and we spent a great deal of time on the issue, including getting consultants—as one has to when one breathes these days—to look at the whole issue of libraries. A very good report was provided, which essentially stated that there should be three major libraries in the country—Auckland, Wellington, and Christchurch—and that services should be provided to the outlying districts. Several district law societies kicked up a fuss about that, saying that their libraries meant a lot to them—well, perhaps not the Timaru district library, because I remember inspecting that and finding that most of its books were in a box down the back of the High Court registry. Certainly, the Hawke’s Bay people seemed to think their district law library was pretty flash. If Mr Fairbrother were here—and, of course, I cannot comment that he is not here—I am sure he would be interjecting on that.

So there is a need for rationalisation of law libraries. I welcome these provisions and express the hope that at the end of the 5-year period we will not need to face a situation where an amendment to this legislation will be required so that the New Zealand Law Society continues to fund libraries. It is high time there was reform of libraries, and that is the only comment I wish to make on Part 11.

I seek leave that all the amendments set out on Dr Worth’s Supplementary Order Paper 344 relating to Part 11 be taken as one question.

The CHAIRPERSON (Ann Hartley): Leave is sought for that. Is that agreed to? Thank you.

The question was put that the amendments set out on Supplementary Order Paper 344 in the name of Dr Richard Worth to Part 11 be agreed to.

Amendments not agreed to.

The question was put that the amendments set out on Supplementary Order Paper 324 in the name of the Hon Phil Goff and on Supplementary Order Paper 10 in the name of the Hon Mark Burton to Part 11 be agreed to.

Amendments agreed to.

Part 11 as amended agreed to.

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