Franks Stephen: Lawyers and Conveyancers Bill — First Reading 
Franks Stephen: Lawyers and Conveyancers Bill — First Reading 
[Volume:610;Page:7387] 
STEPHEN FRANKS (ACT NZ) 
: 
 I look forward to sitting on a Justice and Electoral Committee that has as a member a former committee chairman Dail Jones whose institutional memory goes back as far as that. That will be very interesting. 
In particular it will be interesting because the Lawyers and Conveyancers Bill is an absolutely monstrous bill. It is an extraordinarily large piece of drafting. I am not sure whether it is a monstrous indulgence. In other words the legal profession has been allowed by Ministers and departments that do not know what they are doing to write essentially the prescription it wanted. I suspect that might be the case. I cannot tell whether instead it is a monstrous imposition. It is possible that the officials wore down the representatives of the profession and eventually succeeded in prescribing in minute detail the structure of the profession in a way that is almost unbelievable. Or is it a monstrous own goal that they in fact have finally succeeded in persuading the Minister of Justice who has been totally engrossed in foreign affairs? Although he was the author of a bill in 1997 I think that was going to open up what he called the conveyancing monopoly he lost all interest in it as soon as he became the Minister and had the power to do what he had been threatening to do. 
This bill seems to have been handed to the Hon Lianne Dalziel for her to try to finish it. From the look of it she has probably decided that being captured by Wellington and by the officials is a better fate— 
Simon Power 
: She’s got other things on her mind. 
STEPHEN FRANKS 
: She might have other things on her mind. Lianne Dalziel was asked to introduce the first reading of a bill that is of an unbelievable size particularly when it is compared with say the re-regulation that the accountants managed to achieve. I see nothing in this bill to explain why we do not have a simple empowering statute that used the precedent that reformed the New Zealand Society of Accountants given that the importance of the functions carried out by the professions are probably comparable. Given the extent to which the community relies on the integrity of audit and the standard of accounting in a country that has 30000 accountants the importance we place on their integrity should be at least the same as the importance we place on the integrity of lawyers and the legal profession which has only 7000 or 8000 practising lawyers. Yet we have a bill that goes into micro-management and micro-detail on all sorts of aspects that should surely in a genuinely self-governing profession have been left to evolve. This is not self-governing in any respect. 
This measure is the muddy outcome of the loss of confidence that the profession experienced 10 or more years ago when the Law Society engaged a firm of economists to take a bottom-up look at the society and at the profession. When the economists’ study came back it terrified the board of the society. The board sat on it for months. A bowdlerised or censored version finally emerged. From recollection the board had taken out chapters 3 to 7 or something like that. The resulting rather puzzling economists’ study of the profession and of optimum methods of regulating the profession emerged and caused bewilderment all over the country. It seemed to the conveyancers that it was a subtle plot to get rid of the remaining restrictions on entry to that profession. It seemed to the large firms that it was an excuse for not ending the subsidies that they had been providing to the smaller firms for a very long time through their fees which supported activities mainly availed of by the smaller firms. It did nothing eventually for the fidelity fund—a foolish piece of work if ever there was one—or the cost review jurisdiction an equally foolish piece work and it did nothing on multidisciplinary practices or anything else that had been seen as a topical issue. So it got buried. Then we had the long obfuscation and repeated new arrival dates for this legislation from the Minister of Justice the Hon Phil Goff. Finally this bill emerged. 
What does it do? It nationalises the profession. The mark of a genuinely self-governing profession is its control over its brand over its quality standards and over the members of that profession. Although this legislation keeps the form of self-regulation it completely subordinates the profession to New Zealand politics. When the Minister of Justice has final approval of the rule book of the Law Society which is what this legislation does the Minister of Justice is politically responsible and politically liable every time a lawyer defalcates. Where will the buck stop every time there is a failure of practice by a lawyer? Obviously it will stop with the Minister. Why did he not make rules that would have stopped it prevented it or fixed it? 
Once a Minister is faced with that kind of liability he or she cannot afford to allow any rule that leaves an element of risk but law is a business as well as a profession. Rules have to be written so as to allow for a certain level of experimentation flexibility and judgment and they have to recognise that people will fail there will be dishonesty and it will sometimes have adverse consequences. Of course the Minister has the best of intentions at the moment to ensure that the standard is not set so high that it becomes a barrier to entry or becomes an undue cost which is spread across all clients. But the Minister will have almost no choice. When the Minister has to approve the rule book and when every rule that looks as though it has failed becomes a matter of political liability the Minister has to dictate. 
That is what has happened in other areas. It is what has happened in the securities industry and to the self-regulatory organisations in Britain after the “bold new dawn” in 1987 in Britain’s finance industry. The British finance sector was the envy of the world and now it is the creature of Ministers because they cannot afford not to dictate. 
 What is the Minister inheriting here? A profession that is truly ludicrous in its own eyes. When the profession has not managed to bring Russell McVeagh before its own disciplinary processes in over a decade since the bloodstock partnership scandal erupted when it has spent apparently more than half a million dollars and is still arguing about what evidence will be provided we have an absolute spectacle. It is a profession that purports to be self-governing and self-disciplining but it cannot even manage to get one of its largest members before its disciplinary processes for a substantive hearing. That is what the law has come to. 
I think that the Minister should not be rescuing the profession from its own shame in this position. The Minister will now have to make the rules and will be held accountable next time there is a Russell McVeagh - type scandal. He will not be able to do any better than the Law Society has done because it has not analysed yet what it is that is going wrong. We will now see that the conduct the standing and the branding of the profession will be a matter for politicians to resolve however fondly the Law Society thinks it has managed to rescue the profession from that class. 
We also have the provisions that have attracted a little bit of media attention like the fact that multidisciplinary practices are not allowed. The offence actually is to share income with non-lawyers. I wonder how that works with a turnover lease for example which is pretty common—for shops anyway. Is one sharing income when the lease rental is determined by turnover? What about all the other Islamic banking practices that manage to disguise interest as profit or profit as interest? There are plenty of ways of getting round something as silly as a rule that says income cannot be shared with non-lawyers. We have the prospect of compulsory indemnity insurance which is another way basically of supporting those who otherwise ought to be pushed out of the market. There is the fidelity fund which is the sole practitioner benefit from the large firms. 
There is the cost revision regime. In a business as competitive as law what possible justification is there for the very extensive provisions in this bill that preserve and extend cost revision and what is called the client care regime? I wonder whether the other lawyer members have noticed that there is now to be a set of rules governing client care. Is that not what business competition is about? Is that not what all those seminars are about? I tell members that there is an awful lot to do on this bill.