PROPERTY LAW COMMITTEE SEMINAR

  • Paul East
Attorney-General

WELLINGTON

It was John Mortimer who wrote: "No brilliance is needed in the law. Nothing but common sense, and relatively clean fingernails".

I have yet to understand the significance of the clean fingernails, but there is certainly a lot to be said for common sense.

However something more may well be required from the profession as we enter the next millennium.

Overseas, particularly across the Tasman, the legal profession is facing increased competition and deregulation.

Inevitably similar issues will arise here, if in fact they have not already done so, and the profession will need to respond to the multitude of challenges that this will bring.

I'd like to talk to you today about the changes that have occurred overseas in the regulation of the legal profession and note what parallel changes may occur here.

I also want to describe some reform initiatives that the Government is presently considering that will be of interest to property lawyers.

In Australia, states such as New South Wales, South Australia and the Northern Territory have all implemented reforms to allow non-lawyers to undertake conveyancing.

Similar reforms have also been put in place in England.

Broadly speaking, in New South Wales non-lawyer conveyancers are permitted to undertake most transactions connected with the transfer of title to residential and commercial property.

By contrast, in the Northern Territory non-lawyers are not permitted to prepare leases, mortgages, or encumbrances.

All the jurisdictions that have put such a regime in place have subjected the non-lawyer conveyancers to a relatively substantial regulatory regime.

A central regulatory body has been created that administers licences, sets standards of professional conduct, makes rules relating to the education and training of non-lawyer conveyancers, and deals with disciplinary matters.

In addition, all non-lawyer conveyancers are required to have professional indemnity insurance.

Of particular interest is that conveyancers are required to maintain a compensation fund to reimburse losses suffered as a result of theft, fraud or dishonesty by a conveyancer

This is similar to the fidelity fund maintained by the legal profession in this country.

One of the issues that appears to have generated controversy is the business structure operated by conveyancers, that is whether they should be able to incorporate, act as partnerships, or be employed by lending institutions.

This allows institutions such as banks to offer 'one stop' shops for mortgage financing, which decreases costs for consumers through increased economies of scale.

However, concerns have been expressed in England that this may create difficulties with conflicts between the interests of the bank as lender and its interests as adviser to the borrower.

Also the true cost of the conveyancing may be hidden in another part of the overall package, for example reduced interest rates but increased administration fees.

To deal with these issues, some jurisdictions have restrictions on the business structure that conveyancers can use, and others have put various safeguards in place.

I understand that it's too early to know in these jurisdictions whether any appreciable cost reduction benefits for the consumer have been generated by permitting conveyancing by non-lawyers.

Certainly consumers of conveyancing services have increased choice, which, I suppose, in itself is a good thing.

As you will all undoubtedly be aware, deregulating the conveyancing monopoly is a topical issue in this country. As a result, Government agencies have begun work on the need for such a reform and are consulting with a number of interested bodies, including the New Zealand Law Society.

The issues are complex and link into the wider regulatory context, so it's likely to be a while before any decisions are made.

Other reforms in Australia have taken place. One Australian state has also altered the institution of Queen's Counsel.

In New South Wales, the status of Queen's Counsel is no longer awarded. Instead the title of Senior Counsel is awarded to certain individuals.

The process of appointment is now independent of government and carried out by a professional body.

I note in passing that the Chief Justice has questioned whether the time has come for New Zealand to consider recent changes to Queen's Counsel.

Specifically he mentioned the appointment process, criteria for appointment, wording of the declaration that Queen's Counsel are required to take, and the name 'Queen's Counsel' itself.

I will return to this subject.

So why are all these changes taking place?

First, lawyers are not being singled out as a profession. New Zealand's economic and political climate has been such that many occupations and professions have faced deregulation in some form in recent years.

It reflects the general trend seen in many aspects of our economy of moving away from what is regarded as excessive protectionism and regulation.

The legal profession is perceived in many quarters to be subject to much greater protection than many other occupational groups.

This has been reflected in the literature.

In particular, I'd draw your attention to Dr Alan Bollard's paper on competition within the legal profession which was presented at the last triennial law conference.

I also think that legislation such as the Trans Tasman Mutual Recognition Act 1997 has had an impact.

The Act reflects an increasing harmonisation of activities between New Zealand and Australia by providing that qualifications to practice in one country are sufficient to practice the equivalent occupation in the other country.

This means that New Zealand lawyers will be competing against Australian lawyers both in New Zealand and in Australia.

If Australian practitioners have a much more deregulated profession, then the argument could be made that they'll be able to compete on advantageous terms.

To that extent, it's in the interests of New Zealand lawyers to look at harmonising their regulatory structure with that of their Australian counterparts.

I have no doubt that the New Zealand profession will deal with future changes as successfully as it did when scale fees were abolished and advertising liberalised in the 1980s.

Indeed the E-DEC Report issued late last month seems to acknowledge that the profession needs to respond to a changing environment.

The report states that increasing competition is causing notions of what it is to be part of "a profession" to become blurred and is leading lawyers to ask what law societies are doing to help them in this new, business-like world.

As many of you will be aware, the report recommends restructuring of the New Zealand and District Law Societies into a regulatory body responsible for occupational licensing matters, and a body to act as an advocate for lawyers' interests.

Although the outcome of that report remains to be seen, and much consultation will be required, the profession should be commended for taking the initiative to deal with these issues itself.

Similar reforms to those proposed by E-DEC have recently been undertaken in Victoria.

These involve the separation out of the licensing function from the membership of the equivalent of the Law Society.

Membership of the latter would be voluntary.

I'd now like to discuss the reform initiatives that the Government is considering which will be of particular interest to property lawyers.

The Ministry of Commerce is now actively pursuing reform of the law relating to personal property securities, and is in the process of seeking Government approval for detailed proposals.

Although discussions are progressing the Ministry is drawing on the position outlined in the preliminary papers including the reports of the Law Commission.

This involves creating a single registry for the registration of charges over personal property to replace the present regime which is a combination of the Sale of Goods Act, Chattels Transfer Act, Motor Vehicle Securities Act, the Companies Act, and the common law.

This should significantly streamline and reduce the costs of the registration process for clients.

Lawyers will, I am sure, be happy to assist in ensuring that their clients understand the new regime, and in advising on security documentation and so forth.

For some months now, the Government has been working with the New Zealand Law Society on a new regime for solicitors' trust accounts.

The Cabinet will soon be considering new regulations to assist in implementing the scheme.

As you probably know, the NZLS scheme is designed to target more effectively those solicitors whom experience shows are more likely run into difficulties with the administration of their trust accounts.

The scheme is intended to reduce the chances of a repeat of the some of the difficulties experienced in recent years concerning the activities of some practitioners, of which you will all only be too well aware.

Key features of the proposed scheme include:

Audits would no longer be mandatory.

Routine and random reviews of the controls and procedures of all firms by the New Zealand Law Society Inspectorate.

The frequency of reviews will be based on the risk-profile of the firm. The risk-profile will be determined by, among other things, the size of the firm.

Cause-driven and random investigations by the Inspectorate directed to the detection of the mishandling of client monies and fraud.

Appointment of a trust account partner for each firm who will be responsible for the firm's compliance with the scheme and will certify the reports which are required.

The establishment of a database for the collection and analysis of information concerning the financial risk of solicitors and law firms. Decisions to conduct cause-driven investigations will be made from the database.
Land Information New Zealand, which was formed in mid 1996 from the Department of Survey and Land Information and the Land Titles Division of the Department of Justice has been considering a programme of computerisation of all land title and survey records.

A key feature of the proposal would allow the registration of land title documents by electronic means.

This means that printed forms of documents would not be used for registration of land transactions and that the traditional method of settlement would be altered.

Instead, the practitioner would access the title from his or her office via computer, and create the document needed for the transaction to occur.

Another practitioner acting on the transaction would then be given access to the document via computer to amend or approve.

Once agreement is reached and settlement is due, the practitioners would signal approval and the document would be registered through the computer system.

It is envisaged that this system would be more cost effective, more accurate, and quicker than that presently in place.

If I may return to the subject of deregulation, and, in particular, the likelihood of the legal profession losing its so-called monopoly in the field of conveyancing.

The profession has to decide for itself whether it wishes to oppose such a move and if it does then it must muster sound arguments in support of its position. If the arguments are put forward on behalf of the client or consumer then they will be all the more compelling.

Surely the strongest argument for leaving conveyancing in the hands of the legal profession is to maintain quality. The profession should be stressing that at the moment there is no quantitative control of conveyancing services and that any New Zealander with the intellectual ability is able to attend Law School and, provided they are of good character, obtain admission as a Solicitor.

Unlike the taxi service in the 1970s there is no restriction on the number of people who are licensed to practise. The only restriction is on the level of training required for the job. At the moment a university qualification together with a background and character that allows admission as a solicitor are the only requirements.

A further point may well be able to be made in defence of the present system. That is, that it is most unlikely any major economic benefits are likely to flow from allowing members of the public, other than lawyers, to provide conveyancing services. There is already fierce competition amongst members of the profession, and the cost of conveyancing has been reduced to a level that is most unlikely to be further reduced by any new entrants in the field.

If I may say a further word about Queen's Counsel. Perhaps I am too conservative and traditional with my views. I am, however, in favour of retaining the title and I do not agree with proposals that responsibility for appointment should be handed to the profession who would then decide who qualifies for the rank.

If the profession was to take over this role then the title would no longer be that of Queen's Counsel but would presumably become something like Senior Counsel as is the case in New South Wales.

I also think that there is a sound argument for appointing Queen's Counsel within solicitor partnerships. I note that in the United Kingdom the former Lord Chancellor, Lord Mackay, has appointed two practising solicitors as Queen's Counsel. It does seem ironic that we have not yet moved in this direction when the place we obtained the title from has already taken the step.

As you can see, there are likely to be any number of changes ahead for the legal profession. What will be required from the profession in the 21st Century is certainly more than clean fingernails. It is a recognition that some change is inevitable and that it should be responded to in a positive and constructive way.