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The legal profession: if it ain’t broke, don’t fix it

18 Aug 2022

| Author: Sam Khalesi

I acknowledge all the current and former members of our fraternity for we have inherited a legal system which at its core remains deeply concerned about justice with an entrenched commitment to clients and their affairs.

Although not perfect, our legal system is second to none. I am proud to be a member of the legal fraternity and deeply concerned at the proposed changes by NZLS. It is imperative that NZLS avoids the post-modernist fetish of tearing down long-established institutions and traditions, only to replace them with ideological fantasy.

Before we start to chant “defund the law” (or the NZLS version of the same), let us not forget what came before and admit, at least to ourselves, that the legal system we have inherited, with all its fallings and lack of funding, has and continues to serve our communities well. The system is not perfect but it is, for the lack of a better word, good. We as a fraternity are generally good and in my experience we still care for our clients and respect the legal system we have inherited.

Society has expectations of us which are higher than those of most other professions. It’s a big deal when one in our fraternity decides to break covid restrictions and travel to Wanaka. It is a big deal in our profession when we hear of sexual misconduct by senior members of our fraternity. I suggest the headlines would be far less impactful if it were an engineer taking a trip to Wanaka in similar circumstances.

These are not signs of a failing institution – in fact, quite the opposite. Society still expects us to be held to the highest of standards and this is not a bad thing. It is precisely why people respect, listen to and take advice from their lawyers and still look to the legal system for justice.

We must at all cost resist the urge to blindly follow international trends. Larger jurisdictions that have relaxed their rules have done so at the behest of lobbyists with very particular agendas. I have heard from one member that “we are falling behind our international counterparts”. That is indeed true if we were in a race to the bottom. Having given our fraternity the well-deserved acknowledgment, it’s also important to again opine on some of the changes proposed by NZLS.

Will opening up our profession to non-lawyers improve access to justice?

Opening up our profession to non-lawyers (loosely termed “corporatisation”) under the guise of improving access to justice is little more than propaganda created by overseas lobbyists to open our profession to private money.

The same rhetoric was used when lobbyists came after the medical profession in the United States and the statistics are sufficiently compelling to suggest we should do everything in our power to avoid the same mistakes.

Justice can be achieved only through competence at all levels of the judicial system. That includes the lawyers acting, opposing and the judges presiding. There is no shortcut to competence; it can be obtained only through rigorous academic education and years of relevant experience. The law, and consequently justice, is the foundation of our society. To erode it, water it down or dismiss what we do will derogate the fabric of society, if not immediately then certainly eventually.

Access to justice is not the same as access to pizza, fashion or ordering an Uber. It is not simply about access to a commodity and it certainly isn’t simply about affordability. Poor advice and/or representation from a less-than-competent advisor is not justice. In my opinion, employment advocates are a prime example of this. Second to competence is accountability. We are the only profession where it’s possible to receive millions of dollars into our trust accounts on nothing more than an undertaking. Let the gravity of that sink in for a moment.

We are the sum total of all the legal professionals before us who provided competent advice, kept their word, were accountable and held to account. When one strayed, we as a profession stepped up and made it right and our governing body did a reasonable job of deterring poor behaviour. Again, I am not suggesting we are perfect. We are, however, extremely good as a profession because of these safeguards. This is why we have clients and not customers.

You cannot sacrifice one goat to two gods

I am surprised at the irony of the changes being proposed by NZLS. On the one hand, it seeks higher standards such as diversity training, reporting standards for bullying and sexual misconduct and diversity in the profession, to name just a few. On other hand, it is proposing to permit corporatisation of the industry. These two concepts are non-compatible and as the sub[1]head suggests, you cannot have both.

Think for a moment about a senior practitioner, Mr X, who is charged with sexual misconduct and sanctioned by NZLS and unable to hold a practising certificate for two years. Under the proposed corporatisation model, this isn’t a big deal. Mr X would continue to retain his shareholding in his firm, contract to the firm as a consultant, continue preparing advice for clients and work in the background and profit from the legal profession. Mr X would have all documents requiring a solicitor’s signature executed by a junior staff member with a practising certificate. There would be minimal disruption to his day-to-day work life.

What would stop criminal organisations having shares in a small law firm and laundering money through the trust account or bypassing AML? What about insurance companies? What would protect clients from, say, two firms (each owned by an insurer) over time coming to various agreed positions on the quantum of settlements? Both firms are conflicted in that they are interested in ensuring insurance pay-outs across the board are lower (to benefit their shareholders) rather than to maximise their clients’ pay-outs. It is easy to see why we have such extensive conflict of interest rules – to avoid exactly these situations.

We urge NZLS to consider why we have the rules we have and the long-term damage to the legal system if it continues down the track of corporatisation.


The economics of corporatisation

At a recent NZLS event, a member disagreed with my view that over time, the sector would consolidate and once consolidated (like the medical profession in the US) all indicators, for both patients and practitioners, would deteriorate. They disagreed that corporatisation would lead to an increase in prices and a decrease in the quality of service though these are well-accepted outcomes of consolidation within any industry.

In an article published by The Harvard Business Review, the authors observed that when an industry forms or is deregulated, it will move through four stages of consolidation: opening, scale, balance and alliance. It will take on average 25 years to progress through all four stages. Importantly, the authors noted that every company in every industry will go through these four stages or disappear. Our legal profession will be no different.

We are already seeing this in other jurisdictions which have permitted corporatisation. For example, the world’s largest litigation funder, Burford Capital, took a minority stake in specialist London fraud firm PCB Byrne.  It’s happening in our backyard as well. Wotton + Kearney, a law firm based in Australia and specialising in insurance law, announced it had sold a minority stake in the firm to a private equity company for an undisclosed sum. The private equity firm, Straight Bat, has taken a 30% stake.

We should not rush to follow our counterparts in other jurisdictions and should, at the very least, wait to see how they fare over a longer time span especially as consolidation may take up to 25 years. I do not suggest waiting that long, but I do suggest we observe and see if in fact the trajectory is as economists predict and then decide what changes are appropriate and what are not.

If NZLS makes a mistake, all involved will be forever remembered as the cause of the downfall of a successful profession for nothing other than naivety or worse, vanity. ■

Sam Khalesi is a director of GML Lawyers ■

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