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Dalziel: Speech to Canterbury Law Society

27 March 2006

Speech to Canterbury District Law Society AGM

Randolph Room
Heritage Hotel
Cathedral Square
Christchurch
5.30pm

I completed my law degree at Canterbury University and was admitted to the bar in 1984. Due to my career choice, I only held a practising certificate for about a year. I was elected to Parliament in 1990 and this is the first time that I have had the opportunity to address the Law Society that I have been associate member of for nearly 10 years. So it was with genuine pleasure that I accepted the invitation to come this evening.

It is not of course to say that I have never addressed Christchurch lawyers – I attended a meeting of the local Family Court group around 2½ years ago when I was the Associate Minister of Justice with responsibility for the Care of Children Act which I had just introduced. One of the benefits of my return to the backbench was that I got to play a significant role at the Select Committee tidying up the Bill and saw what I believed to be an excellent piece of legislation pass through the House, albeit no longer in my name.

Despite that, I feel considerable satisfaction when I hear and read of the difference it has made by creating a framework that requires parents to face up to their mutual obligations to their children when their relationship breaks down.

Allowing the media into the Family Court has created an environment of openness that wasn't there before, even though the media rarely attend. This was something called for by both the incoming and outgoing Principal Family Court Judge. It was something they both conceded, not because the media should be able to report details of people's private lives, but rather because the lack of access meant a climate of distrust, which affected confidence in the Court itself.

It is interesting (but not surprising, given the lack of high profile cases) that there has been little coverage of family proceedings. However, a couple of newspapers have taken the opportunity to attend hearings to give the public a flavour of what occurs. Their coverage has been very instructive and I hope there is more of it.

It has reinforced my belief that parents cannot wait until after their relationship breaks down before they start talking about shared parenting. As Minister of Women's Affairs I gave an address on International Women's Day and quoted this extract from an article I had found:

"The problem is that [the Ministry of Women's Affairs] doesn't do one thing for the woman who has to: get up early, get ready for work, get the children's breakfast, get them washed, dressed and their bags packed for school, drive them to school, get to work, work in her paid employment, rush home (having already arranged for the children to be collected), wash clothes, get sports clothes ready for children, oversee homework, cook dinner, do dishes, get children to bed and then spend quality time with her husband ..."

The audience laughed when I got to the end, because they, like me, had assumed that there was no husband; it sounded ridiculous in this day and age that a fulltime working mother would be expected to manage the household on her own. But research undertaken by the Ministry of Women's Affairs and others suggests that although men are playing a greater role at home, this example is by no means unusual.

Why would I mention this to a group of lawyers? One reason is that the quote comes from someone who was a lawyer. But it is really because the legal profession does not have a good reputation for providing workplaces that offer work-life balance to their staff or partners. This is something I believe the profession should address and my saying so is not a new idea. I recall Austin Forbes promoting more balance in legal practice when he was the President of the New Zealand Law Society (NZLS).

He talked about the ridiculous hours of work that solicitors were putting in, in order to meet their earnings targets. He said that it was hard to be offered a partnership without virtually selling your soul to the firm. Parents with childrearing responsibilities found it hard to make partnership. His point was that although as a matter of practice this affected women, it was just as limiting to men.

That was about a decade ago and to be honest I don't know how much the environment has changed since then. I suspect that many law firms have adopted more family friendly policies, but it is hard to get a handle on how widespread that is and what changes have been introduced.

Work-life balance is often identified as a women's issue, but it is not. It's a family issue, which says that work should not impede a family's ability to raise their children, or to create such huge pressure on one or both parents that their relationship suffers as a result. A family friendly workplace recognises that employees have roles and obligations outside the workplace. The evidence suggests that family friendly workplaces that have genuinely flexible working environments have better productivity and better staff retention than those that don't. So it would be good if firms talked about what approaches they have adopted so good practice can be shared and people don't feel that it is unusual to ask for more flexible arrangements.

The government is doing its bit to promote work-life balance through a number of measures including increased access to high quality early childhood education and out of school care and recreation.

Tonight I have been asked to address the topics of legal aid, my small business portfolio and the proposals to regulate financial intermediaries.

LEGAL AID
The issue you have asked me to address is what strategy may be employed by the society to gain an increase in the legal aid hourly rates, which are set by the Legal Services Agency as guideline hourly rates.

I am advised that the rates, which range from $95 to $165 per hour, were essentially set in 1996. When it was suggested I talk about "strategy" I was concerned that I could be crossing that boundary between local MP and Minister of the Crown. After investigating the matter, I found that there was no such conflict as the solution is to be found in the passage of the Legal Services Bill, which is awaiting the conclusion of its committee stages and Third Reading in Parliament. If all goes well that will happen this week.

The government has supported the recommendation of the Justice & Electoral Select Committee, which has added a new clause 33A, requiring the Legal Services Agency to review from time to time the rates of payment for legal services provided by listed providers on a contract for services.

The Minister of Justice has indicated support for initiating a review when the legislation is implemented.

My advice to you would be to prepare for this review by doing some detailed analysis of who is doing what and why. It is all very well to say that experienced practitioners will not do legal aid work when they in fact do. Now it may be that many do so as part of a sense of civic duty in the same way firms do pro bono work for community groups and individuals who would otherwise be denied access to justice. But the bare statistics do not tell the story. That is the analysis you should be doing.

I am told that the response rate for the NZLS 2005 Survey of Listed Providers on the very question of legal aid remuneration was 26 per cent of recipients (i.e. 1,113 lawyers) from the NZLS’s database. This might sound like a good response, but as at September 2005 there were 1,075 criminal legal aid providers, 1,989 family legal aid providers and 2,240 civil legal aid providers. I would suggest that if you want to promote change then a better response is required. However, it isn't just about numbers.

There has been a decline in the family and civil legal aid providers but those who have withdrawn don't appear to have done much legal aid work prior to withdrawing. This is not evidence of anything other than that.

You need to look at who has withdrawn and find out why. At the same time, there has been no decrease in the number of listed providers with higher experience levels. The facts don't fit the theory, so a qualitative analysis is required.

Finally don't get bogged down with arguments that don't carry much weight. It is superficial to argue that there is a direct comparison between criminal legal aid rates and Crown Solicitor rates, when most criminal cases are tried summarily and this means they are prosecuted by a police, not a Crown, prosecutor and I am sure you wouldn't argue for that hourly rate to be used as a comparison.

SMALL BUSINESS

The next area I have been asked to address involves my role as Minister for Small Business. I think one of the things this government has done well is to respond to the reality that small business makes up the majority of businesses in our economy, as well as recognising the need to have mechanisms that engage with them to ensure that the policy development process takes into account their particular vulnerability.

I say vulnerability because small business feels the impact of compliance more than their larger counterparts, simply because they don't have the economies of scale nor the breadth of expertise the larger companies have.

Establishing a Small Business Advisory Group (SBAG) in the way that we did, by advertising for expressions of interest and interviewing dozens of interested individuals, has meant that this group of nine operates as a watchdog on government departments and agencies in a way that has not be seen before in this country. Although the publicity focuses on their reports to government, it is the work they do behind the scenes that is making a real difference. They meet regularly with officials from IRD, ACC, DOL and other government agencies and their influence is significant.

In saying that, because the public attention is on their reports, what they recommend does get careful scrutiny. Although I would have preferred a higher score than the 5.3 out of ten we received for the first report, I am confident that that grade will be improved by the time I respond to their second report.

In that report I was pleased that SBAG commented favourably on my focus as Minister for Small Business, namely:

- Improving business and management capability
- Making transactions between SMEs and government agencies easier
- Enhancing communication between SMEs and government
- Providing more enterprise education for school students and young entrepreneurs, and
- Maintaining a quality regulatory environment that eliminates unnecessary compliance costs and minimises necessary compliance costs

The order is significant because business and management capability is still the number one issue facing businesses and I still have a way to go in ensuring the quality regulatory environment, which is a critical component of the economic transformation agenda. This gives me a significant role to play in both promoting policies to my colleagues and also ensuring that there is a small business lens placed over the development of all relevant policies. I am due to have my first meeting with Ministers who have portfolio responsibilities for the areas covered by the recommendations this week, in order to begin the task of developing the government's response. I am not taking the previous recommendations off the agenda either as I am confident that we can increase our hit rate on them as well.

I would particularly like some feedback from you on one of the SBAG recommendations because it is repeated and extended in the second report. I know many of your members, former members, people eligible to be members and others (who are not eligible to be members of anything let alone a law society) are engaged in the field of employment law.

But before I raise the issue of personal grievance (PG) free periods, can I point out the new Lawyers & Conveyancers Act has tightened the section dealing with misleading descriptions and I encourage you to use it to stop people using titles like Employment Law Specialist, when they do not have a practising certificate or in many cases even a law degree. The Act says:

A person commits an offence who uses or permits to be used in connection with that person's name or business or with the name under which that person carries on business any words, letters, or symbols that the person intends to cause, or are reasonably likely to cause, anyone else to believe that the first-mentioned person or any other person…

(a) is a lawyer; or (b) holds any type of admission, enrolment, or practising certificate under this Act,- unless the first-mentioned person or, as the case requires, that other person is a lawyer or is admitted or enrolled or holds that practising certificate.

… possesses a qualification in law or any branch of the law or possesses special expertise in any branch of the law, unless the first-mentioned person or, as the case requires, that other person holds that qualification or possesses that special expertise.

I hope that you use it to stop these people avoiding the consumer protections that are offered by the Act to practising members of the legal profession.

Anyway, the real issue that I wanted to raise with you is that of the SBAG recommendation on PG-free periods. I am strongly opposed to this proposal for a number of reasons. However, I am aware that small businesses can be particularly vulnerable, especially when they don't have written employment agreements and there has been little or no discussion about expectations before the employment begins. The informality of the business operation is usually reflected in informal employment relationships as well.

I know employers who have hired an individual in good faith, believing that the previous employer's reference is an accurate reflection of the quality of prior performance.

Unfortunately this turns to custard when it is discovered that he was sacked from three of his previous jobs, each time obtaining a financial settlement and extracting the promise of silence and a reference as the price of settling without taking it further.
In some instances the demand would amount to blackmail in any other context. Regardless of the merits of the case, the cost of proceedings in the Employment Relations Authority or Employment Court becomes the sole reason for forcing someone to pay up.

The quality of the hiring decision and the lack of an employment agreement are not resolved by a PG-free period, nor is the problem I have described given that most PGs occur after 3 months. There are probationary provisions in the legislation now, but they require the parties to negotiate with each other and include them in the written agreement and to commit to take steps to ensure that expectations are met on both sides of the agreement. It's hard to imagine that working when most of these employers probably don't have written agreements to start with.

A PG-free period actually poses the real risk of creating inflexibility in the labour market – for example, there will be a higher risk in moving to a new job especially where it involves relocation.

I would value feedback from the profession that represents people on both sides of the equation and who have had 15 years experience of the free market in PGs, which was introduced by the Employment Contracts Act, and whether the fact that lawyers and consultants are charging a fee or an outcomes based contingency results in the focus being on a monetary settlement rather than a resolution of the relationship.

I know when I was a union organiser, nothing was better than getting a person's job back. For the "no win no fee" brigade that wouldn't be a win.

FINANCIAL INTERMEDIARIES AND CO-REGULATION
Another area I am aware you are interested is the issue of Financial Intermediaries and Co-regulation. In December 2005, Cabinet agreed to develop a co-regulatory framework under which approved professional bodies and the Securities Commission will work together to regulate financial intermediaries.

Since then, MED has been carrying out the detailed design work on the co-regulatory model and are working on a discussion document as we speak. Lawyers will have an interest in the current and proposed reform relating to financial intermediaries, as we have assumed that at least some lawyers will fall under the general definition of a financial intermediary, given that some lawyers, in addition to providing legal services, provide financial advice about investment options for their clients.

As lawyers are already regulated and to address risks of duplication, MED has met with the New Zealand Law Society to discuss how lawyers should be included in the co-regulatory model. The NZLS has commented that lawyers are already subject to many of the controls that the task force suggested for financial intermediaries, such as discipline, dispute resolution, competency and professional conduct standards. It is therefore possible that the NZLS may consider additional competency standards for those lawyers who are also financial intermediaries. It is also possible that lawyers may be exempted from the definition of a financial intermediary.

MED officials are working with NZLS to ensure the most effective way to address the position of lawyers in the co-regulatory model for financial intermediaries. That being said, it is important to be aware that the Securities Legislation Bill currently before the House is amending current financial intermediary and broker disclosure obligations, which will affect lawyers who fall within the definition of financial intermediary.

Previously investment advisers had to disclose certain information relating to qualifications, experience and remuneration only if requested to do so by the client. The changes will now require investment advisers to disclose more information prior to giving investment advice, without requiring a prior request from a potential or actual client, and without requiring a prior existing relationship.

These amendments require regulations to be promulgated before the amendments come into force and there is a discussion document out on the proposed regulations.

INSOLVENCY LAW REFORM

The last thing I want to mention is the Insolvency Law Reform Bill, which is at the Commerce Select Committee and submissions close on 7 April 2006. Just quickly the Bill is designed to modernise the law that was enacted in an era of almost no unemployment and limited access to credit.

Although the former of these conditions has improved markedly over the last term of government, access to credit has grown exponentially in the forty years since the Act was passed and there has been a real shift from sole trader bankruptcies to consumer related bankruptcies. In addition, the number of company liquidations and personal bankruptcies has increased substantially over the last two decade and returns to creditors continue to be low.

I am sure that those who have an interest in this area of law will be aware that the Bill introduces a number of changes including a No Asset Procedure as an alternative to bankruptcy, a Voluntary Administration regime to assist business rehabilitation where possible and some new provisions designed to address some of the problems arising from the Phoenix company scenario.

Like many areas of law, insolvency law reform requires a balancing act between a range of competing interests. I hope that I have got the balance right and certainly encourage those who have an interest in this area to make a submission to the select committee.

CONCLUSION

I seem to have traversed a lot of ground, but I do so because it means a lot to me to be given this opportunity to raise these issues with my peer group and members of an honourable profession of which I am proud to be a member.

I always start my fun debates by saying: "I am a lawyer and a politician, you can trust me," which never fails to get a laugh. But I guess it just says that we will always be judged by higher standards due to our professional status and the impact of those who fail to meet them, and all we can do in response is to continue to aspire to achieve them.

Thank you.

ENDS

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