Legal Practice Bill: deliberations

Meeting report

Department of Justice and Constitutional Development briefing
The presentation was done by the Acting Deputy Director General: Legislative Development, Mr Raj Daya.

Regulation Regime: England and Wales
In providing a background to the overview on the study done on the regulation regimes of England and Wales, Mr Daya said that in March 2001 the Office of Fair Trading (OFT) in England produced a report on competition in professions, which recommended that unjustified restriction on competition should be removed. The British government responded with a consultation paper and report into competition and regulation in the legal services market. There were general complaints as well as complaints about lawyer services. The Government’s report concluded that the current framework was outdated, inflexible, over-complex and insufficiently accountable or transparent. The government therefore decided that a thorough and independent investigation without reservation was needed. In July 2003, Sir David Clementi was appointed to carry out an independent review of the regulatory framework for legal services in England and Wales. The terms of reference were: considering what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector; and recommending a framework which would be independent in representing the public and consumer interest, comprehensive, accountable, consistent, flexible, transparent, and no more restrictive or burdensome than was clearly justified.

In December 2004, the Clementi Report was published with recommendations for setting up a Legal Services Board (LSB) - a new legal services regulator to provide consistent oversight regulation of front-line bodies such as the Law Society and the Bar Council. The Report proposed the statutory objectives for the Legal Services Board, including promotion of the public and consumer interest. Another recommendation was that regulatory powers should be vested in the Legal Services Board, with powers to devolve regulatory functions to front-line bodies, now called Approved Regulators, subject to their competence and governance arrangements.

Legal Landscape in England
Mr Daya said that knowledge of the legal landscape in England would help the Committee understand the context when comparing England and Wales to South Africa. He explained that the United Kingdom had a population of about 62 million people. There were 150 128 solicitors (lawyers), 15 387 barristers (advocates) and about 31 000 solicitors and 3 000 barristers work outside private practice as in-house counsel or government lawyers. There were about 10 400 solicitor’s firms, most of which had four partners or fewer (84.8%). In 2009, legal services generated about $36 billion of the UK’s gross domestic product (1.8%).

According to the Clementi Report, typical complaints about lawyers in England fell into three categories: inadequate professional service, professional misconduct, and negligence. Until the advent of the Legal Services Act 2007, complaints about lawyers were handled by a mixture of professional bodies including the Law Society, the Bar Council, and the Legal Services Ombudsman. The professional bodies failed to meet targets set by the ombudsman to clear complaints within a particular time period. Complaints included lawyers not telling their clients about how much they would be charged or being slow about giving estimates, with few given in writing.

Mr Daya explained the changes which were brought about by the UK's Legal Services Act. The Act separated representation from regulation and created alternative business structures. It created a super regulator which was the Legal Services Board, an independent body responsible for overseeing the regulation of legal services in England and Wales to reform and modernise the legal services marketplace in the interest of consumers, enhancing quality, ensuring value for money and improving access to justice funded by, but wholly independent of, the legal profession. He outlined the approved regulators, the alternate business structures, the legal disciplinary practices and the Triennial Review of the Legal Services Board by the Ministry of Justice. To achieve this, the Government conducted a review of all public bodies to identify those which it felt were no longer necessary. The review focused on whether a body’s functions were necessary, and if it thought they were, whether it had to be delivered at arm’s length from Government.

Issues for Consideration
Mr Daya presented the Committee with a list of questions which he proposed should be considered:
▪ Should South Africa allow several regulators to exist?
▪ Should South Africa allow separate regulation for attorneys and advocates?
▪ would the super regulator (National Council) be best placed to achieve regulation for the entire legal profession?
▪ Should South Africa give serious consideration to direct access for instructing advocates to limit costs and access to justice?
▪ Should South Africa create a separate tariff for advocates?
▪ Should fees have a maximum cap?
▪ Should there be more public involvement in the regulatory affairs especially discipline?
▪ Should there be more public involvement in fee setting tariffs?

Discussion
The Chairperson commented that these questions were critical suggestions which had to be considered by the Committee.

Ms M Smuts (DA) said that in the course of the Triennial Review, one of the recommendations from the English judges was that the LSB in the UK should be replaced and the frontline regulators be merged to form a single regulator. In our scenario, this would mean the General Council of the Bar and  the LSSA would be in one regulator each to regulate its own specialist stream. She wanted to know whether in England and Wales they were in fact headed in the direction of the merger. She was aware that the end review of the Triennial Review was that the LSB should go on for a bit, especially the Office for Legal Complaints (OLC). Were things in fact moving in the direction that the judges proposed - that one did not have an overarching regulator but you had at the top the regulatory bodies themselves constituted as the Council? If this was the case, then South Africa was leapfrogging the developments in England as there were not many frontline regulators in the country.

She said that in the Legal Practice Bill, there was the idea that the Minister could close down the Council. What could instead be done was to introduce a triennial review in South Africa. However, her question was whether England and Wales was moving in the merging direction.

Mr Daya replied, with regards to the triennial review and the criticism by the General Bar Council that the super-regulator should be done away with as against the merger, that the present status quo was that the LSB existed, the frontline regulators existed and the report suggested that there was a duplication of functions by the LSB and the other regulators. This was a concern. There was also the concern that encroaching on the work of the frontline regulators was going to cause a clashing of heads. There could not be an overarching regulator and yet still having frontline regulator. However, the Clementi Report did not say that the LSB would be done away with.

In terms of SA, there were two legal industries, attorneys and advocates, and all that the National Council sought to do was to regulate both industries in one council. This was going to be limited to the issue of admissions and discipline. There was no foreseeable problem with this.

On "leapfrogging" into an undesirable system, SA did not have the kind of complex system as did England so joint regulation would not be a challenge.

Mr J Jeffery (ANC) asked if the General Council of the Bar was the same as the Bar Services Board (BSB). How many regulators were there in actual fact? The number of regulators was directly linked to the number of attorneys and advocates. He said that South Africa could not follow the Clementi Report as it was operating in a very different context. The number of advocates and attorneys in both systems was very largely different and the ratio in South Africa as against England was very much lower. The intention from the LSB was not clear. What had they done about reforming the market in terms of ensuring value for money and the regulation of the pricing regime?

Mr Daya replied that the problem with the current model was the concurrent regulation between the LSB and the frontline regulators. It was important to note that in ensuring value for money, one needed consider that the value of justice could never be placed below value for money. It could be relatively cost effective to liberalize and hand out certain legal services to other institutions such as bank but the controversy came with the issues of the need to maximize profits by the banks.

Ms D Schafer (DA) said that it was important to reconsider and not go for the option of the handing over of legal services to other institutions out of the legal fraternity. She asked if the Department had done any study which proved that instructing advocates directly by clients was going to reduce costs.

Mr Daya replied that he did not have the figures but he was going to write to the Bar Council. However, he suspected that direct dealing with advocates, did not always mean a saving of money. It was an arguable point but the various levels of litigation had to be considered. It also depended on the seriousness of the matter.

Ms Smuts said that the Legal Practice Bill was over 12 years old but crucial question the Bill should address was restrictive practices and the lack of competition. In every other jurisdiction, restrictive practices and the lack of competition was the big issue. In South Africa, it seemed that all that was being talked about was transformation and restructuring (except for the current minister who had introduced fees but that was only half the picture). Of course one had to shut down all the provincial and homelands structures but one had to agree on the opening up competition. Every other jurisdiction was handling the issue except South Africa. It was important to consider the difficult question of restrictive practices and who should have the final say about fees. She thought it would be wise not to create a super-regulator but the regulator that was on the table. In the USA the Supreme Court of every state had the final say on restrictive practices. In South Africa, she suggested that it should be the judges who had final say about the Bar rules if the rule is restrictive and causes costs to increase. It was important to shift the discussion from transformation alone.

Mr Jeffery said that the issue of fees was controversial. Was there a means to compare legal fees? Could fees be compared in the various jurisdictions around the world? In England and Wales, how did one get to become a barrister? Was it similar to the South African system?

Ms Smuts said that it did not make sense to ask people to look at what legal fees were around the world. The question was to establish how the other jurisdictions dealt with their fees regimes and regulated the sector.

Mr Jeffery insisted that it was important to know what the fees structure was like in other countries.

The Chairperson said that it was important to remember that there were previous judgments on these issues. The Committee researchers and content advisor could find out what judgments had been handed down on the matter and what positions were taken in these judgments.

Ms S Sithole (ANC) said that the Committee had to be alive to the realities in South Africa and not to carelessly compare South Africa to England and the USA. Access to justice in South Africa was not as easy as in the other countries.

Mr Daya said on the matter of costs, the request of the Members was going to be taken into consideration. It was however important to know that in the fees structure, there were fixed fees and professional fees. The problem was that the fees were informed by the rates of the attorney, their superiority, their efficiency and many other determinants. The professional fee was usually covered by a contract and could not be subject to general standardization. The question had to be asked “what was a reasonable fee that a man in the street can pay?”

Mr S Swart (ACDP) asked for more information on the taxing of advocates’ fees.

Mr Daya said that there were guidelines which were held by the Taxing Master. However, clients could make reference to the General Bar Council for a review of their fees. A review of advocates' tariffs was very important because this did not exist. This was going to prevent the exploitation of the public and the broadening of access to justice.

Mr Swart referred to fees and asked what was the situation with attorneys’ non-litigious costs which were not gazetted. This was the case with commercial law firms. He asked what the state was being charged for its litigation. He was hearing figures of R40 000 to R50 000 per day. What was the situation?

Mr Daya replied that the state had developed a tariff which it was considering for the instruction of advocates and attorneys. The maximum tariff was not informed by the status of the practitioner but on the complexity and length of the matter. This was currently being considered and it was going to be finalised soon, after consultation with all the stakeholders. He said that for non-litigious work, the per-hour billing was very commercial and sadly unregulated.

Mr Jeffery referred to Ms Smuts' point that the Bill was more about transformation than, and said it was important to note that there could not be self-regulation. It was the role of the justice system to ensure that legal practitioners held the cause of justice over their own personal interests. The regulation of legal fees was a complex matter as practitioners were going to argue that if they did not charge the way they did, they would be out of business. The Department was supposed to consider that argument and factor it into its considerations.

Mr Jeffery said that there were questions which were asked in the past but had not been answered by the Department.

The Content Adviser to the Committee, Ms Christine Silkstone, replied that a document had been prepared and submitted by the Department to the Committee which answered all the outstanding questions from the Committee.
 

The Committee was presented with the document answering these outstanding questions.

Ms Schafer asked what the situation in Germany with regards to regulation was.

Ms Smuts said that Germany used the civil law system and that Germany was not a good example for a comparison. She said that it would be interesting to see what the case in New Zealand and England was. What was also important was to establish what was wrong in South Africa and how the situation had to be fixed. It was important to look at the reading of Judge Mlambo on the cost regime in South Africa.

The Chairperson said that the Committee should move to other matters in the Bill besides regulation.

Ms Sithole said that she was very concerned about access to justice and transformation. The population in the rural areas was very scared of courts and the justice system in general. The fact that the Department was conscious that South Africa was a developing state meant that it was the responsibility of the Department to ensure that poor and rural people could access justice. The only time poor people saw the face of justice was when they were arrested and had to meet the magistrate. The Department had to busy itself with the issues of access to justice and transformation.

Mr Jeffery said that there was limited time left for the Committee and the present Parliament to come up with a regulation structure. What could be done was to come up with a framework and principles with just some more detail which could guide and lay the foundation for a future structure.

Ms C Pilane-Majake (ANC) said that the Bill covered restructuring but transformation was ignored by the Bill. The Bill was supposed to come up with ways to improve access to justice. The State had come up with a tariff structure but it was unfortunate that the State had the funds. What was of relevance was to ensure the consideration of people on the street.

She said that looking at international best practices was good but South Africa had to come up with laws which were unique to its history and current situation.

She asked if the Department had considered comparing the regulation of the legal structure with that of the medical field. Although it was a different situation as some of the doctors owned the hospitals while lawyers did not own the courts, it was important to still do some form of comparison.

Ms Smuts said, in reply to Ms Pilane-Majake, that the way to get access to justice was not just to cut fees. It was a complex issue and had to do with allowing new forms of practice which was going to help consumers. Small attorneys firms had an important role to play.

Ms Sithole asked if it was possible for the Committee researchers to look at some other African countries to see what they were doing in this regard.

The Chairperson said that the Committee’s Research team was already looking at Nigeria, Zimbabwe, Namibia and some other countries.

Mr Swart said that it was a very difficult thing to compare professions as it was good to compare apples with apples not apples and oranges. Comparing legal practitioners to engineers, doctors, and other professions could actually end up showing that lawyers did not charge as much. It was also important to note that there were very many different levels of access to justice.

The Chairperson said that the problem with access to justice was similar to the housing problem where there were people who were not poor enough to qualify for legal aid yet not financially capable to afford even an average attorney. This class of people in South Africa constituted a major portion of the population.

Ms Smuts said that to sum it up, the average South African did not have access to justice. Justice in South Africa could be compared to the doors of a Ritz Hotel which were open but open only to those who could afford it.

Mr Jeffery said that he was of the opinion that both attorneys and advocates were not interested in improving access to justice through the reduction of their fees.

Mr Daya said that Clauses 35 and 97 of the Bill related to fees and the transitional fees structure within the legal profession.

Ms Schafer said that following from what the Chairperson had said, perhaps it was time to consider broadening the scope of legal aid. It was important to not over regulate the fee structure of the legal profession as there was the risk of deterring people from getting into the profession. Over regulation could expose the profession to a problem where people would say that they were not willing to undertake so much study and do so much work for very little financial compensation.

Ms Pilane-Majake said that on the comparison of the legal profession and other professions, there was the need for actual research to come up with objective results.

Ms Schafer said that it was also necessary for the Committee to consider that the costs were going up because of inefficiencies in the system. It was a common situation where attorneys billed for their time even when the matter was continually being postponed by the Court. This situation had to be taken into consideration by both the Department and the Committee.

Mr Daya said that a very critical aspect was to open the consultation process to public opinion and comment. There was no big secret in the process and, besides, the biggest stakeholder in the improvement of access to justice was the public.

The Chairperson said that the input by Mr Daya on the involvement of the public was a very good one.

Mr Jeffery asked when the discussions were going to continue since there was the timeframe of completing the process by August 2013.

The Chairperson said that the deliberations were going to be continued the next day.

Mr Jeffery said that there were issues which needed to be resolved with regards to the Public Protector. It was important for the Chairperson to write to her to request her to come and give specific responses. The outstanding issues had to be dealt with. He said that the meeting with the Public Protector was with the intention of resolving those issues.

The Chairperson said that it was important to note that the Public Protector could be invited and such an invitation did not have to limit the items to be discussed. The Committee could raise any matters related to her reports.

Ms Schafer said that she supported the call to have a meeting with the Public Protector to resolve the issues.

The Chairperson said that he wanted to bring to the attention of the Committee the deliberations of the "DNA" Amendment Bill. The Portfolio Committee on Police was proposing that the Portfolio Committee on Justice and Constitutional Development should join them on the 14 and 18 June for deliberations on the Bill.

Mr Jeffery said that it was important to have some officials from the DoJCD present as he did not have a very good experience in dealing with legislative amendments related to the South African Police Service.

The Chairperson said that the Committee was going to decide whether all members should attend or only a delegation should be sent. The next meeting of the Committee was going to be on the 5 June 2013.

The meeting was adjourned.