Legal Practice Bill: Department of Justice response to public submissions: clauses 31 to 69
Justice and Correctional Services
24 June 2013
Chairperson: Mr L Landers (ANC)
The Department of Justice and Constitutional Development (the Department) continued to provide its responses to the public submissions on the Legal Practice Bill, from clauses 31 to 69. The Committee engaged thoroughly with several concepts and principles, but flagged certain issues for further debate.
On issues of principle, the Committee noted that there had been discussion whether to have one code that applied to all legal practitioners, or to retain separate codes for each branch of the profession. They noted that it was widely accepted that there would not be fusion at this point, that the separation of the branches would remain and the only real concession to this was that advocates may, in certain circumstances, take instructions directly from the public. There was extensive debate over whether the current practices of awarding silk to Senior Counsel, with a concomitant increase in the fees charged, should be written into the Bill or left as a discretionary matter, for the advocates’ profession to make recommendations to the President, or whether the Council should be involved. Some Members believed that the whole status should be codified, setting out an official procedure, some held the view that it should be left to convention, and others believed in the liberalisation of the profession, and suggested that there was no reason to retain this status for advocates if a similar status was not conferred on attorneys, and were opposed to the status being linked to fees. There was concern that the approach did not assist the transformative process and there were perceptions that skewed access to justice may be available, depending on financial resources. The DA also noted that it would welcome an opening up of some work traditionally reserved to the profession, but this Bill had taken a very cautious approach and made few changes in practice. The ACDP warned that the legal services market was already shrinking, largely due to encroachment from the financial services field.
The Department was asked to draft two options for clause 31, to reflect separate processes for cancellation of registration, where an attorney had been struck off by a court and where there was an error. The Committee and Department were opposed to the suggestion that advocates should be allowed to become conveyancers and notaries, pointing out that whilst there were some competition considerations, the prime reason for the Bill was the protection of the public interest. The Committee agreed to leave over the question of what paralegals would be allowed to do until the terms had been finalised for the legal profession. Members asked that clauses 34(5) and 34(7) be re-drafted for greater clarity, or that clause 34(5) could even possibly be removed. Clause 35 had been flagged for further discussion already, with options either to create a fee structure for non-legal practitioners, or extending the functions of the Rules Board, and the Department would still report back on this.
In relation to chapter 4, one Member suggested that all complaints should be publicised, and that the members of the investigation committees and reasons for their decisions should similarly be made public on a website, not necessarily in the Government Gazette. Others believed that only guilty-findings should be made available. Most agreed that the complainant should be allowed to be present at the hearing, but that public access could perhaps be requested by anyone. Some Members were concerned with the prescriptions of clause 37(4), which may cause cases to be dismissed for technicalities, and asked the Department to compare these procedures with those in the medical profession. They questioned the appeal procedures, and asked for further additions to clause 42 in relation to sentence. Members also debated whether the disciplinary committee should have the power to award compensation, or should act as amicus curiae and refer the matter to court, and the recourse under the Attorneys Fidelity Fund (for theft of trust funds) and Attorneys Insurance Indemnity Fund (for negligence) was described. The clause was flagged for further debate.
Members also discussed the intention behind, and the comparative situation with ombuds in other fields, and the Committee Researchers were asked to report back with a comparative study of ombuds in the financial services sector. The Department would be asked to revisit clause 49. Members agreed with a suggestion from the Law Society of South Africa (LSSA) that the ombud serve for one term of five years, with an option to renew for up to another five years. Further specifics would also be presented by the department for clauses 52(2) and (3).
The provisions around the Attorneys Fidelity Fund (AFF) were presented, many of which were similar to the existing provisions in the Attorneys Act. The Department and AFF were in favour of a cap of R5 million on individual claims, which would affect only a small proportion of claims. However, Members emphasised the need to provide proper protection, and suggested following the current Attorneys Act provisions, so that the AFF was not liable for claims from investment practices, and suggested that the Department needed to re-word clause 57(1)(e). Further explanations were requested on the submissions around clause 58(1)(l). Members suggested that the Board Members, as dealt with under clause 63(1), should be selected by the Minister, in consultation with the Council, perhaps after the Minister had called for nominations. The issue of removal under clause 69(1)(d) was flagged for later debate. Members believed that clause 87(2)(a) was acceptable.
Legal Practice Bill: Responses to public submissions, from clause 31: Department of Justice & Constitutional Development
Mr Lawrence Bassett, Deputy Chief State Law Adviser, Department of Justice and Constitutional Development, said that he would continue taking the Committee through the Department’s responses on the Legal Practice Bill (the Bill), from clause 31 onwards (see attached document for full details).
Clause 31 Cancellation and suspension of registration
The Law Society of South Africa (LSSA) had commented that before cancellation or suspension of registration, the South African Legal Practice Council (the Council) must have notified the practitioner concerned and given the opportunity to respond before implementing the order of the Court. For this reason, it pointed out that clause 31(2) was unnecessary. However, Mr Bassett noted that the Department of Justice and Constitutional Development (the Department or DOJ) was of the view that clause 31(2) might still be required for purposes of clause 31(1)(b),which related to circumstances where a legal practitioner was registered erroneously or on the basis of false information, such as an incorrect registration number. However, in these circumstances there would have to be an administrative procedure followed, including reference to the High Court, and he suggested that it might be useful to look again at the wording of clause 31(1)(b).
Mr S Swart (ACDP) suggested it could be helpful to change the wording in 31(1)(b) to something along the lines that the Council may cancel or suspend registration, after having followed an audi alteram partem procedure.
Adv Mongameli Kweta, State Law Advisor, Office of the Chief State Law Adviser, confirmed that it was his view that clause 31(2) applied only to the clause 31(1)(b) situation.
Mr J Jeffery (ANC) suggested that two options be stated. The first would oblige the Council to cancel registration of a legal practitioner who had been struck from the roll by the High Court. The second would state that the Council may suspend a practitioner, in the event that the registration of that practitioner was due to erroneous information, but only after following the procedure set out in clause 31(2). This would then not require any mention of the audi alteram partem principle in clause 31(1)(a). He thought also that it would make sense to split clause 31: so that the present sub-clause (1)(a) stood alone, and then the present (1)(b) should become a separate sub-clause, with a link to clause 31(2).
Clause 33 Authority to render legal services
Mr Bassett commented that Mr R Naidoo had made a submission that the provision was too restrictive, but the Department was unsure exactly what was meant by that.
Mr C Erasmus suggested that advocates must also be allowed to be conveyancers and notaries public. The Department said that if this was the case, they would have to hold trust accounts and Fidelity Fund certificates in that case, and be appropriately trained as well in that field.
Mr Swart asked with which type of provisions the banks would have to comply, and wondered if this was already detailed in the banking legislation. He pointed out that clause 33(1)(b) was very specific, and said that no person other than a legal practitioner may “draw up or execute any instruments or documents relating to or required or intended for use in any action, suit or other proceedings in a court of civil or criminal jurisdiction within the Republic”.
Mr Bassett explained that banks were currently not entitled to any fees when they drafted wills, and were limited to receiving remuneration when they administered the estate as executors, which they did based on a set fee, as prescribed by the Administration of Deceased Estates Act.
Mr Jeffery noted that he disagreed with C Erasmus' submission. The Committee had agreed with allowing advocates to receive briefs directly, but had also agreed that the two professions should remain separate. To allow an advocate to become a conveyancer or notary was not in line with the framework, because at present the training for a conveyancer was a specialist branch of the attorneys’ profession, which was more related to administration. The training for advocates was quite different and was geared towards court appearances. It was not appropriate for an advocate to become an attorney, nor for an advocate to become a conveyancer.
Ms D Schäfer (DA) agreed with Mr Jeffery that the professions should be kept distinct.
Mr Bassett said that it was the opinion of the Competition Commission that the legal field should be open and allow for synergies, and that there were functions that could be performed by non-legal professionals. Members should bear in mind, however, that this Bill also had to do with the protection of the public interest, and determining services that could be rendered by non-practitioners. The Department recommended revisiting the rules related to paralegals once the terms were set for legal professionals.
Ms M Smuts (DA) emphasized that the Bill was very modest in scope and that the Competition Commission's recommendation made good sense, because clause 33 set up monopolies. She suggested that it would be useful to conduct an analysis of the legal services market, and decide whether to open these services up, bearing in mind what would be in the greatest interest of consumers. This had been done in the United Kingdom (UK) since 1984, and South Africa should consider this approach. This Bill was very modest and entrenched the current monopolies, with a small concession in the relaxation of referral rules. The DA wished to take a much more pro-active, pro-competitive position for the legal profession.
Mr Swart argued that there was a need to balance the desire to liberalise the legal profession with the amount of work that attorneys and advocates had. He agreed with the Department's view that it was best to settle the issue of legal professionals, before considering the position of paralegals. The amount of work performed by legal professionals was shrinking, and much of it tended to move into financial services. Furthermore, the Road Accident Fund Act was shortly to be amended and even less work would go via attorneys. Mr Swart emphasized that the amount of conveyancing work had dropped substantially since the property market dropped, and the Committee should be mindful of all these points.
Ms Smuts thought the amendments to the Road Accident Fund legislation were positive.
Mr Jeffery said he too was in favour of opening the profession, and liked the idea of being able to consult with a lawyer in a retail company (as with the British-Tesco example), but the Bill did not include representation from the paralegal profession. The Competition Commission's opinion should be highlighted for the Committee Report, but need not be built into the Bill for the Council to look at, because it had an interest in the monopoly.
Ms Schäfer suggested Mr Raj Daya, Acting Deputy Director General: Legislative Development, Department f Justice and Constitutional Development, should go back to the forum on the LLB, and include conveyancer qualifications. She feared that banks may abscond clients if they decided the potential fees were not high enough for them to make a profit .
Mr Daya responded that clause 6(5)(i) already noted the possibility to liberalise the legal profession further in the future, but that required a larger debate from within the Council.
Ms Smuts reiterated that the Bill was still very modest in making changes. She asked for her views to be noted.
Mr Bassett said that in previous discussions, the Department was asked to include a provision to empower the Minister to consider new forms of practice, which would probably be included under clause 34, which indirectly had to do with forms of legal practice, and that may answer Ms Smuts’ request.
Ms Smuts responded that if a study was done, it should not be done by legal professionals, but by the Competition Commission or an entirely different comprised of disinterested parties and economic experts.
Clause 34: Forms of legal practice
Mr Swart asked how the Contingency Fee Act would apply in relation to clause 34(1), or whether there might be something included in the transitional provisions.
Mr Bassett said that the Department would have to make an adjustment to accommodate this legislation.
Mr Jeffery suggested a linkage with clause (34)(1).
Mr Jeffery noted that the Committee was generally in favour of clause 34(2)(b), but wanted to see an additional note that attorneys must be in possession of a Fidelity Fund certificate. He similarly stated that he had no problem with the submission from Legal Aid South Africa (LASA), that advocates who performed work for LASA in a criminal case would not be required to be briefed by an attorney.
Ms Schäfer argued that there were cases when Legal Aid briefed advocates because it did not have sufficient in-house advocates of its own to handle all the cases.
Mr Jeffery thought that there was little point in he Committee speculating on the reasons, and suggested that Mr Bassett seek clarification from LASA directly.
Mr Daya explained that LASA had its own in-house advocates, and raised this point to state that these in-house advocates should not have to be briefed by an attorney.
Mr Swart brought up the broader aspect of attorneys and advocates who were government employees, and stressed the need to ensure that state attorneys, advocates, and Legal Aid staff were also covered by indemnity insurance. He further pointed out that there was a specific provision that related to state attorneys also being state advocates, but said this would fall away once this Bill came into force.
Mr Bassett noted that the Independent Association of Advocates of South Africa had also made a submission on clause 34(2)(b), suggesting that where advocates were briefed directly, they must have compulsory indemnity insurance. Mr Bassett said that this would be covered in the regulations.
Mr Jeffery asked why, stating that the Committee had already agreed that advocates would be able to take instructions directly, provided that they were in possession of a Fidelity Fund certificate, and this would also include indemnity insurance.
Ms Smuts raised the point that clause 34(5) was confusing, and there was no clarity on not-for-profit institutions. She asked what the definition was for a “public interest legal centre” in clause 34(5)(d). She also thought that clause 34(7)(a) was too limiting.
Mr Jeffery agreed that clause 34(7)(a) was problematic, but suggested that it was perhaps put into place to prevent abuse. A non-profit centre was not necessarily always working in the public interest. It would be possible to include the provision for operating in the public interest, but it was not an absolute requirement. He thought it would be problematic to water down the requirement that the governing bodies of a non-profit organisation must consist entirely of legal practitioners.
Mr Bassett asked if the Committee would like to see clause 34(5)(b) taken out.
Mr Jeffery said that this would be desirable. He then asked if “public interest legal centres” were already covered by “non-profit juristic entities”. It could be assumed that a public interest legal centre would be run as a non-profit centre, but then it would surely be covered under 34(7)(b).
Mr Bassett noted that the Legal Resources Centre (LRC) had made a submission under this clause. Clause 34(8) was clearly talking about a law clinic at a university, while clause34(7) referred to all other bodies. The main issue was the ability to employ both attorneys and advocates.
Ms Schäfer said that her concern was that clauses 34(4) and 34(5) did not provide for attorneys and advocates to work at law clinics.
Mr Daya said that there were existing public interest bodies that were not exclusively comprised of legal practitioners, and asked if it would be possible to flag this issue and return to it.
Mr Jeffery said that every public interest legal centre was a non-profit body. However, he did not agree with the requirement, for clause 34(7)(a), that the governing body be made up exclusively of practitioners. The monopolisation was where they were out to make money and where there would be competition.
Ms Smuts said that she thought the Department was arguing that this Bill only provided for legal practitioners, not services, and the LRC was pointing out that subclauses 34(7) and 34(8) were giving descriptions of the services.
Ms Schäfer agreed that the LRC was raising a good point.
Mr Jeffery pointed out that under clause 34(8)(e), there was a specific restriction on what type of work law clinics may undertake. He did not have a problem with the distinction between law clinics and non-profit entities. However, he did have a problem with clause 34(7)(a) restricting governing boards to practitioners only.
Ms Schäfer suggested that in that case, instead of saying that the governing bodies must consist exclusively of legal professionals, it was possible to consider whether “the majority” should be legal professionals.
Mr Jeffery asked why law clinics were not covered under clause 34(4), and why attorneys could not practice there. He asked also, in relation to clause 34(5), why a law clinic could not employ an advocate. Following Ms Schäfer’s suggestion, he proposed an amendment to clause 34(7)(a) to reflect that a majority of legal practitioners should serve on a governing board, as opposed to the board comprising exclusively legal practitioners. He also said that clauses 34(4) and 34(5) must include references to 34(8).
Ms Smuts turned to clause 34(9), and asked if this matter would be dealt with by the Council. She asked Mr Daya to elaborate on what was meant by a limited liability practice.
Mr Daya explained that the “limited liability” related to possible negligence claims. A person who contracted the services of a legal firm would be told upfront that, in the event of a claim, they could only sue for up to R5 million.
Mr Jeffery argued that this could not be dealt with by the Council because it was a provision that empowered the Minister, who was not dependent on the Council to initiate it. He suggested that the Committee Report must state that the new Parliament would have to consider this point. However, this Committee was unable to prescribe exactly how this should be dealt with. He believed that clause 34(9) was fine as it was worded.
Ms Smuts suggested that the word “may” be replaced with “must” in this subclause.
Mr Bassett said that Department had compiled a document setting out how the regulations would be framed, and this explained the circumstances where the Minister may, or must do something.
Ms Schäfer was concerned with the vague language in this subclause.
The Chairperson said that it should be flagged for further consideration.
Mr Bassett finally noted that LASA had asked for a new provision to be added after clause 34. However, it was the opinion of the department that what it had requested seemed to be a duplication of clause 34(4), with partnerships and law clinics added. Partnerships were already mentioned in clause 34(4)(b), and law clinics fell under clause 34(7).
Members indicated that they agreed with the Department on this point.
Clause 35: Fee structure of legal practitioners, juristic entities and justice centres
Mr Bassett reminded the Committee that clause 35 was previously flagged with two potential options, the first creating a fee structure for non-legal practitioners, and the second that looked at extending the functions of the Rules Board to deal with the matter.
Ms Smuts asked if the Department had had any further thoughts about the option of using the Rules Board. She had hoped for more consultation with all of the interested parties.
Mr JB Skosana, Deputy Chief State Law Adviser, Department of Justice and Constitutional Development, answered that the Department had thought the matter over and would be submitting a response to the Committee on that matter after the rest of the Bill had been dealt with.
Ms Smuts suggested that it would be useful to consult with the judges that sat on the Rules Board.
Mr Swart asked if clause 35(b) would cover the fees charged as contingency fees. Most of these fee structures related to litigation, but he wondered how the Rules Board would deal with non-litigious fees. He agreed that the Rules Board should determine the fee structure.
Mr Landers asked Mr Swart if he did wanted non-lawyers to be deciding on the fee structure.
Mr Swart said that his concern was how a non-lawyer would decide on the fees associated with something like a merger or acquisition.
Mr Jeffery said he was in favour of having an advisory committee, rather than the Rules Board, determining fees, because this was not the main function of the Rules Board. He suggested that the Department should draft two proposals. He thought that for the moment, clause 35 remain as currently drafted, but he would like to see some further options.
Ms Smuts asked Mr Jeffery if he had considered the possible unconstitutionality of the Minister being at the receiving end of any fee structures. The Competition Commission had said that competitors could not be involved with writing any rules.
Mr Jeffery responded that obviously the Council would want maximum profits for its members, and that was why he was suggesting the creation of an advisory body, or perhaps even a statutory council that determined fees.
Ms Smuts argued that in her view, it was logical to have the Rules Board determine the fee structure.
Mr Swart agreed with Ms Smuts, but asked why there were tariffs for this profession, although they did not exist in other fields, such as medicine or engineering. He said that the clause was included in recognition of the fact that there was already a certain degree of regulation in relation to litigious matters. If regulation was going to be extended to non-litigious services, then he saw no reason not to have judges determine the fee structure.
Ms Smuts said that both the Black Lawyers Association and DA wanted to see a free market, and that regulation was only needed when there were distortions in the market. Distortions did exist, due to historical inequalities, but the question was whether this clause was needed at all. There were similar problems in other fields.
Mr Jeffery asked who was determining the fees, and where in the Bill the determination of fees was noted.
Mr Bassett advised him that it was addressed in clause 94(1), under the regulations.
Mr Jeffery said that if the provision was changed to read “in consultation with Council”, and Parliament were to serve as arbiter, that would deal with the judges’ concerns. However, he would still like to see the issue remain flagged for future debate, and the two options could be drafted.
Ms Smuts added that the United Kingdom had a consumer panel, which included lay people.
Clause 36: Code of Conduct
Ms Smuts asked why there was a single of conduct for attorneys and advocates.
Mr Daya explained that both professions were subject to the same professional ethics, and this reflected an overall trend of the differences between the two professions slowly being erased.
Mr Jeffery added that some provisions would apply specifically to advocates, such as not accepting briefs from the public, but in general it was a code that applied to all legal professionals, and some points would apply to the different branches of the professions.
Ms Smuts responded that in every other country, rules for barristers and solicitors were separated.
Ms Christine Silkstone, Committee Content Adviser, asked if there was a conflict of interest, between attorneys having rules around taking briefs from clients, whilst advocates did not have the same restrictions.
Mr Jeffery explained that no one was advocating one code that everyone would follow religiously in every aspect, but was suggesting one code with specific points applying to the different professions.
Mr Skosana said that the code was entirely at the discretion of the Council, and the current provision did not allow for any other body to do any drafting on that code. However, there were time frames within which the code must be published in the Gazette. That was what this Committee should be most concerned with, rather then the debate surrounding attorneys and advocates, which had been ongoing for some time and was bound to continue beyond this Bill.
Mr Landers noted that the Committee had not reached any agreement on this clause.
Mr Landers asked Mr Daya and Mr Skosana to comment on the issues of tariffs and fees charged by Senior Counsel (silks).
Mr Jeffery added that advocates liked the concept of a separate senior counsel status, and it would be difficult to abolish it at this point, so he would like to see the Bill provide for the procedure to be followed to take silk, including by whom it would be conferred, and the question of fees. He asked that a draft be prepared, including the fact that silks would be entitled to charge higher fees.
Mr Landers asked if Senior Counsel were currently entitled to charge more for their services.
Ms Smuts asked Mr Jeffery why he was suggesting that this be legislated. She suggested that their fees should be left for the market to decide.
Mr Jeffery answered that currently, there was no separate legal recognition given to silks, whose status was only governed by convention, under common law. Whilst he agreed that the law could not make mention of this, and it be left to the courts to sort out the status issues, he believed that the current procedures should be codified. He noted that whilst presumably an advocate wishing to take silk could apply, directly or indirectly, to the Council, he thought that the legislation should provide specifically for this special status, so that the Council could make a recommendation to the President. Alternatively, he reiterated that it could be left to the common law or convention, in which case the courts would determine how this would work.
Ms Smuts suggested that it should be left to common law, as she felt that it was inappropriate to have a Council which included attorneys deciding on the status of senior advocates.
Mr Swart added that if there was any possibility of dispute it should continue to be governed by conventions. Fees for litigious matters were already regulated. In the high court, the Taxation Master would already allow a higher fee for a senior legal professional than for a junior. There was precedent in other professions for higher fees, for instance a neurosurgeon would charge more than a GP.
Ms Schäfer asked why there was a desire to make separate provision for senior members. The fees would be decided by the fee structure in general, so she questioned why it was necessary to specify the senior status.
Mr Jeffery responded that the distinction between Junior and Senior Counsel was already recognised, so the Bill should not omit it. Currently the convention was that the General Council of the Bar (GCB), which was not a statutory body, made the recommendation, but once this Bill was passed, there would be confusion about who was to deal with what. He agreed that there might be some sensitivity about attorneys or non-lawyers being involved in the matter, on the Council, but then the opposite view was why an attorney should not be able to look at what advocates were doing and determine who qualified for this higher status. The Bill should say something on the matter, and specify the role of the Council. The fee question was not complex because of the existing seniority considerations.
Ms S Sithole (ANC) asked for further clarification on the Junior and Senior Counsel status, and the difference was between them. She asked if a judge would be more inclined to listen to Senior Counsel than to a junior.
Mr Skosana explained that the distinction between Junior and Senior Counsel status, at present, took into account the importance, significance, expertise, experience, and volume of work of the Counsel concerned. The GCB wanted to include seniority status to legitimise its current practice. However, the Bill must make some mention of fee structure, as it would not be appropriate to introduce the various status levels only, without also discussing fees. Previously, there had been something included about status in an earlier draft, but it was removed on the understanding that something new could be included as a result of further consultations. He added that the issue of seniority actually went far beyond the issue of fees, because the conferral of silk status also took into consideration the time served. It was assumed that Senior Counsel would be those from whom the judges were chosen, so the conferral of this status had considerations other than fees. It was important, should it be included, to recognise the seniority and service. However, there was a need for more discussion at a policy level. Currently, there were no criteria or guidelines around senior status, and that was why the Department also wanted to raise the issue as part of the fee structures.
Mr Swart argued that it was an accepted market practice for more senior lawyers to charge higher fees. He asked if these issues had been discussed with the profession, and why the whole concept of silks and seniority was not included in the Bill.
Mr Skosana answered that ranking would not have any relevance to the fees.
Ms Schäfer said that it was difficult to try to introduce anything about Senior Counsel at this point, when it had not been included in the draft Bill, as the introduction of new substantive clauses would affect the whole public participation and submission of comments process. She did, however, believe that somehow the concept of seniority should be dealt with. However, she believed that it would be elitist to retain the position that only the GCB could nominate for silk.
Ms Sithole asked for further clarification from Mr Skosana, and repeated her question whether a judge was more influenced by seniority, or would be more swayed by the arguments presented, no matter who was presenting. She was concerned that, if the former, due process may be denied to the average citizen who could not afford to employ a Senior Counsel. She would like to see transformative change in the field.
Ms Silkstone suggested to Ms Sithole that setting criteria was one way that could drive a transformative agenda.
Mr Jeffery questioned how, if not in this Bill, would Senior Counsel status be determined in future. He reiterated that the GCB was not a statutory body and it would be an anomaly if it was left up to this body to decide if they wished to continue to determine silk status, without requiring it to do so. He believed that the state had a duty to codify the process, and he would like to see options drafted, based on what was used in previous drafts.
Ms Smuts suggested the matter be left to common law to decide, and repeated her view that it did not need to be codified.
Mr Skosana said that during previous discussions, there was a suggestion that this be included in clause 35. He suggested that it could be mentioned in the Bill without any guidelines being set, and it could be left entirely to the profession, or even the universities, but not necessarily left exclusively to the GCB. He said that the Department had been advised that some people became silks without being members of the GCB, and the point was confusing. In addition, there were only four women silks in the country, as opposed to 400 white males. He said that because the profession was determining silk status, there was no element of public consultation, and there were no set criteria. Presently the Minister could not interrogate candidates, but instead the Ministry simply prepared documents that were forwarded to the President with the request for conferral. If these matters were regulated, there would be no need for the courts to get involved.
Mr Daya added that if the Bill were, hypothetically speaking, to be passed tomorrow in its current form, the power to determine Senior Counsel status would continue to vest as it did now, and it may continue to be conferred. He said that this was a strong discussion point in the profession. Many believed this to be an elitist process. The LSSA did not support the recognition of senior status of attorneys. The Department and Committee, however, must bear in mind that the conferring of silk was entrenched in practice. However, the motive behind it was important, as also why this had not been done for attorneys. The question was where to draw the line between entrenching a status and actually introducing a process, and another issue was whether there should be a direct link to the fees.
Ms Smuts pointed out that the several Bars themselves played a decisive role in conferring silk status. In the last 20 years, the ANC had not yet succeeded in moving to one unified profession. She maintained that both attorneys and advocates would continue to exist, and these traditions and conventions were in place for a reason.
Ms Sithole reiterated her concern that many citizens did not earn enough to afford Senior Counsel, but the legal profession should be transformed to make sure that an ordinary person was able to pay for Senior Counsel, and open up access to justice to citizens.
Mr Jeffery commented on Ms Sithole's point that the legal system benefited the wealthy, but made the point that unless the profession was nationalised, that would unfortunately continue. Junior and Senior Counsel were recognised within the profession, even when it came to tariffs. He said Mr Daya's point was that the power to appoint silks was a constitutional power of the President, but the common law convention was that the GCB forwarded recommendations to the President. His concern was still that the GCB was a non-statutory body, and for many years only certain races and genders were included in the recommendations. He asked if any silk had ever been appointed by the President who was not recommended by the GCB or a provincial Bar Council. If the Bill did not provide for appointment processes, the state should begin regulating that now, to avoid potential abuse. He believed it was important to adopt a minimalistic approach.
The Committee asked the Committee and Department if they could envisage a situation where the law school Deans, for instance, might nominate someone for senior counsel status.
Ms Schäfer replied that it did not matter that much, and there would always be practitioners with more experience who would command higher fees.
Mr Swart addressed Ms Sithole's concern about access to justice in the broader context. He explained that most civil cases were done by junior advocates, and that the average citizen would not need a Senior Counsel’s expertise, so it was not really an every-day problem.
Ms Sithole responded that South Africa was a developmental state, and the state had to make sure that everybody was equal under the law. It was not only big corporations, but also ordinary South Africans, who might need Senior Counsel, ordinary South Africans need senior counsel assistance at times, and the Committee must look at all citizens.
Mr Jeffery suggested that there were two options. If the Bill did not address Senior Counsel status, there would be a gap in the process if the Council were to make recommendations to the President. The second option was for the Committee to add something into the Bill. He believed that not regulating this at all posed the potential for chaos. He agreed with Ms Sithole that the legal profession was completely untransformed, but it did not have to be transformed only through this Bill.
Mr Swart suggested ranking Senior Counsel.
Mr Jeffery disagreed with that suggestion. He also did not think it was necessary to also rank attorneys, but deal only with the current practices. He pointed out that different categories were separated by training, but practitioners were not graded within a category.
Mr Daya said that the Department would be submitting another document to the Committee, setting out the concerns of a group of advocates at the Johannesburg Bar, who were very opposed to the retention of silk, which, they believed “does not facilitate access to justice and has come to represent some of the impecunious, evil features of our society: greed and elitism. It is divisive in its nature, and particularly in the manner that it is applied, it divides the Bar. It reduces the dignity of many of our colleagues to acquire this recognition to the extent of obsequious grappling to the whims of those perceived to be in power.”
Mr Skosana noted Mr Jeffery's comment.
Chapter 4: Professional Conduct and Establishment of Disciplinary Bodies
Mr Jeffery wanted to make a general point on disciplinary bodies, and that was to emphasise the need for transparency. Clause 40(8) said that if a legal practitioner was found guilty of misconduct, the Council must publish, in the Government Gazette, the finding, and the sanction imposed, in terms of subsection (3). He would like to see an additional, separate section setting out that the names of the members of the investigation committee, complaints lodged, and reasons for any decision, should be published and made available on the Council's website. The idea that nobody knew what was going on, unless the person was found guilty, was inappropriate for officers of the court.
Ms Schäfer disagreed and suggested that the information should only be published on the website if the person was found guilty, and it was not necessary for every allegation to be published.
The Chairperson asked if the hearings should be open to the public.
Mr Jeffery firstly responded to Ms Schäfer's concern, saying that he agreed that there may be a lot of unnecessary complaints, but if a member of the public had complained about a legal practitioner, the public had the right to know about it, including who had considered the matter. The Bill already provided for publication in the Government Gazette, but that was not enough. He would like to see provision for the right of access to the information. Secondly, in answer to the Chairperson, he said he supported the idea of open public hearings, just as proceedings in the Magistrate’s Court were open, and they were paid for by public funds. As an officer of the court, a legal practitioner must be deemed to sacrifice his or her privacy, and there should be public access, on request. Complainants should definitely have the opportunity to attend hearings throughout, or a hearing could be made automatically open, unless the disciplinary panel decided to close it for a specific reason.
Mr Swart explained that most panels would only have two to three people sitting on them, and it would be impossible to have a panel that met the criteria set out in the current clause 37(4)(c). He also sought clarification on what “due regard to” meant, and suggested delegating disciplinary committees down to the provincial level. He was not opposed to hearings being public, but believed disciplinary matters were internal matters.
Ms Smuts said that transparency was necessary because of the loss of confidence by the public in the legal profession. Clause 37(4)(c)(iv) was clear on the desire for a public presence. There were also many complaints within the GBC, and these should be dealt with by each chamber.
Mr Daya gave some perspective on the number of complaints lodged each year. In 2012, in the provinces of Gauteng, Mpumalanga, Limpopo, and North West, 8 000 files were opened for investigation, and 203 disciplinary inquiry committees were convened. Many of the complaints were thus disposed of and resolved through internal processes.
Mr Jeffery said that what was envisaged by the wording “due regard to” in sub-clause 37(4)(a) did not mean that every point must be met, but these points must be taken into account. He was not sure about the purpose of 37(4)(a), and could not find other references to members of the public having access, so this point needed to be clarified. He imagined the establishment of disciplinary committees in each province where the offence took place.
Commenting on the statistics presented by Mr Daya, Mr Jeffery suggested that perhaps the 8 000 complaints were resolved to the satisfaction of the GCB or Law Society, but not necessarily to the satisfaction of the complainants. That was why he asked that records of complaints be made available.
Mr Swart was still concerned with the composition of the disciplinary committees. He pointed out that some panels may consist of just one investigator, and that if a Committee slipped up procedurally, because it could not meet all of the prescriptions in clause 37(4), offenders could be dismissed, based on a pure technicality.
Ms Schäfer asked if medical disciplinary panels were open to the public. Whilst she agreed that there should be transparency, she had reservations about making the actual disciplinary hearings open to the public, and asked what exact information would be published, and when.
Mr Bassett pointed out two provisions that detailed the complainant’s right to information, clause 37(8) and clause 47, but he acknowledged that these were limited and needed to go further.
Mr Skosana explained that the entire complaints procedure should be read in conjunction with the fact that Council should have already established committees. The Council itself dealt with complaints, many of which were dismissed at a certain point. It was not until the Council found that a transgression may have occurred that had to be dealt with by a Committee, that a formal investigation would unfold. In line with what Mr Jeffery was suggesting, the Council would establish a disciplinary committee, through a written resolution that a prima facie case had been made out, and then, for example, if the complaint arose in the Eastern Cape, it would be conducted at the provincial level. The Council established the committees, though the committees would not necessarily consist of members of the Council. Members of the public could participate in the process, but their role had not been clearly defined in the Bill as that would be determined by regulations. Members of the public could not be a part of the investigative committee (that would be reserved for judges), but could be a part of the disciplinary committees. He added that judges and members of the profession would also be consulted.
Mr Jeffery said that sub-clause 37(4)(a) did not make sense and needed to be re-worked. He believed that the intention behind the provision was that committees should be set up where the complaints arose. However, he disagreed with Mr Skosana that perhaps there was an appropriate place for members of public to serve on the investigative committee. Sub-clauses 37(5), 37(7), and 37(8) did not belong in this part of the Bill, because they dealt with appeals, and they should be moved. He did not understand the LSSA's submission on clause 37(5). Regarding the disciplinary hearing and public access, he proposed three options- firstly, that the public may apply to the chair for access, secondly, that the complainant should always be allowed access for the committee set up to deal with that specific complaint, or, thirdly, that access should automatically be open unless the Committee had reason to have a closed session.
Mr Jeffery added that in respect of the medical profession, the committees had decided that hearings would remain open to the public unless the Chair decided otherwise.
Ms Schäfer maintained her point that until a formal hearing was announced, the complaint should not be published on any website.
Mr Swart spoke to the point about the attendance of complainants at the hearing, and said that a defendant may object to witnesses being present for all testimony, as one witness may influence another.
Mr Daya said that the investigative and disciplinary procedures were similar to those in a criminal court case, but the complainant would be “represented” by the relevant Law Society prosecuting on the complainant’s behalf. Witnesses were not expected to be present for the total duration of the hearings.
Mr Jeffery disagreed strongly, saying that the person prosecuting on behalf of the Council was not representing the interests of the complainant, and it was impossible to compare the disciplinary hearings to a typical court case, as they were different. He felt strongly that in principle, the complainant should have an opportunity to be present.
Mr Jeffery said that the issues dealt with presently under sub-clause 32(5) should be moved to fall under clause 40, which dealt with the proceedings after disciplinary hearings and remedial action.
Mr Jeffery asked if the complainant had a right of appeal. Currently, the Bill stated that the complainant would have to go to the ombudsman, but the complainant should have the opportunity to appeal as well.
He noted that the LSSA had objected to the provision on penalties, namely, the suspension of Fidelity Fund certificates, and suggested that these decisions should go to the Council, or regional councils, but that may raise other internal politics. If the disciplinary committee considered the case, it made sense that it should also consider the penalty. If the guilty party did not like the decision, s/he could appeal. He asked how this compared to the medical disciplinary panels.
Ms Smuts suggested that it might be possible to include something similar to what was provided for under the Judicial Service Commission Amendment Act, pending a full investigation into how the medical councils were conducted. She noted that presently, a disciplinary tribunal made a recommendation to the full Judicial Service Commission (JSC), who made the final decision on misconduct, not a disciplinary committee that was put together ad hoc.
Mr Swart would like to see an addition to clause 42 that allowed for evidence in mitigation of sentence to be introduced, as well as a provision to allow for evidence in aggravation of a sentence. He also agreed with the LSSA's objection to sub-clause 40(8) that every offence and allegation be published in the Government Gazette, pointing out that this would involve massive costs, and this was not done for more serious criminal or medical offences.
Mr Jeffery responded that those proceedings were already detailed elsewhere and were matters of public record, but the disciplinary committees were not readily accessible to the public. Having the decisions published on the website meant that they would be readily available to the public. He made the point that very few of the public read the Government Gazette.
Ms Sheetal Roopram, State Law Advisor, read from the Medical Professionals Act of 1974, subsequently amended in 2009, to explain the procedure in medical matters. This Act stated that should the professional conduct inquiry find the healthcare professional guilty of misconduct, the committee's decision was final, unless either party lodged an appeal. A healthcare professional found guilty of misconduct may be subject to penalties of a fine, reprimand, suspension from a period of practice, removal of name from the Register for a compulsory period of professional service, payment of cost of the proceedings, or other recourse. The Professional Conduct Committee could not order the healthcare professional to make financial restitution to the person lodging the complaint, but it was specifically provided that members of the public who wished to lodge a complaint through the HPCSA may also pursue civil litigation independently.
Mr Jeffery said he agreed with this procedure, and understood it to be aligned with the provisions in the Bill, in that the final decision lay with the disciplinary panel, and not the Council.
However, he did want to raise a concern with sub-clause 40(3), which presently stated that, where a person had been found guilty of misconduct, the disciplinary committee could “order him or her to pay compensation, with or without interest to the complainant.” The GCB objected to that, although the Department had no objection. The example of the medical profession was that this could be pursued through separate court action. He did not understand why there was a problem with awarding compensation to the complainant.
Mr Daya asked if sub-clause 40(3)(a)(ii) dealt with Mr Jeffery's question.
Mr Jeffery clarified that the GCB objected to 40(3)(a)(i), and his difficulty was that many citizens would not have the funds to go to court, and perhaps the issue was with no limits being stated.
Adv L Adams (COPE) asked how decisions were to be made. Clause 37(6)(a) stated that tribunals must consist of “not less than three and not more than five” persons. In the case of a four-person panel, the decisions may be split.
Mr Jeffery responded that clause 39 dealt with how disciplinary decisions would be taken.
Adv Adams asked if the national and regional demographic requirements were phrased in the alternative, or as an “and” requirement.
Ms Silkstone referred to the Department's response to the LSSA's submission on clause 40(8), and asked what constituted a “minor offence.”
Mr Jeffery said that he had indicated his preference that all penalties, offences and findings needed to be made publicly available, although they did not have to be gazetted, and that no 'minor' offences should be excluded.
Mr Swart asked if an additional provision could be added under sub-clause 40(3)(a)(iv), that the Council, on behalf of the complainant, could apply to the High Court for an award of compensation to the complainant.
Mr Jeffery said he did not think that there was not a need for a separate process, like that of the medical board. If the disciplinary committee felt it was appropriate, it could recommend that the Council approach the Court for a compensation order.
Mr Jeffery returned to the question of the composition of the panel, and suggested that there had been a misreading of the phrase “with due regard to”. There was no specific number of people to sit on a disciplinary committee, but only the appeals committee specified this number. It was possible that a disciplinary committee may even be one person, so perhaps it did need to be more explicit. The clause should also set out that decisions should be taken by majority vote, and if there was a split vote, the Chairperson had the deciding vote. However, the Chairperson should not be decided upon by the Council.
Ms Schäfer said that the concerns about composition were justified.
Mr Swart argued that 'with due regard to' created an element that had to be satisfied, and still opened a loophole, because it was objectionable and determinable by the opposing side. An astute lawyer could ask what exactly was done to comply with the criteria, and the panels would have to satisfy them that there was a concerted attempt to fill each criterion.
Mr Schäfer asked if there was any provision for fines, which was separate from compensation.
Mr Daya said that the Attorney's Insurance Indemnity Fund would determine compensation where an attorney had been negligent. The Fidelity Fund itself provided cover against theft. He was concerned at the suggestion that the Council assist the complainant with the High Court process, because this created more obligations, and he wondered also if the full available remedies should be made known to the complainant. It was a grey area.
Mr Skosana said that not every complaint would raise the need for a High Court order, particularly if the compensation requested that was lower than the court costs.
Mr Jeffery said that not every complaint would be about negligence or theft of trust money, so compensation would arise only for matters outside of these issues. Nobody was suggesting that the High Court must address each compensation request, but the process should go through a court. A disciplinary committee could not determine compensation.
Mr Daya asked for further clarification.
Mr Jeffery cited the example that a case may involve some other form of professional misconduct, apart from theft of trust funds.
Mr Skosana asked what Mr Jeffery was suggesting if the disciplinary matter was against advocates who were not covered by the Fidelity Fund.
Mr Daya also asked Mr Jeffery what exactly he was suggesting that the Council would have to do, and whether “assisting” meant acting as amicus curiae.
Mr Jeffery confirmed that he was suggesting something similar, so that the complainant was not left to purse the matter alone.
Mr Skosana suggested leaving this matter over to be discussed at a later stage. He wondered if perhaps a provision could be included such as that the Council may award compensation, subject to confirmation by a court. This would ensure that there were no errors in the process.
Mr Daya explained again that there were already two avenues for compensation. If an attorney stole trust funds, the Fidelity Fund would cover the claim. If an attorney was negligent, a complaint could be lodged with the Attorneys Insurance Indemnity Fund, who would determine, and pay out, any appropriate compensation to the complainant.
Ms Smuts suggested, on the issue of representation, that sub-clause 37(4) be re-worded to read “...the need for investigative committees to be broadly reflective of race, gender…” (and other criteria could be inserted here) insert other criteria here) “must be considered...”, because that was how it was defined in the constitution. She asked if the need for geographic and/or regional representation was really necessary.
Mr Jeffery suggested there was still a need for geographic and regional representation. He also suggested that clauses 41 and 43 be left out of this part, and dealt with in Chapter 5; and sub-clause 42(3) should be made subject to 44.
Chapter 5: Legal Services Ombud
Mr Jeffery said that powers and functions given to the Legal Services Ombud (the ombud) under clause 41 were very broad and wide. The role of an ombud was meant to be a watchdog that made quick enquiries, and submitted recommendations for the Council to take up. However, the ombud has powers and functions under clause 49 that were more akin to disciplinary committees, and this was a cause for concern. He asked what happened to the recommendations that the ombud made and whether they were enforceable.
Ms Smuts said that this ombud was actually an administrative tribunal.
Mr Jeffery disagreed, saying that it was one person.
Ms Smuts suggested that the ombud should be a retired judge.
Mr Jeffery replied in that case, the scope of work the ombud would be expected to do would be more limited.
Mr Skosana explained that the appointment of the ombud was made subject to various requirements, including taking into account the opinions of those in the profession. The Department looked at the ombuds in the banking sector as a model, and was specifically looking for someone stronger than the profession itself, because of public mistrust in the field, and the institution of ombud was intended to be enhanced, by the powers provided in clause 41, which was aimed at restoring public trust. The Department was also guided by the fact that most people did not have the means to go to court, so there was a desire to create an institution that would more easily be accessible.
Mr Jeffery suggested that the Committee Researchers should conduct a comparative study with the ombuds in the banking sector, and specifically examine what the financial institutions did in the case of appeal. He added that the key difference between the two fields was linked to the position of the ombud and the court where there was an insurance complaint, and the extent of the enforceability. He was concerned with the giving the ombud these powers, without ability to appeal.
The Chairperson reiterated the concerns of power, enforceability, and appeals under the ombud, and suggested that there might still be an opportunity for the National Assembly to play a role.
Mr Bassett asked if clause 49 should be left over for the moment, until the Committee had heard further from the Researchers.
Mr Jeffery said he wanted a review of clause 41. He further asked what would happen when a complaint was investigated under clause 49(1)(b), and to whom the reports would be made. He believed that the Department should revisit all of the powers under clause49 (1) that did not set out reporting to someone. For the rest, there should be reports to the Minister or the Council. All recommendations and reports should be made public. He asked if the staff under the ombud would be public servants.
Ms Silkstone pointed out that sub-clause 50(4) said the term of the ombud was determined by the President.
Mr Daya noted that the LSSA had made a recommendation that the ombud serve for one term of five years, with an option to have the term extended for up to five more years.
Ms Smuts agreed with that proposal.
Under clause 51, Ms Schäfer suggested that Parliament should be involved in the event of suspension.
Ms Smuts suggested automatic suspension for anyone under investigation, pending conclusion of the investigation.
Mr Jeffery asked how much state interest there was in the ombud. He suggested that the Committee hold over making any decisions on appointment and suspension until the Researchers had completed their study on the banking ombud.
Ms Schäfer said she would prefer to see something along the lines that the President could only suspend the ombud with the approval of Parliament.
Mr Skosana said that good practice suggested that it was always best to separate powers to suspend pending investigation, from powers of final removal.
Ms Schäfer suggested the power to suspend pending a recommendation from the Council, but other members disagreed.
Mr Jeffery suggested that a study should also be conducted on the United Kingdom and Australia models. He suggested that it might be easier to deal with provisions that dealt with recommendations by an ombud.
Mr Swart was concerned that the ombud could become another layer of the appeal, and people might forum-shop if they did not like the decision. He asked how the decisions of the committees would be reviewed.
Mr Jeffery said that clause 41 allowed for a disciplinary and appeal committee, and the ombud could still investigate, but should not be allowed to overturn.
Mr Kweta said that the reason clause 41 was included under Chapter 4 was because it dealt with investigative and disciplinary committees.
The Chairperson clarified that Mr Jeffery was actually asking if there was a need for clause 41.
Mr Jeffery said that the powers provided for in each of clauses 41and 49 were quite different, and perhaps there was a contradiction. He suggested that the Minister of Finance (or National Treasury) should be asked to determine the number of staff for the office, and salaries, and the Minister of Justice should set the conditions and terms for the Director.
Mr Bassett said that when discussing the matter on previous occasions the Committee had asked his Department to return with specifics, and he said that he was still aware that these were needed, as well as specifics on clauses 52(2)(b) and 52(3).
The Chairperson said that the Minister would determine the number of staff. He pointed out that clause 52(8) charged the Director-General of Justice as the Accounting Officer.
Mr Jeffery argued that the Bill could not just make the Director General the accounting officer without providing the necessary resources to carry out the work, of staff and a budget.
The Chairperson pointed out that clause 52(13) made no mention of the Department of Public Works, quipping that this was only dealing with leases at the moment, and that clause 52(14)(b) would cast a duty on the interim Director General.
Ms Sithole believed that the Director should be the accounting officer, but accountable to the Director-General.
Mr Skosana explained that there had been much deliberation on this issue. Initially, the judges had wanted an ombud that was completely independent of the Department of Justice, but the end result was to have the Director General named as the accounting officer.
Ms Silkstone asked for clarification since the matter involved the creation of a juristic office and independent ombud, yet the funding was coming from the State.
The Chairperson asked whether funding coming from Parliament would have any impact on the independence of the ombud.
Mr Skosana answered that part of the precautionary measures taken were that funds should be approved by Parliament, that the Director-General, would have to report to the Portfolio Committee, not the ombud, and the funding would work similarly to what happened with LASA. The ombud would also work with a transitional council.
Ms Sithole asked if it was stated in terms that earmarked funds could not be used for any other purpose, unless permitted by the Minister of Finance.
Ms Schäfer asked whether there was any more funding found. The Department of Justice's budget, for the whole country, was only half of the budget for the City of Cape Town.
Mr Skosana explained that the costing had been done and would be presented to the Committee in due course.
Chapter 6: Attorneys Fidelity Fund
Mr Bassett referred Members to clause 54 and said that many of the provisions in this Chapter were very similar to the corresponding existing provisions in the Attorneys Act, insofar as they related to the Fidelity Fund and the handling of trust monies.
Mr C Erasmus suggested that the Fund must be named "Lawyers Fidelity Fund". The Department had proposed the name of “Legal Practitioners’ Fidelity Fund.
The Department had further suggested a R5 million cap on individual claims, with the provision that the Minister could raise the cap from time-to-time, but the profession may have some reservations. There was a provision in the existing Attorney's Act that provided for a similar situation, where money that could not be paid out for a single claim now could be paid out at a later stage, when it became available.
Mr Jeffery said that this suggestion was not helpful if a claim was so big that it had the potential to extinguish the fund, either now or in the future.
Mr Daya explained that the nature of the Attorneys Fidelity Fund (AFF or the Fund) was that it was set up, in the public interest, to manage claims as they came up, and the continuity of the Fund was important. The Fund also provided considerable bursary funding to students. Given the direction in which legal practice in South Africa was moving, including transactions with multi-national corporations, it was realistic to introduce capping.
Ms Schäfer asked if multi-disciplinary claims would also be applicable, or if they had to be independently insured.
Mr Daya said the emphasis was on multi-national corporations and transactions.
The Chairperson thought that there were no objections, in principle, to capping.
Ms Schäfer asked why the amount was capped at R5 million, and was told by the Chairperson that this figure had been suggested by the AFF.
Ms Smuts suggested that the relevant attorney should be held personally liable, even if dealing with multi-national corporations.
Ms Schäfer said that there was no obligation on firms to take out any additional insurance.
Mr Jeffery said that the principle concern was that the Fund could be wiped out, as had happened in New Zealand, and he agreed that there should still be a right of recourse against the attorney and his or her firm, even if there was a cap, and the AFF should assist the complainant.
Ms Silkstone said that she did not think attorneys could insure themselves.
Mr Daya said that the AFF had noted that only two historic claims, within the last six years, would be affected by the cap of R5 million, so it was likely that 99.9% of claims would be unaffected.
Ms Silkstone asked if the AFF had the right of recourse against an attorney.
Mr Jeffery said that the accounting line was between the AFF and the Council.
Mr Swart said that funds that were put in trust for investment purposes should not be covered by the AFF when they related strictly to investments.
Adv Adams asked if 'parent' could also include 'parent-in-law'.
Prof L Ndabandaba (ANC) said that was a question of interpretation for the court.
With regard to clause 57, Ms Schäfer asked who would be making the final decision whether money had been stolen.
Mr Jeffery pointed out that the LSSA and AFF had made a submission on clause 57(1)(e). They believed that the exclusion of liability in clause 57(1)(e) should not be restricted, in the manner presently set out in the clause, but that the AFF should not be liable for the theft of any money placed with an attorney purely for investment purposes. The provisions of section 47(1)(g) of the Attorneys Act should accordingly be reinstated in the Bill.
Mr Bassett said that this submission followed what was currently included in the Attorneys Act.
Mr Swart said that although the provisions seemed similar, there was in fact not the same protection, because it would take effect only after a warning issued by the Council. The current provisions of the Attorneys Act were protective for the AFF.
Mr Jeffery said that the AFF would not be liable if the Council warned against continued use of that service. If the warning only came after the theft, the AFF would be liable. Mr Jeffery said there needed to be a distinction drawn between money that was, for instance, paid into a trust account as a deposit for a conveyancing transaction, which was to be invested pending the finalisation of the transaction, and money that was simply paid to a lawyer, for the sole purpose of investment. The latter would not be covered by the AFF because the lawyer was offering an investment practice, and not legal services.
Mr Daya said that sub-clause 47(1)(g) of the present Attorney's Act excluded the AFF from liability for any investment purposes, so he agreed that deposits may be placed with an attorney, and protected, but not investments. The experience of the AFF over many years had been that monies deposited purely for investment had been very large and could have threatened the existence of the Fund.
Mr Jeffery said there was a difference between monies given purely for investment purposes and monies held for investment until the money was transferred for its main purpose. If the client did not receive the warning, the AFF should cover it. He said that clause 57(1)(e) should be worded more clearly.
Mr Bassett said that people who used trust accounts purely for investment purposes generally kept the interest accrued, and it would not be repaid to the AFF.
Mr Daya wanted to link clauses 86(3) and 86(4), where the client instructed the attorney on transactions.
Mr Jeffery pointed out that clause 86(4) included funds for investment purposes. Whilst the Committee did not want to turn attorneys into an investment bankers, it also did not want to stifle normal transactions.
Mr Daya said the Department would report back, on the following day, about money held in trust, with interest to accrue for the benefit of the client.
Mr Bassett confirmed that the drafters would look at wording this more clearly.
Mr Jeffery pointed out that the LSSA had, in its submission, made the point that Attorney's Act currently excluded the AFF from liability for theft for monies deposited solely for investment purposes. The Committee seemed to be in agreement, but he wondered why there was a change now being suggested, particularly since the provision had existed in the Attorneys Act for many years, and not harmed anyone, so there was reason to keep it. The intention of clause 57(1)(d) was to take away the liability of the AFF only where the person was warned and did not heed the advice. However, if the individual did not receive the warning, the AFF could still be held liable. He suggested that the existing provision of the Attorneys Act, which seemed to be working well, should be repeated here, and that clause 57(1)(e) should be reworded. , but if the individual did not receive the warning, they could not be held responsible. He wanted the existing restriction that was in the Attorney's Act to remain, since it seemed to be working to remain. If 57(1)(e) needed to be amended to reflect that, then that should be done.
Ms Schäfer believed the current suggestion did not provide much protection for the AFF and asked how the AFF was supposed to know where clients were investing money.
Mr Jeffery said that a further problem was how to prove that, if a warning was issued, the particular client received it. He was suggesting that the protection must apply, unless the Council or AFF wrote directly to the client.
The Chairperson responded that a further problem was that this would apply only for existing clients.
Mr Bassett further noted that the AFF had made a submission, in relation to clauses 58(1)(i) and 58(1)(j), that the Department must be qualified to ensure that the Fund had first preference in respect of available resources. The Department responded that the AFF would, each year, make an actuarial determination on what it could or could not afford to pay, depending on available resources, and then pay. He pointed out that the intention behind the provision was that the Council should not be “held to ransom” each year, which could affect the Council’s operations.
Mr Jeffery did not understand the AFF’s objections, saying that its expenses were covered under the provisions.
Mr Daya explained that each year there would be a material determination done, where the board interrogated what available resources there were, and balanced these against the Council's requirements and requests. He agreed with Mr Jeffery that the AFF was covered in how it determines what was available and there could not be a particular year where the funds were so tight that they would not do any payouts.
Mr Jeffery asked for more explanation around clause 58(1)(l) submission.
Mr Bassett explained that was related to the liability of the AFF. The AFF had been refunding bank charges. The AFF had suggested that these should in future be restricted to clause 86(2) and (3) matters, since in principle the question was why the AFF should be paying for upkeep of a trust account.
Ms Schäfer asked if attorneys could recover the cost of the fees incurred in operating the trust account.
Mr Bassett answered that the AFF did not want to reimburse attorneys unless the interest on those trust accounts was paid to the AFF.
Mr Daya made a distinction between a “trust”, which was a legal entity, and a “trust account” and stressed that the Bill was speaking to a trust account.
Mr Jeffery referred to clause 63(1) and suggested that the board members should be selected by the Minister, in consultation with the Council. He did not believe that the Council should be making selections on its own. Perhaps the Minister could call for nominations for the vacant positions.
Mr Skosana agreed that this could be written in.
Mr Bassett pointed out that in relation to both clause 64(1)(e) and 87(2)(a), the LSSA had expressed strong opposition.
Mr Daya confirmed that the LSSA currently had exclusive power in this area.
Mr Jeffery agreed with the Department that the first responsibility lay to the AFF. He believed there was potential for conflict in this area, since the board was responsible for the Fund and a majority of the members on the board were practitioners.
Mr Swart believed that clause 87(2)(a) was fine as it was, since it allowed for either the Council or the board to do the inspection.
Mr Jeffery noted, in relation to clause 69(1)(d), that he disagreed with the AFF submission that the Chief Justice should be in charge of removing persons from the board, but suggested that the issue merely be flagged as one to return to later. He believed that there needed to be a measure of institutional independence for the Board, and having the Chief Justice involved may cause a conflict of interest.
The meeting was adjourned.
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