Legal Practice Bill: Departmental responses to public submissions: clauses 74 to 119

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Justice and Correctional Services

26 June 2013
Chairperson: Mr L Landers (ANC)
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Meeting Summary

The Committee started the meeting by discussing clause 69(1)(d), which had been flagged from a previous meeting. Questions had been raised about the relative powers in relation to vacation from office from the Attorneys Fidelity Fund Board (the board), of the board and Council. The Committee agreed to flag, for further discussion, questions around the number of Ministerial appointments to the Board, and also discussed the composition of the Council, in terms of the representation of advocates and attorneys.

The Department of Justice and Constitutional Development continued to present its responses to public submissions on the Bill, from clause 74 to 119. In relation to clause 74, two submissions were made about contributions to the Attorneys Fidelity Fund (AFF) and Council, but the Department did not support either. It did not support the concern by the AFF that clause 75(3) suggested that the independence of the AFF would be undermined, as both the Minister and Council clearly had an interest in receiving reports from the Fund. The Department agreed with the suggestion of the Law Society of South Africa (LSSA) on clause 84(1), to amplify that all attorneys who practised for own account, in partnership, or as a member of a juristic entity, must hold a fidelity fund certificate whether or not trust monies were held at any particular time, as this would clarify that all moneys received must be channeled through the trust account. Members also pointed out that the wording must be changed to include advocates who had applied for fidelity fund certificates, and thought that clauses 84(1) and (6) should be cross-referenced. The Department was asked to do research and revert to the Committee on the position of law clinics, or Legal Aid South Africa, who received costs awards. Clause 84(10) was flagged for further discussion. LSSA’s suggestion that wording similar to section 13B of the current Attorneys Act, No 53 of 1979, was also supported. It was emphasised that training on practice management was essential, and it was necessary to ensure that this applied also to advocates wanting to apply for fidelity fund certificates. In relation to clause 85, there was a suggestion that attorneys who were the subject of prior claims against the AFF should have their contributions “loaded” and the Department would look at inserting this into clause 85. Members discussed, but were not in favour of, insisting that fidelity fund certificates be displayed, particularly if no sanction was to apply for not doing so.

The Department undertook to address the apparent contradiction between clauses 86(4) and 64(1)(g)(i),  but Members asked that the issue be flagged for further discussion by the Committee if any interest must be paid over, and, if so, what cap might apply. In relation to clause 87, it was noted that the AFF had asked for a new subclause or wording so that moneys unclaimed after a year should be paid over to the AFF, instead of remaining in a suspense account, where it was at risk. LSSA also asked that the wording of clause 87(5) be widened to enable the Council to inspect practices other than in relation t accounting irregularities. Members agreed that whilst it was appropriate that both the Council and AFF have inspection powers, this was probably better included under disciplinary clauses. Members agreed with the AFF that the power to apply to court should not vest only in the Council, but also in the Fund, to avoid increase to the Fund’s risk should timeous steps not be taken. In relation to clause 90, the LSSA had said that in practice, although the current Attorneys Act also allowed for the Master to appoint a curator bonis, where an attorney had died, this was not done in practice, as it was swifter to make application to court, particularly since no regulations had ever been promulgated. The references to “judicial management” in clause 90(3) would be removed to bring the Bill in line with the Companies Act. There was an extensive submission by UNISA on clause 91, but the wording followed the existing Attorneys Act, and Members did not comment on the submission. Technical amendments would be made to clause 92. The objections of UNISA to clause 93 were dismissed.

Members noted that most of the submissions on clause 94, which related to regulations, concerned whether the Minister should act “in consultation”, to avoid unilateral decisions by the Minister that might infringe on the independence of the profession. The Department was to present a schedule of all regulations, and matters currently not mentioned for making of regulations,  which would include flagged issues such as community service, remuneration and training of candidate attorneys. The general feeling was that the current system of articles, during which candidate attorneys were paid, was working adequately, but there were problems with pupilage, which was unpaid. Members wanted further discussion on who might pay for pupils, whether there should be standard rates, and whether this might detract from articled clerks being taken on. Clause 96 was discussed in detail, as a number of submissions had been made on the composition of the Transitional Legal Council, and the proportional representation. The arrangements in the attorneys profession, and the reluctance of the General Council of the Bar to reach a compromise in relation to the representation of advocates, were outlined, as well as detailed suggestions from the Competition Commission on the rules, fees and code of conduct. The Department was asked to provide more detail on composition of the independent advocates’ associations at the next meeting. The staffing, assets and source of payment under clause 98 were to be discussed further. Members were divided in their opinion whether the Minister should play a role in appointment of the chair and deputy chair of the Council, and whether this affected its  independence. They also questioned whether any other body than the Transitional Council should be able to decide on removal of a member. The purpose of clause 108 and the powers of the Minister in regard to election procedures were clarified. Members asked the Department to do more research on the training currently offered by the advocates’ profession, for purposes of clause 111. It was clarified that clause 113 was drafted on the basis that the provisions applied only to the practitioners, not to legal advisers, but the Department did not support the submission by the General Council of the Bar, which would entrench separate regulatory regimes. It was decided that any further discussion on fusion of the professions should be held over. The Department was asked to work now on producing a re-drafted Bill, and further reports, by the third week of July.

Meeting report

Legal Practice Bill: B20-2012: Deliberations on clause 69
The Chairperson reminded Members and the officials from the Department of Justice and Constitutional Development (DoJ&CD or the Department) that it had been agreed at the last meeting that clause 69(1)(d) would be flagged for further consideration.

Mr J Jeffery (ANC) said that the issue with clause 69(1)(d), which related to the Council, was that, as presently framed, the person who nominated a member could also remove that member. However, it must be remembered that the Council nominated all its appointees, except the two nominated by the Minister. If the new Legal Practitioners Fidelity Fund (as it had been suggested that it should be named) was to have true independence from the Council it should not be dependent on the Council’s decision on the withdrawal of members. He was also concerned with the wording around who determined the incapacity and incompetence of a member. Clause 69(2) said that it was up to the Funds’ board (the board) to institute proceedings for the removal of a member, but it was not spelt out. His proposal was that clause 69(1)(d) should be deleted and the factors for revocation be clearly set out, with this decision up to the board. There seemed little point in having a separate board if everything was controlled by the Council.

Ms D Schäfer (DA) asked who nominated the members before the board was appointed.

Mr S Swart (ACDP) wanted to flag the question of the number of ministerial appointments, in respect of clause 63, relating to nominations and appointments. The Transitional Council had two ministerial appointments out of 21. He said that he did not have a firm view on the ideal composition, but wanted the Committee to think on the point and discuss it at a later stage.

The Chairperson said that it was important to note that the board was separate from the Council.

Mr Swart said that he understood that, but the board numbers were different from the Council; there were three out of 21 Ministerial appointees for the Council and two for the Board. It seemed to be over-weighted as far as the Ministerial appointees were concerned. There was a need for consistency when it came to numbers.

Mr Jeffery said that he did not have a problem with the submission by Mr Swart, and the Committee could leave it up to Mr Swart to come up with a proposal in that regard. Looking at the board on its own, two out of nine was less than a third. Having only one member appointed by the Minister would be limiting the numbers more, and his fear was that this might pose the risk that it would not being independent from the Council.

Mr Jeffery asked the Committee to return to his proposals on clause 69(1)(d). He said that he was proposing two issues. The first was to state clearly that with regard to the vacation of office, it was the Board that took the decision whether the criteria had been met and the person had to be removed. The second issue was that the nominating body did not have the right to withdraw its nominee.

Ms Schäfer said that there was definitely some reason behind the insertion of such clauses. It would be good to know what the function of such a person was on the board. If the nominating body was being represented on the board, then this entity had to take a certain level of account for the interest which was being represented.

Mr Jeffery said that if that was the case then there was no need for a board.

Ms Schäfer said that the members of the board were there to represent certain interests and if such interests were not being represented, the nominating body should definitely have a right to revoke such representation.

Mr Jeffery said that Council effectively determined 7 out of the 9 people on the board. If the council could just withdraw people at will, then there was no independence.

The Chairperson noted that Mr Jeffery was making a point as the independence of the Board had to be preserved.

Mr Jeffery said that it was true that legal practitioners were best placed to serve on the Council and it was also acceptable for them to be in the majority. However, they had to be given the space to do their work without having the Council breathing down their necks. The current differences of opinion between the Law Society of South Africa (LSSA) and the Attorneys Fidelity Fund (AFF or the Fund) gave weight to the suggestion that there was need for some institutional independence.

Mr Raj Daya, Acting Deputy Director General: Legislative Development, Department of Justice and Constitutional Development, said that in light of the intended amendment to make separate provision for an advocate to hold a Fidelity Fund Certificate (FFC), the Committee might wish to consider that one of the members should be an advocate who held a FFC.

Mr Jeffery said that he was not in agreement with that. The Committee did not know how many advocates were going to want to apply for FFCs. The term “legal practitioner” was open and was not limited to attorneys, and thus could very well already include advocates. The issue of the board was more related to the administration of the Fund rather than the regulation of the practice.

Ms Schäfer said that a possible answer could be to look at tightening up how the members could be removed, which might go in the direction of providing satisfactory reasons. She cautioned against completely eliminating the possibility of withdrawing members of the board. She understood the concerns around members being removed for the wrong reasons, but instead of eliminating that option, the clause could be tightened up, requiring reasons to be given before the withdrawal.

Mr Daya questioned whether, in having the nomination to the board by the Council members, there should also be a provision that the member on the board should also not be a member of the Council.

Mr Lawrence Bassett, Deputy Chief State Law Adviser, Department of Justice and Constitutional Development, said that there was a strong plea that this should not be the case.

The Chairperson thought that this should be included in the Bill.

Mr Daya noted that the composition of the Council was structured so that the members of the Council should not be sitting on the Board. It had to work in both ways, so board members also could not sit on the Council. This was going to guarantee complete separation and enhance independence.

The Chairperson said that this was a good step.

Mr Daya said that he wanted to clarify an outstanding matter on clause 57, which was discussed in the last meeting. He had a brief discussion with Mr Motlatsi Molefe, from the Attorneys Fidelity Fund, with regard to the limitation of liability of the Fund. Mr Molefe said that the Fund covered the trust accounts and liability.

The Chairperson said that the Committee should continue to flag the matter of the withdrawal of members of the board as it was something which had to be carefully reflected upon.

Mr Daya said that any removal had to be in line with the rules of natural justice.

The Chairperson said that it was assumed that the rules of natural justice were observed.

Mr Jacob Skosana, Deputy Chief State Law Adviser: Policy Development, Department of Justice and Constitutional Development, said that if the approach suggested by Mr Jeffery was taken, the involvement of the courts also gave a guarantee that the rules of natural justice would be followed.

Continuation of Department’s response to public submissions, from clause 74
Clause74 – Contributions to the Fund by Attorneys
Mr Bassett said, in relation to clauses 74(1)(a) and (5), that the Department had received a submission from Eskom that the sub-clauses were contradictory, since (1)(a) provided for payment to the Fund and (5) to the Council. Eskom suggested that payment should be made to the Fund. The Department held that the process was that payments were made to the Council, which then paid them over to the Fund. This provision was the same as Section 43(7) of the Attorneys Act, No 53 of 1979.

The Department had also received a submission from C Erasmus. He submitted that all lawyers, including non-governmental corporate lawyers, must be subject to the Fund, except that prosecutors, state attorneys, government lawyers and advocates had to be excluded. The Department pointed out, however, that this commentator later on contradicted himself by stating that it would be advantageous if advocates were also held accountable to the Fund. The Department did not, in any event, support this proposal as it would serve no purpose for these persons to be included, due to the nature of their work.

The Chairperson asked if the Committee had any reactions to this submission. There were no reactions from the Committee.

Clause75 – Audit
The Attorney’s Fidelity Fund submitted that clause 75(3) suggested control of the Board by the Council and was opposed to this as it would undermine the independence of the Fund. The Department responded that it did not agree that this undermined the independence of the Fund.  It merely required the report to be submitted to both the Council and the Minister. Both hade an interest in the report.

The AFF also submitted that the clause must be amended to limit the report to operational reports. The Department responded that it was not clear what was meant by “operational”.

Clause 84 – Obligations of attorney relating to handling of trust monies
Mr Basset said that it was important to look at the comments of the Law Society of South Africa (LSSA) on clause 84(1). The LSSA commented that the Bill introduced uncertainty into the requirement for holding Fidelity Fund Certificates, and would lead to the mingling of business funds and trust funds. It was recommended instead that the wording read that every attorney who practiced for his or her own account, or in partnership, or as a member of a juristic entity, should be required to hold a fidelity fund certificate, whether or not he or she held trust money or trust property at any particular time.

The Chairperson asked if the Department agreed to this proposal.

Mr Bassett said that the Department agreed to the proposal.

Mr Jeffery pointed out that advocates who received FFC had to be included under clause 84(1). He further indicated that, in relation to the LSSA comments under 84(6), employed attorneys (professional assistants and associates) did not operate on trust accounts and so the requirements should apply only to the attorneys referred to in clause 84(1), which, he felt, was not spelt out specifically enough, to make it clear that this subclause would not apply to attorneys employed by firms. He was not sure where the point of mingling of business funds and trust funds came from.

Mr Daya replied that what happened in practice was that it was possible to get a firm that dealt exclusively with criminal matters and the trust account could be bypassed, by simply saying that any fees paid had already been earned. This opened up abuse to bypass the trust regime, by paying funds directly to the business account. What the AFF was saying was that, irrespective of the kind of practice being run by an attorney, it would be compulsory to have a FFC and all transactions must be recorded properly.

Mr Jeffery noted that this was spelt out in clause 84(1), but he still did not understand what the LSSA’s concern was about mingling of trust funds and business funds.

Mr Daya replied that an attorney who had done a criminal matter could argue that the funds that he received after doing the case would not have to be held for any time in the trust account, because the money was strictly in respect of fees already earned, so they were not moneys that had to be paid into the trust account. The LSSA wanted to avoid a situation of vague accountability, where, for instance, the mandate of the attorney might be terminated and then a dispute could arise whether the attorney had been paid for services already rendered or whether the client’s money should have been paid into the trust account. The LSSA wanted to close the “net” or practice of taking funds directly to the business account, by saying that no matter why the money was paid, it had to be channeled via the trust account.

Mr Bassett wondered if the LSSA was not simply saying that every attorney who practised for his own account must be in possession of a Fidelity Fund Certificate.

Mr Jeffery agreed. He thought that all that was needed was to cross-reference clauses 84(6) and 84(1).

Mr Swart said that he did not see any reason why a law clinic or Legal Aid would need a trust account. They did not receive money on trust at all, and they were in fact excluded from doing property work or Road Accident Fund matters.

Mr Daya said that the Department was going to investigate the proposal. He suspected that the legal clinics and the Legal Aid South Africa had a provision of ceding cost orders in favour of the board. These entities would handle matters of individuals, subject to the means test, but also had cession provisions in their favour for cost orders. The Department would find out exactly what the situation was, and how it worked, and revert to the Committee.

Mr Jeffery said that it seemed that there were good grounds for the specific exclusion of clause 34(7) and (8) entities from having to hold FFCs. These clauses related to the forms of legal practice, and included non-profit juristic entities and law clinics. He agreed that the Department should investigate further and brief the Committee.

Mr Swart asked what would happen if a law clinic won litigation, and was going to be paid a fee, and whether this would have to be paid to a trust or business account.

Mr Jeffery said that this point would be included in the investigations by Mr Daya.

Mr Jeffery noted that Legal Aid South Africa (LASA) had also raised questions about a person in the permanent employ of the LASA, and thought the current wording was fine. He was not quite sure why the Department was agreeing to the submission.

Mr Bassett said that he would also have to revert to the Committee on that point, as he did not recall what the reasoning was. He would speak to Ms Wilna Louw, State Law Adviser, and report back.

Mr Jeffery said a person who was a full-time employee of LASA would not need to have a FFC, but obviously if that person was also running a separate attorney’s practice, then a FFC would be required in terms of clause 84(1).

On clause 84(10), Mr Jeffery said that he noticed that the South African Human Rights Commission (SAHRC) wanted to be bound by this.

The Chairperson asked what was meant by “bound”.

Mr Jeffery said that SAHRC wanted the provisions of this clause to apply to itself. He noted that the SAHRC was part of the state, and if there was uncertainty, then the term “organ of state” would apply.

Mr Daya asked if it was not important to look at the whole ethos of transactions, irrespective whether an entity was part of the state or otherwise. It could be looked at from the viewpoint that if money was received, in any form, for the purposes of general housekeeping and protection, there should perhaps be a blanket provision providing for a trust account, so that a legal professional could be held accountable.

The Chairperson said that clause 84(10) should also then be flagged for further investigation and discussion.

Mr Bassett read a submission from the LSSA stating that a similar provision to section 13B of the Attorneys Act should be incorporated into the Bill. The Department had no objection and the matter could perhaps be addressed by regulations in terms of clause 94(1).

Mr Jeffery said that it was a basic principle that every attorney who could apply for an FFC must, within a particular period, and after the payment of a fee, complete a legal practice management course. He wondered if that was covered elsewhere by the Bill, and whether the training procedures were set out. The Council determined the training procedures, so clearly it should also determine the legal practice management courses. This was a transitional arrangement but it was not expressly covered. The question of training had been left open for the bodies to determine.

Mr Daya said that there was a need to emphasise the entrenchment of a training practice management course in the Bill. The AFF had made the point that the training must be mandatory. During the training, it was emphasised that an attorney could not simply open a trust account without having passed the training course. Previous investigations and risk management had shown that this particular area was one of the high risk areas, not because attorneys were stealing from trust accounts, but simply because they were not managing the affairs and trust account issues properly. The training was a protection mechanism for newly established attorneys, and would provide them with a good opportunity to succeed administratively. This was entrenched in the Attorneys Act. Because the Attorneys Act was going to be repealed by this Bill, there was sufficient reason to include it under FFC issues. It could be covered in the normal course of trust accounting.

Mr Jeffery asked for clarity on the point. Training requirements and regulation had been provided for, and it was important to remember that this applied to all attorneys and not a specific category of attorneys. He supposed that there was no harm in including this. One advantage was that if there was a separate course called “legal practice management”, advocates who wanted to take out FFCs should also do it. It was expected that the practice management could be included in attorneys’ regular training programmes, but not necessarily under the advocates training programme.

Mr Swart said that he agreed with the proposal.

Clause 85
Mr Jeffery said that under clause 85, UNISA had suggested that where an attorney had been the cause of prior claims against the Fund, such attorney’s contribution should be "loaded". He supposed that this was akin to bad risk insurance. He wondered if this was not covered anywhere else in the Bill.

Mr Bassett said that this issue could be dealt with by the Council, in consultation with the board. He said that clause 85(3) stated that the Council must, in consultation with the Board, determine the amount of the contribution for the ensuing year, if any, and in the event of a contribution being charged, give notice by publication in the Gazette.

Mr Jeffery said that in that case, there should be specific provision that not everybody would necessarily be paying the same amount of money. If someone was a bad risk to the AFF, then the AFF should be entitled to charge that person more, but this discrimination must be specified. It was not so much to do with the risk profile, as with historic claims. This was an example of a factor that could be looked at in determining separate amounts for various professionals.

Mr Bassett said that this possibly could be put in under clause 85(3) or 85(4).

Mr Bassett noted that Eskom had made a submission that it should be a requirement that the Fidelity Fund Certificate should be clearly displayed at the offices of the attorneys. The Department was not averse to this proposal, and it may be prescribed by the Code of Conduct.

Mr Jeffery said that he did not see the point of this submission, and asked what would be done if it was not displayed, and whether a penalty was going to be imposed.

The Chairperson agreed that a penalty could be imposed.

Mr Jeffery said that several excuses could be given, such as that the certificate had fallen down, or been stolen.

Mr Daya asked how Mr Jeffery would propose dealing with advocates who would take money directly from the public.

Mr Jeffery said that the roll of advocates with FFCs was going to be displayed on the website of the Council. The difficulty, with advocates, was where the FFC should be displayed; whether in the reception area, or with the Secretariat, and, once again, how compliance with the provision would be enforced. He added that in addition to the previous excuses, others might be that the certificate had been left at home, or that the frame was broken and being repaired.

Mr Daya said that he had repeatedly, over the last 50 years, visited medical practitioners, all of whom  handsomely displayed their memberships and certificates.

The Chairperson asked if there was a statutory requirement to display those in the medical profession.

Mr Daya responded that the Department could do some research and revert back to the Committee.

Mr Jeffery said that the problem lay in making a rule insisting that something be done, without also providing a sanction.

Ms Christine Silkstone, Committee Content Adviser, said that practice numbers could be written on every official document, invoice or communication.

Mr Jeffery said that the submission was not talking about whether an attorney did or did not have a FFC. It was talking about the display of that certificate, and he was proposing that if this was a requirement, then it must be properly set out.

Mr Skosana said that some judges used to emphasise the necessity for Counsel to make sure they had their admission certificates with them when they appeared in court. That, however, had not been successful and the department had refused the judges’ request that this be included in the Court Rules, as it would have caused chaos, if perhaps someone was not able to be represented because the certificate was not brought with the advocate on a particular day.

The Chairperson said that it seemed that this suggestion was not finding favour.

Clause 86 – Trust Accounts
Mr Bassett indicated that, in respect of clause 86(4), Eskom had commented that the AFF must receive part of the interest generated by clause 86(4) accounts, as it was effectively carrying the risk. However,  the LSSA submitted that the clause contradicted clause 64(1)(g)(i). The effect of these two clauses, read together, was that the AFF may claim part of the interest on money invested on behalf of a client on a temporary basis, provided that it related to a particular legal services transaction. This was contrary to the current position, and amounted to the expropriation of part of the interest belonging to the client. LSSA suggested that clause 64(1)(g)(i) should be amended, to make it clear that the interest under clause 86(5)(b) accrued to the client. The LSSA would support a proposal that part of the interest accruing on the invested funds were to be paid over to the Fund, provided the portion paid over was limited to 5% of the interest.

The Department had noted the submission and the contradiction would be addressed.

Mr Swart said that this issue should be flagged, because the Committee had to decide if any interest had to be paid, and, if so, what the cap was. He said that he remembered reading newspaper reports from clients complaining about the interest on trust accounts. This was not about attorneys taking moneys from the accounts, but the manner in which the monies were invested. He did not have a particular objection to a particular percentage of the interest going through to the AFF. It was a complex issue that needed to be flagged now for further discussion later.

Mr Bassett reiterated that there was a contradiction, and the Department agreed that it was going to look at the contradiction.

Clause 87 – Accounting
Mr Bassett noted that, in relation to clause 87(4)(a), the AFF had submitted that a subclause should be added to provide that unclaimed moneys must, after a year, be paid to the AFF. Moneys lying in suspense accounts posed a risk. The Department agreed and proposed that the phrase “or which is unclaimed” should be inserted after “unknown”:.

The LSSA had commented that clause 87(5) was not sufficiently wide to enable the Council to inspect a practice for any reason other than accounting matters - for example, to investigate allegations of improper conduct. It was recommended that a new clause be introduced into the Bill also giving the Council the power to inspect the affairs of any firm for purposes of an investigation into allegations of improper conduct. The Department responded that it was not clear what improper conduct the Fund could have an interest in, and thought that it might rather be something to provide for under the discipline clauses.

Mr Bassett said that this was another area of tension between the Council and the board. The LSSA was not very comfortable with the situation.

Mr Jeffery said that he was happy with clause the way it was. It was a concomitant power, and it was correct for both of them to have inspection powers. He agreed that it should be included under the discipline clauses.

The Chairperson agreed with Mr Jeffery’s proposal.

Clause 89 – Court may prohibit operation of trust accounts
The LSSA submitted that the power to apply to court should be that of the Council (or a regional council where that power is delegated to it) and should vest with nobody else. The Department responded, however, that the Board had alleged that the Law Societies did not take timeous steps, and that increased the Fund's risk.

Mr Jeffery said that the LSSA was wrong in its submission, and the power should be extended.

Mr Swart agreed with Mr Jeffery.

Mr Bassett said that the LSSA further commented that the reference to a “trust account practice” was incorrect and should be a reference to an “attorney’s practice”. He said that the Department agreed to this comment.

Clause 90 – Appointment of a curator bonis in respect of trust account
Mr Bassett said that as the Bill currently read, the Master had a role should an attorney die, since the Master could, on application by the Council or any other person having an interest in the trust account appoint a curator bonis. The LSSA said that there should be a provision similar to the current section 81(1)(e) of the Attorneys Act. LSSA pointed out that the experience of the law societies was that the Master had to date refused to make appointments under section 78(9) of the Attorneys Act, on the grounds that the regulations referred to in section 81(1)(e) had never been promulgated. The LSSA suggested that, instead, clause 90 be amended to incorporate the procedure which was currently adopted by the law societies - namely, that the rights and duties of the curator were incorporated into a court order, without involvement of the Master's office. This meant that the Council retained control over the appointment of a curator, and the manner in which the curatorship was exercised. This would also avoid delays that could occur in the Master’s office appointing a curator, and would thus enable the accounting records of attorneys to be taken over without delay by the curator.

Mr Bassett said that this seemed to be working well in practice, and he was not very sure why the Master had been given a role to play. The Department had no objection to the submission from the LSSA.

Mr Swart said that although the Master’s work was very important, it was vital to appoint a curator quickly, to avoid money being stolen. He thought that there should not be any objection to the proposal.

Mr Bassett pointed out that in relation to clause 90(3), the LSSA had pointed out that there was still a reference to “judicial management”, which no longer existed. The Department agreed that the words should be deleted as this Bill had to be brought in line with the new Companies Act.  

Clause 91 – Rights of Banks in respect of trust accounts
Mr Basset said that he was not sure how the Committee wanted to handle the submission and response on clause 91. UNISA had submitted that Section 91(1)(a) provided that a bank would not be deemed to have knowledge (by reason only of the name or style of the account) that the account holder of a trust account was not entitled to all the money deposited in the account. It was not clear why banks were afforded this special protection. If a bank knew that money was held in a “trust account” it was surely fair to accept that the bank would know that the money in the trust account "belonged" not to the account holder, but was held in a fiduciary capacity. As it was presently worded, clause 91(1)(a) created the impression that it dealt with a bank’s right to set-off. If so, it could be mentioned specifically. UNISA submitted that it would seem that clause 91(1)(a) attempted to require something more before a bank was to be deemed to have knowledge about the nature, rights and duties of the parties involved in a bank/trust account holder relationship. However, it did not specify what this additional requirement was.

Clause 91(1)(b), provided that the provisions contained in clause 91(1)(a) did not relieve the bank from any liability or obligation "which legally existed". UNISA wanted to know what type of liability or obligation was being referred to in clause91(1)(b). On the face of it, clauses 91(1)(a) and (b) were in conflict with each other.

UNISA further submitted that the provisions contained in clause 91(2) seemed to contradict those in clause 91(1)(a). Clause91(3), in turn, seemed to contradict the provisions contained in clause 91(2). In terms of the common law, a bank had the right of set-off or combination of accounts. The question was whether clause 91 was aiming to alter the common law, and, if so, to what extent, and the other side of the coin was that if it was not attempting to do so, then the reason for including it had to be explained.

UNISA noted that the common-law right of set-off of a bank had come under scrutiny in three recent decisions. The common-law position regarding the bank’s right to set-off was clear. If a bank had prior knowledge of the source and purpose of the funds in an account, and more specifically, if it had knowledge that a third party had a personal claim against the bank for a similar amount to be paid on demand, it would not be entitled to apply set-off. Real - not imputed - knowledge was required. From the wording of clause 91, it was not clear whether or not this common-law principle was being entrenched. If it was the legislature’s intention to alter the common-law position, it had to do so in clear and unambiguous terms.

Mr Bassett noted that this clause was similar to Sections 78(10) to (13) of the Attorneys Act.

The Chairperson asked if Members had any comments, but none were noted.

Clause 92 – Recovery of costs by attorneys rendering free legal services
Mr Bassett said that the Department agreed with the submissions from the General Council of the Bar that the word "attorney" must be replaced by "legal practitioner", so that it would also provide for an advocate too. The GCB also submitted that the word "instructing" must be inserted before  "attorney" in the last line.

Mr Bassett said that the Department also agreed to the submission from the Wits Law Clinic that the words "to that attorney or practice" should be extended to attorneys practising at a university law clinic.

Clause 93 Offences and penalties
UNISA submitted that clause 93 made it almost impossible for an ex-legal practitioner to earn any kind of living, which seemed unconstitutional. The Department responded that this provision was similar to section 83(5) of the Attorneys Act, which had the intention of protecting the public.

Mr Jeffery said that if an attorney was struck off the roll for conduct unbefitting of an attorney, then that person would have to change his plan, and look at other work.

The Chairperson said that such a provision was not unconstitutional.

Mr Jeffery agreed, saying that if it was claimed that this provision was unconstitutional, then it was also unconstitutional to send someone to jail.

Clause 94 – Regulations
Mr Bassett said that he was not too sure how the Committee wanted to deal with the submissions on this clause. Many of the submissions had suggested that the wording in regard to the regulations should refer to “in consultation”, so that the Minister must not act unilaterally, otherwise she or he would be infringing on the independence of the legal profession. Most of the comments were along similar lines.

He reminded Members that the Department had undertaken to do an audit of all instances in which regulations were referred to. The proposal of the Department was that clause 94 should possibly be re-written, to include everything that was not already stated. It would be useful for the Department to get guidance from the Committee in categorising the different regulations. He had a draft document and he could bring it back when the Committee dealt with the issue of community service and all the other issues which were flagged.

The Chairperson summarised that Mr Bassett was saying that the Department should look again at this clause and revert to the Committee.

Mr Daya asked if the Committee was inclined to broaden the regulations to include candidate attorneys, since there had been some discussion about including candidate attorneys’ remuneration and training.

Mr Jeffery said that the difference was that candidate attorneys worked for a firm, while pupils worked for single advocates. He believed that whilst a standard amount should be set for pupils, it was more difficult to do this for candidate attorneys. In terms of training, candidate attorneys got better training because it was multi-disciplinary, across different departments. He believed that it should not be the principal who paid the pupil. The point was that the differences between candidate attorneys and pupils had to be looked at.

Mr Skosana said that another issue to consider was whether it would be proper to set the standards in the regulations because this could be closing the door for the taking of new candidate attorneys in some of the small firms. Doing articles was by and large working, not just training, since they were paid some form of remuneration. It was important to be careful not to throw the current systems – that did work for the most part – into disarray. It was pupilage that was more problematic than articles.

Mr Swart asked if it could be said that there should be one amount for pupils around the country, as applied in England. This could be done if the funds to make the payments were coming from a state institution, but if it was up to the individual advocates or firms who had to fund it, then it might well be that candidate attorneys in the smaller towns would not earn as much as those in the big cities. He personally was not sure what the answer was. Presumably the cost of living and the nature of work varied according to sizes of towns, and the work that the firms received. At the moment, pupils were not being paid, but the main issue was where the funds for payment would be sourced.

Mr Jeffery followed up on Mr Skosana’s point, and agreed that whilst there could be room for improvement the system of articles was wording. It might be helpful to look at the Council guidelines for the payment of candidate attorneys. Payment could be subsidised by the Sector Education and Training Authority (SETA), particularly to address the larger problem that pupils were not being paid.

The Chairperson said that the Committee should bear in mind that any regulation made under this sub-section must come to, and be approved by Parliament.

Mr Jeffery said that it depended on what was contained in the regulation.

Clause 95 – Rules
Mr Bassett said that this clause dealt with a whole range of rules which the Council “may” or “must” make. The LSSA had made the point that the expression “level of competence” needed to be clarified and the Department agreed that it was going to be clarified in the rules to be made by the Council.  

Clause 96 – Transitional South African Legal Practice Council
Mr Bassett said that about ten submissions had been received on this clause.

The South African Institute of Race Relations submitted that the Transitional Council’s composition gave the Minister too much influence. The Department responded that the Minister was going to nominate only two out of the 21 members of the Council. Mr Bassett said that this matter had already been discussed by the Committee in great detail.

The Independent Association of Advocates of South Africa (IAASA) welcomed the inclusion of IAASA but asked that the incorrect citation of IAASA in clause 96(1)(a)(iii) must be amended to read as follows: “one advocate nominated by the Independent Association of Advocates of South Africa”. The Department agreed to the submission.

The IAASA also submitted that clause 96(1)(a)(i), (ii), (iii) and (iv) in their current forms were unfair and created an undue power imbalance.  It was proposed that two advocates nominated by each of  the following: General Council of the Bar of South Africa; Independent Advocates Association of South Africa; the National Forum of Advocates; and Advocates for Transformation represent the advocates. The Department responded that the proposal could be considered if membership numbers could be provided.

The Competition Commission submitted that the Transitional Council would make rules and develop codes of conduct to guide practitioners on what prices to charge. The Commission was concerned that the structure and role of the Transitional Council would mean that legal practitioners, who were parties in a horizontal relationship, would be determining standards and recommending fees. The Commission was also concerned by the fact that the Bill did not make it clear what the content of the rules that the Transitional Council would make would be. The Commission recommended as follows:
a) Lowering the representation of legal practitioners on the Transitional Council so that it could be deemed to be independent of the legal profession, by increasing the number of non-practicing legal professionals on the Council itself;
b) The Transitional Council could recommend a fee structure and leave it open to each practicing attorney or advocate to translate this into actual charges for services rendered;
c) The Transitional Council could recommend fees or a fee structure to the Minister or a panel selected by the Minister, for that body to take a final decision;
d) The Transitional Council could form a fees sub-committee dominated by members appointed by the Minister, but on which the legal fraternity would also have representation. The decision of the sub-committee should then be final; 
e) The Transitional Council could set price caps and allow the market to compete below the cap.

The Competition Commission recommended that the Bill should be specific on the content of the rules to be made by the Transitional Council and also specify what was likely to be in the new code of conduct.

Mr Jeffery said that he wanted to say something about the composition of the Transitional Council.

The Chairperson suggested that he wait to do so, until the members of the DA arrived.

Mr Jeffery then suggested that the matter should be flagged for discussion at a later date, unless Mr Skosana had anything which he wanted to say now. Obviously there were issues, as the Bar Council did not want Advocates for Transformation to be represented on the Council, but these would have to be tackled.

The Chairperson agreed that the matter should be flagged and said the other submissions and responses related to clause 96 be discussed later on.

Clause 97 – Terms of reference of Transitional Council
Mr Bassett read out the UNISA submission on this clause, which stated that the provision merely postponed the problems and disputes that could not be resolved thus far. UNISA was concerned that the clause provided that parties must reach an agreement, and this seemed contrary to good practice, and unenforceable. The taking over of the assets of private institutions, where all the members had a shared interest in the assets, seemed to indicate a deprivation or expropriation, with incumbent constitutional implications. The Department responded that this was inevitable, as there was the need to make progress.

The South African Institute of Race Relations (SAIRR) was concerned that the Transitional Council could recommend that representation from organisations aligned to the ruling party should be increased. This could be negative for the independence of the profession. It was unclear whether the current professional organisations would be able to retain their assets, or if they would be confined to arguing over the amount of compensation they were entitled to receive. The Bill made it clear that control of the legal profession was to pass from independent professional bodies to an entity under significant executive control.

Mr Bassett said that there were many other general comments.

Mr Jeffery was scathing of the submission from the SAIRR in regard to the increasing of representation.

Mr Skosana said that the structure of the organisation had not been negotiated with them and this submission was made from the perspective of providing inclusivity.

Clause 96 resumed
Mr Jeffery suggested that since the members of the DA were now present, the Committee could briefly discuss the issues which were flagged, while Mr Skosana was still present.

Ms D Smuts (DA) asked why there was such good parity between the two professions in clause 96, but in the final Council the attorneys had been given more powers.

Ms D Schäfer (DA) asked why National Association for Democratic Lawyers (NADEL) and Advocates for Transformation seemed to be getting double representation, because they were already represented on the GCB and the LSSA.

Mr Daya replied that the process was that the Transitional Council (TLC) had to be seen as an inclusive process out of the current formations, and so in all of its definitions it encompassed all of the voluntary associations across the whole legal profession. The thinking was that it was very important process to have everyone included in the final structure and statutory regulatory framework. The roles of the voluntary associations were extremely important, and they could not be excluded because they were voluntary. The political dispensation to include proportional representation between the statutory LSSA and NADEL and Black Lawyers Association (BLA) was not coincidental. There had, more than ten years ago, been a negotiated political process to include them, but the profession was now calling for a change. Similar considerations applied to the GCB; whilst there was a perception that the GCB had the largest number of advocates, that was not in fact correct. All organisations should be part of a negotiated process in which they had a vested interest.

Ms Smuts said that there were apparently 2 000 advocates in the GCB, but asked how the remaining 4 000 were divided between the independent Bar, the National Forum and Advocates for Transformation.

The Chairperson asked that the Department provide the requested figures and breakdown to the Committee when it next met, and agreed that accurate numbers were needed.

Mr Daya responded to Ms Schäfer that speaking of “the LSSA” alone did not necessarily include other bodies. The LSSA had eight statutory members. There was a need to ensure that specific other organisations were represented in the process, and that was why they were specifically named. A racial connotation had to be avoided at all cost.

Mr Skosana said that it was easy for the Department to get the LSSA to come to the party in terms of its representation. It was, however, very difficult to do so with the advocates. The GCB and the Independent Advocates did not want to come together, and that is why they were kept separate, but both included. The last three advocates mentioned were essentially a compromise, as the Department wanted five advocates nominated by the GCB, but the GCB had maintained that it was not going to nominate independent advocates on to this team. It was important to remember that there were no structures in place, and so it came down to a question of the Department either excluding the GCB or providing that the Minister nominate five advocates, and that was not desirable at all. The Department had then suggested that GCB should nominate five advocates, which must include two from the independent bar, but this request too was turned down, as also another for four advocates from the GCB and one independent one. The Department had then decided that separate seats be provided for the GCB and the independent advocates, to ensure inclusivity. The National Council process must be democratic and the profession must choose the members.

The Chairperson said that it seemed that the GCB had been dragged, “kicking and screaming” into the new system.

Mr Jeffery said that clause 108 dealt with the decision making process. The recommendations were made as provided for in clause 97, and if the parties could not reach agreement, the Minister made the recommendations after consultation. Assuming that recommendations were made, the Minister would, within six months of receiving them, make appointments in consultation with the Council. If the parties failed to make recommendations, then the Minister must make recommendations, after consultation, before they were approved by Parliament. He said that he thought that effectively, if no “gun was held to their heads” the parties may not find each other. If the advocates could not agree amongst themselves, he questioned how they would agree with the attorneys.

Adv L Adams (COPE) said that if the Council must be seen as inclusive, she wondered if there was any deadline around inclusion of voluntary associations because recently there had been many new associations, and wondered when they would have to have been formed to be included, and whether a deadline might result in some not being included at all.

Mr Jeffery made the point that the clause was going to work out after a long time. The life of the Transitional Council was limited, and there had not been representations from anybody else to be included, besides the employees of the Law Society. The Committee and the Department had had hearings and all attorneys, since they were all under the LSSA already, were included.

Mr Daya added that there were other interest groups, but all of them had a specific interest, so the line had to be drawn somewhere.

Mr Swart said that the point was that all attorneys, no matter whether they also belonged to another interest group, were already represented by the LSSA.

Ms Schäfer agreed with Mr Swart.

Adv Adams wondered on what basis it was then determined that one group could have separate representation, but another had to be represented through the LSSA. She proposed that only the LSSA and the GCB should be represented, otherwise the process had to be opened for everybody.

Mr Jeffery reiterated that the GCB did not represent all advocates. As far as attorneys were concerned, there was an agreement between the LSSA, NADEL and BLA relating to representation, but it was limited to these bodies only. No other representation was included – except that Legal Wise had requested representation for the insurance sector. If nobody had asked for representation, he saw no point in pondering if they should be included.

Mr Daya clarified that the LSSA presently represented the four statutory law societies (under the Attorneys Act), hence the political arrangement to include 25% NADEL, 25% BLA and 50% statutory. LSSA functioned with a 20 person council and this process duplicated what was already in existence.

Mr Jeffery reiterated that the GCB was not representing everybody, which was why there was a need to have other representation for the advocates.

Mr Swart said that the representation from NADEL and BLA was made up only of attorneys.

Clause 98 – Powers and functions of the Transitional Council
Mr Bassett said that the Department had noted the submission by the LSSA that the resources of the law societies were already severely stretched. The LSSA proposed that whatever additional staff were required should be employed at the cost of the Department, in terms of section 107(2)(a).

The Chairperson asked if that proposal was made by the mother body, or the four statutory bodies.

Mr Bassett said that the submission was made by the mother body.

Mr Daya said that this suggestion presupposed that the LSSA was guaranteed to have its staff included into the structure. This had been an issue flagged, for consideration also of its contribution with assets, and the process must be negotiated.

Mr Jeffery said that the staffing must be worked out in consultation with the Director-General of the Department of Justice, so both bodies had veto rights. He did not believe that there was any need to insist that the Department must pay for the additional staff.

Clause 100 – Chairperson and Deputy chairperson
IAASA submitted that the Minister must not be consulted on this process, as it detracted from the independence of the profession. The Department responded that the Minister’s involvement was “in consultation”.

Ms Schäfer agreed with IAASA that it was not appropriate. Most bodies elected their own chairpersons and there was no reason why the Minister should be choosing a chairperson, or having a veto right over the choice of the chairperson. Once the body was established, it had to choose its own chairperson.

Mr Jeffery said that he saw that the Council was not restricted, as in the first meeting the members elected and appointed a Chairperson and Deputy Chairperson from amongst themselves. He wondered then what the purpose was, and whether it was necessary to have a Ministerial veto.

Mr Daya replied that there were two aspects. The first was linked to the funding process during the TLC period, by the Department of Justice. The second was that the TLC process was likely to be fraught with political tension, and it would be important to get the right person to lead to ensure that the whole profession was happy.

Mr Jeffery did not share the views. There was a point where the money for the Transitional Council came from the Department, and the function of the Transitional Council was to agree on the points under clause 97. This was different from the final Council. He wondered if “after consultation” would be adequate.

Ms Schäfer said that whilst the Transitional was clearly not the same as the final Council, it was going to be extremely influential on the final Council. Including this provision was merely adding fuel to the fire of people wanting their independence from the Minister.

Clause 102 – Vacation of Office
Mr Bassett said that the GCB was saying that the removal of a member should not be left to the sole decision of the Transitional Council.

Mr Jeffery asked whose opinion should be taken into account. There was a judgment call on capacity, which was objective. Since this was a representative body, it would be important to have “good cause” shown. He thought that this decision should vest with the Council, as he could not see who else might decide on this.

Clause108 – Rules and regulations
The South African Institute of Race Relations submitted that it was unacceptable that the Minister should have so much influence that s/he might decide alone on the election procedure. The GCB also submitted that the Minister should not have such powers, and suggested that if this provision was retained, it should be exercised “in consultation” with the Transitional Council.

The Department responded that this procedure would only happen if the Transitional Council did not make recommendations. In addition, the Department felt that a deadlock breaking mechanism was necessary.

Clause 111 – Transitional provisions in relation to qualification
Mr Bassett read the submission from the IAASA, which stated that the clause only referred to training by the LSSA, and must be amended to also include any other training course approved by any existing Association or Bar Council. It was submitted that the amendment would then include IAASA. IAASA said that the existing associations and bar councils had duly approved their training programmes, which should therefore be recognised.

The Department responded that the training referred to, which was offered by the LSSA, was recognised as part of the candidate attorney's vocational training. More research would have to be done whether the training by the advocates' associations would form part of pupilage.

The Department also agreed to the submission by the LSSA that the words "for purposes of the Attorneys Act, 1979" should be added to this sub-clause.

Clause 113 – Existing advocates, attorneys, conveyancers and notaries
Mr Bassett read through the submission of UNISA, which had submitted that this clause was pointless as the Law Societies already had these lists. In addition, it pointed out that legal advisers (working in commerce) were not required to be admitted by Court. The Department responded that the provisions did not pertain to legal advisers, but to practitioners.

The GCB commented that the Bill should provide the proposed Chamber of Advocates with the power to determine a mechanism to ensure that advocates who were practising when the Act commenced, and who had not passed the General Council of the Bar's pupillage examinations and membership requirements should comply with the standards, by example through legal education. Each practicing advocate who, when the Act commenced, was not a member of a constituent Bar, had to be compelled to keep chambers approved by a regional council of advocates.

The Department held that this presupposed the two chamber model, which the Department felt was merely an entrenchment of the current state of separate regulatory regimes for the advocates and attorneys.

Clauses 114 – 119
Mr Bassett read through the various submissions and responses from the following commentators: UNISA, the GCB, IAASA, LSSA, and Legal Aid South Africa (see attached document for full details).

Mr Jeffery asked if the Committee could have a discussion on the fusion of the profession.

The Chairperson said that the Committee would discuss that later. Members needed the time and space to rest and relax after these deliberations.

Mr Jeffery pointed out that the Committee now was waiting for a re-drafted Bill, from the Department, with corrections, insertions and options.

The Chairperson agreed. If it was possible, he requested that the Department could submit the redrafted Bill to the Committee a week before Members were due to return from recess, in the third week of July.

The Chairperson expressed his thanks to all involved in the deliberations, including the Committee’s researchers.

The meeting was adjourned.


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