The legal system is one of the fundamental underpinnings of modern society and of the modern capitalist economy. It allows the interaction of economic actors through a shared framework of laws and contracts that is so necessary for the market system to operate efficiently and fairly. Its operation is vital for the prevention of coercion that is the key role of the State.
Why then do we continue to allow those with the ability to hire high-quality and intelligent legal advisors to corrupt this vital system, simply because they have the means? If the police force functioned in this way, as they do in many third world nations, all those in the public arena would be crying bloody murder.
In recent years, many cases have arisen of large corporations with their tremendous means using these means to corrupt the justice systems in many wealthy nations. We have seen these corporations smothering their accusers in paperwork and using obscure legal means only accessible to a law firm with thousands of high-paid lawyers at its disposal. Surely this is coercion? Surely it meets the criteria for a vast market failure? Surely, we, as moral beings with a belief in the rights of men to defeat those fighting outside the rules, should stop this madness?
The role of the State is defined, in classical liberal orthodoxy, as the prevention of coercion. We already fund publicly police forces and military defence for the protection of citizens against aggressors and we disallow citizens from hiring their own agencies to act in these positions, in the knowledge that such agencies could be used for illegitimate coercion in their own right. Surely legal services are no different.
A lawyer is a key ingredient in a fight against illegitimate coercion by anyone – be it a multinational corporation in breach of contract, a prosecutor acting on the State’s behalf attempting to jail an innocent man or another individual guilty of tortious negligence against oneself. For one to be denied this key to justice because of one’s wealth is a tacit position taken by society against the victim and for the aggressor.
Critics may argue that such legal services are already provided by the State or charity for those unable to pay through programs such as Legal Aid, Community Legal Centre and public defenders. But these programs have a key shortcoming. While they increase the fairness of a legal dispute by providing at least some legal services, the discrepancy between the legal representatives of both sides remains wide.
For example, the average salary of a Community Legal Centre lawyer in New South Wales in 2010 – which is roughly comparable to our situation in New Zealand – was over $70,000 less than the average salary of corporate lawyers in the same survey. Even the most benevolent of top-tier lawyers would find it hard to accept such a dramatic pay differential, some of which is explained by a lack of funding but more of which is explained by the relative experience levels and levels of schooling in the two group.
How is that fair? Why should those without the means who must seek legal advice from charity or the State be stuck with less-experienced, less-well schooled lawyers while the corporations they will often be suing have the crème-de-la-crème of legal expertise? Surely that is a recipe for illegitimate coercion.
It is a rare moment when the Institute proposes the increased involvement of the State in any area of life, but it is our belief that the situation is sufficiently coercive, dangerous and unfair to warrant a full State-based reform of the legal services.
We propose the creation of an independent commission within the judicial branch called the Legal Provision Commission, as far removed from the prosecutorial and representative sections of the Government legal services as possible, to manage the provision of legal services within New Zealand.
The LPC would be headed by a suitably experienced non-lawyer commissioner serving at the pleasure of Her Majesty the Queen and a board comprised the Chief Justice of New Zealand, two other retired or serving judges, serving at the pleasure of the Queen and 3 members elected for 3 year terms by the lawyers who are members of the LPC systems.
The LPC would be funded with the reallocation of existing Government expenditure to the various legal aid initiatives to it and an additional amount.
As a component of the judicial branch of the State, the Commission would be entirely independent of the Government except for the appointment of the commissioner and judicial representatives. Decisions made by the LPC would be appealable to the Court of Appeals unless otherwise provided or the case in question is under the jurisdiction of the Supreme Court, in which case, decisions would be appealable to that Court.
This LPC would administer two separate systems for legal provision – one of which being for in-court legal services and another for other legal services.
In-Court Legal Services
In order to prevent the vast mismatch in legal representation common now, no private provision of in-court lawyers would be permitted. All in-court legal services in both civil and criminal cases would be allocated and financed by the LPC provisionally. The only exception to this being the Government’s legal services, which would continue to be under the Attorney-General’s
Lawyers would continue to work for private firms and themselves but would now be required to contract to the LPC. Every lawyer would be assigned to one of 5 classes in increasing seniority and importance. Firms would be paid more for higher class lawyers and lawyers would be able to move between classes based on the assessment of judges and of independent assessors.
Any party that wants to litigate an issue would be required to contact the LPC and request a lawyer. Those made party to a case by another party – i.e. as a defendant – would be automatically assigned a lawyer by the LPC.
When asked for a lawyer for in-court legal services, the Commission would have a qualified lawyer or judge assign the case a class based on its level of legal difficulty and of the possible award/punishment. Once this class is decided, both parties would be randomly assigned a lawyer from this class who is available, however lawyers in firms with existing relationships with either party would not be eligible.
Those who wished to undertake their own legal representation would still be entitled to do so and would be able to request funding from the LPC for any costs incurred in doing so, including 50% of lost earnings. Such funding for self-representation would only be available while costs remained reasonable and litigants who exhausted such funds would be given no further assistance from the LPC in the case.
However, in cases of a corporate party, the use of in-house counsel and directors with legal experience would be subject to review by the Legal Provision Corporation to ensure fairness was maintained. If the LPC held that the use of such related parties for self-representation would be unfair, the LPC could either upgrade the class of the case and provide the other party with a higher level of legal representation or could prohibit the use of the related parties.
LPC-provided lawyers would also have limits on the interaction they could have with their client’s general solicitor or in-house counsel. LPC-provided lawyers would be entitled to interview these lawyers for general background and an understanding of the situation of the case but the seeking or provision of advice from these lawyers to the LPC-provided counsel would be explicitly prohibited.
The Commission would have on staff lawyers and accountants to analyse the cost-efficiency of various cases and undertake actions to stop any abuse of the system. Lawyers found to charge the Commission for unnecessary services would be fined or removed from the system. The LPC would randomly audit various cases at various classes with various firms to ensure no abuse was occurring.
Parties in legal disputes would also be prohibited from hiring so-called ‘consultants’ and expert witnesses to strengthen their case or legal representation and any party or LPC-provided lawyer acting on their behalf who felt such investment necessary would be required to request funding from the LPC for such.
Throughout the case, funded lawyers would only have contact with the Commission with regard to funding requests for extraordinary expenses and for the invoicing of their own services, in accordance with the standardised contract agreed with the LPC for that class of lawyers. Such funding requests would be reviewed by experienced lawyers and accountants within the LPC for their reasonability and would be kept entirely confidential in order not to harm a party’s case. Such lack of contact between the law firm and the LPC ensures that case details cannot leak, cases cannot be unfairly damaged and the LPC and its staff cannot influence the legal process.
In order to prevent vexatious litigation, at the conclusion of any appeals process, subject to any court order altering the terms, the losing party would be required to refund the LPC for all of the expenses incurred on his behalf and 80% of the expenses incurred on the behalf of the other party. The LPC would be also granted discretion to not fund those cases it sees as having no merit, however it would not be able to do so in cases related to mistreatment by the State or the LPC itself.
Any violations of the rules of LPC provision discovered would be reported to the judge in charge of the case in question and sanctions would be decided by the agreement of the judge and the LPC and would be issued under the authority of the Court. Such sanctions could include the decision of the case in favour of the opponent on technical grounds, a full refund of the LPC for all costs incurred by either party, fines, a temporary ban from the use of LPC resources by the party and/or sanctions on the law firm or lawyer.
Other Legal Services
With regard to other legal services, for example the preparation of contracts and the provision of advice on arrangements with the government and such, there remains a vast degree of unfair information asymmetry that corrupts the marketplace and interactions with the State.
In this area, however, we see the development of longer-term relationships between clients and solicitors as important and the full imposition of a state-provided system as an incorrect course of action.
Instead, we would create a system whereby all firms offering legal services outside of court would be required to contract with the LPC to take at least an amount of cases at various classes funded by the LPC proportional to the number of lawyers of various classes and in various specialisations under their employ.
The amount of cases each firm would be required to take per annum would be based on a projection made by the LPC on the number of cases in each specialisation at each class that the LPC would be required to fund.
People and companies who are unable to afford legal advice and require it for any reason would apply to the LPC for a lawyer to be assigned to them, or if they already have a lawyer for funding to be provided to use them.
All those who interact with the State would be notified of this process and would be granted time and the ability to request legal services. People who request contracts to be signed or undertake employment-related discussions would be required also to notify the other party of their ability to request assistance from the Commission and to give the other party time to use said ability.
People would be able to request services through any Government office – including the IRD, WINZ, the Police and Customs – and through a NZ Post shop or online. Priority would be given to those with an urgent need for services, for example those in custody or with a looming deadline, and to New Zealand citizens and permanent residents.
The LPC would be able to fund various legal services, including the analysis of contracts and the serving of various legal papers. The LPC would not, however, fund the drafting of contracts, real estate-related services and other such services in which the party requesting funding is in the more powerful position. The LPC would also use IRD financial data to assess an applicant’s ability to pay for legal services themselves. The LPC would set out clear rules on what level of income or asset base was required to be considered eligible for LPC services and would publish these.
When applications for services are received, the LPC would assess the required services, the applicant’s financial position as according to the IRD if available and if provided, the requested provider and assess the level of funding possible, the class of legal services required and the best providers. When a degree of urgency is required, financial considerations would be delayed and conducted while the legal services are being conducted and afterward.
If in its assessment of the required actions and funding, the LPC would require further time than is allowable by law, court order or contract, it would be able to request an emergency delaying order or stay of execution from a District Court judge to allow them to take such decisions in time. We would hope, however, that such orders would be rare as the LPC would be sufficiently efficient and well-staffed to enable quick recourse.
Once this is assessed the LPC would contact the client and detail any costs they would be required to meet and the legal providers which the LPC is willing to fund or partially fund and who have to accept their case and offer to put the client in touch with the providers. The client would then choose the providers, who would then communicate with the LPC in accordance with their contract.
If during the conduct of the services any extraordinary expenses were required, the providers would be able to request funding from the LPC.
At the conclusion of the provision of the services, the lawyer would report to the LPC the expenses and the outcome of the case. If the case results in a significant financial windfall for the client, the LPC would be entitled to, at their discretion, request remuneration from the client, being no more than 50% of the direct financial gain from the transaction.
In order to prevent vexatious use of LPC-funded legal services, the LPC would be entitled to deny funding to those cases it sees as having no merit, however it would not be able to do so in cases related to mistreatment by the State or the LPC itself. Such decisions would be reversible by a District Court judge after a petition to him. Should a LPC-funded non-court legal action evolve into a court case, the funded non-court lawyer would be responsible for the initial briefing of the in-court lawyer.
Analysis of Our Plan
With this plan, we set out to enhance the fairness of our judicial and legal systems. The status quo creates a vast power asymmetry that is corrupting to the market and to the rights of citizens and certainly meets the classical liberal criteria for state intervention.
With a compulsory, government-funded, tiered system for in-court legal services, our plan removes the mismatch in legal representation that is often common in court cases currently and removes the resultant coercion.
Furthermore, our plan also provides limited state funding for out-of-court legal expenses, allowing those with a weaker financial position to make informed decisions on contracts and to have legal recourse when things don’t work, also reducing the current coercion common with the information asymmetry between small business and consumers and larger corporations and wealthy individuals.
And while our plan will cost the Government more, the resulting increase in efficacy and fairness of our justice system are surely worth it, and with a single point-of-reference for all legal services financed by the State, our plan would be far more efficient than a half-baked increase in services from the various existing agencies, requiring less time and man-hours per case.
To conclude, our plan for a full-throated reform of the legal system, while possibly distressing to the legal profession, is a needed and acceptable, in the classical liberal philosophy, intervention from the Government in our currently unfair and inequitable system and it is an important measure to protect consumers and small businesses from coercion.