LawNews- Issue 14

Govt

urged to scrap review panel’s REPORT

Contents

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Top KC slams legal profession review as ‘deeply flawed’, urges govt to reject recommendations

Gary Judd KC Dear Misha

This letter responds to your email of 27 April which includes, “To enable me to make an informed response [to the recommendations made by the Independent Review], please provide your responses to the recommendations using this survey, by 5 May.”

I have fundamental objections to the recommendations, which cannot be conveyed by responses to the survey questions. For example, “5. Recommendation 1: Establish a new independent regulator to regulate lawyers in Aotearoa New Zealand,” and “6. Recommendation 2a: Ensure the independence and effectiveness of the new regulator by institutional arrangements that include establishing an independent statutory body, which is not a Crown Entity and not subject to direction from ministers.”

My answer to 5 would be “do not accept”. Yet, question 6 requires an answer presupposing at least some level of acceptance of question 5, as do all the other questions hanging off question 5.

There are similar problems with the other sets of questions. Overall, the questionnaire and its explanatory comments seem designed to elicit the responses desired by the proponents of the recommendations.

My objections are concerned in one way or another with failure to ensure that recommendations are in alignment with lawyers’ fundamental obligation to uphold the rule of law. To my mind this is a fundamental defect in the panel’s approach.

The interest of the public requires the rule of law to be upheld

On pages 7-8, the panel indicates the rationale for occupational regulation is to protect consumers and the public and that the current model does not adequately protect and promote the interests of consumers. It is stated that, “The Law Society’s responsibility to promote the interests of the profession conflicts squarely with its duty to regulate in the interests of the public.”

Whilst this may be so, it ignores the society’s responsibility, its fundamental obligation by reason of its representation of lawyers, to uphold the rule of law and to promote the upholding of the rule of law.

There is nothing more important for lawyers vis-à-vis the interests of the public than the upholding of the rule of law because of lawyers’ unique connection with the law, and the rule of law’s position as one of the twin principles of the New Zealand constitution.

The interests of consumers, properly understood, reduces to the interests of each individual who engages with a lawyer. The public interest in the upholding of the rule of law is the interest of each and every member of the community.

It follows that the report and recommendations should have been predicated upon the upholding of the rule of law as the fundamental public interest to be protected and promoted.

Continued on page 04

The report and recommendations should be rejected in their entirety and a fresh start made, this time with terms of reference which put the rule of law at the forefront

In an open letter to Misha Henaghan, Auckland Branch President of the New Zealand Law Society, barrister Gary Judd KC dissects the recommendations of the independent panel reviewing the legal profession and the feedback processes set up by NZLS

Gary Judd KC

No enunciation of requirements of rule of law

Although the report refers to the rule of law 58 times, the only attempt to state what it requires is a reference by Professor Jacinta Ruru in her minority commentary (report, p 106) where she says, “The rule of law is alive to the unique circumstances of Aotearoa New Zealand. It requires that all people are bound to follow the law.”

That is not what the rule of law is about. It is the rule of law, not rule by law. Dictators and other despots past and present have used law as a means of subjugating the people and securing power and control over them. The idea inherent in Ruru’s description is that any law may be passed and if it is, the rule of law “requires all people are bound to” follow it.

It is indeed correct that if Parliament passes a law, all people are bound to follow it. This is not the result of the rule of law; it is because the government has a monopoly on coercive power and may demand compliance with the law on pain of penalty. This is so whether the law conforms with the rule of law, or not. Put around the other way, a law may be non-compliant with the rule of law, but the people may be forced to comply with it anyway.

By way of example, in 1705 the colony of Virginia passed a law defining all blacks, mulattos and Native Americans, all nonChristian persons brought into the colonies as servants (even should they later convert to Christianity) to be slaves and went on to state that all slaves “shall be held to be real estate”.

It was propounding that slaves were property who might be owned like real estate. The people of Virginia were bound by that law, but as it denied political equality to the people defined as slaves, it was a law which contravened the rule of law.

Public interest demands lawyers’ independence

Only the government and its agencies may confer and exercise public power, and the rule of law is primarily concerned with

keeping the government under control, ensuring that it is limited by law in terms of the ability of the people of the community peacefully to terminate its authority to rule and the necessity for the laws it makes to conform with certain minimum standards.

The rule of law is a fundamental requirement of civil society, a substantive as well as a procedural concept, and “a norm of institutional morality for the guidance of public action”. It exists to protect the people, including to provide moral and political restraint on government.

Lawyers play an essential part in providing that moral and political restraint by speaking up when they see the rule is not being adhered to, and where the opportunity permits, by advocacy in the courts in support of the rule of law.

To fulfil this role, lawyers must be independent and be able to maintain their independence.

The proposal for an independent regulator in Recommendation 1 is in direct conflict with that necessity. It is one thing for members of the legal profession to say: if you wish to be a member of this profession, you must abide by the rules the profession has set for membership.

It is quite a different thing to give the power to make the rules to persons or bodies outside the profession.

Proposals create conflict of interests

Even worse, Recommendation 2b, in purporting to “ensure the independence and effectiveness of the new regulator”, proposes to empower the minister to appoint the regulator’s governance board. The minister and the minister’s colleagues are the very people whom lawyers should be seeking to restrain from contravening the rule of law. Yet, they will be empowered

Continued on page 05

Overall, the questionnaire and its explanatory comments seem designed to elicit the responses desired by the proponents of the recommendations

Photo: DNY59 Getty Images

Continued from page 03

to undermine lawyers’ ability to do that through influence on the regulatory function.

The conflict of interest is palpable. Proposals to create such a power, to invite the government to legislate for such a power, are a shameful betrayal of both lawyers and the public interest.

In an attempt to palliate the obvious inappropriateness of such a structure, the recommendations propose that the minister make the appointments “following advice from a nominations panel comprising a mix of consumer representatives, governance experts and members of the legal profession”. It is almost unbelievable that it might be thought that provision for advice to be given might ensure independence of the new regulator. The minister is not required to accept advice.

The idea of the minister having any involvement at all in the regulation of the profession could not be countenanced by anyone who understood the importance of the legal profession’s involvement in the upholding of the rule of law.

It is no answer to say that the minister is only appointing the board. Whilst it is theoretically possible for a minister to be completely indifferent to the likelihood of appointees reflecting the minister’s views about the restrictions which should be imposed on lawyers, that is not political reality. And anyway, the mere possibility of the minister being able to appoint people who will do what the government desires is enough to outlaw government involvement.

NZLS must demonstrate that rule of law is valued

Having explained why the proposed structure is not reconcilable with lawyers’ role in upholding the rule of law, I now set out why the report and recommendations themselves do not uphold the rule of law.

I note the panel’s thinking was “neatly captured” in MBIE’s submission (page 81). That submission, as quoted, completely ignores the far more important public interest in maintaining the rule of law and the implications that may have for the establishment and composition of a new regulator.

The credibility of the report and recommendations are undermined by its failure to reconcile its recommendations with,

and ground them on, the rule of law. The importance of this failure cannot be overemphasised. A few years ago, then Chief Justice, Dame Sian Elias said:

The rule of law can be imperceptibly eroded unthinkingly if it is not valued by our society….

The challenges for judging and for the rule of law in New Zealand in the 21st century are to ensure that access to independent courts and the rule of law continue to be valued as constitutional fundamentals by the community. That requires understanding of our constitutional and legal history. This is a year of anniversaries of importance to law. It is 175 years since the signing of the Treaty of Waitangi, by which constitutional government was established and the enacted and common law of England, arrived on these shores so far as appropriate to the circumstances of New Zealand (an important qualification). With the treaty, Magna Carta, 800 years old entered New Zealand law. These are points of reference we need to talk more about. It is not fanciful to see in Magna Carta ideas central to the rule of law and which have influenced our constitutional history ever since. The 800th anniversary of Magna Carta may be a good time to take stock. Magna Carta confronted the arbitrary power of the King. Over the following centuries the ideas it launched brought the King under the law, as Bracton and Coke had insisted he was. The King, they said was made by the law. And, as James I had the wit to see, the implication of being made by the law was that the King was subject to the law.

The report and recommendations do not just “imperceptibly” erode the rule of law; the erosion is perceptible and palpable. No regard has been paid to “our constitutional and legal history”. The report does not recognise that the treaty brought the rule of law to New Zealand. Not recognising that critical fact, the panel does not explore the rule’s implications for the panel’s work. The frequent references to the rule of law do no more than pay lip service to it, without actually seeking to understand its requirements and its relevance to

Continued on page 14

My objections are concerned in one way or another with failure to ensure that recommendations are in alignment with lawyers’ fundamental obligation to uphold the rule of law

How the ‘proper purpose’ rule should be applied to trusts

Anthony Grant

This week’s article is concerned with the decision of the Privy Council in Grand View Private Trust Co Limited & Anor v Wen–Young Wong [2022] UKPC 47.

In 2001, two brothers settled Trust A for the benefit of their children. On the same day, they created Trust B which was what I will call a quasi-charitable trust which held several billion dollars’ worth of assets.

In 2005, the trustee of Trust A added Trust B as a beneficiary of Trust A. It then removed all the previous beneficiaries of Trust A and distributed all of Trust A’s assets to Trust B. In short, all the original beneficiaries of Trust A were removed as beneficiaries and all of the Trust’s assets were distributed to a new beneficiary.

The decision to do these things was made at the request of the settlors of both trusts. They reasoned that the beneficiaries of Trust A would be inheriting sufficient wealth from other sources and that Trust A was no longer needed for their benefit.

There is no doubt that Trust A was originally intended to benefit the children of the two founders: the trust deed provided that on the expiration of the trust period, the trust fund was to be divided equally between them.

Some of the children challenged these decisions. One of their arguments was that the power to appoint and remove beneficiaries had not been exercised “for the purposes for which they were conferred” and they sought a declaration that the assets transferred from Trust A to Trust B were held on either a resulting trust or a constructive trust for the benefit of the original beneficiaries of Trust A.

The Privy Council held that the power in the trust to appoint and remove beneficiaries was a fiduciary power and the exercise of the power was subject to duties and restrictions imposed by equity [51]. The board considered it had to identify the purpose for which the powers had been granted. This is “the proper purpose rule” – the means by which equity controls the exercise of a fiduciary’s powers in respects not spelled out in a trust deed.

In the past, the proper purpose rule was generally referred to as a “fraud on a power” but the board said the term “fraud on a power” was inappropriate. “There is much to be said for discarding this historical language and referring instead to the proper purpose rule.” [56]

It held that the proper purpose of a power is to be determined at the date when the deed of trust was created. [61]

The board concluded, “it is generally the case that fiduciary

powers conferred on a trustee of a trust with identified beneficiaries must be exercised to further the interests of the beneficiaries” [120] and that the power to remove the beneficiaries of Trust A and replace them had been undertaken for an improper purpose. [122]

The Privy Council’s reasoning is not confined to the power to remove beneficiaries. It extends to all powers that exist in a trust. It will, for example, apply to a power to vary the terms of the trust.

The decision raises important questions about changes that will typically occur with a settlor’s intentions for the objectives of a trust.

At the time a trust is created, a settlor may generally intend that the purpose of a trust is X. But as decades go by, the settlor may intend that the trust is to fulfil purpose Y. A lesson from the Grand View case is that if a settlor wishes to preserve the right to change the purpose or objectives of a trust, he/she should use wording which enables a court to interpret the proper purpose of the trust as encompassing both purposes X and Y.

I suspect most New Zealand lawyers are not aware that the “proper purpose” doctrine has been expressly embedded in the Trusts Act 2019.

It can be seen from ss 4(a), 21, 26(b) and 27. Sections 4(a) and 21 provide that trustees must have regard to the “objectives” of a trust. These will align closely with a trust’s “purpose”.

Section 26(b) provides that “a trustee must… further the permitted purpose of the trust…” Section 27 is the most significant of the provisions in the Trusts Act. This provides that “a trustee must exercise the trustee’s powers for a proper purpose”.

Because New Zealand courts have tended to focus on the words “fraud on a power” and not on the words a“ proper purpose”, I think it likely that many practitioners will be less familiar with the requirement that trustees must exercise powers only “for a proper purpose”.

The Privy Council’s decision in the Grand View case can be seen as an illustration of the requirements of s 27. Although trustees may have powers to amend a trust, to resettle it, to appoint and remove trustees, to appoint and remove beneficiaries and so on, none of these powers can be safely exercised unless it is aligned with “the proper purpose” of the powers. ■

Anthony Grant is an Auckland barrister and trustee specialising in trusts and estates. He is a speaker at the Cradle to Grave conference on 25 May ■

Trustees may have powers to amend a trust, to resettle it, to appoint and remove trustees, to appoint and remove beneficiaries and so on, but none of these powers can be safely exercised unless it is aligned with the ‘proper purpose’ of the powers

Anthony Grant

How New Zealanders could consider using private trust companies

Henry Brandts-Giesen

In the best of DIY New Zealand tradition, the task of managing a family trust is often given to a solicitor, accountant, financial advisor and/or the clients themselves – or even to a relative or friend.

Elsewhere, this way of doing things would be viewed as rather peculiar and fraught with issues such as conflicts of interest or duty and, more fundamentally, a fatal shortfall of competence. Independent, regulation and professional thirdparty fiduciary service providers would normally be appointed.

In this respect, we here in New Zealand have arrived at something of a watershed.

On the one hand, considerations of expanding liability and complexity now discourage some lawyers from taking on the role. On the other hand, such change seems unlikely unless and until:

■ more capable independent fiduciary services providers enter the ecosystem;

■ lawyers and accountants become more comfortable about ceding governance responsibilities and focussing on advice and transactional services for trusts; and

■ clients realise that to enjoy the benefits of trusts, there needs to be some investment in governance and advice and a commitment to due process in the exercise of fiduciary functions and duties.

Nonetheless, some degree of evolution surely lies ahead. How might the land lie in a more sophisticated private wealth structuring ecosystem?

Often New Zealand professional firms provide these fiduciary services through an omnibus trust company wholly owned by the partners, in part for reasons of protection from personal

liability. However, that notional protection is eroding in the face of expanding director liability imposed both by common law and legislation.

That said, there are some good reasons for using corporate trustees, particularly for continuity. In recent decades there has been a tendency to use standalone corporate trustees owned by the family the trust is set up to benefit (better known globally as “private trust companies” or “PTCs”).

However, the New Zealand approach to using PTCs is unusual in a global context. In other, more sophisticated trust jurisdictions, PTCs are not a “retail” option and typically used only in complex and ultra-high value situations.

Generally, PTCs in other countries will be well engineered and have a mixed (family/independent) board, a bespoke constitution, independent advisors and formal policies and procedures. Sometimes they are regulated entities.

These PTCs are also, typically, orphan entities, meaning they are not owned by any natural person, professional firm or other operating entity such as a trust company.

This orphaning of ownership is usually achieved by structuring the PTC as a company limited by guarantee or having the shares held by a non-charitable-purpose trust.

Orphaning ownership provides continuity when family members die because it avoids the shares in the PTC falling into an estate that requires probate and administration and/or has issues when a professional firm or trust company restructures or disbands.

For most legal systems, the trustee’s independence from the settlor is a fundamental requirement to grant

Continued on page 15

For most legal systems, the trustee’s independence from the settlor is a fundamental requirement to grant effective protection over the trust property and avoid unwanted tax consequences for the settlor

Henry Brandts-Giesen

Considerations of expanding liability and complexity now discourage some lawyers from taking on the role

Activist lawyers: heroic prophets or unprofessional moral absolutists?

odious but these progressive activist lawyers can’t wait for free and democratic governments to get with that program, so they have invented a novel scheme of partisanship.

Warren Pyke

On 29 March 2023, a group of 140 lawyers calling themselves “Lawyers are responsible” issued a press release titled: A Declaration of Conscience for the Legal Profession

This encyclical conveyed their collective judgment that the climate crisis poses an existential risk to humanity. They pronounced that, by way of affirmative action, they intend to withdraw legal services from businesses and presumably governments that promote new fossil fuel projects, and they eschew acting in criminal or civil proceedings against peaceful climate protesters.

Some of the signatories to this declaration included certain King’s Counsel (for the declaration and the list of signatories go here).

A lawyer from Guyana is quoted as begging her legal colleagues to join in the “frontline” fight to uphold the rule of law and protect the planet from the “killing effects” of fossil fuels; she implores lawyers to take a stand against “ecocide”; a barrister says humanity has reached the point of no return and lawyers brokering “these deals” fail to protect the rights of the marginalised, adding that the rule of law is subverted “when those causing the harm go unchallenged but those raising the alarm were criminalised”.

‘Undesirable’ clients

The declaration has been the subject of critical comment in England (see comment of John Gould in The Law Society Gazette, 21 April 2023). As the gazette writer observes, the denial of legal representation by the signatories is premised on individual conscience. He adds that it is an essential principle that people are not denied legal representation just because lawyers regard them as undesirable or morally reprehensible. This ought to go without saying in an open society. Despotic statist regimes deny representation to those deemed to be

The threat to justice is always greatest when there are powerful moral beliefs in play. The rule of law guarantees due process to everyone, not just those approved by lawyers. The signatories eschew acting for those who they consider to be heavy with the mephitic odours of moral putrefaction, while celebrating their stance of not acting as counsel in proceedings against those who peacefully tilt at windmills.

The fundamental obligation on lawyers to be independent cannot be casually cast aside by the artifice of conscience. Fortunately, most lawyers are not easily led astray from their professional obligations. The practical effect of the declaration on clients will be negligible, if not invisible. Only a few of the current signatories appear to be practising barristers in England, eight of whom appear to come from the same chambers. The author of the gazette piece likens the gesture made by the declaration to a sit-in on a road where there is no traffic to obstruct (glue or no glue being applied).

An iniquitous effect of the declaration is the signal it sends to the public. A significant number of the public is already cynical about the motivations of lawyers, and suspect partisan or selfserving behaviour. Lawyers can become targets for public dislike of their clients. The message from the profession and its leaders must be that lawyers do not choose their clients, and they are not to be aligned with their clients’ behaviours or interests.

A further troubling aspect of the declaration is that it appears to ignore a live public debate about climate change. There are many sources of information: a recent authoritative source is Steven E Koonin’s book, Unsettled? What Climate Science tells us, what it doesn’t, and why it matters (BenBella Books, Inc Dallas, 2021).

Koonin was a former Under-Secretary for Science in the Obama administration, is a former professor of physics and astrophysics at Caltech and is a professor at New York University, among other prestigious posts. He is not the only highly qualified scientist who makes a persuasive case, based on data and evidence, that the alleged climate crisis may not be as imminent or as severe as some people and politicians are being

Continued on page 11

The message from the profession and its leaders must be that lawyers do not choose their clients, and they are not to be aligned with their clients’ behaviours or interests

If you are a barrister, adopting the declaration makes a dead letter of the cab-rank rule

Warren Pyke

Continued from page 10

led to believe. However, the main point of this article is not to comment on the shallowness of single-minded extremists.

Serious breach

Lawyers may freely participate in public causes or debates, but when doing so they act as citizens, not lawyers. The lawyers who signed the declaration seek to bring the weight of their professional status to bear upon the public interest issue they champion. This is a mistake.

They grievously add to their error by expressly excluding persons or corporations from access to legal representation in a free and democratic society, which is a serious breach of the obligation on lawyers to be independent.

The declaration does not uphold the rule of law, it is corrosive of it and of the administration of justice. It attempts to drum up support for the denial of due process to an identifiable group, and in doing so it is discriminatory. If you are a barrister, adopting the declaration makes a dead letter of the cab-rank rule.

Moreover, the declaration perversely appears to hold that only those who peacefully protest are deserving of inclusion in this discriminatory scheme. Apparently, according to these modern-day gatekeepers, a lawyer must first adjudge if the

protester was peaceful before deciding whether to accept or decline instructions. It is not clear whether those who favour gluing themselves to roads and bridges will find themselves on a sticky wicket by failing to meet the non-violent test.

We must presumably await delivery of the next edict to clarify this point.The guiding notion of this secular clergy appears to be that the moral high ground can never be surrendered.

This sorry state of affairs brings to mind the words of Lord Peter Rawlinson when he appeared for the unpopular late UN Secretary General Kurt Waldheim in a mock trial. He made it clear that he didn’t ‘’care a fig’’ for Waldheim as a person, but he took on his defence because he was passionately interested in justice being done (Waldheim was ‘acquitted’ of ‘charges’ of being implicated in Nazi crimes).

The logical extension of this zealotry is to exclude as clients all those who invest in or promote fossil fuels, and to accept as clients only those who ride bikes, drive electric vehicles and use solar heating. Cattle beast and dairy farmers can also get lost, as can petrol station proprietors, international travellers, wood fire burners and gas stove users. Hemp sandal wearers are allowed, but only if they swear off using plastics. All clients must promise to recycle. The list can go on. Only in this way can lawyers save the planet.

One hopes that such a facile declaration finds no home in New Zealand. ■

Warren Pyke is an Auckland barrister ■

The author of the gazette piece likens the gesture made by the declaration to a sit-in on a road where there is no traffic to obstruct

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Continued from page 05 the work the panel was doing.

The New Zealand Law Society more than any other nongovernmental institution should be showing that the rule of law is valued by our society.

Fundamentals of the rule of law

The rule of law is generally regarded as having originated with Aristotle. Its most important points are captured in his Politics

Aristotle said:

At this place in the discussion there impends the inquiry respecting the king who acts solely according to his own will he has now to be considered. The so-called limited monarchy, or kingship according to law, as I have already remarked, is not a distinct form of government, for under all governments, as, for example, in a democracy or aristocracy, there may be a general holding office for life, and one person is often made supreme over the administration of a state…. Now, absolute monarchy, or the arbitrary rule of a sovereign over an the citizens, in a city which consists of equals, is thought by some to be quite contrary to nature; it is argued that those who are by nature equals must have the same natural right and worth, and that for unequals to have an equal share, or for equals to have an uneven share, in the offices of state, is as bad as for different bodily constitutions to have the same food and clothing. Wherefore it is thought to be just that among equals everyone be ruled as well as rule, and therefore that an should have their turn. We thus arrive at law; for an order of succession implies law. And the rule of the law, it is argued, is preferable to that of any individual. On the same principle, even if it be better for certain individuals to govern, they should be made only guardians and ministers of the law. On the same principle, even if it be better for certain individuals to govern, they should be made only guardians and ministers of the law. Aristotle: The Complete Works (p 2499). Feedbooks. Kindle edition, translation by Benjamin Jowett

The emphasised sentence is frequently quoted by writers on the rule of law. When it is taken in context, Aristotle’s full meaning can be seen. Individual equality gives rise to the rule of law; in a community of equals, every citizen should have the opportunity to rule and be ruled in turn, which requires succession according to law.

“[A]nd should have their turn,” reflected Greek civilisation of Aristotle’s time where the population, measuring only tens of thousands, had embodied democracy in a form embracing universal entitlement to involvement in the affairs of the city state. Democracy, when resurrected many centuries later, took the form of representative democracy, catering for states with populations numbering in the millions and tens of millions.

Our concern is not with democracy as such but with the rule of law, although in Aristotle’s conception they go hand-in-hand.

The rule of law is preferable to the rule of any individual, Aristotle said. This means the law is a more just and impartial way of regulating society than relying on the arbitrary decisions of a single individual or group of people. It reflects Aristotle’s

belief that a just society is one where power is distributed equally and is regulated by a set of fair and impartial laws. From Aristotle, we can take these ingredients of the rule of law:

The rule of law is grounded in the equality of individuals as members of the community. It requires that society be regulated not by individuals or groups of individuals but by fair and impartial laws which reflect the principle that no one has an entitlement to exercise power over another. Of necessity, some one or more must be selected to exercise authority but those allowed to govern do so only as guardians and ministers of the law.

New Zealand’s rule-of-law heritage came to us from England through the treaty, as Dame Sian noted.

Magna Carta was seminal, but it and other attempts to bring the King under the control of the people were short-lived, until the Glorious Revolution of 1688-1689, so-called because James II was deposed and the monarchy made subservient to Parliament, it is said without a drop of blood being spilled (hence the revolution was glorious). The principle of rule by the people’s chosen representatives replaced rule by an individual whose entitlement to rule derived from his ancestry.

Writing at that time, in Book II of his Two Treatises of Government, John Locke produced the philosophical justification for rejecting monarchical rule and substituting the community’s ability to authorise some of their members to exercise governmental authority.

Locke built upon the foundations laid by Aristotle, relying on “the state all men are naturally in … a state of perfect freedom to order their actions, and dispose of their possessions and persons, as they think fit, within the bounds of the law of nature, without asking leave, or depending upon the will of any other man…. [And] A state also of equality wherein all the power and jurisdiction is reciprocal, no one having more than another”.

The “bounds of the law of nature” which limit the state of perfect freedom require respect for the freedom of others.

The state of nature has a law of nature to govern it, which obliges every one: and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions….

Later in Book II, he developed principles of politics grounded on freedom and equality of members of the community who would give up some of their rights by submitting to the determinations of the majority (Chapters VII and VIII). As he put it (§87):

And thus all private judgment of every particular member being excluded, the community comes to be umpire, by settled standing rules, indifferent, and the same to all parties; and by men having authority from the community, for the execution of those rules ….”

These principles have been developed without changing them. In Locke’s day, “man” or “men” meant that literally, with

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The minister and the minister’s colleagues are the very people whom lawyers should be seeking to restrain from contravening the rule of law. Yet, they will be empowered to undermine lawyers’ ability to do that through influence on the regulatory function

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rules even as to which men could qualify as men. Women were excluded. Slaves were excluded.

The conception today is that all people are naturally free and equal.

With the advances in knowledge now available, another way of putting it would be that genes and the DNA they contain do not confer special powers on some to rule over others. The idea that they do is pernicious.

Political equality is the basis for the rule of law’s requirements that the law must rule and do so by rules which are indifferent, the same for all, with the right to impose such rules belonging to the community through the representatives it chooses and replaces according to settled constitutional law.

Special treatment based on ethnicity incompatible with rule of law

The terms of reference invited the panel to examine:

“the role of Te Tiriti o Waitangi and biculturalism in the statutory framework, and in organisational and governance arrangements,” with the purpose of promoting “a commitment to honouring Te Tiriti o Waitangi and the bicultural foundations of Aotearoa New Zealand, including Te Ao Māori concepts” (Report, 30-31).

The panel could have commenced its consideration of the treaty by noting that it brought the rule of law to New Zealand. It could have observed the rule of law’s requirements for equal treatment. Having acknowledged that, the report could have noted further that “honouring” the treaty requires honouring the rule of law, so that the panel could not propose arrangements not predicated upon the natural equality of all members of the

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effective protection over the trust property and avoid unwanted tax consequences for the settlor. Therefore, direct ownership may interfere with the goal of asset protection due to perceived control retained by the settlor.

Such issues are universal, but particularly acute in New Zealand where we have so many PTCs with shares held by family members and/or professional firms.

A possible solution to this problem would be for PTCs to be “orphaned’ in the overseas fashion. However, our law does not permit companies to be limited by guarantee or trusts to be set up for noncharitable purposes.

Potential solutions

A New Zealand law-governed trust could be set up for charitable purposes (but not registered as a charity) by a professional firm and used to hold shares in PTCs. But there is a risk that such an arrangement

community, and the principle that no member of the community is entitled by reason of birth and ancestry to any special treatment under the law.

Instead, the panel’s report and recommendations advocate a special place for Māori in the organisational and governance arrangements for the profession. That is incompatible with the rule of law.

The treaty does not justify departure from the rule of law. The very idea embodies a contradiction and is absurd. It would be ridiculous to claim that the “solemn compact” which brought the rule of law to these shores also required rejection of the equality principle lying at the heart of the rule.

Conclusion

The report and recommendations are deeply flawed. The recommendations do not align with lawyers’ fundamental obligation to uphold the rule of law. They do not align with New Zealand’s constitutional commitment to the rule of law. If adopted, they would compromise lawyers’ ability to remain independent and therefore their ability to uphold the rule of law.

If the equality principle is rejected, the rule of law is rejected. By rejecting the equality principle, the report rejects the rule of law. By doing so, it fails to comply with lawyers’ fundamental obligation.

The failure is so critical that the report and recommendations should be rejected in their entirety and a fresh start made, this time with terms of reference which put the rule of law at the forefront. ■

would be viewed adversely by a court on public policy grounds, especially if there was no financial benefit to a named charity.

Another option is for a professional firm to set up a trust such as that described above which adopts the governing law of a country that permits non-charitable purpose trusts (under the Hague Convention applicable to trusts, that is permitted). But that is a bit awkward and would require some knowledge of, and advice in relation to, foreign laws.

Another approach could be for a professional firm to set up an incorporated society for the sole purpose of holding shares in a PTC (and/or nominees for that matter). This would need 10 members and these could be drawn from the partnership. In smaller firms this could be difficult but firms in a similar location could get together to set up and operate such an entity. Issues of confidentiality would need some careful consideration.

The incorporated society would operate on a not-for-profit basis and be a pure functionary for holding shares in PTCs. Its constitution would set the rules by which it operates and there would be a small

committee to manage the affairs of the incorporated society. But there would likely be very little activity on a day-to-day basis because the sole purpose of the incorporated society would be to hold shares in PTCs.

Whenever a new PTC is set up for a family trust, the shares would be issued to the incorporated society, thus alleviating all the issues associated with ownership of the shares falling into estates on death and perceived corporate power being exerted to influence the fiduciary functions of a trustee.

None of this would change the best practice of a PTC having a bespoke constitution to limit its powers to act as trustee of a specific trust or group of trusts and requiring directors to act unanimously or otherwise consistently with the terms of the trust which prescribe how trustees make decisions.

This is, of course, quite novel and imperfect but in my view is worth considering, especially now the law relating to incorporated societies has been modernised by the Incorporated Societies Act 2022. ■

Proposals to create such a power, to invite the government to legislate for such a power, are a shameful betrayal of both lawyers and the public interest

Henry Brandts-Giesen is a partner at Dentons Kensington Swan ■