Necessity of Commercial Knowledge

An interesting Times online articlefeaturing the lack of commercial knowledge among the trainee lawyers at Freshfields. The lawyers there are of course practicing solely in commercial areas of practice and 15 questions were set out to test their commercial knowledge. The average score came back at 43%.I have taken a look at the questions and they aren’t that easy. No way I would have scored high on that quiz. Here in Malaysia, a lot of people practice in some form of commercial practice, but there may not be enough emphasis in pushing for lawyers to also maintain a broad base of business knowledge and being in tune to current events.

Quoting from the Times article:

An e-mail sent to the trainees later by an unnamed graduate recruitment officer called for an improvement in their general business knowledge and suggested that they would be tested again. “A person who claims to be a commercial lawyer but who doesn’t have much of a handle on what is going on in the commercial world isn’t, in the end, going to be fantastically credible to clients,” it said.

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Legal Lay-Offs

With the credit crunch continuing unabated around the world, the crisis has now left UK and US law firms reeling in its wake. The number of lay-offs keep piling up.Over in the UK, Hammonds has hit 95 and Eversheds clocks in with two redundancy consultations, with the first round having 33 jobs under the chopping block and its second with 45. On the other side of the Pacific, US firm Orrick Herrington & Sutcliffe will be laying off 40 associates and counsel and White & Case has measured in with 70 lawyers.

While areas linked to real estate practice has been pretty badly hit, the lay-offs are also hitting corporate lawyers doing M&A work for instance.

Entry of UK Law Firms into Singapore

It is interesting to see that the present slowly in the economy has not quite dampened the impending entry of foreign law firms into Singapore. Legal Week reported that at least 6 UK law firms have applied for the 5 Qualifying Foreign Law Firm licences up for grabs, in order to set up shop and practice Singapore law. These firms include Ashurst, DLA Piper, Herbert Smith and Norton Rose. Clifford Chance and Allen & Overy, despite having a JLV presence in Singapore, are believed to have applied as well.The presence of the foreign law firms should continue to boost the legal job market in Singapore.

Plugging the Legal Brain Drain

(from The Star, 26 September 2008)Thirteen thousand. That is roughly the number of lawyers currently practising in Malaysia. It gives the impression that there are more than enough lawyers here. So why should we worry if a few hundred, or even a thousand, lawyers leave the profession to work in other jurisdictions?

Around 1,000 new lawyers join the profession annually so shouldn’t there be plenty of legal talent here in this country?

There is, however, cause for worry. Increasingly, law firms are complaining of a general decline in the quality of lawyers entering the profession. Our brightest and best law graduates are choosing instead to practise in other countries.

Further, the pace of lawyers leaving Malaysia for other jurisdictions like Singapore, Hong Kong and the Middle East appears to have also accelerated, and this exacerbates the legal brain drain that we are facing.

In her Putik Lada article ‘Not as Glamorous as Boston Legal’ (The Star, Aug 15), Melissa Tai touched on some of the problems the profession faces in attracting and retaining legal talent. What I will be setting out is a wish list of sorts and some solutions to this problem.

Wish List

At the top of any lawyer’s wish list would be the obvious factor of higher pay. Undoubtedly, other jurisdictions offer a significantly more attractive remuneration package, even after factoring in the higher cost of living.

It is accepted that present market forces result in relatively low legal fees being charged, which in turn contributes to a relatively low amount of pay compared with other jurisdictions.

The difficulty in attracting lawyers to stay in Malaysia goes beyond the issue of pay. One of the strong appeals of working overseas is the opportunity to be exposed to more international and high-calibre work. There is no easy answer to this, as other countries like Singapore, for example, also grapple with the same issue of lawyers leaving for this reason.

One possible solution could be a controlled liberalisation of the Malaysian legal market to allow foreign law firms to practise in Malaysia. This may help to provide international exposure within a local setting. This idea has been in the pipeline for many years and it remains to be seen when it will be implemented.

Steps which law firms themselves can take would include a change in the work culture and the general improvement of the work-life balance of their lawyers. Firms may need to restructure the work and careers of their lawyers to meet both the firm’s needs and the lawyers’ personal priorities.

Law firms must also recognise that up to 70% of the younger lawyers are women and that part-time and flexible work arrangements have to be offered. The existence of family-friendly parental leave schemes would be more beneficial than having such talent leave practice altogether.

Bringing back respect to the profession

Taking a step back from what law firms can do, there is the more over-arching issue that must be addressed. Respect must be brought back into the profession in order to continue to attract and retain our brightest talent.

Firstly, the starting point has to be the improvement of the quality of law graduates entering the profession. Hence, the announcement of a Common Bar Examination is welcomed and it must be compulsory for all graduates, whether from local or foreign universities, to pass the Common Bar Course before they are admitted to the Bar. Everyone has to go through the same gatekeeper, and higher standards can be more easily maintained.

The implementation of the Common Bar Course would have to go hand-in-hand with an improvement to the present pupillage system. Pupillage is the compulsory nine-month period in which a law graduate undergoes training with a senior lawyer to gain practical experience before being admitted to the Bar.

A proper pupillage structure for the determination of certain core skills, the teaching of such core skills by the senior lawyer or the law firm, and an assessment of such skills must be put in place.

Secondly, an essential aspect of bringing back respect into the profession is the need for an efficient and strong judicial system. The frustration of having cases unduly postponed or court hearing dates being fixed more than five years down the road will drive lawyers away from practice in Malaysia.

The surfacing of images of a lawyer apparently brokering the appointment of judges leads us to question the integrity of the judicial system. The sluggish investigation into the findings resulting from this apparent brokering of judges and the stalling of the implementation of the Judicial Appointments Commission also raises doubts on the sincerity for judicial reform.

Conclusion

The fall-out from the subprime crisis has resulted in large lay-offs from major law firms in America and in England. China, post-Beijing Olympics, may well also experience some slowdown. The effect of these events is that it may result in a brief respite from the exodus of legal talent from Malaysia as job opportunities in other jurisdictions may become harder to come by.

But immediate steps must be taken to allow us to continue to attract and retain our legal talent. The solutions I have touched on are not exhaustive but may well go a long way to plugging the legal brain drain we are experiencing.

eLawyer Legal Blog Writing Contest

eLawyer is holding what could be the first ever legal blog writing contestin Malaysia.

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The topics you can select from are:

1) Towards an independent judiciary in Malaysia

2) Common Bar Exams: The creation of a new problem or a solution for an old one?

3) Welcome CheDet.com: the impact of Tun Mahathir’s blog

4) Anti-party Hopping Law- Agree or Disagree?

You are to send in an entry not exceeding 1,000 words and you stand to win up to RM 500 cash! Successful entries will be featured in an exclusive section on the eLawyer website. You’ll have to sign up for free as an eLawyer member to participate.

I have been invited to be a judge of the contest and I am privileged to have with me as judges as well, Dr Azmi Sharom from the University of Malaya and Fahri Azzat.

Hope you all support the contest and send in your entries!

The Implied Undertaking Rule

An interesting read, Allens Arthur Robinson’s update on the implied undertaking rule which was affirmed by the recent Australian High Court decision of Hearne v Street[2008] HCA 36.The implied undertaking rule is that a party receiving documents in litigation holds them subject to an implied undertaking to use them only in the proceedings in which they were produced. The reasoning behind such a rule was explained by Denning in Riddick v Thames Board Mills Ltd [1977] QB 881:

“A party who seeks discovery of documents gets it on condition that he will make use of them only for the purpose of that action, and no other purpose.

Compulsion [to disclose on discovery] is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice.”

Hearne v Street summarised that the implied undertaking rule applied to all documents and information that one party to litigation is compelled, whether by reason of a rule of court, a specific order of the court or otherwise, to disclose, including:

(i) documents inspected after discovery;
(ii) answers to interrogatories;
(iii) documents produced on subpoena;
(iv) documents produced for the purposes of taxation of costs;
(v) documents produced under a direction from an arbitrator;
(vi) documents seized under an Anton Pillar order;
(vii) witness statements served under a judicial direction;
(viii) affidavits; and
(ix) expert reports.

The implied undertaking is usually released once the relevant material is tendered or read in open court. A breach of this implied undertaking (which is given to the Court) would mean that a party is in contempt of Court.

Application of Implied Undertaking Rule

Let me just highlight some issues and the application of this rule in the context of a shareholder dispute.

A shareholder who is not a director, or a director-shareholder who has been denied access to company documents, will not have access to crucial documents to help evidence any of his complaints. A shareholder may wish to bring an oppression petition under section 181 of the Companies Act 1965 to seek for a share buy-out or other reliefs. One of the drawbacks of a petition is that there is no automatic right to discovery. In fact, in See Hua Realty Bhd v See Hua News Holding Sdn Bhd [2007] 7 CLJ 152, discovery of documents in the oppression petition was disallowed.

Would the new statutory derivative action provisions assist such a shareholder? The new provisions allow for wide ranging powers for inspection and to effectively order discovery of documents at the leave stage. At a talk I attended, it was suggested by a senior corporate litigator, that he did not see the inconsistency in bringing a section 181A statutory derivative action for the specific purpose of discovery, and to have an oppression petition run in parallel. This was to get over the hurdle and difficulty of obtaining discovery in the oppression petition.

However, I would think the implied undertaking rule should strictly apply in preventing the use of any documents obtained under the section 181A proceedings for use in the oppression petition proceedings.

Similarly, if the shareholder agreement contains an arbitration clause, any order for discovery by the arbitrator (or even interim order for discovery to be granted by the Courts under section 11 of the Arbitration Act 2005) should mean that the documents or evidence can only be used within the arbitration proceedings and not be used for other litigation proceedings.

That means a shareholder may have to continue to grope in the dark and not be able to have access to documents to evidence at least some of the complaints the shareholder may have.

Tony Blair’s Upholding the Rule of Law: A Reflection

I was in attendance at the Mandarin Oriental on Friday to attend the 22nd Sultan Azlan Shah Law Lecture series. The speaker for this year was Tony Blair, former PM of the United Kingdom, and he would speak on the topic ‘Upholding the Rule of Law: A Reflection’.

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It took a while for Blair to delve into the topic proper, although it was still entertaining to hear him speak about his barrister days and his eventual move into politics.

Very quickly, you could tell that Blair adopted a very utilitarian approach to his topic on the Rule of Law. You may first ask, what is the Rule of Law? A basic description of it would be that no one is above the law. As Dicey would put it, one of the principles of the rule of law is the absolute supremacy of regular law as opposed to arbitrary power. Some of the elements that Blair identified would constitute the Rule of Law is that of an independent and strong judiciary, as well as an independent Bar.

In this day and age of the awakening of China and India and the economic forces they wield, the rise of sovereign wealth funds, and the development of new business sectors, made the Rule of Law all the more relevant rather than it being cast aside. ‘Footloose capital’, as Blair put it, would need an outlet, the growing global workforce would need an outlet to live and work. The Rule of Law would aid in such a process.

“Get good governance. Get a proper judiciary, proper laws”.

“Get a reputation that there is a commercial and criminal legal system that operates fairly and then wait for businesses to come, because they will.”

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Blair stressed that a judiciary which was still corrupt indicated the immaturity of a country. A judiciary that became corrupt, was an indicated of a country in decline. He also emphasised that the Rule of Law did not just mean an independent judiciary, but it also necessitated an efficient judicial system. He repeated the oft-used phrase that justice delayed is justice denied. Further, judges could not be tainted with any allegations of corruption. The public’s confidence in the judiciary must be upheld at all times.

Blair also shared with the audience the obvious tension he felt between the executive, in making laws, and that of the judiciary, who interpreted the laws he, as Prime Minister, had crafted. He was almost critical of the judicial activism in making law rather than interpreting it.

He shared with the audience the passing of certain anti-terrorist laws which provided for preventive detention. These laws were eventually challenged in the House of Lords, where the Court declared these laws contrary to the Human Rights Act. He expressed his steadfast disagreement with the decision, but he was also steadfast in agreeing that the Court had the power to make such a decision.

“It is right that they can; that they are above me and not me above them.”

I have to say that Tony Blair is an excellent speaker. His oratory skills and ability to command attention. I cannot say that I enjoyed the content of his speech that much, but it was enlightening though to see the viewpoint from the Executive, from his vantage point of Prime Minister and wishing to create laws with the greater public good in mind, but having the necessary stumbling block of the check and balance of the Judiciary interpreting such laws. The speech hardly broke new ground in academic discourse, but still interesting to listen to Blair speak nonetheless.