Putik Lada: A Step Forward but Not Quite There Yet

My article for the Putik Lada column published in The Star on 19 December 2008:“THE Prime Minister must uphold the continued independence of the judiciary and must have regard to the need to defend that independence …”

These initial words from the Judicial Appointments Commission Bill 2008 serve as a guarantee of the continued independence of the judiciary and imposes a duty on the Prime Minister to defend that independence. The tabling of this Bill in Parliament is an acknowledgment that for too long, the present system of appointing and promoting judges is inadequate and open to abuse.

However, the question then arises whether the Bill goes far enough in ensuring the protection of the independence of the Judiciary.

The Good

The Bill proposes to establish a nine-person Judicial Appointments Commission (JAC) to select and then recommend to the Prime Minister individuals to be appointed as judges to the High Court in Malaya and in Sabah and Sarawak, the Court of Appeal and the Federal Court.

This will also include the appointment to the four highest judicial offices – Chief Justice of the Federal Court, President of the Court of Appeal, Chief Judge of the High Court in Malaya and Chief Judge of the High Court in Sabah and Sarawak.

While not explicitly stated, it also appears that the JAC will similarly select and make recommendations to the Prime Minister on the promotion of judges.

The Bill further sets out the selection criteria that must be taken into account by the JAC in selecting the candidates, for example, integrity, competency and experience, decisiveness, ability to make timely judgments and good legal writing skills.

In another move to be lauded, the Bill also disqualifies a serving judge or Judicial Commissioner from being appointed if he or she has three or more pending judgments.

Some degree of transparency is ensured through provisions dealing with the disclosure of interest by the members of the JAC and disqualification from participating in the discussion or deliberation of the JAC.

The JAC must prepare an annual report of all its activities to be submitted to Parliament, although there is no clear definition as to the exact detail of the activities to be reported to Parliament.

The Bad

The Bill, however, is silent on the obligation of the Prime Minister to consider the recommendations made by the JAC. It provides that where the Prime Minister has accepted any of the persons recommended by the JAC, he may proceed to tender his advice in accordance with the constitutional procedure for the appointment of judges set out in Article 122B of the Federal Constitution.

There is no provision dealing with a situation where the Prime Minister rejects the JAC’s recommendation.

As the Bill currently stands, there is no need for the Prime Minister to provide any explanation if he rejects the recommendations of the JAC.

Another criticism of the Bill is that it gives the Prime Minister a great deal of influence over the JAC. The Prime Minister appoints five of its nine members, namely, a Federal Court judge and four eminent persons.

While these four eminent persons cannot be members of the Executive or other public service, and there is consultation with the various stakeholders, it is the Prime Minister who ultimately appoints them; and he may also revoke their appointment at any time without furnishing any reason.

A further degree of influence is that the Prime Minister determines the allowances to be paid to the members of the JAC.

The Prime Minister is also given the power to make modifications to the Act in the first two years of its coming into force. There is little restriction on the exercise of such a power except that it is meant to be for the removal of difficulties and prevention of anomalies in the implementation of the Act.

Finally, questions remain on whether the proposed JAC framework would be constitutional. Article 122B of the Federal Constitution requires the Prime Minister to consult various parties, including consulting with the Conference of Rulers, before his advice is tendered to the King. It clearly does not provide for the JAC to provide any input in that process.

At best, the JAC may sit uncomfortably with Article 122B since it may be argued that the Prime Minister is not confined to only consulting with these parties. A constitutional amendment may be required to further codify the JAC process of the appointment and promotion of judges.

The Ugly

The Bill is a move in the right direction in safeguarding the independence of the Judiciary. However, this does not detract from the fact that further discussion is required and that certain changes have to be implemented before it is passed.

The present system vests the Prime Minister with the absolute discretion to appoint and promote judges.

The Bill, in its present form, creates a veneer of independence in this appointment and promotion process but in the end, the ultimate decision still rests with the Prime Minister.

There is a risk that the entire JAC framework, with its selection process and selection criteria, will be rendered redundant since there is no obligation for the Prime Minister to accept any of the JAC’s recommendations.

Also, question marks remain in relation to the constitutionality of the Bill. In upholding the independence of the Judiciary, the Bill explicitly imposes a duty on the Prime Minister to have regard to the need for public interest to be properly represented.

The public interest is not served through the entrenchment and codification of the power which is currently wielded by the Executive arm of the Government over the judicial appointments process.

Now that the Bill has been passed despite the misgivings and issues highlighted above, the legal fraternity can only hope for the best, and will no doubt follow its implementation closely.

The writer is a member of the Bar Council’s National Young Lawyers Committee (NYLC). Putik Lada, or pepper buds in Malay, captures the spirit and intention of this column – a platform for young lawyers to articulate their views and aspirations about the law, justice and a civil society. For more information about the young lawyers, please visit www.malaysianbar.org.my/nylc

Legal Technology Conference: Online Marketing for Lawyers

I was fortunate to have been invited by Asia Business Forum to speak at the Legal Technology Conference held on 16 – 17 December 2008. A friend of mine, Eddie Law, was the one who put forward my name to the organisors.It was a great experience overall and this was the first time I had given an external talk outside of the Bar and outside of the office. I had a 45-minute slot and I was worried that I wouldn’t be able to fill up that entire slot.

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My presentation was on Online Marketing for Lawyers: How Lawyers Can Increase Their Online Presence. Having firstly defined what is marketing especially in the context of the provision of legal services, I quickly touched on the more traditional forms of marketing. I was going to touch on three forms of online marketing, being websites, blogs and social networking platforms. However, before I launched into the three areas, I set out the legal framework governing the level of publicity or marketing allowed in the legal profession.

In Malaysia, the ‘code of conduct’ of lawyers is set out under the Legal Profession Act as well as its various rules. Under the publicity rules and certain Bar Council rulings, there are restrictions on the level of publicity that can be made in the electronic media.

Having set out some of these restrictions, I weighed in with my criticism of the heavy restriction of publicity. On the one hand, I recognised to need to protect the dignity of the profession and to prevent soliciting and touting for work, and on the other hand, there is a need for law firms to not only market for clients in a local environment, but to also market themselves globally against other law firms.

I moved on to the first method of online marketing that of websites. I shared some practical tips on ideas for presentation as well as ideas for content. I took screenshots of some law firm websites to give ideas while also highlighting some of the recent trends in content on some of the websites.

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In relation to blogs, I used some of the content from an earlier article on bLAWgs and how the growth of law blogs is also seen on the Wall Street Journal’s law page. It features breaking law stories from around the web with the majority of the stories coming from blogs.

The lure of blogs as a marketing tool is simple. If people are reading what you are writing on a daily basis, and you are writing interesting things that are helping them understand how their business works, it is natural that they will want to contact you and harness more of your expertise.

Finally, I then elaborated on the rise of social networking platforms such as Facebook and LinkedIn. The use of LinkedIn especially could be of benefit as a marketing tool. It focuses on professional connections as opposed to Facebook’s focus on personal connections. The appeal of social networking can also be seen in Legal OnRamp. A social networking website, only by invitation only, for in-house counsel along with certain law firms.

Attendance at the conference was low, which was really a shame. There was some very interesting talks, especially on the use of technology as an aid to litigation, or the roll-out of the e-court system here in Malaysia. I met a number of interesting individuals and I look forward to keeping in touch with them.

Just and Equitable Winding Up: KFC or Chicken Farmer?

I am resurrecting this post after some editing.Under the Companies Act, one of the grounds which the Court may wind up a company is on the “just and equitable” ground. This is very different from the usual winding up proceedings based on a company’s inability to pay its debts.

One of the common examples for the imposition of these just and equitable principles is that the law takes into recognition some form of personal or quasi-partnership relationship between the shareholders. An example may be a family business, where the initial patriachal sole proprietorship has become a sprawling family empire controlled by the sons. A falling out between the shareholder-brothers may then jeopardise the relationship of mutual trust and confidence and may justify the winding up of the company.

The leading case on just and equitable winding up is that of the House of Lords decision in Ebrahimi v Westbourne Galleries Ltd and others [1973] AC 360. The principles enunciated in Ebrahimi are applicable within Malaysia, as held by the Privy Council in Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 WLR 413. The Singapore Court of Appeal decision in Chow Kwok Chuen v Chow Kwok Chi and Another [2008] SGCA 37 is also an interesting case analysing the just and equitable winding up provisions.

In a particular clear cut matter, where I argued that the just and equitable principles did not apply, I simplified (whether rightly or wrongly) the principles as such:

“Imagine if you had a company, let’s call it KFC Pte Ltd…”

Imagine a company, let’s call it KFC Pte Ltd, and it happened that soon after its formation, it started to be very successful in making and selling fried chicken. Over the decades, you have different shareholders entering and exiting the company. As KFC’s chicken business got larger, other companies started to become shareholders as well. However with the drastic onset of bird flu, KFC’s board of directors makes a decision to diversify its business. KFC would no longer solely focus on fried chicken, it would start making and selling fish burgers as well.

The decision to diversify the company’s business was a purely commercial decision, and just like KFC, the company is a commercial entity, which was free to pursue other lines of business. There was no case for a failure of the substratum of company based on some form of mutual understanding.

In contrast to KFC, another scenario may perhaps justify the imposition of just and equitable considerations:

Two best friends meet and decide to form a private limited company. One has a factory to produce fried chicken, and the other friend has a large chicken farm. They decide to form this company for the sole purpose of producing and selling fried chicken. If the friend with the factory suddenly wants to start making fish burgers, then perhaps, the friend with the farm can say that look, we had this common understanding between us that the company was formed to produce fried chicken, there has now been a failure of the substratum of that company. It could then be argued that it might be just and equitable to wind up the company so that the two friends could go their separate ways.

“…whether the company was more KFC, or more of that of the chicken farmer.”

So the case may sometimes boil down to whether the company is more KFC, or more chicken farmer. Unfortunately, a case will unlikely be so clear cut to differentiate between these two scenarios and the Court will need to hear evidence, whether through affidavit or through witnesses, in order to assess whether a just and equitable winding up should be allowed.

Good News and Bad News for Singapore Legal Market

The good news is that several international firms have clinched the Qualifying Foreign Law Firm (QFLF) licenses to set up their law firms in Singapore. 4 UK firms and 3 US firms, namely Allen & Overy, Clifford Chance, Herbert Smith, Latham & Watkins, Norton Rose and White & Case have won the licences ahead of 14 other firms. The total of 6 licenses given out were an increase from the original 5 licenses that were up for grabs.The scheme gives the foreign firms the right to practise Singapore law in permitted areas through Singapore-qualified lawyers employed by them. Previously, foreign firms could only practise through a joint law venture. As announced a short while back, Clifford Chance had broken off its joint law venture with Wong Partnership, undoubtedly because it had already submitted its proposal to get the QFLF and perhaps there were already indications that it had succeeded.The bad news for the legal market is that the wave of lay-offs in the US and UK legal market will likely hit the Asia-Pacific region. ALB is of the opinion that the question is not if the Asia-Pacific legal services market will be hit by this wave of redundancies but when.ALB reports on the talk that one of Singapore’s most prestigious capital markets and M&A practices had already kicked a number of its lawyers to the kerb in an effort to reduce costs. I have also heard some mention of Singapore law firms thinking about not paying out bonuses for this year. Would have been previously unimaginable hearing talk like that.

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.

Legal Salary Statistics from Australia, Hong Kong and Singapore

ALB recently featured an article comparing the salaries from several reliable recruitment companies to provide an overall view of legal market salaries for private practice lawyers of PQE 1-6 across the Asia-Pacific region.Very interesting results, especially where the Singapore international law firms seem to be paying very high relatively. For example, 3 years PQE is drawing an average of S$165,000, which is more than S$13,000 per month!

I have extracted some of the tables from the article:

Australia (Sydney – top tier only) (AU$)

Qualification ALB average
1 year PQE 73,833
2 years PQE 85,750
3 years PQE 97,833
4 years PQE 114,833
5 years PQE 129,583
6 years PQE 157,500

Hong Kong / China (HK$)


Qualification ALB average
1 year PQE 845,847
2 years PQE 926,114
3 years PQE 1,000,714
4 years PQE 1,109,357
5 years PQE 1,183,500
6 years PQE 1,270,229

 

(international firm salaries – not local)

Singapore (S$)


Qualification ALB average
1 year PQE 141,375
2 years PQE 152,000
3 years PQE 165,125
4 years PQE 228,125
5 years PQE 244,375
6 years PQE 256,875

 

(international firm salaries – not local)

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.

Meet-up with Law Students

A few of the KL young lawyers hosted a huge bunch of ATC law students for dinner and drinks over in Bangsar this evening. They were very good company and I always find it heartwarming to see law students so interested in the law, in already being keen on doing pro bonowork and being generally passionate or interested in finding out more about the law.I guess this is in contrast to myself where I kinda ambled along my law degree and then being very fortunate to falling into an area of law that I enjoy and now enjoying the practice of law.

I think it is also very important for the profession to continue to maintain links with law students. They are after all the future of the profession and the meet-up today was just an extension of a long-standing young lawyer project in reaching out to the law students from local universities and other local institutions. It’s important to manage the expectations of law students, give them an idea of what real practice is like and also give the law students to ask any questions that they have. I would have appreciated any such opportunity to mix with lawyers when I was at law school, but never really got such opportunities.

Judging from the questions and the discussions we had, the students have a very good idea of what their goals and interests are in the practice of the law, and I think that bodes well for the profession.

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.

Mandatory Advertisement of the Winding Up Petition

In an earlier post, I had touched on the Court of Appeal decision which decided on the mandatory obligation to advertise the presentation of a winding up petition. This therefore precluded any injunction to restrain such advertisement.The Federal Court in Savant-Asia Sdn Bhd v Sunway PMI-Pile Construction Sdn Bhd has confirmed the mandatory nature of the advertisement of the winding up petition. This is notwithstanding the fact that post-presentation of the petition, the debt under the petition had already been paid by the respondent company to the petitioner and that the petition was going to be withdrawn.

The single issue to be determined by the Federal Court was whether a petitioner in a winding-up petition may be excused from advertising the fact of the petition after the debt had been fully paid by the respondent.

In the judgment of Arifin Zakaria FCJ (as he then was), held that winding-up proceedings were essentially a class action. It seeks to provide protection to unsecured creditors upon the date of the presentation of the petition. Since it is a class action, there is a need for it to be advertised to give notice to all creditors, and this is a mandatory obligation provided under the Winding-Up Rules.

The Federal Court quoted with approval the finding by Abdul Aziz JCA when the case was before the Court of Appeal, that “to omit to advertise the petition would directly assist the appellants to surreptitiously keep the money exclusively to themselves, in the event that there were other creditors.”

The effect of this judgment is that it not only confirms that it is mandatory to advertise the winding up petition upon presentation, but it now imposes a positive obligation for the petitioner to advertise even after the settling of the debt post-presentation of the petition. I can see the strength of the argument that the statutory scheme for winding up should be to enable the protection of unsecured creditors and to uphold the pari passu principle.

However, the strict application of these principles will potentially lead to disastrous practical effects. It is now imperative for the recipient of a Section 218 Notice to immediately apply for injunctive relief to restrain the presentation of a winding up petition within the 21-day notice period. There cannot be an injunction to restrain the advertisement of the petition, even if the debt is bona fide disputed. Winding up proceedings may be abused to bring undue pressure on a company to pay out on an alleged debt, even if it is disputed, within that 21-day period. For public listed companies in particular, where the advertisement of a winding up petition may lead to irreparable harm to its reputation and even a suspension of its securities on the stock exchange, they may have no choice but to pay out on such debts.