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On this site you'll find posts and pages from recent years. The site began as part of my public law practice after leaving Parliament in 2005. Accordingly it records my opinions, not necessarily those of Franks & Ogilvie of which I am a principal, or any client, or the National Party for which I contested the Wellington Central electorate in November 2008.

From the Wellington Writers’ Walk:

“It’s true you can’t live here by chance, you have to do and be, not simply watch or even describe. This is the city of action,the world headquarters of the verb”

– Lauris Edmond, from The Active Voice

German savings – not wasted in state imposed housing bubbles

  • January 27th, 2015

A report placing responsibility for the US sub-prime mortgage crisis (and thence the GFC) squarely on the regulators,  coincides with intriguing dinner table conversation with three young German friends for whom we’ve been a base for exploring New Zealand this summer.

I asked how they felt about being expected to fund Greek fecklessness and corruption? Where would young Germans now put their famed savings, with the EU’s money printing threatening them with negative interest rates? Would it go instead into more lavish housing and consumption ‘squandering’?

They say there is not much discussion, even in social media, about the financial situation. Most attention is on the challenge to the orthodox view that it is improper to express anxiety about Islam. And patiently they explained  again (because we’ve explored this curiousity several times) that few have expectation or desire to buy a home “because it is bad investment”.

Pressed they agree “We do not expect to sell houses for more than they cost us. Building a house and keeping it in repair will mostly cost more than you can sell it for. So why would we save that way?”

They tell us that in rural areas people customarily own their own homes because they own land anyway. I ask how it is that population growth has not produced capital gains for housing renters. They see it as simple “Because people will build more apartments, and we like to live that way. There are social housing providers which provide inexpensive apartments, but also there are companies. Where there are one-story places will become multi-floor apartments”.

They are young teacher and psychology graduates, so cannot tell me how the notorious German penchant for regulation has managed to avoid regulating building intensification and land supply into housing shortages and booms and busts. But their account chimes well with Oliver Hartwich’s urging that we should examine and compare the incentives on local government in Germany, and here.

German local governments automatically share the benefits of growth in local economies. That counterbalances Nimbyism.  Not such natural predator keeps in check the RMA powered Knights of Ni nicely identified by Bernard Hickey.

Instead of wasting our time with amalgamation proposals a useful Local Government Commission (and badly orchestrated “Better [X, Y, Z]” campaigners) should be pressing for effective local government reforms.

Teacher Unions losing power – Democrat dilemma over charter schools

  • January 26th, 2015

A Democrat aligned polling firm engaged by the major US charter school (and voucher) supporter group has found Democrat support for school choice. The teacher union stranglehold on education reform may be ending.

Unlike New Zealand, where party whips can force MPs to stick with policies they know voters don’t like, Democratic party discipline is unlikely to beat a major shift in sentiment. Teacher union funding of Democrats may delay, but it will not preserve the union ability to lock poor kids into poor schools (and accordingly into their birth class).

The release from Beck Research, a Democratic polling firm, reports that nearly 70 percent of Americans support the concept of school choice, 45 percent strongly support it, and only 27 percent oppose it.

From their press release:

“The findings of this poll reflect what we saw in the 2014 midterms and what I am seeing in communities across the country – a demand from parents for more options in deciding how their children are educated”. “Educational choice through opportunity scholarships and charter schools provide these options … educational choice is an immediate solution for parents’ who have children trapped in underperforming schools.

…other signs of school choice momentum – the resounding victories of prominent school choice advocates in the 2014 elections and a growing sense that national education unions are losing their influence with voters. Teachers unions spent at least $80 million in 2014 to express opposition to candidates supportive of such education reforms – and lost every race.

Deborah Beck of Beck Research said, “The poll clearly shows widespread support, among both political parties, for school choice. Any public official – or potential candidate for President — who ignores these numbers does so at their own peril.”

Key findings from poll:

  • 69 percent support the concept of school choice, including 45 percent who strongly support it, 27 percent oppose it.
  • 76 percent support public charter schools, with only 20 percent opposing it.
  • 54 percent of those surveyed believe that giving parents more choices of schools will improve the education system.
  • 65 percent believe choice and competition among schools improves education.
  • 62 percent believe we need to make major changes to the ways that public schools are run.

The poll also confirmed Hilary Clinton and Mitt Romney as the leading contenders for the Presidency, by a long shot

Sir Ath’s funeral

  • January 23rd, 2015

This afternoon I was among the throng at Athfield Architects’ sunwashed village layered as a maze between Amritsar St and Onslow Rd. We were expressing our thanks for the delight Sir Ian had added to our lives.

I’ll post a link to today’s drone video when it is available. Look at it just to see the village. For me an  inspiring thing about that village has always been the sense of freedom created by the absence of railings and other safety ninny construction. Though many kids grow up there, they can run around and practice courage over the risk of falling, as if we were still the country that created Ath.

He knew his time was limited, so he’s been stuffing it with action. Before Christmas Ath and I politely jockeyed for time in the saddle of our new jointly owned tractor. There was little pretence from either of us about necessity, or mere usefulness. His hours mowing, slashing gorse, opening pathways, excavating and and generally glorying in the combined power of diesel and hydraulics were because he remained a boy. Powerful machinery is  for joyful play.

A friend predicted funeral references to John Donne’s poetic description of our collective loss as each life is lost to our community – ‘no man is an island…’ (see at the foot). In the event no one did use that piece. Tom Scott as MC masterfully captured the irreverent commemorative tone Ath would have wanted.

But I’ve long wanted to dispute the Donne thesis. Maybe I’ve autistic symptoms,  but I’ve never heard it without wanting to argue the point, from my first exposure as a school pupil.

Ath’s death diminishes our community, and the life wealth of each of us. But Donne’s main point was different. He was asserting social relativism, claiming that everyone is valuable.

That I do not feel and it is patently untrue. There are many who make no net contribution and some whose departure is a gain for all. Saying that every death diminishes us is to derogate from the worth of those who are genuinely irreplaceable.

The world will no doubt somewhere see the like of Ath again but I do not expect to see that rarity. He is a promontory lost, not a totara falling in a remote forest.

“No man is an Island, entire of it self; every man is a piece of Continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man’s death diminishes me, because I am involved in Mankind;

And therefore never send to know for whom the bell tolls; it tolls for thee.”

 John Donne, Devotions upon Emergent Occasions (1624), ‘Meditation’, XVII

Judges initiating long overdue reform of barrister restrictive practice?

  • January 21st, 2015

In an elegant 13-page decision Justice Joe Williams  applies the electricity transmission pricing methodology to the North Auckland and Northland (NAaN) network. It might yet be followed by a turgid Court of Appeal 100-pager.

Only a few lawyers will get to appreciate the beautiful legal prose. But many more could be interested in the revolutionary kicker at the foot of the decision.

The Court document records the “solicitors” on record in this case as being none other than Thorndon and Shortland Chambers.

As far as I am aware there are no firms with those names. They are of course collations (I dare not use the technical description of partnership, or practical description of ‘firm’) of lawyers who operate from the same premises, market a collective brand, and otherwise share expenses and interests in much the same way as do ‘eat what you kill’ law firms.

But barristers have clung to the anti-competitive rules that prohibit practicing in collectives, and stop clients contracting directly with them. Instead unwilling clients are forced into countless artificial contracts. They must expensively channel their ‘instructions’ to barristers through cooperative ‘post-box’ solicitors.

Have the Courts recovered their common law mojo, and seized back the power to regulate those granted audience before them (admitted lawyers)? Has Williams J decided to end the farcical ‘direct intervention’ rule, by approving barristers’ chambers as de facto solicitors firms for the purposes of the rule?

I fear not. More likely this is accidental – the felicitous outcome of a judge’s clerk drafting the way he or she has seen things actually working, without seeing the precious historical toes thereby trod.

But the oddity may attract attention nevertheless to the elegance of an arcane judgment.

Victims guaranteed non-restorative justice

  • January 13th, 2015

Mike Yardley in Stuff nails the idiocy that even Judith Collins did not eliminate from the Ministry of Justice’s fiddling with criminal process.

Michelle Smith’s powerful letter to The Press on Saturday underscores the outright stupidity of the overcooked restorative-justice revolution that has been unleashed on our courts.

In this case, her loved one, Terrence Martin Smith, died after being doused with petrol and set alight. How unbelievably insulting to presume the victim’s family would wish to rendezvous over tea and biscuits with the killers, ahead of sentencing.

At the other end of the spectrum, The Press reported the case of the Rolleston scooter rider who last month pleaded guilty to intentionally exposing his genitals to passing women.

The female complainant made it patently clear she didn’t want to meet the offender, yet sentencing still had to be delayed for a month.

This is so inquiries can again be formally made about convening a conference, even though the woman has clearly seen more than enough of the individual.

Politicians, not the judges, deserve most of the blame for the continuing contempt of recent year reforms, for victims.

Why good people shun local government

  • December 15th, 2014

Councils throughout New Zealand depend on the accidents of election or employment of a few self sacrificing competent people to carry the busloads of nodding passengers elected every three years. It is clear that size of local government unit is no predictor of overall competence or efficiency. A good mayor, or deputy, or CEO can make a council look adequate, or even good.

John Roughan’s Saturday Herald opinion piece reports on part of a day following Auckland’s Cr Cathy Casey.

He nails it in the last paragraph and leaves us to imagine the rest of the day –

Long ago when I covered councils, elected members took time out from real jobs. These days they need to be full-time to read the volume of paper produced for them, let alone spend most of every day in meetings. If the vacuous, mind-numbing verbiage they are fed is a terrible waste, imagine the cost of writing it? Up close it’s worse than I thought.

Why do many business people think that local government will improve by amalgamating units. They would not (won’t) tolerate the days spent reading the trite drivel Councillors are fed, or listening to the predictable whines of those who hate change in every sphere.  So why is the Wellington Chamber of Commerce, and the Property Council so indifferent to throwing their weight behind the mayors willing to talk about changes that would actually change the kind of people who’d be prepared to do the job?

Nothing to hide – supernatural surveillance – revealed preference on privacy vs security

  • November 18th, 2014

On The Nation on 15 November, I speculated that people might trade privacy for perceived security more readily than the commentariat think. I suspect that privacy is a recent pre-occupation of academics and lawyers because it gives them a new field in which to boss people (particularly business people) whether or not the public in whose name they claim to act would actually make the same choices if they knew the costs.

Among the reasons for that suspicion is the great mismatch between what people tell pollsters they worry about, and how most of us act. Though a few paranoids worry intensely, most ordinary people I know joke about surveillance, and allow collection of data by business without serious second thoughts. We are probably a bit more anxious about government data collection, perhaps because of well-founded suspicion that governments are much more likely than businesses to misuse date against us.

I thought I should see if there has been much recent  investigation of the topic. As it happens, there has. November 12 saw the release of a PEW survey reported here.

Daniel Solove’s summarised comment on it is here, and here.

I disagree with Solove only on emphasis and prescription, not the description of the issues.  I think he over-estimates the public anxiety about data collection per se, and is on stronger ground when worrying about misuse of it. In other words, intuitively when we trust the collectors to be only after us commercially, we are less genuinely worried than when we think data might be put to use by a coercive state, to persecute us, or to discriminate, or to permit covert or overt harassment.

To me it is idle to think that a democratic government will not be forced by public concern to collect as much information as is reasonably possible to prevent domestic terrorist attacks. That will ensue, lawfully or not, whatever the law says nominallly. Accordingly I would prefer to focus effort more on the achievable constraints on the holding of surveillance information, than on holding back the full tide of data collection.

As I said on Saturday, when you grow up in a small community, you assume general knowledge about you from most people you meet. Sometimes it would be great to know that it was better informed than gossip.  And we need to remember that we might be the first civilisation attempting to maintain mutual civility without a near universal belief that God, or angels, or gods, or other supernatural beings were monitoring and potentially holding us accountable for everything we’ve thought, let alone everything we do.

As a confirmed worrier about the likelihood of malign uses of power by the state, I suggest the following priorities:

a) first to strengthen the safeguards against surveillance data being unnecesarily accessible to politicians, to use against political enemies;

b) secondly to strengthen neutral  oversight of the  agencies that collect it, to ensure that they do not become septic independent centres of potential oppression and threat to democratic leadership (Hoover’s FBI);

c) thirdly, to ensure that transparency is general, to reduce the risks of improper privileged use of data collected by the state. the people should know most of what the state knows, if they wish, through open registers;

d) refining the Official Information Act to make it more reliably self enforcing (because the Ombudsmen are useless) but on the other hand increasing protection of communication that will be better if it is privileged, to stem the trend toward non-recorded communication and other devices to avoid the law;

e) making rights to correct more reliable;

f) beefing up protections against threats to longstanding free speech rights, including by ruling out the ‘right to be forgotten’,

g) reforming defamation law.

‘Who watches the watchers?’ – responding to ISIS

  • November 16th, 2014

TV 3’s The Nation  on 15 and 16 November screened significant interviews, with the PM,  Att. Gen Chris Finlayson, and defense expert Dr David Kilcullen.  As a panellist I wanted to ask supplementary questions more than to comment despite perceptive interviewing from Paddy Gower and Lisa Owen. Each interview could have prompted an entire hour’s discussion.

Serious people will want more on Kilcullen’s repeated references to steps needed instead of the containment  policy implicit in the western ‘no boots on the ground’ policy that depends on drones and air support for Kurds. John Key was asked about the ‘green on blue’ attack risk while we train the local fighters our strategy will depend on, but did not pretend there were as many answers as there are questions.

Some of  Kilcullen’s explanations are here, in the Australian of 1 November.

“This conflict will not be over quickly or cleanly. On the contrary: it is, and will be, a multi-generational struggle against an implacable enemy, and the violence we’re dealing with in the Middle East and Africa is not some unfortunate aberration — it’s the new normal.”

Kilcullen highlights the risks from our internal responses (if the West fails to destroy the caliphate’s appeal to its own citizens):

“…if we fail to face the threat where it is today — primarily overseas — we’ll suffer the consequences at home. This isn’t to rehash some Cold War domino theory in which we “fight them there or we’ll fight them here”. It’s just to recognise the reality that a purely isolationist, defensive, policing strategy — protecting ourselves at home rather than seeking to defeat terrorism abroad — ultimately means the end of society as we know it. Mass surveillance, secret police, a national-security state, guards on every gate, a garrison society: that’s what a “defensive” strategy actually entails.”

He seems to be warning against the current mealy-mouthed approach to Islam within our countries, pretending that the conservative Islamic leaders, their schools and their doctrine are part of the solution, instead of recognising that they are fuel for the problem:

Western governments have been their own worst enemies here: the tendency to treat Muslim communities as a special case, to think that “mainstream” society can deal with “the Muslim community” (whatever that is) only through self-appointed, often conservative, authoritarian elders and notables, is to deny people the individual freedoms that belong to them, by right, as members of our society while absolving them from the responsibilities that go with those freedoms.

It’s to set up an unelected, often illiberal intermediary between our wider society and the idealistic, motivated young people who deserve — and from whom society has a right to expect— the same rights and responsibilities as anyone else. So the right strategy for dealing with 11/3/2014 The West’s failed counter-terrorism strategy requires a complete rethink domestic radicalisation is more freedom, not less — but with it must come more individual accountability.

We badly need more discussion of this, facing up to the lie that Islam is a religion of peace. It is no more peaceful than the religion that drove the Crusaders. The Protestant division between church and state,  and secularisation after the Enlightenment defeated the Popes, has eventually leached out that religious power in most of the West.

There has been no Islamic equivalent. I want to know how Dr Kilcullen would foster a similar change among the young people of pious Islam. It has a closed culture and kills apostates precisely to avoid that risk.

Do we need a ‘balance’, or a rule, on director liability?

  • November 13th, 2014

This afternoon I will present to a group of lawyers who’ve been sold a seminar session that knocks off their full 10 points worth of annual Continuing Professional Development in one day.

I hope some will be interested in policy because I’m struggling to see how I can make a bare legislation update interesting, to people there under compulsion, not intellectual or professional curiousity.

With luck I’ll be drawn into argument over what the courts are telling us on directors.

We’re all now floundering without a compass in the fog of company law. Confused legislation, and conflicting judicial approaches mean lawyers can’t confidently tell directors what is left of the ‘business judgment’ rule. It was not complicated in the recent past. It said that judges should not second guess business decisions in the absence of evidence of bad faith or gross negligence.

That was then. Now directors plow shareholders’ millions into buying legal ‘sign-offs’. Subjecting business decisions to lawyer reassurance brings lawyers into the heart of hundreds of businesses that would rarely have talked to a lawyer 3 decades ago. Yet the Lombard case showed that clean sign offs may not be enough.

Despite the high profile cases, not many directors have been held liable. Even fewer have had to pay material sums. But being sued is immensely costly and outcomes are unpredictable. Directors have heard that D & O policies may be invalidated, or not cover legal costs.

So director liability cases sow disproportionate fear. They justify universal investment in rituals of overt diligence to placate the unpredictable judges.  Sign-offs are bought at the cost of shareholders, not the directors. So director liability law is profitable for lawyers and insurers.  Yet the apparent ‘failure’ of prosecutions, and the absence of any New Zealand equivalent to the multiple century ‘die in jail’ sentencing we read about in other jurisdictions lead to deep disappointment from lay people. Court cases which may be a crippling waste of money and initiative can still  fail to build investor confidence. The rarity of useful recovery of investor money in court cases makes them seem farcical to investors who’ve been lead to expect more than law can deliver.

Chapman Tripp and Russell McVeagh have recently turned their fog lights into that fog. Chapman Tripp congratulates Parliament for passing something that was not as stupid as first introduced. Russell McVeagh draws atttention to an Australian court decision that highlights how much (probably unintentional) risk our directors face from recent poorly written reform, which Australian directors are now better protected from.

Jim Farmer QC reflects on his experience defending the Lombard directors. He penetrates further than most commentary, though without showing much more than silhouttes. He draws on the respectable scholarship that our courts ought to discuss, but have not..

Farmer sets the scene referring to the constant and ludicrous cry of the regulators for

…” shorter and simpler offer documents”.

He goes on:

“Having defended the directors of Lombard in their unsuccessful appeals in the Court of Appeal and Supreme Court (except as to sentence in the latter), I find that objective and, generally, the cry for less time on compliance one that has a major disconnect with the views of the Judges, which can be broadly summarised as a need for more, not less, detail.  

This may be the inevitable outcome of the statutory provision in the Securities Act that empowers the Court to find a statement misleading and untrue by omission but it is also a reflection of the way in which Judges, who seldom have practical commercial or board experience themselves, interpret that provision.  While there is invariably judicial denial that hindsight is being applied, the fact of a corporate collapse and the sense that someone within the company must be to blame – rather than external events beyond the company’s control – puts directors at risk when the offer documents are later subjected to close judicial scrutiny.”

The paper helpfully traverses the origins of company law, and the unique features that made it a key to the Anglo-sphere leaving competing economies behind. But curiously it does not highlight the key protection created by the classical era judges which modern legislators and judges have discarded. Perhaps even the best of the current judges and commentators do not remember what we’ve dumped, if  Farmer’s paper is a guide.  He does not highlight the importance of losing the distinction between dishonesty on the one hand, and foolishness or carelessness on the other. The law once assured ’stakeholders’ it would not forgive directors who were dishonest, or who feathered their own nests at the expense of the company, but on the other hand (with some anomalous exceptions) it broadly told stakeholders not to come crying over spilt milk for losses from poor choice of directors, including if they were incompetent or negligent.

Farmer refers to

..”the famous case of Re City Equitable Fire Insurance Company in the English Court of Appeal in 1925 where it was allowed that directors’ duties had to be viewed, first, in the context of the particular business carried on by the company and, secondly, the manner in which the work of the company was distributed between the directors and management.  The Court also said that regard should be had to the fact that directors’ duties were of an intermittent or part-time nature to be performed at periodical board and board sub-committee meetings.”

He calls on judges to revive that kind of balancing assessment.

I think another approach is more likely to bear fruit. Judges already think they are balancing risks, where the legislation allows.Some show pride in decisions that require directors to continually ‘up their game’. They think they are doing God’s work in making it risky for people to take on directorships who can’t penetrate the mysteries of modern compliance accounting. They feel particular virtue in discouraging sleeping directors, and house-hold name appointments.

I’ve seen no evidence that any modern judge or legislator has taken into account the highly respectable scholarship that suggests that directors should be sleeping stewards,  lest they have a dog, and bark as well. That view of proper directorship is particularly important to justify the near universal pattern in small companies, where it would be absurd for directors to try continually to follow the activity of their general manager. Directors are often appointed solely as a probity backstop. They do their job well if they  come awake only when an agency risk is likely to materialise (the risk of management diverting company resources to their own benefit) or when it is time to change management.

Instead some judges, too many journalists and most regulators (many of them of the lawyer/cleric persuasion) may take at face value much of the voluminous ‘governance’ dogma. It seems designed to make out of directing a full time, licenced craft and mystery. It requires directors to set strategy, to oversee accounting and other compliance activity, to second guess and engage with management in myriad ways.  For many companies and investors that may now be their reasonable expectation. But that  hands on governor model has not been shown to be value adding.  It has no more empirical research foundation than ‘angels on the head of a pin’ theology.

When invited to consider whether  extra liability and diligence is efficient our judges/regulators have no tools for considering the question. Several I’ve discussed this with are puzzled by the argument that directors will demand part or, or much of the return that should be going to shareholders, if they face the asymmetric risk (having to reimburse for losses, but not receiving the gains of efficiently risky decision-making).  They understand that having to compensate shareholders (or creditors) for risk decisions necessarily made under the uncertainties of time pressure, inadequate information, and competing priorities, could be problematic, but they miss completely the significance of not sharing in the upside of such decisions that prove profitable. The director’s incentives when faced with asymmetric risk are to over-invest in precautions, especially when the cost can all fall to the account of the company (shareholders).

So a  key need is to re-establish for the clerical lawyer class the moral/economic  underpinning of classically efficient rules, such as caveat emptor, and the ‘business judgment’ rule.

Farmer’s piece heads in the right direction. But it should have a simple concluding paragraph.  There is no point in  calling for ‘balance’ from judges un-equipped to work through the factors. So we’d be better to revert to the bright-line rules of more simple days (simple rules for a complex world).

In brief:

  1. Limited liability is not a privilege – it is efficient standard form contracting for allocation of the inevitable risks of loss in a business world where we know, and want, to allow for an infinite range of decision modes, ranging from simple intuition, to the most highly systematic and researched decision – making.
  2. director liability should be swift and ruthless for dishonesty. Current law is disgracefully slow, and expensive in maintaining the right levels of risk for dishonesty;
  3. There may be a category of negligence so wanton that it would be efficient to characterise it as deemed breach of the duty of good faith (call it recklessness as to the outcome for others).
  4. But otherwise shareholders accept the consequences of mistakes in the selection of directors, and directors honest mistakes or derelictions, as just one species of the risks of investment, among all the much bigger ones they accept when gambling on the unknown future;
  5. More specific ex ante allocations of risk can be matters of contract (including the Articles or constitution of the company) which can vary for the circumstances of each company.

Cr Lester needs support – take responsibility for your own safety

  • November 12th, 2014

How refreshing to see Cr Lester willing to reject a fun police role for the Council. The numbers who’ve hurt themselves on the wonderful swings that appear from time to time in the Town Belt near our home are a tiny fraction of the people who’ve thrilled themselves.

The swings are so much more spectacular than anything people will have experienced in the boring ‘play grounds’ with their dumbed down gear. I wonder if people are becoming more susceptible to panic and letting go of these ropes precisely because they are so unfamiliar with exposure.

James Delingpole’s speculates on this indirectly in his Spectator comments  on his kids learning from living in the country, including the use of  fire arms. Thanks to Whale Oil for the link.

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