Lawyers furious after u-turn on heritage law society building sale

Thursday 22nd November 2018

Members of the Auckland District Law Society are angry the organisation has accepted an offer for the sale of its historic Chancery Chambers building, just three months after they voted against any such sale.

In a close-run vote in July, the society’s 3,500 members rejected a resolution put to them by the ADLS Council, the society’s eight-person ruling body: “that the council be authorised to explore the possibility of the sale of Chancery Chambers”.

The ADSL was firmly in favour of the sale, but told members in writing that if they voted against the proposal, “the building will not be sold by this Council”.

Just four months later the society’s president, Joanna Pidgeon, has signed a $14.9 million deal to sell the building.

Yesterday Pidgeon met with tenants and told them the ADSL had accepted an offer for Chancery Chambers, conditional only on members voting again.

Pidgeon told BusinessDesk the proposed price was a good deal for the society, as it was above a $13.9 million valuation the ADLS had received before the July vote.

She said the society was particularly keen to sell the building because the proposed purchaser had done desktop analysis of seismic risk, which suggested Chancery Chambers was below the ‘34 percent of the current standard for new buildings’ cut-off level for a building to be considered earthquake-prone.

Council assessments had put the building at 37 percent and the society had not done its own evaluation, Pidgeon said. It had also not investigated other potential purchasers for Chancery Chambers which might be able to offer more.

Chancery Chambers is a 1924 heritage building “in the heart of Auckland CBD’s legal district, on the corner of Chancery and O’Connell Streets”, according to the company’s website.

“Many of Auckland’s well-known identities have worked in the building, which for a time housed a tea room in the sixth-floor tower and a Turkish bath complex in the basement,” the site says.

The ADLS bought and renovated the building as its headquarters in 1989. It was listed on its 2017 accounts as being worth just under $11 million.

Members have until Dec. 10 to vote on the proposed deal, and if they vote ‘Yes’ the sale becomes unconditional on Dec. 12 - less than three weeks away.

Barrister Helen White, who is a Chancery Chambers tenant, ADLS member and opponent of the sale, was angry after the revelations yesterday. Meeting with BusinessDesk and fellow lawyers Jim Thompson and Will McKenzie, White said the ADLS had no right showing potential purchasers around and allowing them to do seismic testing, when members had explicitly told the law society at the vote in July they didn’t want it to look at a sale.

“How could she sign [the unconditional agreement] having made those representations?”

White says the members need much more information than the society has given them in order to be able to make a decision on whether to keep or sell the building. These include detailed and independent engineering evaluations of earthquake risk and how much any remediation might cost.

Pidgeon says the current proposal is a “good deal” and members will have the chance to ask questions at an information evening on Nov. 28.

However, she accepts the society hasn’t got any new details about earthquake risk other than those from the potential purchaser, and those won’t be made public.

“We haven’t had a detailed seismic assessment and we haven’t had a detailed cost proposal, but our indications are that it will cost ‘some millions’ if it is below 34 percent to bring the building to 37 percent, and ‘more millions’ to get it above that.”

She says the society risks having to go into debt, or raise member levies if it doesn’t sell the building.

The accounts for the year to Sept. 30, 2017, the most recent ones available, show the society in a good financial position. Total revenue was $6.15 million, including $655,000 received in rent from Chancery Chambers tenants.

The only building-related expense listed in the accounts is $30,600 in depreciation. The ADLS paid just over $2 million in salaries to its 25 staff, an almost 70 percent increase in salary costs from 2011 levels.

It made a net surplus after tax of $426,000.

White says she is disappointed by a lack of good faith from the ADLS board. She says she isn’t necessarily against a sale, but the lack of detailed evaluation means members can’t make an informed decision. She is calling for members to say ‘No’ until they know more.

“[Joanna Pidgeon] has signed us up to sell the building and she’s entirely in control of the information.

“Before they say ‘Yes’ to the sale, the membership needs to be sure they aren’t missing an opportunity to go to market and get the best possible price.”

Meanwhile, there are other ructions facing the ruling body of the Auckland District Law Society.

A group of lawyers, spearheaded by Russian-born Serge Roud of law firm Loughlin McGuire, are pushing for rule changes they say will bring the ADLS framework more in line with the incorporated society-type organisation it is now, rather than the regulatory body it was until 2009.

At that time, all statutory powers for district law societies were transferred to the New Zealand Law Society and the ADLS became what Roud calls a “union of like-minded lawyers”.

Its roles include professional development, organising events, liaison with government and the media, and selling a ‘WebForms’ service to lawyers.

Roud says his rule change will give members more power to have a say in their organisation. His proposals include:

- getting rid of unelected members of council, so all councillors are elected by members;

- clarifying the objectives of the organisation;

- making membership lists public so members can contact each other;

- having the “chief executive” role be replaced by a “secretary of the society” role, accountable to members;

- removing all secrecy from council meetings, including allowing members to attend meetings and see agendas and minutes.

Roud says during the past two years, he and the other lawyers supporting the rule changes have been blocked from presenting them to members, a claim Pidgeon rejects. She says Roud and other members didn’t initially follow the correct procedures to put a vote to other members, and a special general meeting has now been called for Dec. 17.

Roud was earlier this year thrown out of the ADLS and his tenancy in the Chancery Chambers building was not renewed.

He says he was expelled because the law society didn’t like him challenging the rules and the leadership; Pidgeon says his conduct amounted to bullying, a charge Roud denies.

Roud, who has the required 24 members supporting his rule change proposal, says the vote on the building should be delayed until after the special general meeting.

While members could challenge the ADLS Council’s decision to sell the building after saying it wouldn’t, he says that would require opposing lawyer members going to the High Court and asking for an injunction. That would be both difficult and time-consuming, particularly in the busy run-up to Christmas.

“Who’s going to do that?”

He believes the ADLS operates more like a listed company than a members’ organisation or incorporated society, and he questions whether the leadership has too much power.

“This situation is more common for countries like Russia or China, where the administration has more power. I came across these situations in my life in Russia, and I believe the council is not acting in the best interests of the membership of the society.”

(BusinessDesk)

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