The Legal Aid Review report, released yesterday, described a system undermined by incompetent, unscrupulous and sometimes corrupt lawyers looking after their own interests.
The report, by Dame Margaret Bazley, said administrative costs were out of control.
It also raised serious concerns about how the agency operated and how the system was open to abuse by bad lawyers.
Legal aid helps those who cannot pay for their court defence, so their financial circumstances do not deprive them of a fair hearing.
"There is a small but significant group of lawyers, and some defendants, who are abusing the system to the detriment of clients, the legal aid system, the courts and the taxpayer," Dame Margaret said.
"While there are very good lawyers in the legal aid system, there is also a small but significant proportion of very bad lawyers who are bringing themselves and their profession into disrepute."
The situation could not be allowed to continue.
The report recommended the Legal Services Agency, which administers the aid, should lose its independent status and become part of the Justice Ministry.
Justice Minister Simon Power said he was "deeply concerned" by the findings and the Government would be moving quickly to address some of the report's recommendations.
New Zealand Law Society Otago branch president Brian Kilkelly had not studied the review's findings in detail yesterday, but said he rejected any suggestion lawyers were prolonging cases to maximise their income.
"It's got the potential to happen, but I generally have much more faith in lawyers working in the best interests of their clients, rather than trying to prolong matters for further payments."
He had not heard of lawyers seeking top-up payments from clients, but said he would be "very surprised" if it was happening, and believed cases of ill-preparedness were not restricted to lawyers receiving legal aid payments.
New Zealand Law Society legal services committee member David More, of Dunedin, said he was "very concerned" the report found some lawyers were "rorting the system".
However, he was also not aware of any in Dunedin who were trying to squeeze additional payments out of the system, asking for top-ups or neglecting to prepare.
Mr More, also a member of the society's Otago Standards Committee, said the committee would come down "very strongly" on such practices.
New Zealand Law Society vice-president Anne Stevens, of Dunedin, said she, too, had never encountered dodgy behaviour by southern lawyers in her 22 years of practice.
She was pleased Dame Margaret's report noted there were many scrupulous and experienced lawyers using legal aid, alongside a "small but significant" proportion of lawyers rorting the system.
"Thank God she said that because the examples she gives of appalling conduct - and it is appalling - I have never seen."
All three spoken to believed southern lawyers would be "pretty cross" to read the report, with concerns about standards of behaviour potentially overshadowing other useful recommendations within the report.
"Underneath there are some quite good recommendations in terms of reforming the [Legal Services] agency and improving the system," Mr More said.
In particular, he agreed the agency should be incorporated into the ministry, saying it would save on the "extraordinary" amounts spent on administration - "a lot of which is wasted".
Mr Kilkelly also acknowledged there were "a lot of difficulties" in the system, but did not believe that included the quality of representation offered to people from lawyers receiving legal aid.
Many lawyers were doing a huge amount of legal aid work in criminal cases, being paid "rates that are just less than satisfactory" but who worked because of a "degree of social conscience", he said.
"The gravy train comments that are made, I just reject entirely."
In June, Mrs Stevens criticised reduced legal-aid funding in the Budget, which amounted to a 2% pay cut.
She said legal aid rates varied from $55 to $182 an hour, depending on the case, while a Crown prosecutor - paid by the Ministry of Justice - received $198 an hour at the same hearing.
Legal aid concerns
Poor practices identified in the Legal Aid Review report released yesterday.
- Lawyers making sentencing submissions without having read the pre-sentence report.
- Lawyers ignorant of legal principles and not realising their own ignorance.
- Lawyers failing to turn up to court.
- "Car boot lawyers" using a district court law library phone as their office number, interviewing rooms as their offices.
- Lawyers gaming the system by delaying a plea or changing pleas part-way through the process to maximise payments.
- Report author Dame Margaret Bazley said unverified sources believed up to 80% of lawyers practising in the Manukau District Court could be gaming the system.
- Lawyers who demanded or accepted top up payments from clients who do not understand legal aid.
- Widespread abuse by duty solicitors of the preferred lawyer policy, including taking backhanders for recommending particular lawyers to applicants.
