Sunday, May 11, 2014

End the lawyers' monopoly on conveyancing in Malaysia


End the conveyancing monopoly

Lawyers set outrageous fees despite the fact that the work done does not involve additional skill.

WHEN I started my legal practice many years ago, it was quite common for lawyers to give discounts on fees chargeable for conveyancing and loan transactions. In fact, some of us charged time costs to clients because the work was quite straightforward (even if the sums involved were large).

In those days, there was already a no-discount rule. The legal fraternity then was more realistic and the Bar Council was lenient when it came to the amount of fees we could charge: no one would be liable for disciplinary action for not following scaled fees, and breaches were more frequent than observance. Those were happy days.

By and large, conveyancing and loan documentation for financial institutions are straightforward matters. They usually involve standard terms that lawyers use on a daily basis without much effort (though some lawyers might dispute this).

Conveyancing fees are what we call “easy money” – clerks do all the work and lawyers collect their fees for signing on the right pages. The higher the value of the property, or the value of the bank loan, the higher the fee.

I have never thought it right to charge high fees on this basis; after all, high-value residential property transacted in Ampang, for example, requires the same work and skill as that of lower-valued property in Klang, so why should there be a difference in fees?

The fact is that the scaled fees mandated by the Bar Council favour the lawyer who undertakes larger property transactions – but why this is so can be difficult to understand, and I suggest you read Michael Joseph’s Conveyancing Fraud, which was first published in 1989.

Joseph was an English solicitor who did his part to expose the arbitrary and unfair system by which the Law Society of England and Wales (the governing body for solicitors) set outrageous fees despite the fact that the work done had no relation to any additional skill.

Ultimately, good sense prevailed and solicitors lost their monopoly over conveyancing in England and Wales. A new breed of professionals called “conveyancers” was given the right to do this work as well and, as a result, fees were much reduced and services improved. That’s what competition does to any industry.

But not in Malaysia. Here, the Bar Council still insists that only lawyers can undertake conveyancing work and scaled fees must be strictly followed – a practice abandoned long ago in other Commonwealth countries.

When it comes to this issue, the Bar Council somehow always overlooks the question of public interest. It seems that, to the Council, it’s their members’ interests that are more important.

The economist Adam Smith warned us 250 years ago that when people of the same trade met, the conversation usually ended up in a conspiracy against the public through the raising of prices.

We now have the Competition Act 2010, which in essence seeks to promote the competitive process, and the rule of the game is to discourage anti-competitive behaviour. The stance taken by the Bar has been definitely against the Competition Act, although no one dares to challenge the lawyers’ monopoly.

The question remains: why must lawyers be the only type of professionals allowed to do conveyancing work?

A solicitor friend countered this view by saying that the Competition Act itself allows for exclusion. For example, Section 13 of the Act exempts any agreement or conduct that complies with a legislative requirement. My friend argued that the Solicitors’ Remuneration Order 2005 (which allows for scaled fees to be charged) is such a legislative requirement.

But wait a minute. I’m not saying that the Bar is in violation of the Competition Act. I’m saying merely that the Bar’s monopoly on conveyancing is not in compliance with the spirit of the Act. The Bar is once again out of touch!

The Malaysian Competition Commission, under the able leadership of former Chief Judge of Malaya Tan Sri Siti Norma Yaakob, should exercise its power under Sections 11 and 12 of the Competition Act to perform a “market review” of the situation and publish the results.

I am sure such a study will show the need for the establishment of a new breed of professional conveyancers so as to give lawyers some fair competition, and I’m sure the market review will benefit the public immensely.

Arguments that conveyancing work is complicated and must be done by lawyers have already been used in Australia and England, and have been found to be baseless – in fact, the quality of conveyancing services in Australia and New Zealand actually improved after the lawyers’ monopoly was broken.

In Malaysia, there are many former legal clerks and Land Office employees who can qualify and be registered as conveyancers. Of course, local conveyancers will have to be properly regulated under their own professional standards organisation to ensure that a high quality of work will be maintained.

The lawyers’ monopoly has no purpose whatsoever in this day and age. Moreover, given that the Bar Council has always fought for the political and human rights of the people, I believe it should extend this public spirit to conveyancing and other spheres, even if it means less “easy money” for lawyers.

In fact, the real test of our commitment to a particular cause is our willingness to persist even if it hits our pockets, so I say again: the public will surely benefit from an end to the conveyancing monopoly, services will improve and prices will fall. So why can’t we do it?

Contributed by by datuk zaid ibrahim The Star/Asia News Network

> Datuk Zaid Ibrahim, true to his Kelantan roots, is highly passionate about practically everything, hence the name of this column. Having established himself in the legal fraternity, Zaid ventured into politics and has been on both sides of the political divide. The former de facto Law Minister at one time is now a legal consultant but will not hesitate to say his piece on any current issue. He can be reached at zaid.ibrahim@partners-corp.com. The views expressed here are entirely his own.
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