Saying goodbye to the Duplicate Certificate Title

The biggest problem, and this appears to have been overlooked due to all the other distractions and debates, is the duplicate title. If you are going to replace paper based systems with paperless electronic systems, you need to get rid of the duplicate title. The first step in paving the way for electronic conveyancing is eliminate the paper duplicate certificate of title. To do this, you need policy, legislation and implementation.

I just cannot see how electronic conveyancing can be introduced and work successfully unless the duplicate has been eliminated. If it just too hard to abolish the duplicate title, I really think we are better off thinking about other things, like cars, long weekends and other fun things.

At the moment there is no clear policy on dealing with the duplicate. And certainly nothing that goes close to a uniform national approach from all eight jurisdictions. Queensland has come closest to abolition of the duplicate, but even there it is optional for a party to request a certificate. Only a current title search will reveal if a certificate of title has been issued.

In Victoria, the duplicate certificate of title has not been abolished, but the issue was addressed in the context of electronic conveyancing which as we know is living in a state of limbo. But if we were to wake up one morning and find ourselves using the ECV system, one has to look at the requirements and standards that conveyancers must observe. The key provisions deal with identity and clients need to be properly identified to prove they and only they have the right to deal with the land on the Register. The Transfer of Land Act was amended with the insertion of section 27AB Verification of Identity.

The Registrar is not required to register an instrument under section 27A if the Registrar is not satisfied as to the identity of any person by or on behalf of whom the instrument was executed.

Item 3.3 of the gazetted Registrar's requirements for subscribers to identify a client, being an individual are at least 100 points in accordance with Schedule 6.

Schedule 6 is in three parts. The first part is the straight forward 100 points proof of identity credentials. Checking the passport, birth certificate, drivers licence, medicare card, rate certificate etc.

As the Registrar correctly recognised, the 100 points standard is deficient unless the credentials are verified. This makes perfect sense to avoid identity fraud - either title fraud or mortgage fraud. Anyone can photoshop a drivers licence. Well not anyone but anyone with a crooked bent can. It now looks like the life of a conveyancer is not conveyancing but becoming a pseudo detective to catch the crook. The second and third parts of the identity check is to -

Part 2. keep a copy of the identity documents (although this could lead to breaches of personal privacy data if these documents were lost) and list the type of document, names, as in the extract published below

Part 3. detail the methods and sources of verification for Checks. In an exercise of futility I dutifully rang Vic Roads to ask how I would go about verifying a client's driver licence which equates to 40 out of 100 points. Kerry-anne of VicRoads was very helpful and liaised with her departmental manager and advised the following is required for any licence verfication check -

VicRoads has three requirements.

1. Consent from person in writing (privacy) for VicRoads to divulge information to lawyer / conveyancer
2. License Search Request: providing Name; Licence No; DOB; Address.
3. Search application fee of $7.80

Delivery methods

In person - done over the counter
By Mail - 5 working days (only 5 days!)

God help us if there were more than one individual registered on title.



So you see the conundrum. If we want to replace paper based conveyancing with electronic methods, we first have to abolish the duplicate title. If we abolish the duplicate, we have to replace it with a methodology of identification requirements. When you take a hard look at the issues of identity, you can come up with a system that has all the appropriate safeguards, but and the but is you can end up engineering a system that is worse than the current system we already have, know and works.

Caveats Online

Electronic Conveyancing: "Saving you time, money and effort". Well that's the official spin from ECV. For the moment that is hollow rhetoric. It might save your client the odd $20 on statutory fees. But it is questionable when it comes to saving time and effort. This is demonstrated by the process for lodging one of the simplest of instruments – a caveat

How much time did it take above the manual system when lodging caveats online? I estimate it took over 20 minutes of additional time (which would be better spent on hold trying to book a settlement with the banks). In the old fashioned manner of paper and print, a simple purchaser's caveat takes just a few minutes to print, sign and post. The electronic alternative takes over 20 minutes. The couple of caveats we lodged online each took well in excess of 20 minutes to complete. One took 26 minutes, the other about 25 minutes. With repetition, you might just get it under 20 minutes, but I don't think I will be persevering too much longer because of the time factor. Unless it saves you time, using the system will translate into higher costs to the client. Still, if the matter was one of urgency, I would lodge electronically, but not otherwise. The irony is to lodge a caveat online, first I printed out the caveat to assist me in completing the fields online. In addition, the process is simply bewildering.

Authenticating Paperwork

Schneier on Security
A blog covering security and security technology.

June 25, 2009
Authenticating Paperwork
It's a sad, horrific story. Homeowner returns to find his house demolished. The demolition company was hired legitimately but there was a mistake and it demolished the wrong house. The demolition company relied on GPS co-ordinates, but requiring street addresses isn't a solution. A typo in the address is just as likely, and it would have demolished the house just as quickly.

The problem is less how the demolishers knew which house to knock down, and more how they confirmed that knowledge. They trusted the paperwork, and the paperwork was wrong. Informality works when everybody knows everybody else. When merchants and customers know each other, government officials and citizens know each other, and people know their neighbours, people know what's going on. In that sort of milieu, if something goes wrong, people notice.

In our modern anonymous world, paperwork is how things get done. Traditionally, signatures, forms, and watermarks all made paperwork official. Forgeries were possible but difficult. Today, there's still paperwork, but for the most part it only exists until the information makes its way into a computer database. Meanwhile, modern technology -- computers, fax machines and desktop publishing software -- has made it easy to forge paperwork. Every case of identity theft has, at its core, a paperwork failure. Fake work orders, purchase orders, and other documents are used to steal computers, equipment, and stock. Occasionally, fake faxes result in people being sprung from prison. Fake boarding passes can get you through airport security. This month hackers officially changed the name of a Swedish man.

A reporter even changed the ownership of the Empire State Building. Sure, it was a stunt, but this is a growing form of crime. Someone pretends to be you -- preferably when you're away on holiday -- and sells your home to someone else, forging your name on the paperwork. You return to find someone else living in your house, someone who thinks he legitimately bought it. In some senses, this isn't new. Paperwork mistakes and fraud have happened ever since there was paperwork. And the problem hasn't been fixed yet for several reasons.

One, our sloppy systems generally work fine, and it's how we get things done with minimum hassle. Most people's houses don't get demolished and most people's names don't get maliciously changed. As common as identity theft is, it doesn't happen to most of us. These stories are news because they are so rare. And in many cases, it's cheaper to pay for the occasional blunder than ensure it never happens.
Two, sometimes the incentives aren't in place for paperwork to be properly authenticated. The people who demolished that family home were just trying to get a job done. The same is true for government officials processing title and name changes. Banks get paid when money is transferred from one account to another, not when they find a paperwork problem. We're all irritated by forms stamped 17 times, and other mysterious bureaucratic processes, but these are actually designed to detect problems.

And three, there's a psychological mismatch: it is easy to fake paperwork, yet for the most part we act as if it has magical properties of authenticity.
What's changed is scale. Fraud can be perpetrated against hundreds of thousands, automatically. Mistakes can affect that many people, too. What we need are laws that penalise people or companies -- criminally or civilly -- who make paperwork errors. This raises the cost of mistakes, making authenticating paperwork more attractive, which changes the incentives of those on the receiving end of the paperwork. And that will cause the market to devise technologies to verify the providence, accuracy, and integrity of information: telephone verification, addresses and GPS co-ordinates, cryptographic authentication, systems that double- and triple-check, and so on.
We can't reduce society's reliance on paperwork, and we can't eliminate errors based on it. But we can put economic incentives in place for people and companies to authenticate paperwork more.

This essay originally appeared in The Guardian.

Court win for apartment buyers leaves developers reeling

VICTORIANS buying houses and units off the plan have secured new legal rights to demand their money back, under a landmark ruling that has sparked fears of a collapse of projects across Melbourne.

In a setback for an industry already reeling from the credit crunch, the Supreme Court of Victoria has found that off-the-plan buyers can tear up their contracts and get their deposits back when projects are not completed on time.

The ruling came in a case involving two luxury apartment buyers in Geelong who won the right to have their deposits refunded and contracts revoked because the developer took several months longer to finish the project than agreed.

Until this ruling, it had been standard practice for developers to put clauses into off-the-plan contracts allowing for the extension of completion dates.

Reasons for late completion could have included labour strikes, planning approval delays, shortages of materials or labour and weather.

But in a ruling this month, Justice Bernard Bongiorno said such clauses were invalid because they put the risk of delay onto home buyers, leaving them with no way out.

The decision is an unwelcome one for an industry already faltering in the credit crunch, with more than $2 billion worth of Melbourne projects delayed or abandoned since September because of a lack of finance.

A leading property lawyer estimated the decision had put 10 per cent of Melbourne projects at greater risk of collapse.

One of those involved in the case, Jennifer Clifford, said developer Solid Investments had asked for three time extensions to complete her $2 million apartment overlooking Corio Bay. "None of it was the developer's fault," she said. "Things just kept going wrong. I mean there were objections and they struck an underground creek.

"(But) why should we as the prospective purchasers just have to keep hanging on for who knows how long?"

The Edgewater project, in which businessman Frank Costa paid a record Geelong price of more than $3 million for a penthouse, was completed in March.

Edgewater developer Murray Stone, who is appealing against the Supreme Court decision, said the ruling "opened a can of worms" for the industry. "Any contract that now goes over the sunset clause becomes void," Mr Stone said. "Even if buyers want to settle the contract they can't. They have to enter a new contract and not get the stamp duty savings."

He said it was difficult for developers to simply make sunset clauses longer, say five years, because banks would not normally lend beyond a 30-month completion date.

"All projects will now be under an enormous amount of pressure and the banks will probably not loan."

Freehills property partner David Sinn, whose firm was not involved in the case but advises many developers, said it set a precedent that had the industry worried about project collapse.

"Any current development where they have pre-sold apartments and are struggling to get finance is now at risk of buyers terminating their contracts and getting refunds," he said.

The Age Marika Dobbin
June 25, 2009

E-conveyancing plan thrown a $2m lifeline

The Australian
Chris Merritt, Legal Affairs editor | June 19, 2009

THE push to establish a national electronic conveyancing system gained fresh impetus this week when the NSW government allocated $2 million to the project.

The extra funding, which was made available in the state budget, comes soon after NSW, Victoria and Queensland were given the leading roles in planning the national system on behalf of the Council of Australian Governments.

It also comes soon after Kevin Rudd was warned that the project was at risk of collapse because no funds had been allocated to establish the company that would run the system.

NSW Lands Minister Tony Kelly said his government had long been a supporter of a national e-conveyancing system and the extra $2m would help pay for its contractual and logistical expenses.

The extra funding has been allocated to the Lands Department, but if the company that will run the national e-conveyancing system is established before July next year, the $2m from NSW will be redirected to support the new entity, Mr Kelly said.

"A single national electronic conveyancing system would be a significant step towards creating a seamless national economy and NSW is working with Victoria and Queensland for it to be operational from 2010," Mr Kelly said.

He said an independent study by KPMG had indicated that the potential annual cost savings in NSW from a single national e-conveyancing system (NECS) would amount to $50m.

"Costs for the average conveyancing transaction are expected to fall by $170, providing both home buyers and sellers overdue cost relief," Mr Kelly said. "The process efficiencies available to industry as a result of NECS include less data entry and document preparation, settlement and lodgment savings, courier and bank cheque savings, and lower process administration costs generally."

The extra funding for the national system comes soon after the Victorian government was asked to hold an independent audit into why its state-based e-conveyancing system had cost an estimated $50m to build yet had been used for just one completed property settlement.

State opposition frontbencher David Davis called for the audit after telling parliament that the state government was continuing to spend about $6m a year on its e-conveyancing system, which is known as Electronic Conveyancing Victoria.

Consultants had made "tens of millions of dollars" from the project, but there had been no return for the Victorian community, Mr Davis said. "It seems a very expensive approach given the very small number of transactions that have been achieved with that system."

In the 18 months since the system had been available for use, it had been used for one transaction and had not been endorsed by key industry groups such as the Law Institute of Victoria and the Australian Bankers Association, he said.

Mr Davis said the national approach to e-conveyancing, which had been endorsed by COAG, seemed like a significant step forward because it would provide a low-cost approach.

He said there was "enormous resistance" from other states and the federal government to the idea of using the Victorian system as the proposed national system.

"ECV would have to be massively adapted and would not necessarily work in a simple way," he said. "But the key thing here is that ECV has seen massive expenditure by the state government and has been a massive opportunity for consultants, who have made tens of millions of dollars."

The Victorian government declined to answer questions from The Australian about whether ECV had in fact cost $50m, as alleged by the state opposition.

The government also declined to say whether it would allow the expenditure on ECV to be audited.

Innovation Minister Gavin Jennings, who is responsible for ECV, said in a statement that the government was continuing to work with state and federal governments and believed ECV "provides the basis for a national approach to electronic conveyancing".

His statement said ECV had "successfully processed over 600 transactions".

When asked through his spokesman if all but one of those transactions concerned the lodgment of documents rather than property settlements, Mr Davis declined to answer. He also declined to provide a breakdown showing the type of transactions that had been processed by ECV.

"Victoria is an active participant in the COAG process and is continuing to work with all jurisdictions and industry groups in the development of a national EC system," the statement said.

While Victoria is one of the three states with a key role on the national project, the state government has a significant financial commitment to its own state-based system, a government document shows.

The same document shows the financial plan underpinning the government's expenditure on ECV could be at risk unless most property transactions go through the state-based system.

A regulatory impact statement, dated July 2007, for new fees on land transfer says: "... the government has provided over $29.4m toward the development of the electronic conveyancing project".

Although that figure only covers expenditure up to July 2007, the regulatory impact statement shows the government was expecting to spend a further $49.5m on the project between 2007-08 and 2013-14.

The figures contained in the regulatory impact statement indicate ECV could cost the Victorian government $80m by 2013-14. The document shows also it had been planning to spend a significant amount of that money employing contractors and consultants.

It says the state government "has indicated that the full implementation and ongoing operational costs should be recovered from users of the services of Land Victoria".

But it warns that the amount of revenue generated by ECV will depend on how many transactions are processed using the system and it says the expected take-up rate for ECV is 26.5 per cent of all property dealings in 2009-10, rising 69.8 per cent in 2013-14.

The year in which expenditure on ECV would be greatest was expected to be 2008-09 when the system was expected to have cost Victorian taxpayers $9.7m, the regulatory impact statement says.

The year with the smallest government expenditure on ECV was expected to be 2012-13 when the system was tipped to cost $5.7m.

Over the seven years covered by the regulatory impact statement, the biggest single item of expenditure was expected to be "application development and support", which was predicted to cost the state government $18.5m over that period.

This includes the costs of developing and supporting the software that underpins the system and of a contract with what the document refers to as an "application development and support service provider".

Salaries for public servants and contractors working on the project were expected to be $18.1m over the same period. According to the document, 10 contractors were working on ECV in various roles.

"Major items comprise project management, business operations, user acceptance testers and the roll-out team that will train potential users and provide support," the regulatory impact statement says.

Rumour or Fact

AUSTRALIAN E-PROJECT ABANDONED
By Kelly Ng | 15 June 2009

FutureGov website

The Australian federal government has ignored a funding request and has withdrawn its involvement in a national online conveyancing system.

The National Electronic Conveyancing System (NECS) requires A$20 million (US$15.7 million) to establish itself and recruit executives. According to Les Taylor, Chair of the Steering Committee, industry participants – lawyers, bankers and conveyancers – will abandon the project if sufficient funding does not materialise.

The federal government allocated A$550 million (US$433 million) to the Council of Australian Governments (COAG) to reform and harmonise regulation across states. Some of this money was meant to fund the e-conveyancing project. However, of the A$100 million that will be paid out this year, none has been earmarked for this project, said Taylor.

NECS, was started in 2005 was supposed to be completed by next March, will allow practitioners to electronically transfer property ownership and make payment online. It is expected to reduce costs of buying and selling property by A$250 million annually because consumers will pay less legal and conveyancing fees.

The federal Government cuts link to ailing e-scheme

Chris Merritt, Legal affairs editor | June 05, 2009
Article from: The Australian

THE federal Government severed one of its last links with the moves to establish a national electronic conveyancing system last week after being informed that the scheme was on the brink of collapse.

The decision to reduce the Government's involvement was taken last Friday by an inter-governmental committee that reports to Finance Minister Lindsay Tanner and Small Business Minister Craig Emerson.

That group, the business regulation and competition working group, decided to hand responsibility for the planned system to the governments of Victoria, NSW and Queensland.

The decision came a week after Kevin Rudd was warned that the project was at risk of "complete failure".

This warning was contained in a letter to the Prime Minister from Les Taylor, a former general counsel at the Commonwealth Bank, who heads the steering committee that has been planning the national e-conveyancing system since 2005.

Mr Taylor told Mr Rudd that unless $20million in repayable seed funding could be found to establish the company that would run the new system, lawyers, bankers and conveyancers were likely to abandon the project.

While the commonwealth has promised the states $550million if they undertake a series of micro-economic reforms, including e-conveyancing, no funds have been earmarked for the project.

Friday's decision to shift responsibility for the scheme to Victoria, NSW and Queensland was taken by government officials at a meeting that was not attended by ministers.

One of those familiar with the meeting said it was normal for responsibility for major national projects to be divided between the states.

However, Opposition legal affairs spokesman George Brandis urged the Government to take back the lead role on the project and end years of bickering between the states that have alienated the private-sector players in conveyancing. "It has been a shambles for more than a year now and the Attorney-General has shown a complete lack of leadership in trying to resolve the problem," Senator Brandis said.

"There is a very significant risk that because of the delay and lack of leadership from the commonwealth in particular, that this whole project might fall over.

"The optimal result of a seamless national system is going to be lost and we may well end up with a set of arrangements that are no better than the current arrangements."

He said the problems with e-conveyancing went much deeper than the lack of funding to establish the new system.

"The various participants cannot even agree on a model that they are prepared to work towards," Senator Brandis said.

"Until the state governments are able to reach agreement on that threshold question, there is no point in talking about funding for the system."

He said the lack of agreement between the states appeared to be associated with the fact that the Victorian Government had continued to develop a state-based e-conveyancing system while industry and other state governments wanted a national one.

Last October, it was revealed in The Australian that the Victorian Government was continuing to develop its system -- less than four months after Mr Rudd had announced that all states would be using a national e-conveyancing system by March 2010.

In a joint statement with Mr Tanner, Mr Rudd said last July industry groups had estimated that "a national electronic conveyancing system could reduce the costs of buying and selling property by $250million a year".

"Consumers will save money by spending less on expensive legal and conveyancing fees," the joint statement said.

They said the agreement to establish a national system "is only possible because all states and territories have agreed to co-operate".

The delayed start date of late 2011 will deprive house buyers and sellers of cost savings that on the estimates used by Mr Rudd and Mr Tanner are worth about $437million.

The later start date was put in place after all state governments failed last year to meet a series of deadlines for seven key decisions on establishing the new system that had all been listed in the July statement by Mr Rudd and Mr Tanner.

At the same time, the Victorian Government continued to develop its state-based system, which would be at risk had the states reached agreement on the matters listed in the July statement.

The deadlines that the states missed had been set after e-conveyancing was placed on the agenda of the Council of Australian Governments following a summit in February last year of the key industry groups.

That meeting was chaired by one of the most senior officials in the federal Attorney-General's department, Richard Glenn.

Mr Tanner and Mr Emerson were then given responsibility for a working group of officials that was to prepare options for the structure of the system.

But in March, it emerged that the federal and state governments had agreed to delay the new system and responsibility for the project had moved back to the states.

Senator Brandis said the hiatus over the national e-conveyancing system could be resolved if Mr McClelland ensured the project was given priority by the standing committee of attorneys-general.

Land Victoria - Request for an audit

Land Victoria: electronic conveyancing

Mr D. DAVIS (Southern Metropolitan) -- My adjournment matter is for the attention of the Minister for Environment and Climate Change, who is responsible for the Land Victoria section of the Department of Sustainability and Environment. It concerns in particular Electronic Conveyancing Victoria, known as ECV, an electronic conveyancing system that seeks to replace paper transactions with electronic conveyancing. The Victorian government has expended a significant amount of money -- $50 million on recent estimates and more than $40 million 18 months ago -- and is continuing to spend around $6 million a year on the ECV project. The national approach that was endorsed by the Council of Australian Governments about a year ago was a significant step forward, because it would have provided a low-cost approach to conveyancing transactions around the country. Unfortunately Electronic Conveyancing Victoria, despite expenditure of more than $50 million, has only had one transaction in the 18 months it has been in operation. It seems a very expensive approach, given the very small number of transactions that have been achieved with that system. I am very aware that the Australian Bankers Association, the Law Institute of Victoria and other key groups, like the conveyancers, have not endorsed ECV and the electronic conveyancing approach in Victoria. What I now seek from the Minister for Environment and Climate Change, after the expenditure of at least $50 million of public money for a single completed conveyancing transaction, is an audit. I seek that he order a clear external audit that would achieve an understanding of how this money has been wasted and how the government proposes to put this into the national scheme. There is still enormous resistance from the other states and the national government to the simple approach of putting ECV in as the national system. ECV would have to be massively adapted and would not necessarily work in a simple way, but the key thing here is that Electronic Conveyancing Victoria has seen massive expenditure by the state government and has been a massive opportunity for consultants, who have made tens of millions of dollars with no return to the Victorian community, so I ask the Victorian environment minister to immediately launch an audit.

Hansard. Upper House. 3 June 09

Westpac sorry for security 'stuff-up'

FULL DISCLOSURE / MARK HAWTHORNE / THE AGE
June 4, 2009

A SECURITY breach has allowed confidential Westpac shareholder information to be included in an official document published on the Australian Securities Exchange website.

A document Westpac released to the ASX in March contains the security holder reference numbers (SRN) and holder identification numbers (HIN) of up to 20 different accounts controlled by global investment bank JPMorgan and retired 65-year-old shareholder Peter Liddle, who resides in the Northern Territory. Such details could be used by share "bottom feeders" such as David Tweed to gain control of the shareholdings.

The addresses and account details of JPMorgan Nominees and Mr Liddle are hidden in white type in the PDF document, which was issued by Westpac company secretary Anna Sandham on March 13.

The details cannot be read — but if the words are highlighted and copied into another document, such as an email, they can be converted into black type.

Several business websites, such as wotnews.com.au, converted the PDF document into text, and in doing so published the SRNs and account details on the internet.

The letter was sent to holders of St George Bank shares and hybrid securities, offering the chance to convert them into new Westpac securities. The two banks merged last year.

A spokeswoman for JPMorgan said she was "astonished" to learn Westpac was responsible for the security breach, but assured the bank's institutional customers that their shares were safe. "These are nominee accounts and no transfer of the shares can be done without the approval of the actual account holder," said Claire Linton-Evans.

Such safeguards are not in place for retail shareholders such as Mr Liddle, who only discovered his account details were public knowledge when BusinessDay contacted him.

"I'm absolutely horrified to find that all of my personal account details can be read on the internet," Mr Liddle said. "I've already had that Tweed bloke trying to get his hands on my wife's Woolies shares once this year, and my SRN is on the internet. It's my 65th birthday today, and now I have to sort out this mess."

Westpac spokesman David Lording admitted that a "stuff-up" had led to the release of the information. "It was our mistake, it was our fault, and we have already apologised to the people affected," Mr Lording said. "We contacted them today and apologised, and will be implementing new procedures to ensure it doesn't happen again."

Mr Lording said he was aware the information had "originated" in an official release from the bank to the ASX. "Somehow the information was in that document. It was an inadvertent mistake, not a deliberate one, and we apologise to the shareholders affected."

I'm late for a settlement

Conveyancing drift

The Australian 29 may 09

THE late newspaperman Paddy McGuinness frequently advised reporters to "follow the money" in order to arrive at the root of any particular problem.

If that dictum is applied to the problems of building a national electronic conveyancing system, it is hard to avoid the trail of money laid down by the Government of Victoria.

If a national electronic conveyancing system is established, the Victorian Government will need to admit that much of the money it has spent on its state-based electronic conveyancing system has been wasted.

A national system -- by definition -- would operate in every state. And that would consequently render the Victorian system superfluous. Politically, that would be a catastrophe for the state Labor Government.

The state Opposition estimates that the Government has shelled out about $50 million on its e-conveyancing system.

Yet that potential embarrassment would disappear if the national system were somehow stymied.

Every year that a national system is delayed is another year in which buyers and sellers of houses are being deprived of cost savings that have been estimated to be worth $250 million.

Those benefits, however, are spread among a diffuse group of people in other states who might not be aware of what they have lost.

E-conveyancing edges closer to total collapse

Chris Merritt | May 29, 2009 The Australian

THE push to roll out a national electronic conveyancing system is close to collapse because the nation's governments have not allocated $20 million to establish a company to run the new system.

Kevin Rudd was warned this week that without repayable seed funding for the new company, the national e-conveyancing project is at risk of "complete failure".

The Prime Minister received this warning in a letter from Les Taylor, who chairs the steering committee that has been planning the new system.

Even though the Council of Australian Governments has agreed that the states should establish a single national e-conveyancing system, Mr Taylor wrote that the savings from the project were at risk of being lost for at least a generation.

Those savings have been estimated by industry groups to be worth $250 million annually.

"I have to tell you that the real prospect that you and your COAG colleagues are facing is the complete failure of this important micro-economic reform project," Mr Taylor wrote.

A former general counsel of the Commonwealth Bank, Mr Taylor said lawyers, bankers and conveyancers were likely to abandon the project unless $20 million was provided to establish the company that will run the system.

The project could be saved "by a modest injection of seed funding by the Commonwealth", Mr Taylor wrote.

Mr Rudd's office told The Australian the federal Government had already provided significant funding through COAG in exchange for the states and territories agreeing to set up the new system.

A spokeswoman for Mr Rudd said the Government was committed to providing $550 million to the states and territories as part of COAG's "seamless economy national partnership agreement".

"In exchange, the states and territories agreed to reform and harmonise regulation across 27 regulatory hotspots, including the creation of a national electronic conveyancing system by the end of 2011," the spokeswoman said. "This includes an upfront facilitation payment in 2008-09 of $100 million, to be shared between the states on a per capita basis."

Mr Taylor's letter to the Prime Minister is the result of concern among the private sector groups involved in conveyancing that none of the money flowing to the states under the COAG agreement has been earmarked for the e-conveyancing project. Because the e-conveyancing company is not due to be established until September next year, it will be too late to have access to the Government's $100 million facilitation payment that will be made this financial year.

And while the COAG agreement provides a strong financial incentive for the states to make progress on 10 priority areas listed in the agreement, those priority areas do not include e-conveyancing.

If the states fail to meet their commitment to establish the project, they could still receive their full reward payments from the commonwealth so long as they make progress in the other areas covered by the agreement. Concerns have also emerged that the problems associated with the national system could be associated with Victoria's growing commitment to a separate state-based e-conveyancing system.

Victorian Opposition frontbencher David Davis said he believed the state Government had now spent about $50 million on its state-based system, which is known as ECV.

"It's a tragedy that a genuine national system has been spiked by the activities of the Victorian Government in preference for their $50 million white elephant," Mr Davis said.

COAG's endorsement of a single national system raised doubts about the future of ECV because the national system would operate in each state.

While ECV has been open for business for about 18 months, it has been boycotted by solicitors because of concerns by their professional indemnity insurer that it could expose lawyers to increased potential liability.

The major banks have refused to use ECV because they do not wish to encourage the development of state-based systems that would diminish the efficiency gains from e-conveyancing. 

All the private sector players in conveyancing are concerned that COAG's decision to delay the establishment of the national system means years of preparatory work by the steering committee is in danger of being lost. 

By delaying the start date for the project from March next year until the end of 2011, COAG has already wiped out cost savings for home buyers that, based on industry estimates, are worth about $437 million. 

Mr Taylor's letter to Mr Rudd says private sector groups involved in conveyancing had made it clear to the steering committee at its last meeting that without a clear funding commitment, they did not believe their organisations would continue to support the project. 

These groups include the Law Council of Australia, the Australian Institute of Conveyancers and the Australian Bankers Association. 

The steering committee, which also includes representatives of state and federal governments, has been working towards establishing a national e-conveyancing system since 2005. 

While its work has been hampered by disagreements between the state governments, Mr Taylor told Mr Rudd that many key requirements were well advanced. 

"Unfortunately the point has now been reached where unless a firm commitment to provide the funds necessary to establish the corporation and to attract capable and skilled directors and executives is forthcoming, then I have to tell you that it is my considered opinion that the industry participants in the project will be highly unlikely to be able to continue their support of the project," Mr Taylor wrote. 

"The fact is that if the banks and legal practitioners, in particular, walk away, the project will fail and the considerable value and progress created by the committee's work to date will be lost. 

"If this is allowed to happen, then the prospect of electronic conveyancing delivering financial benefits to Australians, particularly greater housing affordability for young people will be lost for at least a generation," Mr Taylor wrote. 

The Australian Bankers Association said the uncertainty over the capital base for the national system was a great concern. 

"You cannot expect private sector organisations like banks to stand idly by and do very little while the states have gone back to their people to discuss funding," said ABA director of retail regulatory policy Ian Gilbert. 

"Each bank will have to make its own decision but it's totally unrealistic to expect that people will be kept on hold, on ice, while the jurisdictions sort out questions of funding. 

"This is not the way that the private sector would go about it. It would all be up front, organised and settled," Mr Gilbert said. 

Law Council of Australian president John Corcoran said the legal profession was extremely disappointed by COAG's decision to delay the start date for e-conveyancing. 

"It really took us back to square one," Mr Corcoran said. 

Westpac backflip on India jobs shift

WESTPAC has dispatched a strike team to India as part of an offshoring reconnaissance mission a week after the bank's chief, Gail Kelly, drew widespread praise for suspending the practice of sending jobs overseas.

The Australian understands the bank's top technology executives have travelled around India over the past two weeks to meet with about eight outsourcing companies.

Two outsourcers will be selected to perform a range of work and are set to benefit as Westpac spends hundreds of millions of dollars over the next couple of years to update core banking systems and integrate complex technology functions as part of the $12 billion acquisition of St George bank.

Several sources confirmed the Westpac contingent met with technology firms Accenture, IBM, EDS, Wipro Technologies, Tata Consultancy Services and Infosys, as well as one or two others.

A fortnight ago Ms Kelly announced she had put the brakes on Westpac's offshoring of Australian-based jobs, a decision prompted by the recession and expectations that unemployment could rise next year to 8.5 per cent.

"I've decided to suspend further offshoring until conditions improve," she said.

Westpac declined to comment on the visit to India or the bank's future offshoring plans.

Ms Kelly's commitment to keep jobs in Australia followed a three-year undertaking by Commonwealth Bank chief executive Ralph Norris not to send jobs offshore.

Westpac's stance also drew praise from Finance Sector Union national secretary Leon Carter who said the bank had sent 460 back-office jobs overseas, mainly to India, and was probably considering a similar fate for "1000 or more" other positions.

"This is an excellent outcome because maintaining jobs in Australia is of paramount importance," Mr Carter said at the time.

It is believed Westpac plans to set up a two-vendor panel which can be called on when necessary to perform a range of work.

The prospective outsourcing vendors were not provided a specific brief by Westpac but were asked to pitch for where they could offer technology services to the bank.

It is not clear whether there are plans to set up a "captive" outsourcing centre similar to ANZ's Bangalore facility which houses more than 3000 staff.

The winners will benefit from the merger of St George and Westpac, which is slated to cost $700 million when completed, with half of the spend expected to cover the integration of the banks' technology systems.

It is believed the outsourcers panel could be drawn on to complete the lion's share of this work as well as lucrative work to update Westpac and St George's core banking systems.

St George has already outsourced the support and maintenance of key legacy systems to Indian firm Infosys.

There has been a surge in local technology work over the past year, spurred by several legacy system overhauls and consolidation across the financial services industry.

An industry source said banks had been forced to look for resources overseas because of the limited technology talent pool in Australia.

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Mahesh Sharma | May 18, 2009 | The Australian

30 minutes to lodge a caveat

Electronic Conveyancing (EC), the first online caveat has been processed in Victoria by EC Subscriber and National President of the Australian Institute of Conveyancers (AIC), Pauline Barrow.

Pauline said EC was a “convenient and efficient online service (which) has resulted in the preparation, lodgement and registration of a caveat within 30 minutes.”

Source EC News 13 May 2009

LIXI - major focus on NECS

LIXI continues to contribute to the development of the National Electronic Conveyancing System (NECS). The work currently under way will ensure that the data transactions are designed well in advance of the roll out of NECS and conform to the requirements of LIXI members. NECS is proceeding rapidly with requirements development and has encouraged LIXI to be proactive with the requirements for the data standards. All members are encouraged to participate in the requirements gathering process. The NECS transaction standards are a major deliverable for LIXI over the next 18 months – on the scale of the original credit application language – and is a key focus for us this year.

May 09 LIXI newsletter - Erik Fenna CEO - introduction

ANZ moves to Bangalor India

[ email message ]

Unfortunately this is where the issue lies, our settlement prep dept is in Bangalor India, this is why they do not guarantee the 10 day turn around time, but will try to get this done within that timeframel, I will keep on their backs.

 

I will get approx 3 days notification therefore it should give you ample time to book in settlement,

 

Thanks Bruce and apologies for the delay,

 

(name withheld)

Business Banking Manager 
Australian & New Zealand Banking Group Limited 

Identity and the Land Registry

For the past 150 years, Land Registries^ have not conducted or insisted on identity checks in respect to the Register. How many titles are registered in false names? How many titles are registered in names where the proprietor is long dead. No one knows. And how does it matter? 

With anti-money laundering legislation and the advent of electronic conveyancing , identity has become a front and centre issue. Especially with the likelihood of the elimination of the duplicate certificate of title, the right to deal with the land is the central issue.

Today's rules are quite simple

1. The right to deal with the land is you can produce the duplicate certificate of title
   
2. The right to be registered on title is premised on production of the duplicate certificate of title and a transfer of land executed by the registered proprietor
   

Under an electronic conveyancing regime, the first premise is the duplicate certificate of title will not exist. (If this is not to be the case, what's the point to all this?) Legislation will have to be passed, which states, "upon this date the duplicate certificate of title will no longer be required to convey title" or words to that effect. The right to deal with land will solely be adduced by the entry on the Register. 

The rules under an electronic conveyancing regime

1. The right to deal with the land is you can prove you are the person who is registered on the Register; and
   
2. The right to be registered on the Register is an electronic transfer executed by the person, or his agent, who is registered on the Register
   

The right to deal with the Land

A vendor or borrower will no longer have to produce the duplicate certificate of title.

The right to deal with the land might be a combination

• Security number issued to the registered proprietor 
• as is the current practice with shares, a Shareholder Reference Number (SRN)
  
• administratively, the SRN is sent to the address shown on the Register
• the SRN is not publicly searchable
• Proof of Identification
  
• What standards will be set?
  
• Who is qualified to carry out the test?

Proof of Identification (POI) 

What standards will be set?

FTRA (or 100-point) Standard

It is widely acknowledged the FTRA (or 100-point) Standard is an inadequate standard.

NECS and the Land Registries agree on this point.

The FTRA (or 100-point) Standard, although widely known and used, is more than 20 years old. It was devised before the development of desktop publishing and the wide availability of inexpensive, high-quality colour printing. It is generally considered to be from an era when identity fraud was much less of a problem generally and to Land Registries than it is today. While still a useful general-purpose standard, it is considered by Land Registries to be insufficiently rigorous for deterring fraud in land title transactions.

Unless the client is known to the conveyancer, production of identity documents does not cut it. Especially in an age where every student, from the age of 15, for the past 10 years or more has been dealing in false IDs.  How hard is it, or how easy is it, to produce false identity documents. Google "false ID" and GET YOUR FAKE ID HERE! screams out in capital letters. Scan, photoshop, print and laminate.

The FTRA standard is simply inadequate for an electronic conveyancing regime. 

**The Gold Standard

The Gold Standard recently developed by the Commonwealth Government as part of its National Identity Security Strategy (NISS) goes at least one step forward in solving the POI issue. And that is adding verification. A key principle of the Gold Standard is POI credentials and other information provided by the applicant should be verified with the relevant issuing authority or other authoritative source.

Which raises the question what are the procedures for document verification? Which also begs the question that at present, there are no systems which allows conveyancers to verify clients' credentials. In fact a conveyancer calling any government agency to verify a client's credentials will be met with a barrier of privacy concerns.

Which also raises the question are lawyers and conveyancers qualified to identify clients? Not beyond asking for  a copy of drivers licence or other identification.

The Gold Standard envisages enrolling agencies would enrol a person to a a Gold Standard (only once). This individual becomes a known customer. As a result, once an individual has been enrolled, this could be used to streamline enrolments with other agencies (ie Land Registries and applied to land registry transactions).

Who is qualified to carry out the test?

From the above analysis, It is clear that lawyers and conveyancers are not qualified to carry out POI tests, beyond attesting to knowing long standing clients.

It cannot be left to lawyers and conveyancers to carry the responsibility and liability for identity checks (at least not along the lines of the present FTRA 100 point standard)

Government and the Land Registries need to implement as part of its EC system a point of entry for lawyers and conveyancers to conduct verification checks^^ on credentials presented to them. 

Ipso facto, Land Registries are therefore hamstrung until government itself implements the essential elements of the NISS which covers verification checks, being what I believe is the minimum standard for electronic registration systems. 

Is there an alternative?

The government is concerned about the least possible call upon Torrens Assurance Funds for compensation in the event of registration fraud.*  I would suggest that in the absence of a system that permits lawyers and conveyancers to simply carry out verification checks (as iterated in Principle 7 of the NISS), the government will need to extend the Torrens Assurance Fund to cover and indemnify for losses due to identity fraud.

** NISS Gold Standard Paper 

Brett Hayton - 247legal

---

* The principles of Client Identity Verification are collectively intended to provide:

• users of NECS with confidence in the authenticity of the transacting parties they are dealing with
  
• transacting parties with confidence in the use of NECS by their representatives
  
• the community with confidence in the integrity of the land title registers
  
• the least possible call upon Torrens Assurance Funds for compensation in the event of registration fraud.
  

Source NECS paper

^ Exception - Lands NSW now has an identity check using the FTRA 100 point standard

cf. SA - The instrument must be witnessed by a person who either knows the executing party personally or is satisfied as to her or his identity.

Qld - A mortgagee intending to take a mortgage over freehold land as security for a debt or liability, must, prior to lodging a mortgage instrument for registration, take ‘reasonable steps’ to ensure that the person who executed the instrument as mortgagor is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in the lot. Under the Land Title Act 1994, a mortgagee takes ‘reasonable steps’ if they comply with the practices included in this Manual. In essence, these practices reflect the ‘100 points of identification’ provisions under Commonwealth legislation governing certain financial transactions, namely, the Financial Transaction Reports Act 1988 (FTRA) and the Financial Transaction Reports Regulations 1990 (FTRR).

NECS National Project Team 

Client Identity Verification (CIV) Standard – a purpose built standard should be developed based on current practices in financial institutions under the Anti-Money Laundering legislation (March 2009)

^^ Identity Security and the National Document Verification Service

Impersonation - an article by bruce schneier

Lending Landscape in Australia post GFC

Compared to the pre GFC era, there is very little competition for lending in Australia. After mergers and acquisitions by the Big 4 their market shares stands around 90%

1. CBA (BankWest)
   
2. ANZ
   
3. NAB
   
4. Westpac (St George & RAMS)
   

Thereafter, the alternatives stand as

• Bendigo / Adelaide Bank
  
• BEAT
  
• heritage building society
  
• ING
  
• Homeloans Ltd
  
• AMP
  
• IMB
  

As the big banks get bigger, perhaps the differentiater for clients is service. Service by brokers and service by the lender pre and post settlement. 

Convert your fax into a scanner

Elecronic conveyancing doesn’t have a fixed definition.

NECS decribes it as an efficient and convenient way of completing property based transactions and lodging land title dealings for registration. In others word conducting a financial settlement electronically and registering land registry instruments electronically rather than with paper forms lodged over the counter.

247Legal has attempted to define electronic conveyancing - the system of exchanging sales & mortgage documentation and property data electronically between vendor & buyer, agent & lawyer, brokers & banks, government & land registry from point of sale to contract to settlement without (or with minimal) printed documentation.

Or perhaps electronic conveyancing can be as simple as being able to exchange documents electronically.

To be able to exchange documents electronically, by email for example, you have to be able to convert a paper document into an electronic document. The most common method is to use a scanner and the most common format is a PDF.

For the past 30 years, the fax has been the most common method for exchanging documents. If it has not yet happened, soon scanned to email documents will overtake the fax, which is common sense. But fax technology continues to dominate the industry, particularly with the 4 major banks. This is despite headlines for example that the approval times blow out at one major bank because its fax machines are being clogged (Herald Sun March 10, 2009). The banks' back office operations must be drowning in faxes, as testimony by the conveyancing industry provides in legions of stories of lost faxes.

 

 

Fax technology is redundant. Or it should be

If your office still does not own or use a scanner, 247Legal has done some bench testing on scanners and scanning options that might help you to cross over.

The bench test is a 15 page contract of sale using an enterprise and desktop scanner as well as a fax to email service. The scan test was timed from placing the document into the scanner or the fax

Toshiba Estudio 4511	37 seconds	$14,315
Fujitsu duplex fi-4120C	1 minute 55 seconds	$1,400
Mbox fax to email	57 seconds** being the time spent to send the fax ** the Brother MFC fax scans to memory, then sends and it may be several minutes before you receive the email with PDF attachment	$10 per month plus cost of local call

The Toshiba I would describe as the mothership won hands down. But for the price of a small car, you want to be pumping out volume. But then again this is a true multi function device, for a fully networked print, copy, scan solution.

The Fujistu is a great compact desktop scanner capable of scanning duplex. Having used this model for several years, the author can attest to its usefulness and reliability. The current model is the 6120, is faster than the 4120 and comes bundled with a full version of Adobe Acrobat which is a significant cost saving in itself.

If you are not ready to make the investment in a scanner of your own, there is an alternative that can transform your existing fax machine into a scanner. By subscribing to a fax to email service likembox.com.au, any business can convert their current fax machine to a scanner. Take any document, feed it into your fax, dial your mbox fax number, and voila a minute or two later, the sent fax will be back in your inbox as a "scanned" PDF. And the bonus is, because mbox is a fax to email service, all your inbound faxes can be delivered to you as email as well. Mbox provides an effective low cost alternative to buying a dedicated scanner. Its not quite retiring the fax, but its giving it a new lease of life. The basic mbox service costs $9.95 per month

Conveyancers and lawyers are in the paper business. Today, the scanner is a basic tool of trade. If you are not ready to buy, consider subscribing to a fax to email service to gain the benefits of the paper saving. Or if you can buy, buy the best your can afford. It will pay for itself many times over and it is part of the matrix that we call electronic conveyancing.

eDischarges: First element of eConveyancing in Ireland

The Property Registration Authority (PRA) in partnership with the Law Society andIrish Mortgage Council has developed a new online system which will enable lending institutions to request the cancellation of registered charges by electronic means without the need to submit any paper to the PRA. The new system – known as eDischarges - will be more secure, efficient and transparent than the existing process and will eliminate many of the inefficiencies and delays currently experienced when mortgages have been redeemed.

Catherine Treacy, Chief Executive of the PRA said “The launch of this new system for processing discharges of charges in a completely paperless environment is public validation of a significant amount of work undertaken over the past two years.  While planning and development work has been ongoing for several years this is the first public step on a journey that will ultimately lead to a complete system of electronic conveyancing in Ireland.  All of the parties, particularly the staff in the PRA who have worked on the development of this system, can take great pride in their achievement.  The PRA would like to place on record its sincere thanks for the contribution made by the Law Society and Irish Mortgage Council and our colleagues in the Revenue Commissioners and Companies Registration Office, to the successful delivery of the new eDischarges system.”

The development of an eDischarges capability by the PRA is central to the development of a national system of electronic registration of title (eRegistration). The launch of eDischarges will also mark the delivery of the first element of eConveyancing in Ireland.

Gabriel Brennan, Law Society eConveyancing Project Manager said “The Law Society is delighted to be involved in this exciting initiative and thanks the PRA staff and Irish Banking Federation (IBF)for working so closely with the legal profession on the design of this new system. As a result of this collaboration inefficiencies and delays in the release of registered charges will be eliminated. Also in conjunction with this project the Law Society and IBF have initiated a new streamlined procedure for requesting title deeds, redemption figures and discharge of a charge. Together these two initiatives represent significant reform of the conveyancing process. There remains, however, considerable work to be done to reach the ultimate goal of eConveyancing and the Law Society looks forward to building on this progress with the PRA and IBF in the coming years.” 

Three lending institutions - Permanent TSB, AIB and KBC Bank - will launch the live system on the 30th March 2009 and, two weeks later on the 14th April, the system will be available to all lenders.

Pat Farrell, Chief Executive of IBF said “There was great appreciation amongst IBF members for the constructive nature of the working relationship with both the PRA and the Law Society.  This dialogue has led to the first tangible milestone on the road towards a fully functioning eConveyancing system in Ireland. IBF welcomes the move towards a modern, paperless and streamlined conveyancing system. Ultimately, eConveyancing throughthe introduction of a technology driven process will benefit Irish consumers and other stakeholders in the form of enhanced consistency, transparency and reduction in time and costs. In the meantime, IBF looks forward to continued engagement with the PRA and Law Society to achieve further improvements to the conveyancing process.” 

Source  Sarah Long in Changes in land registry practice and procedure in other countries

COAG's report card for national electronic conveyancing

22. A National Electronic Conveyancing System A single electronic system for completing real property transactions and lodging land title dealings for registration in Australia

COAG’s Business Regulation and Competition Working Group has published its 2009 Annual Report Card on progress towards a "seamless national economy".

• COAG to agree the form of the new legal entity for an e-conveyancing system by mid-2010. 
  
• Subject to States and Territories settling funding, new entity to be established and new Board appointed by September 2010. 
  
• Nationally uniform business processes to be agreed by September 2010. Any legislative changes to be enacted and all related transitional arrangements completed by early 2011. 
  
• New electronic conveyancing system to commence by end-2011.
  

Economic Appraisal of Electronic Conveyancing in NSW

National Electronic Conveyancing System

Under current arrangements, every State and Territory has its own unique property conveyancing system with different processes and procedures, based on an antiquated system of paper-shuffling. A single national electronic conveyancing system will mean consumers across the country can benefit from one system to settle property transactions, reducing costs and increasing efficiency in the property market.

Lands has been working with industry groups and other jurisdictions to develop and implement a National Electronic Conveyancing System (NECS) since 2005. NECS will provide an efficient online national platform to electronically:

• Prepare and sign instruments;
  
• Settle property transactions;
  
• Lodge instruments with land registries; and
  
• Meet associated duty and tax obligations.
  

The Council of Australian Governments (COAG) is overseeing the implementation of NECS - see the media release at http://www.pm.gov.au/media/release/2008/media_release_0339.cfm

Economic Appraisal of implementation of NECS in NSW – In mid-2008 Lands contracted KPMG to conduct an

Economic Appraisal of implementation of NECS in NSW, and specifically to:

• familiarise with the conveyancing industry, engage with the key industry stakeholders, understand how the current conveyancing arrangements operate, and confirm the potential impacts of an electronic business environment and how best to apply the required methodologies
  
•  identify the information required and accountable sources of information necessary to carry out the economic appraisal according to the required methodologies
  
• research identified sources, obtain and analyse the information required for the appraisals
  
• prepare financial and economic appraisals of the NSW implementation of electronic conveyancing using NECS in a manner that can be shared with key stakeholders
  

KPMG completed their investigations and analysis in late 2008, concluding the implementation of NECS in NSW provides

• process efficiencies to industry including reduced data entry and document preparation, settlement and lodgment savings, courier and bank cheque savings and less process administration cost generally
  
• a ‘mature year’ saving of $49.8M in NECS-related conveyancing costs in NSW*
  
• an average saving of $170 per conveyancing case (i.e. per property sale or refinance)
  
• positive Net Present Value of $164.1M over the period to 2020 for the NSW proportion of costs to commission
  
• and operate NECS compatible systems for industry, government and NECS
  
• stakeholders generally consider that electronic conveyancing will result in considerable industry cost savings
  

* a ‘mature year’ is from 2020 when take-up of NECS to 70% of NSW land dealings is achieved, quantified in 2008 $ and volumes.

Based on the study, operation of NECS in NSW is expected to achieve savings of $49.8 million each year in

conveyancing costs to the NSW economy.

The NSW economy can attain the greatest benefit from electronic conveyancing where NSW is ready for implementation of NECS as soon as an acceptable system is ready. A significant part of “being ready” entails thorough consultation with stakeholders in NSW addressing business practices, risk management arrangements, supporting legislation and system and information service requirements during 2009.

The KPMG Economic Appraisal of Electronic Conveyancing in NSW report is available on the Department of Lands web site at 

http://www.lands.nsw.gov.au/_media/lands/pdf/necs/other/NECS_KPMG_final_report_Jan_2009.pdf

Source lands nsw newsletter

Please note

This newsletter is issued by NSW Department of Lands’ Land and Property Information Division (LPI). The information in this newsletter is correct at time of publication but may change as the NECS project develops. It reflects current thinking to generate discussion and is not a substitute for publication of Lands Circulars announcing policy changes.

Conveying the buck

THE delay to the planned national e-conveyancing system will prevent big cost savings being passed on to homebuyers nationally but, in Victoria, there will be some more pleasant side effects for the state government.

The delay to the national system looks like extending the financial windfall that is currently being enjoyed by the government.

That windfall is the result of increased charges for traditional paper-based conveyancing that were imposed by the Government to drive traffic to its state-based e-conveyancing system. That system, known as ECV, has a fee regime that is lower than the fees for paper-based conveyancing.

Nevertheless, it has been used for just one property settlement because it does not meet the fundamental requirements of its main customers -- banks and solicitors.

As a result, ECV is being boycotted by the banks -- which favour a national approach -- and by solicitors, who fear it will expose them to greater liability.

So while ECV is barely used, its existence is indirectly responsible for a revenue rip-off by the state Government.

If the states ever get around to establishing the organisation that will run the national system, the Council of Australian Governments has already decided one of its first responsibilities will be to have a good look at ECV.

The aim will be to decide whether any parts of the software underpinning the Victorian system can be used in the much larger national system.

For those who authorised the expenditure of $40 million on ECV, that process is unlikely to have a happy outcome.

Even if the new organisation decides to recycle 75 per cent of ECV's software, there will be no place for a state-based e-conveyancing system once the national system is rolled out.

Crucially, COAG has endorsed a single national system, not a federation of state systems.

If the new national system is indeed national, it is unlikely to be boycotted by the banks and if the nation's governments build a system that meets the minimum requirements of solicitors, they will have no reason to stay away.

That means the end of Victoria's revenue boom. Worse, it also means someone will need to explain to Victorian taxpayers why $40 million of their money was spent on a little-used system that is about to be scrapped.

Then again, all that unpleasantness will only happen in the most unlikely of circumstances.

It would first require all the state governments to break with tradition and take a national approach to e-conveyancing.

Now that the federal Government has decided to take a back seat on this issue, the one centre of power that is obliged to act for all of the nation is unlikely to cause much trouble.

Even if the states do nothing about e-conveyancing, the federal Government has signed on to a COAG deal that means the states could still be in line to pocket every dollar of a $550 million reward payment for reforming the national economy.

So if nothing changes there is a strong chance that harmony will continue to prevail in Victoria and conveyancing will continue to be a relatively expensive paper-based pursuit.

There is, however, an alternative.

To date, the record of the states on e-conveyancing is appalling. They have shown little interest in moving quickly to pass on cost savings to businesses and consumers.

They continue to treat this issue as a low priority, despite the fact that Kevin Rudd says e-conveyancing can cut the cost of buying a home by hundreds of dollars.

So how long will it be before the banks wash their hands of this mess and team up with solicitors and licensed conveyancers to establish a private sector e-conveyancing network? This would not, of necessity, extend to the state land titles offices. ...

It would still, however, cut the cost of property transactions and lead to savings that could be shared between banks, conveyancers and homebuyers.

It would also have the added benefit of insulating the private sector from the massive waste of time and money that is the hallmark of the states' handling of e-conveyancing.



PREJUDICE: Chris Merritt | March 20, 2009

Article from: The Australian

Costly delay on e-conveyancing

Chris Merritt, Legal affairs editor | March 20, 2009

Article from: The Australian

FEDERAL and state governments have decided to delay the national rollout of electronic conveyancing in a move that is set to wipe out cost savings for homebuyers worth hundreds of millions of dollars.

The decision, which follows eight months of inaction by state governments, will put back the start date for e-conveyancing by almost two years.

Instead of introducing e-conveyancing nationally by March next year, all governments have decided that the new system should now be made available by the end of 2011.

The delay of up to 21 months means governments have abandoned the schedule announced last July by Kevin Rudd and Finance Minister Lindsay Tanner.

At the time, the Prime Minister and Mr Tanner said the annual cost savings associated with e-conveyancing had been estimated by industry groups to be worth $250 million.

Based on that figure, a delay of 21 months could wipe out $437.5 million worth of cost savings on property transactions.

In November, Mr Rudd said e-conveyancing could save homebuyers hundreds of dollars on every house they purchase.

The delay, which is understood to have been caused by the states, has triggered urgent talks between Mr Tanner and representatives of the Law Council and the Australian Bankers Association.

Solicitors and bankers, along with non-lawyer conveyancers, are the key players in most property transactions.

Mr Tanner put pressure on the states last week to move faster on e-conveyancing. "I have recently met both the Australian Bankers Association and the Law Council of Australia and both have expressed a strong desire for more rapid implementation of electronic conveyancing," Mr Tanner said.

"I have just written to state and territory treasurers asking them to consider the possibility of earlier implementation and asking for advice as to whether that would be feasible in their jurisdiction."

Law Council president John Corcoran said the e-conveyancing project had been plagued by setbacks and the latest delay meant "we are back to square one".

The Australian Bankers Association warned the new plan meant there would be an 18-month hiatus before the states created the organisation that will run the national e-conveyancing system. "If we lose momentum in the current environment, it might be very difficult to get key stakeholders back into the process," said Ian Gilbert, the ABA's director of retail regulatory policy.

Details of the delay are contained in an implementation plan for the reform of 27 key areas of the economy that has just been made public by officials of the Council of Australian Governments.

The original timetable, which was published after last July's COAG meeting, had required the states to take five key decisions before the end of this month about the organisation that will run the national e-conveyancing system. None of those decisions have been taken.

In July, the states failed to meet their commitment to agree during that month on the form that the new organisation would take.

In October they failed to meet a commitment to settle and sign a governance agreement that month concerning the new entity. They also failed to agree on how the new entity would be funded.

In December, they failed to meet a commitment to establish the new organisation and appoint its board.

This month they failed to reach agreement on nationally uniform business processes for the new entity.

Under the revised timetable, these decisions are now due to be taken between the middle of 2010 and September of that year.

But concerns have already emerged that the delay in establishing the new organisation -- and a lack of seed funding -- might make it difficult to meet the revised start date of late 2011.

The development of a national system has now been incorporated into a broader COAG project for the development of a "seamless national economy".

The states are to receive up to $550 million from the federal Government for introducing reforms in 27 areas covered by the agreement. Most of this will be paid to the states after they make the reforms. But $100 million will be made available as a "facilitation" payment this financial year.

Because the e-conveyancing body is not due to be established until September 2010, it will be too late to gain access to the Government's $100 million.

The COAG agreement provides a strong financial incentive for the states to make progress on 10 priority areas listed in the agreement.

E-conveyancing is not among them.

If the states again fail to meet their commitments on the e-conveyancing project, they could still receive their full reward payments from the commonwealth so long as they make progress in the other areas covered by the agreement.

The ABA's Mr Gilbert said creating the new organisation by September 2010 and giving it 12 months to introduce the new network "is an extremely ambitious thing -- particularly where there has been little work done in the interim".

He was also concerned the federal Government had decided not to provide any "seed money" for the new organisation and was leaving its funding to the states.

"Seed funding is absolutely essential," Mr Gilbert said.

"You cannot set up a company and have it conduct business, including hiring contractors and remunerating staff, unless it is absolutely certain of its funding sources.

"If this was addressed now by the commonwealth putting in the seed funding, there would be no reason why the steps to set up the entity could not be expedited.

"We could see that entity in place in a matter of months, rather than 18 months," Mr Gilbert said. The Law Council's Mr Corcoran said the most alarming aspect of the new approach was the requirement that funding for the new organisation would depend on the states reaching agreement.

"This is exactly where we were in 2005," he said. "We see this as a very backward step."

The COAG agreement also shows that federal ministers are to have less responsibility for overseeing the introduction of e-conveyancing.

Last July, all governments had agreed that responsibility for overseeing the implementation of the new system should be vested with COAG's business regulation and competition working group.

This group is co-chaired by Mr Tanner and Small Business Minister Craig Emerson.

But the latest COAG agreement makes the introduction of e-conveyancing a state responsibility.

The agreement says the states and territories will have responsibility for working with each other and the commonwealth to implement a co-ordinated national approach on e-conveyancing and several other areas.

Those areas that are commonwealth responsibilities are listed separately.

However, Mr Tanner and the BRCWG are expected to continue to have a role in checking the timetable is carried out.

Australian

Caveats Online

Victoria follows Tasmania's lead.

From April 2009, subscribers will be able to lodge caveats in Victoria using the Electronic Conveyancing (EC) system. 

Requirements for client identification and representation agreements have been streamlined for caveat transactions and these are reflected in the updated Registrar’s Requirements. The Registrar has not specified how you should identify your client nor requires a standard representation agreement to be entered into with your client in relation to the caveat transaction. 

What types of caveat can be processed through EC?

Initially, caveats expressing the following grounds of claim can be processed using the EC system:

• contract from the registered proprietor(s)
• mortgage from the registered proprietor(s)
• charge from the registered proprietor(s)
• charge contained in an agreement from the registered proprietor(s)
• charge contained in a mortgage from the registered proprietor(s)
• charge contained in a building agreement from the registered proprietor(s).


It is intended that additional types of caveats will be introduced at a later date.

Identity

The identity of the client must be verified but this should be no more onerous than the process for paper caveats.

Source EC Brochure Caveats Online

ANZ slashes jobs

Chris Zappone

March 13, 2009 - 10:32AM

ANZ Bank will dump 500 back-office staff in Australia and shift the jobs to India by the end of the year.

An ANZ spokeswoman this morning confirmed that most of the jobs about to be scrapped were in Melbourne.

"In 2008, the size of the operation in Bangalore grew by around 500 people and it is reasonable to expect there will be some further growth in 2009," said an ANZ spokeswoman in a statement.

Go to BusinessDay's Jobs in Jeopardy index for the latest news on job cuts. 

However, call centres will remain in Australia and New Zealand, the bank said. 
 
The confirmation follows reports in the The Age last year that the bank had been advised by consultants to cut 620 jobs between January and September 2009, with 870 jobs identified for "offshore migration." At the time, the bank refused to quantify any local cuts.
 
The move will allow ANZ to focus more on its Asian business and confirmed the latest round of cuts in Australia would boost the 3000-strong workforce it already has in Bangalore.

Centralising the processing centre in Indian is part of the ANZ's plan to grow into a super-regional bank in Asia, as outlined by chief executive Mike Smith.

Late last year, the bank moved 500 back-office jobs to India as part of the transition. The jobs are separate from the 800 retrenchments ANZ announced in December affecting local employees.

Austock banking analyst John Buonaccorsi said ANZ's Mr Smith was "more aggressive" and "less sentimental" about moving back office jobs than his predecessors, as the bank moved to centralise its processing centre ahead of regional growth.

Mr Buonaccorsi said that typically, when a bank moved jobs to India, more positions were created overseas in the process because of the lower productivity of workers relative to their Australian counterparts.

Rod Masson, policy director at the Finance Sector Union, described the cuts "scurrilous".

"It shows contempt for the Australian community and in a more targeted sense for Australian workers and finance workers."

He called on the Government to address the issue of off-shoring by banks.

The Federal Government needs "to lay some conditions on the continued taxpayer support that’s being used to underwrite the risks to these businesses," he said.

Major banks often tried to hide the extent of processing happening outside Australia, he said, with local employees instructed not to reveal to customers what duties are being performed overseas.

"Fundamentally the banks are actually embarrassed they have to do this," he said.

"They’re quite happy to take the cost savings. But they’re embarrassed and understand there will be a public backlash should it be revealed."

czappone@fairfax.com.au
BusinessDay

Comment: my understanding is ANZ residential mortgages is being affected as follows

1. Mortgage and security preparation is effectively being offshored to Bangalore; and

2. Settlements are outsourced to an outside Australian company

SAI Global fail to take over Espreon

SAI Global has failed to compulsorily acquire information services provider Espreon, managing to secure only a little more than two-thirds of the company in its recent takeover bid.

The takeover offer closed yesterday at 7pm, at which point SAI Global, an applied information services company specialising in risk management and compliance, had secured a 61.23 per cent relevant interest, well short of the required interest of more than 90 per cent for a compulsory acquisition. In addition, over 1 million shares (1.28 per cent) were the result of acceptances of the takeover offer made by SAI to Espreon shareholders.

Espreon today reported that SAI Global had secured 62.5 per cent relevant interest at the conclusion of the bid.

SAI chief executive Tony Scotton and chief financial officer Geoff Richardson have been nominated to join Espreon’s board, an intended move set out in the SAI Bidder’s Statement. Effective today, they have been appointed directors of the company following the Espreon board’s approval of the nominations.

Espreon’s board has experienced further changes with the resignation of three members, the retirement of two members and the appointment of a new company secretary.

Reported by Money Management : 12 March 2009 | by Amal Awad

Re: Outcome of SAI Global and Vectis off market bids for Espreon

As you may be aware, Espreon has been the subject of two off market takeover offers, one from SAI Global Limited (SAI) and one from Vectis Group Pty Limited (Vectis).  These offers have now both concluded and SAI has secured a controlling 62.5% of Espreon’s shares.

Espreon Announcement

National Electronic Conveyancing – COAG implementation timetable

COAG have posted on their website the timetable for a National electronic conveyancing system A single electronic system for completing real property transactions and lodging land title dealings and registration in Australia. 

2009-2010

All jurisdictions: COAG to agree the form of the new legal entity for an e-conveyancing system by mid 2010

States and Territories: agree governance arrangements for new entity by mid 2010

2010 - 2011

States and Territories:

• subject to States and Territories settling funding, establish new entity and appoint Board by Sept 2010
  
• agree nationally uniform business processes by Sept 2010
  
• enact any necessary legislative changes and complete all related transitional arrangements by early 2011
  

  

2011 - 2012

States and Territories: commence the new e-conveyancing system by end 2011

The conditions on funding are quite complicated and tied in with the States reaching key milestones on reforms in 27 specific areas, not just electronic conveyancing. Quite a task

Link to funding document National Partnership to deliver a seamless national economy

Comment:

The government's proposed national electronic conveyancing system has just taken a couple of crazy left turns.

There is now a new timetable, with the commencement of the new e-conveyancing system by end 2011, being nearly 3 years from now.

Implementation of the new e-conveyancing system is still the responsibility of the states and territories, so that hasn't changed. However, e-conveyancing has just been tossed into the bed with 26 other State regulatory reforms such as nationally consistent uniform occupational health and safety laws; environmental assessment and approvals; payroll tax; rail safety regulation; food regulation; mine safety; maritime safety; wine labelling; etc (and I have only quoted 8 other reforms) all of which are dependent on electronic conveyancing reform and vice verca.

I can see you asking the question what has e-conveyancing got to do with wine labelling? Well not a lot but its all to do with the funding.

If any government stalls on any of the reforms in any of the 27 areas, Commonwwalth funding can be and probably will be withheld. This is classic school teacher / pupil relations of old. If the recalcitrant student doesn't own up all students will be punished and stay back for detention.

The first agenda items for the States and territories are -

• settling funding, establish new entity and appoint Board by Sept 2010
  
• agree nationally uniform business processes by Sept 2010
  
• enact any necessary legislative changes and complete all related transitional arrangements by early 2011
  

Where does that leave NECS? My guess is NECS and NECO will continue the co-operative work with the states and industry until the new entity is established. We will just wait to see whether this is sooner or later and whether COAG's novel approach to funding will actually work. The agreement is the States will get some upfront funding and then nothing until years 4 & 5 when the reward funding kicks in.

Approval times blow out at CBA

The CBA's fax machines are being clogged.

It may be Commonwealth Bank’s turn to aggravate mortgage brokers and take weeks to handle their loan applications.   

Mortgage Choice told the Herald Sun that CBA was taking up to 20 days to process loan documents, a major irritant at a time of a revival in demand for new home loans.

CBA's head of retail products, Michael Cant, told the newspaper the bank's first home buyer volumes had more than doubled since the increase in the grant from the federal government was announced in October, while aggregate home loan volume was up 40 per cent since the middle of February.

"The volumes have been extraordinary in the last month - they have hit a record high," Cant said.

On the other hand Cant said reports of 20-day waits on approvals were rare.

Westpac had even worse delays in processing applications lodged through brokers late last year and early this year, though the bank had managed to catch up as of a month ago.
 
Mortgage Choice chief executive Paul Lahiff told the Herald Sun, “we are experiencing incredible growth in activity.”

Lahiff said his company record growth throughout February, with more than 25 per cent of all brokered loans being for new homes.

heraldsun

Another reason to pursue eMortgage

For years now, mortgage technologists have been offering electronic mortgage technology, basically digital docs that Fannie Mae or Freddie Mac will accept in the place of paper documentation, to mortgage lenders who really weren't that interested. OriginatingeMortgages would involve changing the way lenders worked with closing agents and borrowers. It might be more confusing for borrowers, despite the fact that they use a similar keypad to buy just about anything from Home Depot, Best Buy, Wal-Mart or Staples. It might involve additional software or hardware that could be expensive or difficult to implement. Some of these excuses may have been actual reasons a few years ago, but they aren't today.

Today, eMortgage technology is affordable, easy to install, understood by closing agents and borrowers and readily accepted by secondary market investors, at least the ones that are still in the market. And here's another reason to go all-electronic now:

According to a story in the Honululu Advertiser, homeowners there are finding a handy way to stall the foreclosure process. They simply ask to see the original paper documentation.

"During the real estate frenzy of the past decade, mortgageswere sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed."

As the "victim" of possible foreclosure points out in the story:

"I'm going to hang on for dear life until they can prove to me it belongs to them," said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left."

It's probably time now for lenders to get rid of the paper once and for all.

Rick's Notebook blog

Perfect storm hits Fairfax as rivers flow online

Terry McCrann

February 24, 2009 12:00am

Hera;d Sun

WILL there be Fairfax broadsheets for Costello or indeed anyone else to write in, much further into the future?

The most stunning revelation in Fairfax Media's numbers was that it earned more from its online operations than from the two 'rivers of classified gold' - its two broadsheets, The Age and theSydney Morning Herald.

Even more tellingly, the single biggest component of the online profit has precious little to do with media in anything remotely like the traditional sense, far less journalism. And even less to do with Australia - it was the New Zealand Trade Me online advertising business.

Talk about climate change, in the half the two rivers ran about as full and fast as the Murray - generating just $47 million in profit before interest and tax (EBIT). In contrast, online generated $51 million, with around half that coming from Trade Me.

In the December 2007 period, the two broadsheets contributed $70 million or nearly double the $45 million that came then from the online businesses.

The broadsheets have been hit by two perfect storms with any realistic assessment suggesting they will only get worse this year and longer-term.

The first is the traditional reality that costs are locked-in, so what happens to revenue tends to flow straight through to the bottom line.

In the good times that's been fantastic. In the latest half though, a $21 million drop in revenue was matched dollar-for-dollar by a $21 million drop in EBITDA (earnings before interest, tax depreciation and amortisation).

Because of a rise in depreciation, it was even worse at the EBIT level - profit dropped by $23 million.

Online is less cost-inflexible and less capital-intensive. So depreciation took just $5 million of online's $56 million EBITDA, as against $23 million or nearly a third of the broadsheet's EBITDA.

The second storm is, of course, that fundamental erosion of print's classified base. The 'climate change' that the occasional 'flood' in a property boom is not going to prevent.

But nothing could more explicitly demonstrate the basic insoluble problem: that while the ads might be migrating to the online space, whether or not Fairfax keeps them, the profits don't flow with them.

Take out Trade Me across the ditch, and Fairfax made precious little online in Australia. But those revenues came with substantial costs.

But at last they are growing. Albeit mostly in NZ. Revenues in every other division were down, and in every case operating profit fell by more than the revenue drop.

And this, when the Australian economy was still in reasonable shape. At least, compared with what might come.

Fairfax will be praying - in the non-religious sense of course, that is de riguer these days and was on display again last Sunday - that the government's stimulus packages will work and quickly.

Fairfax, and its lenders. It has $2.5 billion of net debt and is uncomfortably close to its debt covenant limits.

Shareholders are merely bystanders in all this. There is no way Fairfax is going to go to them for fresh capital.

Big Four squeezing non-banks into mergers

The Australian

Adele Ferguson | February 23, 2009

WHEN the Bank of Queensland appointed corporate advisers in December to review acquisitions, strategic partnerships, mergers and possible takeover offers, it sent a clear message that any rival outside the Big Four banks needed a new set of tricks to compete.

Bank of Queensland chief executive David Liddy told shareholders: "To compete with the big banks, smaller banks such as BoQ, as well as credit unions and building societies, have been merging and will continue to do so."

Two weeks later, on December 24, Wizard Home Loans was sold to Commonwealth Bank and Aussie Home Loans for $26million. The remaining non-bank lenders, Resi Mortgage Corp, First Mac, Pepper Home Loans, Better Choice Home Loans, Beat Home Loans and a few others are expected to either close down or merge as credit conditions worsen.

In the regional banking sector, Suncorp and Bendigo Bank are tipped as takeover targets as the dislocation in capital markets, falling asset prices and pressure to re-capitalise make it increasingly difficult to compete with the bigger banks.

On the mutual side, more credit unions and building societies are considering merging to compete with the bigger players, at a time when falling interest rates are crunching their margins and more rigorous regulation is pushing up their costs.

There are 130 credit unions and building societies in Australia, representing $65billion worth of assets, 3.4million members, and 6 per cent of the home loan market.

It is in this market that the Big Four banks are monstering competitors. To put it into perspective, they have doubled their market share in the home loan market from 45 per cent in 2007 to about 90 per cent at the end of November 2008.

For customers, the diminished competition means that banks have regained pricing power over savings accounts, credit cards and -- most significantly -- home loans.

Lenders that have reduced their presence or exited include Majestic Mortgages, Macquarie, Bluestone Mortgages and Virgin Money. For credit unions, their real competitive advantage is in the deposit market, where they capture 12 per cent of all deposits, making them the third largest holder of deposits from the household sector, putting them ahead of ANZ and National Australia Bank.

Commonwealth Bank controls 28 per cent of the market, following its acquisition of BankWest last year, and Westpac has 20 per cent following its merger with St George last year.

In the case of Australia's credit unions and building societies, five are in merger discussions, and at least another 15 are expected to join forces within the next 12 months.

Since the start of this year, HMC Staff Credit Union has announced a merger with NSW Police CU, Regional One has announced it is in merger talks with mecu, CSR has merged with Select Credit Union and Dnister Ukrainian Credit Union is in talks with Karpaty Credit Union but its members are yet to be notified. 

Consolidation of the 118 credit unions is based on using economies of scale to compete with the banks in a falling interest rate environment. 

Some mergers are likely to have the gentle hand of the industry's self-regulator, Credit Union Financial Support System and the financial regulator APRA, pushing them together. 

Such matchmaking is expected after June 30, when a few credit unions, that have indulged in risky practices are expected to report low profits or losses for the year. 

"When this happens, there could be a negative reaction from members, such as rapid deposit withdrawal, and the Australian Prudential Regulation Authority will want to avoid this," another source said. 

The Australian understands that before the government guarantee was imposed in October, APRA had put at least 10 credit unions on day watch to ensure liquidity levels and forward cashflows were sufficient to withstand the stresses and strains of the global financial crisis. 

It now has one on day watch, and is making weekly phone calls to most credit unions to check on liquidity and profits, according to CUFSS chief executive Gary Eggert. 

The majority of Australia's credit unions were strong, with liquidity above 18 per cent and sound profit, Mr Eggert said. If anything went wrong, CUFSS had the financial firepower to come to the rescue. 

One hundred of Australia's 118 credit unions are members of CUFSS, providing it with 3.2 per cent of their balance sheet. This adds up to $1billion that can be drawn upon to bail out potential blow-ups or liquidity problems. 

"In 10 years this fund has been invoked only once and it resulted in a merger with another credit union, and no one lost any funds," Mr Eggert said. 

CUFSS can decide whether the support is in the form of a market-rate loan, a concessional loan or a permanent loan (the latter category would be provided only if a credit union was to merge or transfer). 

Louise Petschler, chief executive of Abacus, the peak body for Australia's credit unions and building societies, said the tough environment could be the making of the industry. 

"Credit unions were born in tough times, and they will continue to do well in this difficult environment," she said. 

Nevertheless, as in any industry, a few credit unions wandered outside of their core business, grew too fast, expanded into risky areas and allowed their cost structures to get out of control. 

APRA's mission is weed out the weaklings by putting them on close watch, forcing the entire industry to increase its liquidity from the required 9 per cent to 15 per cent, and demanding all provide board-approved funding plans. 

These funding plans require each credit union to provide various funding options, assess the impact of various stress scenarios and set out a contingency plan if the credit union loses a significant funding source. Any funding plans not up to scratch are sent back. 

As the chairman of APRA John Laker said at a recent conference for the industry: "In the current environment, APRA will not accept a funding strategy based crudely on turning the loan tap off if funds cannot be raised. Easy to do if the ADI (deposit-taking institutions) is writing personal loans; much less easy for mortgage loans where there may be a gap of up to two months between approval and funding, and where the timing of redraws against existing facilities is unpredictable." 

Brian Bennett, who has been running the 55-year-old Encompass Credit Union in Sydney for almost four years, said in the past few months there had been a surge in deposits, mainly from self-funded retirees. 

"The government guarantee certainly helped ease any concerns about deposit lending institutions and helps explain the 10 to 15 per cent increase in deposits in the past few months," he said. 

Mr Bennett estimates Encompass's tier-one capital is 22.93 per cent, compared with the average of the banks at 8 per cent, and its liquidity is 27 per cent. 

"Credit unions are a good alternative to the banks because they are mutuals, and that means they are more personal and friendly, charge less in fees and are less risky because we didn't get involved in commercial lending, toxic assets or commercial property or development," he said. 

Victoria's largest credit union, mecu, is in talks with RegionalOne to create one of the nation's largest, with assets of more than $2billion. Mecu, with assets of about $1.8billion and 112,000 members, and RegionalOne Credit Union, with more than $270million and 20,000 members, aim to have the deal approved by members in June. 

Mecu chief executive Phylip Doughty said both credit unions had annualised growth rates exceeding 20 per cent because of increased deposits, a spike in refinancing and strong demand for loans from first home buyers. 

Mr Doughty said consolidation across the sector would accelerate, particularly as interest rates continued to come down and compliance costs rose. 

"The shakeout in the banking sector has been astounding and the Big Four now dominate. This will give credit unions an opportunity to step into the breach where the second tier banks were, and non-bank lenders such as Wizard were," he said. 

As the global financial crisis continues to take victims in Europe and the US, Australia to date has managed to navigate its way out of the mess relatively unscathed. 

The banks, non-banks and mutuals all have their own demons to contend with, but if credit unions can successfully merge to create a few mega credit unions, curb their costs and find alternatives to deposits for funding, they could well emerge as the new force in banking.

Will SAI play hardball?

The finish line is getting closer with SAI Global announcing that it holds 49.38 per cent of voting power in Espreon, the business services company it has made an all-scrip offer for.

SAI will announce today either an extension of the offer or the status of their conditions, revealing whether they will use an alleged breach in their bid conditions to scupper the deal.

The breach was an ACCC investigation into the proposed acquisition started on January 14. Although it has been going on for over a month now, SAI only made note of the breach on Wednesday (see Hopes dashed by SAI, February 18).

If the breach is declared, SAI can either walk away or cancel a sweetener of offering one SAI share for every 4.4 Espreon shares.

However, SAI is unlikely to walk because based on the company's closing price yesterday the value of their scrip offer is less than the lower end of Espreon's 48.5 cents a share valuation, according to independent experts Lonergan Edwards & Associates.

It appears then, that SAI may enter hard-ball phase. Originally the company was seen as something of a white knight for Espreon, fighting off a hostile bid from former competitor Vectis, a private company owned by Melbourne businessmen Alan Schwartz and Jacob Weinmann. However, Espreon shareholders are now likely to rue the day they refused Vectis's original offer of 65 cents a share in June of last year.

SAI is being advised by Macquarie Capital and lawyers Gilbert + Tobin. Advising Espreon are TC Corporate and Baker & McKenzie on the legals. Vectis is being advised by Grant Samuel and Mallesons Stephen Jaques. 

Business Spectator

After announcing it had crossed the 50.1 per cent threshold in its takeover of business services provider Espreon, SAI Global has redeclared its offer as unconditional – allowing Espreon shareholders a great sigh of relief.

SAI said on February 18 that an ongoing ACCC merger investigation could constitute a breach of its terms (Hopes dashed by SAI, February 18), causing consternation once again for Espreon investors who have repeatedly seen their hopes for a positive shareholder exit dashed.

Since mid last year Espreon has knocked back a series of increasingly smaller offers. Former competitor Vectis initially offered Espreon shareholders 65 cents a share in cash in June. SAI is making an all-scrip offer of one SAI share for every 4.8 Espreon shares, effectively valuing the target at 48.96 cents per share. SAI's offer increases to one for 4.4 shares if it comes to own 90 per cent of Espreon.

The outcomes of the ACCC investigation, which begun on January 14, will be announced on February 25 and, hopefully for Espreon, will constitute the last major hurdle to the deal.

SAI is being advised by Macquarie Capital and lawyers Gilbert + Tobin. Advising Espreon are TC Corporate and Baker & McKenzie on the legals. Vectis is being advised by Grant Samuel and Mallesons Stephen Jaques. 

Espreon and SAI - an update

Espreon shareholders could be once again disappointed after its supposed white knight bidder SAI Global said that an ACCC investigation had breached one of its offer conditions, meaning that the offer of one SAI share for every 4.8 Espreon shares may not necessarily go unconditional. The alleged breach will also allow SAI to walk away if it chooses to do so. 

SAI had offered Espreon shareholders a sweetened deal of one SAI share for every 4.4 Espreon shares if at least 90 per cent of shares were acquired by February 27. Latest figures show that SAI holds 45.48 per cent of voting power. 

The competition watchdog's informal review of SAI's proposed acquisition was commenced on January 14 by merger investigators Jason Byrne and Brett Morris. The ACCC has set February 25 as the date it will announce its findings. 

This latest announcement comes as a disappointment after SAI's offer, which valued the target at 52 cents a share based on SAI's closing price of $2.50 on January 9, was welcomed by Espreon on January 13.

The SAI deal favourably compared with a rival offer from Melbourne-based private investment firm Vectis Group, which was offering 45 cents a share in cash.

Vectis, which used to compete with Espreon before selling parts of its business to SAI Global several years ago, first made an offer to Espreon in June of last year – plonking 65 cents a share on the table, or $62 million, before the market went south. 

In a signal that Vectis, led by prominent Melbourne businessmen Alan Schwartz and Jacob Weinmann, wanted to re-enter the sector, Stephen Cooper and Cam Stewart from Grant Samuel were hired to advise on a scheme of arrangement, as were Craig Semple and Nicola Charlston from Mallesons Stephen Jaques. 

Espreon responded by hiring Robert Fraser from TC Corporate, along with legal firm Baker & McKenzie to advise on its options. The Espreon team managed to subsequently force Vectis to raise its offer by an extra $5 million, or 5.5 cents per share, but then that offer was withdrawn, with negotiations returning to the original proposal of 65 cents a share. 

Yet it didn’t stop there. That number was reduced again to 62.2 cents a share in August and to 44 cents in October. By November negotiations were over and the parties agreed to disagree and go their separate ways. It was thought at the time that accounting software giant Reckon would put in an alternative bid. Vectis had, after all, planned to spin off a portion to Reckon had the deal gone ahead. 

However, the day of 'Reckoning' never arrived and Vectis subsequently went hostile, this time reducing its offer to 40 cents a share, increasing to 42 cents if it managed to get full control. Espreon dismissed it as inadequate, opportunistic, uncertain and highly conditional, and a “waste of time and money”. Espreon had, after all, already spent $1 million of cold hard cash on advisory and legal fees for the original scheme of arrangement proposal.

Major Espreon shareholders Hunter Hall (19 per cent) and LUT Investments (12 per cent) had also refused to agree to the deal. Institutional shareholders, including Dick Pratt’s Thorney Holdings control a combined 48 per cent of Espreon. 

Vectis’s offer was subsequently increased to 45 cents cash before SAI, advised by Macquarie Capital and lawyers Gilbert+Tobin, came onto the scene. The rest, as they say, is history.

But now, with SAI throwing this latest spanner in the works, what can history teach us? Don’t look a gift-horse in the mouth? Probably, but it’s not over yet. SAI are due to issue their notice of status of conditions this Friday. 

Business Spectator

Westpac strife lessens, but still annoys

The operational problems at Westpac’s home loan centre in Adelaide may be improving, but they are still creating headaches for the bank.

The bank has cut the expected delays of six weeks in processing home loan applications (for loan applications submitted through the typical mortgage brokers) to nine days.

One factor in the delays, according to advice from Westpac business managers to brokers earlier this month, is that “application numbers reached record highs” creating “an unprecedented pipeline in the system”.

Westpac’s more accommodating stance on lending policies is certainly driving this demand.

It is also leading to the occasional public relations flap.

The Herald Sun today reported that Westpac denied some customers the advertised fixed rate home loan of 4.99 per cent, an offer heavily promoted in December. The bank instead amended final contract documents to a higher rate of 5.49 per cent.

Westpac told the newspaper the bank erred in one case raised with the newspaper, but said its advertising was not misleading. The bank described this as an administrative error.

 

Source Finance News

Fraud and Electronic Settlements (NECS)

FRAUD IN CONVEYANCING

Fraud and Electronic Settlements (NECS)

As most conveyancers will be aware, Australia is heading towards a national electronic conveyancing system, referred to as the National Electronic Conveyancing System (NECS). The NECS is described as “Australia's joint government and industry initiative to create an efficient and convenient way of completing property based transactions and lodging land title dealings for registration”. The proposed NECS is therefore somewhat of a misnomer as it deals with the settlement and registration aspects of the conveyancing transaction rather than a model for electronic ‘conveyancing’ as a whole. For example, the proposed NECS does not cover preparation and exchange of contracts for sale, pre-settlement investigations, procurement of any insurances required by purchasers, such as title insurance, creation of loan documentation or processes for examining and registering instruments once lodged with a Land Registry.

 

Essentially, a conveyancer using the NECS will electronically:

• prepare dealings and related instruments to register changes in ownership and interests

• settle financial transactions (including payment of duties, taxes and any disbursements)

• lodge their dealings with the appropriate Land Registry

• receive confirmation of dealing lodgement and registration.

 

One question which is often raised is whether the proposed NECS will increase or decrease the scope for conveyancing and mortgage fraud. Certainly, the NECS model has not been designed to specifically deal with the allocation of fraud risk. For example, it is stated on the NECS website that “the NECS design is based on, as far as possible, maintaining the existing risk allocations and management philosophies in the paper-based conveyancing and settlement processes.”

Therefore the NECS model does not appear intended to specifically prevent the types of fraud which are currently occurring in the paper based system from occurring in the electronic based NECS on the basis of the re-allocation of risk.

Conveyancers will still be responsible for the registration of title documents as part of the conveyancing transaction and will be responsible for identifying their clients and acting in their best interests. Although it is difficult to draw any reliable conclusions given that the NECS is still in the development rather than implementation stage, a recent study based upon the current NECS model has concluded that the types of fraud currently occurring in the paper system, ie, forgery of signature and identity theft, fraud by solicitors and conveyancers, can continue to occur in the proposed NECS.

In relation to forgery of signature it is noted that whilst NECS certifiers will digitally sign mortgage and title instruments on behalf of their clients, NECS requires a client authorisation form to be completed and physically signed by the client, in which case, fraud may still be perpetrated by a fraudster who forges a signature on the authority and the witness does not follow the proper attestation or the attestation is also a forgery. In this respect the paper concluded that “the only difference between the paper system and the NECS is that in the paper system, the forgery is on the land title document, whereas in the NECS, it is on the authorisation form”.

 

Identity fraud can also continue to occur in the NECS and the onus will continue to be placed on the conveyancer as a subscriber to the NECS to properly identify the client. In this regard, the NECS will require conveyancers to provide certifications on electronic instruments prior to signing them on behalf of their clients. The conveyancer must certify that the “prescribed procedures” in verifying the identity of the client have been followed, and the conveyancer is holding a properly completed and signed authorisation form and has thoroughly and carefully examined and retained copies of all identification documentation.

 

The identity certification procedure is intended to give all participants in the NECS confidence that the practitioner has followed the prescribed procedures to verify the identity of the client and “may protect the practitioner from a negligence claim if the identity is subsequently proven to be false”.

 

Conveyancers should therefore be mindful that failing to follow the prescribed procedures will almost definitely result in a finding of negligence.

 

Although the precise nature of the prescribed identification documents is yet to be determined it is anticipated that there will be some move towards uniformity across the States and Territories and may result in a 100 point system similar to that under the Financial Transaction Reports Act 1988 (Cth) being adopted.

 

It is argued that the NECS may also introduce new opportunities for fraud within the conveyancing industry, namely, the unlawful use of a conveyancer’s digital signature certificate (as a certifier in the NECS) to digitally sign documents. That is, a fraudulent person with access to the NECS, such as a law clerk or other employee, would be able to prepare mortgage documentation, digitally sign the document on behalf a client and lodge it for registration.

 

 

Extract from a paper presented at the Australian Institute of Conveyancers 2007 National Conference, March 2007

By Paul Watkins

General Counsel, Australia

Stewart Title Limited

Mortgage frauds involving counterfeit Certificates of Title

Mortgage frauds involving counterfeit Certificates of Title

Division: Land and Property Information No: 2007/01

Date: January 2007

This circular is issued to advise all LPI customers that a mortgage fraud scheme involving counterfeit Certificates of Title is currently operating. Since late December 2006 at least nine counterfeit Certificates of Title have been identified by LPI. The counterfeits are being used as security to obtain substantial mortgages. All instances of the fraud scheme discovered to date share the following features:

• Loans are sought from non-bank financial organisations and are arranged by a mortgage broker;

• The loans are subject to high interest rates;

• The mortgagor may be unwilling or unable to personally attend settlement;

• Directions are received to pay the loan monies to a third party rather than to the mortgagor;

• An unencumbered Certificate of Title is offered as security for the loan;

• The Certificate of Title used as security is a computerised title dated prior to January 2004.

The counterfeit Certificates of Title used in the fraud scheme are produced by superimposing details from title searches of genuine titles on forged certificates in the format used prior to the introduction of certificates with enhanced security features in January 2004. The counterfeits are of reasonably high quality and are used in conjunction with forged identity documents purportedly proving that the fraudster is the registered proprietor of the land in the title.

Conveyancing practitioners who are approached by potential clients previously unknown to them in circumstances that match those set out above should act with extreme caution. Practitioners are strongly advised to seek confirmation from LPI of the authenticity of the Certificate of Title offered as security before proceeding to settlement.

The Law Society of NSW has recently communicated with its members warning them about the scheme. The following extract from the Law Society notification provides advice that all members of the conveyancing community should note:

“The Fraud Squad has warned of the extraordinary and widespread increase in identity fraud, where whole, well-documented identities are acquired by fraudsters. Forged passports, drivers’ licences, credit cards, letterheads etc are all available to fraudsters. It is not unusual for fraudsters to have an excellent working knowledge of conveyancing procedures, and to falsely sign documents as a solicitor, justice of the peace or otherwise……If a client has not been known to you personally for some time or the signature to be witnessed was not given in your presence, do not act as witness. Think carefully about the wisdom of acting on behalf of a mortgagor whom you have never personally met or with whose directors you are not personally acquainted….The Law Society recommends that in addition to obtaining a clear copy of all documents used in the identification process, practitioners ensure that at least one such document displays both a good quality photo and the signature of the person so identified.”

 Des Mooney Deputy Director General, Department of Lands and General Manager, Land and Property Information

Mortgage Fraud White Paper

Mortgage fraud is a growing phenomenon with a signifi cant and direct impact on every party to the mortgage relationship, including brokers, managers, lenders or securitisers, insurers and consumers. The Mortgage & Finance Association of Australia (MFAA) engage PricewaterhouseCoopers (PwC) to produce a joint white paper on methods to reduce fraud risks in the mortgage loan application process. This paper represents the MFAA taking a leading role to promote discussion about mortgage fraud and strategies to address fraud risk.

The results of the study undertaken by PwC are set out in the following pages. In preparing the white paper, PwC reviewed the current state of fraud in the mortgage industry in Australia and in comparable markets overseas, and conducted indepth consultation with representatives from:

• Banks

• Securitisers

• Mortgage Managers

• Mortgage Aggregators

• Mortgage Brokers

• Lenders Mortgage Insurers

• Professional Indemnity Insurance Brokers, and

• Title Insurers.

The objective of the white paper is to assist members in reducing the risk of mortgage fraud, through awareness of the risks and providing a description of procedures that mitigate these risks.

Electronic Processing 

As with many forms of financial transactions, the future of the loan application process may evolve to include a range of electronic and/or automated aspects. Electronic processing and other technological innovations may improve processing efficiency, however, these changes carry the potential to expose particular aspects of the loan application process to an increased risk of fraud. 

All of these factors will influence consumer confi dence in and response to the mortgage loan application process. A consistent and co-operative approach to the constantly evolving risk of fraud and non-compliance will assist the mortgage industry as a whole in preparing for and managing the potential dangers and, crucially, may assist in sustaining consumer confidence in the process.

Title Insurance 

An increasing number of securitisers and lenders are taking out title insurance to manage risk particularly mortgage fraud. A title insurer will typically put measures in place to mitigate fraud. These include simple procedures for mortgage processors to follow to help detect fraud before the loan funds are drawn down, and working with originators to highlight areas where there is a greater risk of a fraud occurring.

MFAA PwC White Paper

NAB drops Satyam from IT roster

Article from: The Australian

NAB today decided to cancel the second phase of a massive outsourcing project contracted to Satyam Computer Services of India.

National Australia Bank’s technology services general manager, Craig Bright, said the bank would be exposed to too much risk if it continued with the second wave of its IT outsourcing (ITO) strategy, which was given the green light last November.

NAB announced the decision to cancel the Satyam contract at Melbourne’s Telstra Dome today, sources said, conducting separate briefings for its staff and the contracted employees of India’s beleaguered IT services firm.

National Australia Bank would not comment at time of publication.

The termination of the ITO Wave 2 is likely to see working visas revoked for the 100 Satyam staff.

The bank already retrenched about 50 employees, primarily contractors, as part of the early stages of ITO Wave 2, and had previously scheduled another round of redundancies in March.

The bank said it would not sever the ITO Wave 1 outsourcing arrangement with Satyam, which is offering support and maintenance of key technology functions. 

However, it is understood that NAB executives were considering how to stop dealing with Satyam altogether, to either bring the technology functions back in-house, or outsource them to another firm.

While it would take between three to five months to bring the components back onshore, NAB will need to find the internal resources to support the work as it has already retrenched and made redundant hundreds of permanent and contractor staff that were responsible for the functions.

The second tranche of technology outsourcing includes the management of Siebel, payments and account services applications.

The Australian recently reported that NAB encountered a number of problems transitioning technology functions to Satyam in the early stages of the outsourcing program’s life.

At the meeting today, the bank did not outline back-up proposals following the decision to drop Satyam. NAB chief information officer Michelle Tredenick has previously told staff the bank had several contingency plans to deal with situation.

NAB’s ITO strategy - spearheaded by Ms Tredenick - is part of the bank’s upgrade of its technology systems and processes, which also includes spending $1 billion over five years to replace its core banking systems.

Satyam’s chairman and founder B. Ramalinga Raju and other senior executives were arrested after Mr Raju admitted inflating the company’s books by more than $US1 billion ($1.55 billion). Two partners from the company's auditing firm, PricewaterhouseCoopers, have also been arrested.

E Conveyancing - yet another stuffed up project

I’ve been aware of this one for a while, but was reminded by the comment below.

The idea is quite simply, to have one electronic system to do property conveyancing, eliminating all that faxing around of fiddly bits of paper etc.

It isn’t that big a project (speaking with my ex IT Manager hat on) as there are only about 400 000 transactions a year across Victoria, so you don’t need a really wiz bang system to handle that type of volume, and the database wouldn’t be that big either.

Of course, that’s not how the Government is doing it, spending $30M - $40M with no usable system in sight.

This commentary was published on the VicWatch blog

Rent data unfit to publish

Dewi Cooke | the age

January 31, 2009

OFFICIAL government figures on the state of Victoria's rental market have been missing since May and, when they finally are released, are likely to be nine months out of date.

Substandard data collection has been blamed for the long delay in the Office of Housing's quarterly rental report, which last published figures from March.

The Residential Tenancies Bond Authority, a government agency under the auspices of Consumer Affairs Victoria, is responsible for collecting the information and outsourced the task to an Indian-based company, iGate, which has offices in Ballarat.

The data was then passed on to the Office of Housing for analysis but was said to be unusable.

"I was not prepared to publish data that we could not stand by," Housing Minister Richard Wynne said.

The information in the Rental Report is considered a truer indication of the state of the market because the authority records all official rental agreements lodged in the state.

Figures provided by the real estate industry rely on publicly advertised rent or rents reported by agents.

Reports of Melbourne's rental vacancy rate have swung from a tight 1.2 per cent to a healthier 3.9 per cent.

The Office of Housing's December quarter figures are now expected to be published on time in March, while the figures from June and September 2008 will be rolled into one report.

But Opposition Housing spokeswoman Wendy Lovell questioned the delay and said Victorians had been left in the dark about the market.

"You've got to wonder what they are trying to hide." she said.

The Tenants Union of Victoria's Toby Archer said accurate and up-to-date information was "crucial" as the state's rental crisis continued.

A spokeswoman for Consumer Affairs Victoria said data collection for the report had always been outsourced but iGate had been contracted only since July.

"As sometimes happens when moving to a new processing system, a number of teething problems occurred," she said. "These issues have since been resolved."

Grim outlook for real estate jobs

Eli Greenblat | The Age

January 31, 2009

VICTORIA'S real estate industry could start hemorrhaging jobs this year, with a 25 per cent slump in transactions during 2008 forcing suburban offices to cut back.

Real Estate Institute of Victoria chief executive Enzo Raimondo said his recent discussions with members confirmed that the industry was set for a contraction.

"When you have 25 per cent less transactions, you can't have the same number of people dealing with them."

Mr Raimondo said the REIV's corporate membership had remained static at 1900 agencies, but he expected a reduction in the number of individual members.

He said individual REIV memberships had fallen to 6200 from 6500.

"A number of agencies have put off quite a few staff," Mr Raimondo said.

It comes as the REIV's latest report on property prices shows that the Melbourne metropolitan median price for a home fell 0.9 per cent in the December quarter to $426,000. The median price for an apartment eased 1.1 per cent to $365,000.

Annually, the Melbourne property market fell sharply, in line with most asset classes in the grip of the economic crisis, with the median value down 9.7 per cent in 2008.

Wakelin Property Advisory director Monique Wakelin said the bulk of the property sales in the December quarter were in the more affordable suburbs thanks to the recent increase in the first-home buyer's grant.

At the upper end of the property scale, in the leafy expensive suburbs of Melbourne, activity was marked by sellers driven to desperation by depreciating shares and other assets.

"They are not so much dumping their homes, but what they are having to do is sell because they have used a whole heap of equity in their home to gear into the stockmarket.

"It's all the usual high-end suburbs … such as Brighton, Toorak, Kew and Malvern," he said.

Renters face tax hit

Mark Hawthorne | The Age

January 31, 2009

VICTORIAN home renters and small business owners could face hefty stamp duty bills under an amendment to the Duties Act being debated in State Parliament this week.

Proposed amendments to the bill will make some tenants liable for stamp duty if the property they are renting is sold during during their lease.

The stamp duty rate is 5.5 per cent of a property's value, and the changes could lead to stamp duty bills totalling tens of thousands of dollars for renters and business owners.

For example, a person renting a $400,000 flat could be liable for a stamp duty payment of $22,000, and have just 14 days to settle that debt, if the property is sold.

The Duties Amendment Bill 2008 was tabled in Parliament in December following pressure from the State Revenue Office to close loopholes governing the transfer of properties, particularly those owned on 99-year leases, to avoid stamp duty.

Critics have described the changes as a "stealth tax" and say thousands of Victorians will have to pay stamp duty on properties they do not own.

The changes mean:

■The effective reintroduction of lease duties in Victoria, which the State Government abolished in 2001.

■Tenants who pay any consideration other than just rent — for example, hiring a gardener or removing signs from a shop or warehouse — will have to pay stamp duty if the property is sold.

■Property buyers may have to pay double stamp duty — once when contracts are signed, and again on the completion of sale.

■Retirement villages will no longer be exempt, adding tens of thousands of dollars to the cost of buying into a village.

■Stamp duty will have to be paid within 14 days of a contract of sale being signed, rather than within three months of the transaction being completed.

A spokesperson for Treasurer John Lenders said: "Our objective is clear — to close a loophole that allowed people to circumvent tax by deliberately structuring their affairs to take advantage of the abolition of stamp duty on leases.

"The SRO has monitored changes in market practice since the abolition of lease duty and observed that there has been a rise in certain types of leasing arrangements that have exploited the loophole.

"Typically these arrangements are used at the top end of the property market. This legislation will not affect those entering into ordinary commercial leases.

"If it is shown that the bill will have unexpected consequences that are not able to be overcome administratively, then we will consider appropriate amendments to the bill when it is debated in Parliament next month."

Global accounting firm PricewaterhouseCoopers has been among the most vocal of the legislation's critics.

"The legislation was designed to address a particular case that the State Revenue Office lost in the Supreme Court," said Barry Diamond, a partner with PwC.

"In trying to introduce amendments that would close loopholes, there are other consequences that are simply absurd.

"The key message that PwC, along with other key stakeholders, would like get across is that we want the State Government to either withdraw or substantially amend the changes immediately.

"There are a number of consequences of this bill — it introduces a stealth tax, and creates some absurd consequences for people renting a property whereby they could get a stamp duty bill for tens of thousands of dollars."

According to Mr Diamond, the changes will affect those who have a "provision in their lease other than rent".

"This is much more common for commercial leases, where the tennant will have provisions to remove signage from a shop or warehouse.

"If those provisions are in the lease, to pay any consideration other than rent, then they will be liable for stamp duty."

Since the bill was tabled in December, the Government has received complaints from the Law Institute of Victoria, the Property Council, the Tax Institute of Australia and the Australian Bankers Association.

"The real question is: was this the intention of the Government, are they really introducing a tax by stealth?

"Or have they just got it wrong and caught a lot more things in their amendments, like certain long-term leases?" Mr Diamond asked.

Shared Workspaces

Communication & Co-operation

Communicating with others using various aspects of the World Wide Web has become commonplace. Most of us use e-mail daily, many are members of specialty-group forums, and more and more of us are making and finding friends on web portals such as Facebook and My Space.

Legal and conveyancing professionals have probably not been the quickest to adopt many aspects of the digital world. I recall a story (supposedly true) from my first law firm. The previous decade the managing partner purchased a personal computer for word processing. It was probably among the first in town - he was a very astute man who saw massive potential to this new technology. His assistant promptly resigned stating “I am not going to waste time with some new fad that will be gone in a year”. While this is one exaggerated perspective, as a profession we do tend to regard technology with some resistance.

Property work has at its core a co-operative need between practitioners and lenders, and we achieve that today already using technology. The telephone, facsimile and e-mail now all play a part alongside “snail-mail” as facets of the communication technologies used by us to achieve the result for the client, who is relying on us and her or his lender for the desired result.

Unification

The internet provides the ideal platform for the unification of these separate communication systems. A purpose-designed web platform can create an environment where lenders and conveyancers can communicate in a standardised way, each seeing and receiving what it needs to progress their work.

Instead of a dozen major lenders with a dozen different ways of attempting to obtain their (in essence) identical requirements, a unified web based portal can allow communication that not only saves expenses such as postage, facsimile and telephone - the staff hours able to be saved are immense.

Shared Workspaces

The concept of Shared Workspaces is simple – design a system where the conveyancer can upload documents like contracts and transfers, and the lender can print (or save to its electronic file) those documents instead of writing to the practitioner, or telephoning and then the practitioner mailing or faxing etc. Simply put, it is a web page that is accessible by the conveyancer and lender for that transaction. That web page becomes their “Shared Workspace”.

A method of creating the Shared Workspace is needed, and this should be one where either the lender or the conveyancer can create it, and the system will know when another party is trying to join, and invite them in if appropriate. Couple this to a method of creating (or identifying already open) Shared Workspaces via a single process, and we have the makings of the first real 21st Century advance in the property settlement arena.

Shared Workspaces can combine all of a practitioners matters into a single page, and allow any filewith any lender to be actioned. While Shared Workspaces will allow many things to be achieved, the “killer application” is perhaps the readily identifiable status of a file: A conveyancer can see at a glance whether the lender has joined the Shared Workspace, and when the lender is ready to be booked. Consider the time spent on hold waiting to book a loan advance, only to find out that it is not ready to be booked. Not only has the practitioner lost valuable time, but the lender has wasted their time in taking those calls, and that time would be better spent getting those files ready in the first place! If in future the practitioner could see at a glance that the matter is or is not ready to book, then booking arrangements can only benefit.

With industry support gathering pace, this future is closer than you think.

Contributor Nick Spanninga 2009

 

Drop in home loans raises fears of higher rents

And there are fears that a drop in investment loans could lead to skyrocketing rents and more homelessness.

Just 5994 new loans were approved in WA in November, the lowest since he same month in 2002 and almost 40 per cent fewer than in May 2006, according to Australian Bureau of Statistics data. It was a fall of 5.8 per cent on October.

The raw data shows just under 5000 were for buying established houses. There were also 2104 refinancings, which are not included in the overall totals.

About $171 million in loans were for building new homes and a further $57 million were for building them. About $1.3 billion was loaned to buy established houses.

Loans for investment housing, which were not broken down by state, fell 7.4 per cent on the previous month and 33 per cent on November 2007.

Housing Industry Association executive Chris Lamont said the investment numbers were of "real concern".

"Unless new measures are implemented... we are going to see more households struggling to afford rental accommodation," he said.

"This is likely to mean an increase in demand for public housing and potentially a further increase in homelessness."

He called for a doubling of the depreciation allowance, incentives for building energy-efficient homes and an expanded national rental affordability scheme.

Meanwhile, the Urban Development Institute of Australia has backed the Housing Industry Association's analysis of other recent housing data by pointing to an expected improvement in new home sales to first home buyers with the tripling of a grant.

HIA WA executive director John Dastlik told WAtoday.com.au last week that there would be a lag between the introduction of the $21,000 grant and its flow-through effect on home sales due to the approvals process in WA.

He was commenting on figures showing new home approvals in the state slumped to an eight-year low in November.

Figures released by the federal government at the weekend showed there had been 279 applications for the grant in WA since October 18, the date it was increased.

But UDIA WA chief executive Debra Goostrey said this was misleading as in WA there needed to be a contract to build before prospective homeowners could apply for the grant, unlike the eastern states where house and land packages from the same company triggered an application much sooner.

UDIA figures showed a "major jump" in land sales from when the grant was announced. The top 12 developers in the state sold 678 lots in the six weeks from October 27, almost 300 more than in the corresponding period before that date.

Author: Chalpat Sonti
Date: January 15, 2009
Publication:  The Age

NAB faces IT losses after Indian fraud

NATIONAL Australia Bank could be forced to write off millions of dollars invested in its offshoring program as a result of the Satyam corporate fraud scandal.

NAB is one of Satyam's biggest customers in Australia and has already made a significant investment on training and transition costs and redundancy payouts as part of its information technology offshoring (ITO) program.

Satyam founder B. Ramalinga Raju last week admitted exaggerating profitability and assets.

Insiders said the bank would face hefty losses if it brought the work back onshore.

"This initial investment was meant to be repaid over the next five years with lower maintenance costs," one source told The Australian. "If NAB breaks out of the ITO wave 1 contract now, there will be large losses of that initial investment which can never be recouped."

Around 90 Satyam staff service NAB, with about 40 per cent based in Australia.

The bank has offshored key technology functions to Satyam, exposing it to significant risk if this service were interrupted.

"It has literally 'bet the bank' with entrusting its key applications to Satyam," a source said.

"Without these applications being successfully supported and maintained, the NAB could not continue to operate."

The Australian understands it will take at least a year for NAB to transfer the work in-house and that the relevant expertise doesn't exist within the bank to service this.

"Most of the staff displaced by ITO wave 1 have been given redundancy packages and long left the NAB" the source said.

"It would take at least 12 months and considerable expense to bring ITO wave 1 applications back in-house."

The bank has a number of contingency plans, spokeswoman Kerrina Lawrence said, and has a core group of internal and external staff capable of performing the work if required.

"NAB's priority is ... seamless service. All business-critical support is performed by NAB's Australian team members."

Qantas is monitoring its relationship with Satyam, as it has more than $US135 million of contracts with Satyam, according to analyst firm IDC.

Mahesh Sharma | January 21, 2009

Article from: The Australian

ECV - the last post from the House?

Mrs KRONBERG (Eastern Metropolitan) 

 

I find that there are serious sinister elements to the e-conveyancing system. Buried in the e-conveyancing system is a grab for cash. It is almost a new kind of taxation on behalf of this government. As a way of herding people like sheep -- there are the ones that get on the truck and the others that run out into pasture -- to use the e-conveyancing system the government has placed an impost on people who refuse to use this electronic device. A price rise has been factored in for people who are buying homes.

On top of the state's stamp duty burden and all of the other costs that are passed on by developers to homebuyers, there is a ratcheting up of some 32 per cent on the price of conveyancing. This corralling is to ensure that users of the old paper-based system are forced to turn to the new electronic system.

How are we to understand this grab for cash in this climate? The dimensions are that the government is set to collect an extra $6 million from the price hike of $15.50 on the 400 000 conveyancing transactions across the state. I think these sorts of burdens are an obscenity. What if you wanted to avoid paying the $15.50 on those transactions? What choice do you have? 

 

Mr D. DAVIS (Southern Metropolitan) 

 

I am pleased to be able to make a contribution to the debate on the motion that has been brought to the chamber today by Mr Rich-Phillips, and I compliment him on his timely and balanced motion. It is a motion that does draw openly and directly on the work of the Auditor-General over the recent period. I want to put on the record my compliments to the Auditor-General for the very important series of reports that deal with these areas of ICT (information and communications technology) project implementation by this current Labour government. Nine years into this government and we have an enormous list of projects, and I do not need to detail them all. Mr Rich-Phillips and others have looked at particular details in those projects. But it is important to note that today we do not see the Minister for Information and Communication Technology in the chamber; we see the Acting Minister for Information and Communication Technology, who is trying to get a grip on this portfolio, trying to get a grip on this out-of-touch area of government activity that has cost the community an enormous amount of money.

The motion of Mr Rich-Phillips is timely, balanced and sensible, and points to a major area of government failure over the last nine years. Again I put on record the importance of the Auditor-General's work in forensically ensuring that these matters come to public and parliamentary notice.

My comments today, beyond what I have just said, will be restricted to the electronic conveyancing issues, which I have raised in the Parliament on a number of occasions previously. The Acting Minister for Information and Communication Technology will know that in his other role as Minister for Environment and Climate Change he has responsibility -- and I am sure some days he rues the fact that he has this responsibility -- for electronic conveyancing. To be fair to him, he inherited this white elephant, and I say advisedly it is a white elephant. It is worth putting on record that this project is now tens of millions of dollars -- in all probability more than $40 million -- in the red. It has been mismanaged comprehensively by the department, and there are real questions of probity as to how this process has been undertaken.

I have indicated in the Parliament before that there are serious questions about the involvement of Ajilon, which is indeed a major international contracting company that has, in my view, an unhealthy position in the way it is operating with the Department of Sustainability and Environment. I make the point that Mr Rick Dixon from that firm is sitting in a position where not only is he in a managerial role in the department but he is also involved with the Ajilon firm, which is a successful tenderer to that department as well.

It is hard to think of a more difficult position to be in in terms of avoiding the appearance of a conflict of interest, and it would be hard to avoid the appearance of a conflict of interest in such a situation where you are both in a managerial role and also a contractor for a major contract with that section of the department.

I note that the decisions that have been made by the Council of Australian Governments to move towards an electronic conveyancing system nationally are important. I believe this is the way to go nationally. There are enormous transaction costs that can be reduced by the implementation of a successful electronic conveyancing system that is compatible across jurisdictions. To implement such a system you need to have major buy-in from the stakeholders in the transactions involved inconveyancing -- in this case, hopefully, electronic conveyancing -- and they are the banks particularly, but also building societies and credit unions as well, and solicitors and conveyancers.

The truth of the matter is that this government has not been successful in winning the confidence of the banks in this country, it has not been successful in winning the confidence of the Law Institute of Victoria and solicitors, and there are major concerns about the liabilities that may arise from transactions that occur where there is no satisfactory insurance behind them. The advice to many solicitors is, 'Do not take part in the Victorian system because of the insecurity of your legal indemnities and your insurance support in particular'. That is a major concern. The government has not got these factors right. It is important in implementing these systems to ensure that you have the support of the major players. Ultimately the system will only be used in the way that we would all desire if it does have support across major industry groups.

What is the government's solution to that? It is to belt those who have to pay conveyancing costs across the head.

It says, 'We're going to lift the price of paper conveyancing, although we know that there is only one transaction in Victoria that has occurred as a full electronicconveyance transaction' -- one! -- 'at a cost of $40 million for the project'. What a white elephant, what a disaster, and what a disgrace. The minister now has two hats with which to manage this responsibility -- as Acting Minister for Information and Communication Technology on the one hand and as Minister for Environment and Climate Change on the other. He is now in a position where he can certainly intervene to stop this remarkable merry-go-round of activity where consultants order more work from a consultancy with which they are connected, they grow richer by the day, the money is pumped in by the community and there is no output. One transaction -- $40 million! What a disgrace. The minister should hang his head in shame. Let me just ask the minister how many things he could have used that $40 million for. Health, education or transport? Which of those would have been better to have spent the $40 million on?

Let me now move to the national system. That same group of consultants who have got their grip and their teeth into the department in Victoria -- some might say it in a more prosaic way than I have explained it, and God knows what transactions have transpired outside the department on this matter -- now want to get their teeth into the national system as well. It is a disgrace, and it should be stopped.

The Council of Australian Governments has said we are going to go to a national system, and that is supported. There should be a national e-conveyancing system, as the national newspaper and others have indicated very strongly, but it should be a clean system. It should not be a corrupt system; it should be a system that is seen to be clean, and it should be a system that the community in all states can have confidence in. I, for one, do not have confidence in the system in Victoria, and that is a very sad fact, given the expenditure of more than tens of millions of dollars of community money.



That same group of consultants now want to try to ramp the department up to go into bat at the national level. They now want to get their mitts on the money across the nation. Let me tell you -- and I think some of my federal colleagues have begun to make this point clearly too -- that it is unlikely that the national system will jump at such an offer. I do not think the state governments around the country and the national government are going to be willing to fund at a national level an expansion of a system where only one transaction has been delivered for $40 million.

I think it is worth quoting very briefly the editorial in the Weekend Australian of 12-13 July 2008, and then I will conclude. The heading is 'Nation building' and the subheading is 'Lessons from Victoria's wasted conveyancing efforts'. I will quote several paragraphs from this because I think it is important. It points to the transaction costs that can potentially be saved and the benefits for the national economy. It reads:

The decision of the Council of Australian Governments to build an electronic conveyancing system that spans the nation is by no means glamorous. But history will see it differently.

This is the modern equivalent of the nation-building projects of previous generations. It might not have the cachet of a Snowy Mountains scheme, but just like that great project of the 1950s, electronic conveyancing will benefit all succeeding generations.

Industry groups estimate that if this single initiative is implemented properly, it will cut the cost of buying and selling homes by $250 million a year.

That is not just for one year; it is for next year, the year after that and the year after that. Economic efficiency is about lowering the transaction costs in the economy, and that can be successfully done with an electronic conveyancing system, but not a white elephant like we have got in Victoria. The editorial goes on to say:

The Victorian government appears to have wasted $40 million by building a system that does not comply with the basic requirements of the main players in conveyancing ...

This is the direct result of two mistakes that should be avoided by those who build the national system.

The first mistake was the refusal to accept that conveyancing is primarily a commercial transaction, not a filing procedure for land title bureaucrats.

Those at Land Victoria have a lot to answer for on this. This is a long-term blunder in management of land procedures that should have been done correctly.

The second mistake was to cede control of the system to private consultants.

The Victorian experience shows that those skilled in computer technology are of most value when their role is confined to implementing public policy decisions -- not making them. Responsibility for the national system must remain in the hands of those who are responsible to voters, not shareholders.

To avoid the fate of the ECV --

Electronic Conveyancing Victoria --

the national system should be designed around the business needs of the private sector. By endorsing the principle of a single national system, COAG's working party is off to a flying start.

I agree. It is something that should be supported, but there are traps for young players. In Victoria this Brumby government has fallen deep into the pit.

 

E-Conveyancing in the House

Mr RICH-PHILLIPS (South Eastern Metropolitan) -- I move:

That this house --

(1) notes with concern the repeated failure of the Bracks and Brumby governments to successfully deliver major ICT projects on time and budget including the ultranet, HealthSMART, the myki ticketing system, Project Rosetta, the criminal justice enhancement project, the housing integrated information program, e-conveyancing and the LEAP database replacement;

(2) notes the loss of ICT expertise in government following the disbandment of the Office of the Chief Information Officer; and

(3) calls on the Minister for Finance, WorkCover and the Transport Accident Commission, as minister responsible for procurement, to develop ICT project management expertise within the Department of Treasury and Finance as a key element of all major government ICT procurement projects.

Information and communications technology (ICT) procurement in the Victorian government sector is now a major industry. The Auditor-General estimated that in 2007 the Victorian government spent $1.5 billion on ICT structure and assets. To put that in context, the government claims for the 2006-07 financial year that its total infrastructure investment was $3.2 billion, so the spend on ICT is approximately 45 per cent of the total amount the government has spent on infrastructure. It is a very significant item of government expenditure, and it is an item of government expenditure that the taxpayers of Victoria can and should expect the government to carry out efficiently and effectively.

Over the last 15 years we have seen major changes in the use of ICT by government. Going back to the previous government, which was a pioneer in introducing ICT to the Victorian government sector, we saw entities like the Parliament of Victoria adopt the use of basic ICT. We saw Parliament introduce a website, the document management system for legislative documents and a whole range of that type of generation 1 ICT projects. Those sorts of projects were introduced across government during that seven-year period.

More recently, under this government, we have seen the trend towards the use of ICT continue, and the projects have become more elaborate, more expensive and more complex. As expected, as you evolve through an ICT framework, the returns on those projects have also diminished. The early, simple projects were easy and had big returns. The projects have since become more complex, and the returns have proportionally diminished.

Notwithstanding that, over that period of time we have also seen Victoria slip behind as a state jurisdiction delivering ICT projects. Through the 1990s Victoria was without doubt the leading jurisdiction in Australia among the states and the commonwealth in the use of ICT for service delivery to its constituency base and the use of ICT among government agencies. Victoria has now lost that leading position to other states and territories that have leapt ahead as Victoria has undertaken a number of significant ICT projects that have failed to deliver on their promises, both in terms of cost outcomes and the time frame in which they were to have been delivered.

The first element of this motion relates to the numerous projects which have not been delivered in accordance with the plans that were put in place for them. I would like to start by running through a few of those projects.

At a number of my colleagues on this side of the house intend to speak at some length on particular projects in their portfolio areas, so I will not dwell on them in any great detail.

......

Electronic Conveyancing

It has been a similar scenario with the electronic conveyancing system, the subject of some comment in this place. I understand the Leader of the Opposition will make some more detailed comments on this later in the debate. The project was announced in 2004 by the then Minister for Planning, Mary Delahunty, who stated in her announcement in March 2004 that:

Land Victoria estimates that if the 400 000 conveyancing transactions that are conducted manually each year are conducted online, the savings in time and paper will amount to more than $100 million a year.

That was the government's target back in 2004 for the e-conveyancing system: it would process 400 000 transactions and it would save $100 million a year. Having spent $40 million implementing the project, the reality has been quite different. Twelve months after the system became available the total number of transactions that have been undertaken is one -- there has been a single transaction using the e-conveyancing system.

The reason the system has not been taken up is that the solicitors involved in conveyancing will not use it, because they have been advised by their professional bodies that they are at risk of professional liability issues if they do so. The banks will not use it for transactions, because they have concerns about the plethora of state-based e-conveyancing systems and would prefer a national system. Again with this project the government failed to create specifications that were acceptable to the end users.

We have spent $40 million on a system that the key parties -- the conveyancers and the banks -- do not want to use and have demonstrated they will not use because it does not meet their requirements.

At a federal level we now have proposals for a national conveyancing system. This throws great doubt on the investment Victoria has made in its e-conveyancing system. It would appear from coverage of the issue that there is limited prospect of the Victorian e-conveyancing system being picked up as the national model. Apparently there is some support from Queensland, but there is limited support across the other jurisdictions. There is every prospect that the $40 million the Victorian government has committed to this project will be wasted because the system did not meet the requirements of the key parties to conveyancing transactions and has simply not been used.

Four years ago the forecast from the then Minister for Planning, Mary Delahunty, was of 400 000 transactions a year, but that has not come to pass because the government did not do its homework on this project.

Ms PENNICUIK (Southern Metropolitan) 

With regard to the e-conveyancing system, notwithstanding whatever problems there may be in terms of its implementation, it seems the biggest problem is that potential users of the system do not want to use it. That is problem no. 1. I note a rather large article in the Australian in May titled 'Revolt against Victorian e-system' that reported that the private players were refusing to engage with it and that:

The Law Council of Australia and the Australian Bankers Association have written ... to the federal government, urging it to have nothing to do with any plan ...

That seems to make e-conveyancing pretty well doomed.

I note Mr Pakula said the matter is now going to the Council of Australian Governments. Perhaps that would have been the best approach from the beginning. The advice and the understanding was that you needed a national system for e-conveyancing, because people are buying and selling properties across state borders. Certainly we should have learnt from 100 years of federation that having six state-based and perhaps two territory-based systems is a recipe for disaster. If one state attempts to implement this system on its own and then expects the country to integrate eight different systems, it is bound to fail. I note that $40 million has been spent on e-conveyancing; that is not a small amount of money, and it certainly could have been better spent on other projects.

SAI Global agrees to buy Espreon

Information services and training company SAI Global Ltd has agreed to buy financial services provider Espreon Ltd for as much as $53.9 million as it aims to diversify its property transaction business.

The announcement follows Espreon's rejection last month of a $42.7 million takeover bid by private investment firm Vectis Group Pty Ltd.

Shares in SAI gained eight cents, or 3.2 per cent, to close at $2.58 and Espreon stock surged 37 per cent, or 13 cents, to 48 cents.

"SAI is a well-respected and innovative corporation with a demonstrated record in the provision of information and transaction services," Espreon chairman Phil Andersonsaid in a statement.

"All of Espreon's key stakeholders, including shareholders, employees and customers, should benefit from SAI's wider network and the ability to access itsextensive resources."

SAI will offer one share for every 4.8 Espreon shares if it attains more than a 50 per cent holding, valuing Espreon at $49.4 million, Sydney-based SAI said.

The offer will be increased to one SAI share for every 4.4 Espreon shares if SAI gains more than 90 per cent of the target. That would value Espreon at $53.9 million.

Before the offer announcement, SAI shares last traded at $2.50 on January 9 and Espreon shares closed at 35 cents on the same day.

The higher offer valued Espreon at 56.8 cents per share, 26 per cent more than Vectis' offer of 45 cents a share.

"The board of Espreon believes the offer represents superior value to shareholders compared with the Vectis takeover bid, providing an opportunity to realise value for their investment at a substantial premium to recent trading prices of Espreon shares," Mr Anderson said.

SAI said it would benefit from the national property business Espreon owns, which will expand SAI's predominantly Victorian operations.

The company also said the takeover would add to profit in the first full year of ownership, and would expand the information services business.

Espreon's board intends to unanimously recommend the offer, which will create a $405 million company, in the absence of a better proposal.

SAI already owns about 20 per cent of Espreon after buying 18.7 million shares for 47 cents each from Hunter Hall Investment Management.

SAI's offer is subject to attaining a minimum 50 per cent of Espreon and no regulatory actions or material transactions taking place.

Espreon recommended on December 22 that shareholders reject the 45 cent per share Vectis bid, which had been raised from the initial 40 cent offer of November 28, describing it as opportunistic and undervaluing the company.

In August, the companies had agreed on a 62 cent takeover bid by Vectis, after the private firm's initial approach in June.

That agreement was terminated on November 6 after the fall in the S&P/ASX 200 Index in September and October triggered a termination clause in the scheme of arrangement.

Reckon Ltd, which develops and sells accounting software including Quicken, also owns about 20 per cent of Espreon.

ANZ Bank reviews Satyam links

ANOTHER major local bank is studying the impact of its exposure to Satyam Computer Services' $1 billion corporate scandal.

ANZ Bank has around 100 Satyam contractors who support IT projects. They're mainly based at the bank's Indian subsidiary which employs under 2000 people. 

Last week, the bank told employees that it would develop a contingency plan although its relationship with Satyam was "modest". 

"The relationship involves a number of Satyam staff who support development and testing on information technology projects. This means there is no effect at all on ANZ's day to day IT operations," David Cartwright, ANZ operations, technology and shared services group managing director, said. 

"(As) for the technology development projects that Satyam contract staff are supporting, we are currently assessing key person dependences and developing a plan for how we manage through the situation," Mr Cartwright said. 

"While there is some work to do on this, it's clear that we will be able to take the issues at Satyam in our stride and largely get on with business as usual given the depth of our own IT resources and our relationships with a range of IT vendors globally." 

Unlike other blue-chip companies such as National Australia Bank, Telstra and Qantas, ANZ doesn't have any long-term contracts with Satyam. 

Most local customers are assessing their contractual obligations with Satyam. 

A multi-million-dollar software facility being built on Deakin University's campus in Geelong is also under a cloud as the future of Satyam remains uncertain. 

Satyam's world came to a crushing halt when the company's founder and chairman B. Ramalinga Raju admitted to overinflating the value of cash and bank balances by 50.4 billion rupees ($1.44 billion). 

In scenes out of a Bollywood movie last Friday, Mr Raju, Satyam's former chairman, was arrested with B. Rama Raju, his brother and co-founder, on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery. 

Satyam chief financial officer Srinivas Vadlamani was arrested on Saturday. 

The high-profile case has forced the Indian Government to appoint three members to the board of Satyam after it dismissed the incumbent board. 

PricewaterhouseCoppers, which has been auditing Satyam's books for nearly a decade, said it adhered to “applicable auditing standards and (was) supported by appropriate audit evidence”. 

The Australian | Fran Foo | January 12, 2009