E-conveyancing system in trouble

A feud between Victoria's solicitors and non-lawyer conveyancers threatens to undermine the launch of an electronic conveyancing system that could cut $70 million from the cost of home ownership.

Electronic Conveyancing Victoria is due to begin full operations on November 16 but there is a risk that solicitors may boycott the scheme.

Law Institute of Victoria chief executive Michael Brett Young has warned the state's solicitors that without changes the institute "cannot recommend that its members enter the scheme".

Unless the stand-off is resolved, it threatens to undermine the viability of the e-conveyancing system, which could cut the cost of conveyancing transactions by between $235 and $395, the state Government says.

The scheme had already been rocked when major banks withdrew from it last month because of frustration with a lack of co-operation between Victoria and authorities working on a national e-conveyancing project.

If solicitors join the major banks on the sidelines, the Victorian system would be deprived of the two main industry groups that are central players in most conveyancing transactions.

The institute's concerns were triggered by an adverse assessment of the system by the organisation that provides professional indemnity insurance for the state's solicitors.

The institute is also concerned that non-lawyer conveyancers will be using the new system before their new regulatory regime comes into force next year.

The institute says current legislation governing conveyancers does not provide enough insurance cover.

Mr Brett Young says this means solicitors "do not feel confident" about entering into electronic conveyancing transactions with unregulated conveyancers. However, non-lawyer conveyancers say their insurance cover has satisfied the state Government and solicitors are simply trying to dominate the new system.

Although the major banks have withdrawn from the e-conveyancing system, the Government says talks are continuing. Other financial institutions are still involved, including the Australian Securities Exchange, Bendigo Bank and the credit unions.

To justify the investment made by its members in the Victorian project, a national system needs to emerge, the Australian Bankers Association says.

After the big banks withdrew, the Victorian Government made the software underpinning the system available to all other states for assessment.

Queensland's Department of Natural Resources and Water had earlier conducted tests on the Victorian system and, according to Victoria, found that it could be adapted cost-effectively to meet Queensland's needs.

In Victoria, however, the system's launch may be marred if the state's solicitors heed the institute's warning about potential risks in using the new system.

The institute's concerns originated with the Legal Practitioners Liability Committee, a statutory authority that provides professional indemnity insurance for Victoria's solicitors and most national law firms, but they are also linked to the long-standing antipathy between solicitors and non-lawyer conveyancers, who have won government approval to compete for legal work in conveyancing transactions.

In the current issue of the Law Institute Journal, Mr Brett Young writes that the committee "believes there are greater risks for practitioners operating in this system than under the current system".

"Without the committee's endorsement, the institute cannot recommend that its members enter the scheme."

Talks aimed at resolving the committee's concerns are under way, but that organisation's assessment of the new system appears to be at odds with one commissioned by the Victorian Government.

A spokeswoman for Environment Minister Gavin Jennings, whose department is responsible for the system, said there was a low level of risk associated with the new system.

"A risk assessment by a major accounting and consulting firm has been undertaken to determine the level of cover required by participants. This identified that the level of risk was very low," the spokeswoman said.

Mr Brett Young writes in the Law Institute Journal that the 2008 start date for the conveyancers' regulatory system "raises questions about the ability of conveyancers to be involved in the process, particularly in relation to their ongoing insurance requirements".

"The institute believes the current conveyancing legislation does not provide sufficient insurance coverage for solicitors to feel confident entering into e-conveyancing transactions with unregulated conveyancers," he writes.

However, the rules governing the system require all users of the new system to have a set level of insurance cover. A Mallesons Stephen Jaques overview states that the system's users will be required to sign contracts agreeing to comply with the rules.

The Australian Institute of Conveyancers, which represents non-lawyer conveyancers, says the institute's concerns appear to be based on a misapprehension.

Conveyancers institute Victorian chief executive Jill Ludwell says a government working group responsible for e-conveyancing had talked to the group's insurance broker and was satisfied with the insurance cover in policies for its members.

"We showed them our policy, they had a look and said they were satisfied with $1 million in professional indemnity cover and fidelity cover of $50,000," she says. "Electronic Conveyancing Victoria laid down guidelines for indemnity insurance and that is well and truly covered by members of the conveyancers institute. We get on very well with ECV. We have members helping them get the whole thing up and running. We have no problems with ECV and they seem to have no problems with us," she says.

Ms Ludwell says the law institute's warning to solicitors about participating in the system amounts to a threat to conveyancers. "They have it in their minds that electronic conveyancing is going to be legal work."

She rejects Mr Brett Young's assertions that conveyancers have not participated in consultations over the insurance requirement for e-conveyancing. "We have been consulted, and just not in their hearing," Ms Ludwell says.

Mr Brett Young writes in the Law Institute Journal that the law institute supports the system but unless its concerns are addressed, the launch date will be meaningless. He says he would not characterise the committee's view of the new system as an adverse risk assessment.

"They have some concerns over insurance and they want those concerns dealt with," he said. "They are looking to be included in the ongoing review of the system to make sure their concerns are addressed."

One of the committee's main concerns was the possibility that solicitors might be liable under the new system to compensate victims of fraudulent transactions if the fraud had been caused by others, such as conveyancers.

Ms Ludwell says this concern seems baseless because solicitors and conveyancers already work on opposite sides of paper-based conveyancing transactions. "What's the difference?"

Mr Brett Young says the new system posed risks for solicitors that were not present in traditional paper-based conveyancing.

Parties to the new system need to warrant that they have taken reasonable steps to ensure the information provided by another party, such as a conveyancer, is correct, Mr Brett Young says. If the information proves false and the conveyancer has inadequate insurance, there is a risk of liability falling to the solicitor, he says.

Mr Brett Young says he would like to see Victoria's system running as soon as possible. "But it will only work if you get all of the stakeholders on board. These issues can be addressed very quickly and we could then move forward," he says.

Mr Jennings' spokeswoman says the new system will not alter the substance of conveyancing transactions.

The Government has been working with the law institute for more than two and a half years on the e-conveyancing project. Within two weeks, the law institute is due to report on its assessment of the legal framework for the system. The Government will then hold discussions with law institute representatives.

Chris Merritt | October 12, 2007
Business Australian