VICTORIA'S move to control the future structure of electronic conveyancing has suffered a series of setbacks that could undermine its goal of sidelining the industry's non-government players.
Victoria's plan, for a network of state-based electronic conveyancing systems, has been rocked by two independent reports and a revolt by the private sector players in the conveyancing industry.
Lawyers, bankers and other private sector interests confronted senior Victorian government officials on April 18 at a heated meeting in Sydney.
They warned that a network of state-based e-conveyancing systems, modelled on Victoria's ECV system, was unacceptable.
The Law Council of Australia and the Australian Bankers Association have written a joint letter to the federal Government, urging it to have nothing to do with any plan for electronic conveyancing that does not address the concerns of business users.
A Single National System
The major banks fear that unless e-conveyancing is established as a seamless national system, big savings in the cost of property transactions will be at risk.
At last month's meetings of the Council of Australian Governments and the standing committee of attorneys-general, all of the state governments publicly committed themselves to developing a "single national e-conveyancing system".
But Victorian officials told their interstate counterparts this month they had been holding talks with Queensland about adopting a version of Victoria's state-based system.
Despite COAG's decision, one of the most senior Queensland Government officials, Neil Lawson, has since tried to have the word "single" deleted from future references to the proposed structure of the e-conveyancing system.
However problems associated with developing state-based e-conveyancing systems have since been identified by information technology consultant Unisys and national law firm Clayton Utz.
IT review
Unisys conducted a preliminary review of Victoria's ECV system at the request of the NSW Government and found a number of problems.
NSW Lands Department director-general Warwick Watkins told the Victorian Government about the result of the Unisys review on April 3.
"The result of this work is a preliminary view that the system would require significant modification and enhancement to be suitable in NSW," Mr Watkins wrote.
The review was carried out using an ECV "demonstration system". At the insistence of the Victorian Government, private sector users of conveyancing were excluded from the review.
In a letter to the secretary of Victoria's Department of Sustainability and Environment, Mr Watkins wrote that he would have preferred to include industry representatives in the assessment.
The State Guarantee and Liability
Concerns have also emerged about what appears to be a gap in compensation arrangements for those who suffer losses because of problems with state-based e-conveyancing systems.
A legal opinion by Clayton Utz, which has been obtained by The Australian, warns that the Victorian system appears to be relying on the state's Torrens Assurance Fund to compensate people for any losses caused by the system.
It says equivalent funds around the nation had been designed to compensate losses arising from mistakes at the state land registries and, in some cases, mistakes by lawyers or conveyancers.
But it says there is a series of limitations on the coverage of these funds and most losses that may arise solely from the acts or omissions of an "electronic lodgment network operator" are unlikely to be come within the Torrens Assurance Fund system.
It gave the example of losses arising from a delay in settlement or registration of a property transaction that is caused by the operator of the electronic network rather than incorrect entries in the land titles register.
The opinion, by partner Mark Sneddon, says this view is based on Clayton Utz's risk assessment and experience with the Torrens Assurance Fund provisions in NSW and Victoria.
The opinion, marked privileged and confidential, says the national business model that has been approved by private-sector users and all state governments, would enable an independent electronic lodgment network operator "to compensate a wider range of losses".
This would be achieved without requiring state and territory governments to underwrite the legal liabilities of the system operator, the opinion says.
Concern about increased potential liability is the main reason why the Law Institute of Victoria has refused to recommend that solicitors use the ECV system.
The concern arose before ECV was launched last November. It has not been resolved despite talks between the state government and the Legal Practitioners Liability Committee, which provides professional indemnity insurance for the state's solicitors.
The Victorian system is also being boycotted by the major banks. As a result, private sector conveyancing in Victoria remains paper-based despite government expenditure of about $40 million on ECV.
The Clayton Utz opinion was commissioned by the National Electronic Conveyancing Office, an organisation made up of government and business representatives that is responsible for building the national e-conveyancing system.
The opinion was commissioned after Victorian government officials told their interstate counterparts in Melbourne last month that they had advice from Mallesons Stephen Jaques that raised concerns about increased potential liability for state governments associated with the single national system that NECO proposes to build.
That two-day meeting in Melbourne excluded lawyers, bankers and other business users of conveyancing. It took place in the Mallesons offices and was chaired former NSW premier Bob Carr.
The Victorian Government issued a press release after the meeting outlining a proposed new structure for e-conveyancing that it said had been endorsed.
Instead of the single national system that had already been approved, that press release outlined a system in which the states would adopt versions of ECV that would be customised to include differences between the states.
When the Clayton Utz opinion was discussed at the April 18 meeting of NECO's steering committee, Fiona Delahunt of Victoria's Department of Sustainability and Environment sought to have it withdrawn.
The minutes of that meeting, which have been obtained by The Australian, state: "Fiona Delahunt expressed concern at the process by which this advice has been obtained and requested that it be withdrawn.
"She expressed her view that it misrepresented what Mallesons had said and that it should not have been commissioned before Victoria's work was completed," the minutes say.
The minutes also show that Australian Bankers Association director Ian Gilbert asked Ms Delahunt to make available the Mallesons advice that had supported the views that Victorian government officials had expressed to their interstate counterparts.
"Fiona Delahunt said that the advice was a presentation that included a PowerPoint presentation that she agreed she could make available to the committee and that written advice would be sought from Mallesons," they say.
The minutes also show that Victoria is now insisting that the structure for e-conveyancing be changed to accord with that outlined in the Victorian Government's press release after the Melbourne meeting.
"In response to an inquiry from industry members, Fiona Delahunt confirmed that the nine issues outlined in a press release after the March meeting (of state government officials in Melbourne) are Victoria's conditions for the transfer of ECV to the jurisdictions," the minutes say.
IP
The intellectual property underpinning ECV has long been seen as a potential basis for the single national e-conveyancing system that has been endorsed by NECO.
But the minutes suggest that Victoria will not allow other states to use its intellectual property unless they agree to build state-based systems modelled on ECV, instead of a single national system. Ms Delahunt's statement about Victoria's conditions for making ECV available triggered a discussion that the minutes describe as "lively".
The word National has more than one meaning
The minutes also suggest that the government of Queensland, like Victoria, may be having difficulty embracing COAG's decision to establish a "single national" system.
One of the most senior Queensland Government officials, Neil Lawson, asked for the word "single" to be deleted whenever reference is made to building a national electronic conveyancing system.
The request by Mr Lawson, who is executive director of the Queensland department of natural resources, led to an examination of the statements by COAG and the standing committee of attorneys-general endorsing a single national system.
Mr Lawson asked that the minutes record the fact that Queensland does not support the national business model that has been endorsed by other NECO members. But it still supported a "national" model, he said.
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