White Elephant

LAWYERS have an obvious and direct interest in the struggle to develop a national system of electronic conveyancing.

Conveyancing might not be glamorous, but it still provides a solid income base for most of the nation's small law firms.

But the broader community should also be watching this debate. It will reveal a great deal about the type of Government Kevin Rudd is running.

This issue has already revealed a lot about the Government of Victoria - and much of what has come to light is not flattering.

The rest of the nation can learn a great deal from the Victorian experience. It is the perfect example of how not to build an e-conveyancing network.

The state Government has alienated the key players in the conveyancing industry. Instead of giving the business users of conveyancing what they wanted, the Government designed a system that ignored the financial interests of solicitors and the major banks.

It simply overlooked the fact that conveyancing is primarily a commercial transaction. The involvement of government bureaucrats in land titles offices is a second-order issue.

Until there are significant changes to Victoria's system, any solicitor who uses it is extremely courageous.

The Law Institute of Victoria, quite responsibly, refuses to recommend that solicitors use this system because of concerns about increased potential liability. The LIV's concerns, which are backed up with advice from its insurer, have been validated by a separate legal opinion from law firm Clayton Utz.

The banks, also acting responsibly, want a national system so they can cut transaction costs. They informed the Government about this well in advance. They now refuse to use the Victorian system, which is known as ECV, because they have not seen enough progress on a national system.

Instead of addressing those reasonable concerns, the state Government is persisting with efforts to spread versions of this disaster to every state.

They simply don't get it. If they want their system to succeed, they need to stop driving the banks crazy by continuing to push for a network of state-based e-conveyancing systems. State-based systems might suit bureaucrats in state land titles offices, but the primary users of conveyancing - the business users - want a seamless national system. So give it to them.

It would also be sensible if the Government finally got around to addressing the concerns of solicitors. Liability issues concerning ECV first came to light last year.

Until the concerns of the banks and solicitors are addressed, any state that adopts ECV is at risk of importing the same sort of strife that now afflicts Victoria.

When ECV was launched, the Government said it would cut hundreds of dollars from the cost of each conveyancing transaction. It has actually done the reverse.

With the exception of just one transaction, which went through last week, every conveyancing deal that has been processed in Victoria since the launch of ECV last November has been based on paper.

But from a government perspective, who cares? The money is rolling in to state Government coffers. In the run-up to the launch of ECV, the Government increased its fees on paper-based conveyancing, which is the only system generally available.

Again, Victoria ignored the protests from the Master Builders and the Law Institute.

For the taxpayers of Victoria, ECV is a disaster. It has cost them $40 million to develop and has produced next to nothing. It is associated with fee increases, boycotts and increased risks for solicitors.

But the Government is still bleeding money over this white elephant. In an effort to persuade other states to adopt ECV, the Government has recruited Bob Carr to its cause. It has has now paid for two meetings chaired by Carr at the offices in Melbourne and Sydney of Mallesons Stephen Jaques.

Those efforts, however, are beginning to take on an air of desperation.

This is the can of worms that has now been inherited by federal finance minister Lindsay Tanner, who has responsibility for solving this problem.

Tanner knows that the best outcome is a national system - not one that stops at state borders. But to achieve that outcome, he faces some tough decision-making.

Will the commonwealth's approach to electronic conveyancing be skewed by a desire to help the Labor Government of Victoria avoid embarrassment? Or will the Commonwealth swallow hard and tell the Victorians that their system, despite costing $40 million, will not be adopted by other states. If Tanner is truly committed to a national e-conveyancing system, the Victorian state-based system must be sacrificed.

Any government that signs off on a network of state-based ECVs will be seen by history in the same light as the geniuses of colonial times who signed off on inconsistent rail gauges.

Victoria has blown $40 million, and the sooner everyone recognises that fact the sooner the nation will have a truly national e-conveyancing system.

The alternative is to surrender to the forces of parochialism and allow state systems to dominate. That, inevitably, would need to be accompanied by a law forcing banks and solicitors to use a system that has all the attractions of the plague.

Chris Merritt | Prejudice | The Australian | May 23, 2008