LegCo Paper No. CB(2) 1164/96-97
Ref : CB2/BC/47/95

Minutes of the Seventh Meeting of the Bills Committee
on the Legal Services Legislation (Miscellaneous Amendments) Bill 1996

held on Tuesday, 7 January 1997 at 2:30 pm
in Conference Room A of the Legislative Council Building

Members Present :

    Hon Fred LI Wah-ming (Chairman)
    Hon Mrs Selina CHOW, OBE, JP (Deputy Chairman)
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Dr Hon LEONG Che-hung, OBE, JP
    Hon Emily LAU Wai-hing
    Hon James TO Kun-sun
    Hon Howard YOUNG, JP
    Hon Andrew CHENG Kar-foo
    Hon Albert HO Chun-yan
    Hon IP Kwok-him
    Hon Ambrose LAU Hon-chuen, JP
    Hon Bruce LIU Sing-lee
    Hon Margaret NG
    Hon Mrs Elizabeth WONG, CBE, ISO, JP

Members Absent :

    Hon Ronald ARCULLI, OBE, JP
    Dr Hon Philip WONG Yu-hong
    Hon Christine LOH Kung-wai
    Dr Hon LAW Cheung-kwok

Attendance by Invitation :

Mr Robert SAYER
Former Vice-President of the English Law Society

Action Committee
Mr Winston CHU
Convenor
Action Committee
Mr David GLYNN
Convenor
Sub-Committee
Mr Anthony SHIN
Convenor
Sub-Committee
Mr Daniel OR
Convenor
Sub-Committee
Mr Leslie KACZMAREK
Member
Mr Alan AU
Convenor
Sub-Committee
Ms Melissa PANG
Convenor
Sub-Committee
Mr Jeff TSE
Member
Mr Benjamin CHANG
Member

Clerk in Attendance :

Mrs Betty LEUNG
Chief Assistant Secretary (2)3

Staff in Attendance :

Mr Jimmy MA
Legal Adviser
Miss Flora TAI
Senior Assistant Secretary (2)3



I.Meeting with Mr Robert SAYER on the abolition of scale fees for conveyancing in England

(Relevant papers are

    - Reply letter from the Law Society of England to the enquiry of the Secretariat (made at the instruction of the Chairman) on the experience of the United Kingdom on abolition of scale fees in conveyancing (issued vide LegCo Paper No. CB(2) 826/96-97);

    - Submission from the Democratic Party (issued vide LegCo Paper No. CB(2) 838/96-97);

    - Mr Robert SAYER’s paper on "the effect of the abolition of conveyancing scale fees in the United Kingdom" (issued vide LegCo Paper No. CB(2) 845/96-97);

    - Appendix to Mr Robert SAYER’s paper on "the effect of the abolition of conveyancing scale fees in the United Kingdom" (issued vide LegCo Paper No. CB(2) 874/96-97); and

    - Letter from Mr R C ALLCOCK dated 2 January 1997 to individual members with attached papers on the abolition

of scale fees in conveyancing (AGC’s letter).

2. Mr Winston CHU informed the meeting that invitation to Mr Robert SAYER to visit Hong Kong was extended when he was the Vice-President of the Law Society in England. His visit to attend the meeting was on an honorary basis. It was financed by contributions from the Action Committee and was supported by the Law Society of Hong Kong.

3. At the invitation of the Chairman, Mr SAYER briefed members on his paper on "the effect of the abolition of conveyancing scale fees in the United Kingdom". Members noted the typographic error on page 16 of his paper that the number of complaints for 1988 should be 17,771. He stressed that there were figures to show that: (a) the value of negligence claims against the Solicitors Indemnity Fund had increased tremendously during the period from 1984 to 1992; and (b) conveyancing claims accounted for about 52% of all negligence claims by value. He also drew members’ attention to the study conducted by the Law Society in England in comparing the numbers and values of conveyancing negligence claims made against ordinary law firms and those against law firms which offered to charge or had charged low conveyancing prices (appendix to his paper referred). In this regard, members noted that the latter set of figures were considerably higher than the former figures. With reference to the quotation from the Monopolies and Mergers Commission Report in 1970, i.e. "fixed scales of fees were unlikely to be in the public interest" in para. 7 of the paper on "Legal Services in Hong Kong: The Abolition of Scale Fees for Conveyancing in England" (enclosure to the AGC’s letter), Mr SAYER also referred members to the attached extract which gave a full version of the source text, i.e. "Collective restrictions on price competition.....are unlikely to be justified as in the public interest unless exceptional dangers are involved".

4. Mr Howard YOUNG asked and Mr SAYER responded that the estate agents had all along retained 2% commission of the sale price for property for each transaction from the vendor in England whereas the solicitors’ conveyancing fee had been decreased from 2% to 1% of the sale price. Mr YOUNG then remarked that in Hong Kong estate agents had 2% commission and solicitors normally had conveyancing fee of just over 0.5%. Mrs Miriam LAU sought Mr SAYER’s expert opinion as to how the situation in England would differ if it had a complicated title registration system similar to Hong Kong. Mr SAYER opined that a complicated title registration system would not prevent solicitors from price cutting and doing shoddy work. The situation would therefore be probably worse.

5. Mr Albert HO asked why the stance on advocating the re-introduction of scale fees was not apparently supported in England and other commonwealth countries such as Canada and Australia. Mr SAYER said that solicitors from other countries including Canada and Australia had complained about similar problem of price competition to him. Yet, the situation in England might be unique in the sense that it had experienced a change of mortgage system which enabled estate agents to corner the market. In this connection, he referred to the letter dated 30 December 1996 from the Law Society in England (issued vide LegCo Paper No. CB(2) 826/96-97) which implied that there had been a tendency for competition for lowered price which then led to a decline in the quality of service provided after the abolition of scale fees. However, Ms Emily LAU pointed out that the letter only stated that it would have been wise to have underpinned quality of service through establishing minimum standards for the conduct of conveyancing work. Ms LAU then asked and Mr SAYER informed members that his view represented largely the High Street firms which concentrated mainly in conveyancing work in England. He further explained that the Law Society of England did not advocate the re-introduction of scale fees because it was dominated by large law firms which could afford to earn low profit margin per transaction due to large volume of conveyancing business.

6. Mr Albert HO then queried Mr SAYER’s proposition that there was a casual link between price cut in conveyancing fees and negligence, since such a casual link, as indicated by the Law Society of England, had yet to be established on the basis of factual evidence. He suggested that there might be other possible solutions (such as reforming the insurance scheme) to safeguard the consumers from negligent act of solicitors. Mr SAYER pointed out that reforming the insurance scheme would only be a remedial measure in the light that problem might only be detected years after a defective transaction took place. Mr HO then asked whether such a casual link applied to other areas of legal services (such as litigation or probate) too. Mr SAYER replied that most litigation fees were based on hours of work and the court’s level and all courts in United Kingdom had their acceptable scale of costs. In this regard, Mr HO remarked that the litigation scales were not statutory and lower fees were allowed by way of agreement in Hong Kong.

7. Ms Emily LAU sought Mr SAYER’s comment on the letter dated 12 December 1996 from the Office of the Fair Trading in England (issued vide LegCo Paper No. CB(2)868/96-97) which stated that: (a) no evidence was found by the Solicitors’ Indemnity Fund to support a link between low price and negligent conveyancing work; and (b) "cut-price" conveyancing was still relatively rare and those firms which got a significant share of their income from conveyancing regarded it even now as ‘fairly profitable". Mr SAYER remarked that if a link between low price and negligent conveyancing was admitted, there might be pressure to break up the Solicitors’ Indemnity Fund.

8. The Chairman remarked that the Law Society, as a professional body, had the duty to ensure quality of service by way of its disciplinary powers and setting rules of professional conduct. He quoted North Ireland as an example where scale fees were abolished and a Home Charter Scheme was in place which set out detailed guidelines of legal service in conveyancing. Mr SAYER responded that the Law Society in England had done its job in ensuring professional standard. Its Guide to Professional Conduct of solicitors had increased in volume from 100 pages to over 600 pages. A Code of Conduct for lenders had also been drawn up. However, he remarked that such rules of professional conduct could not preclude shoddy work if solicitors were desperate for business. He also reminded members that the Home Charter Scheme had a recommended fee too which every member had to follow. In this connection, Ms Margaret NG asked and representative of the Action Committee agreed to provide information on the Code of Conduct for lenders in England and the Home Charter Scheme in North Ireland for members’ reference.

Action
Committee

9. The Administration had argued that there was no basis for assuming that serious difficulties faced by solicitors in England at the time of recession would have been different even if scale fees were still in place. Mrs Elizabeth WONG asked Mr SAYER whether the argument had any basis. Mr SAYER said that recession was clearly one of the factors highlighting the problem of negligent conveyancing. Mr Andrew CHENG remarked that giving an independent legal advice should be a lawyer’s duty regardless of the fees charged. He asked whether the problem of price cutting for business in England was related also to the existence of licensed conveyancers and a large number of solicitors, in addition to the recession. Mr SAYER responded that there were only about 300 licensed conveyancers (most of them worked for law firms) who charged similar fees as solicitors. They therefore would not have any real effect on conveyancing prices. Independence of the legal profession would be undermined because estate agents were able to control the flow of business through their referral of clients.

10. Ms Margaret NG asked whether conveyancing fees had actually risen in England after the abolition of scale fees as suggested in para. 15 of the AGC’s paper. Mr SAYER said that the conveyancing fees had gradually gone down according to his own experience and then went down drastically from 1979 onwards. Ms NG then queried why commercialization of the legal profession was undesirable. Mr SAYER remarked that commercialization would mean that solicitors could not help those who could not afford a solicitor by either doing work free of charge or charging a nominal fee. It would have adverse impact on the legal system and the justice of the society.

11. Mrs Selina CHOW asked and Mr SAYER responded that the Monitoring Unit of the Law Society in England would inspect small law firms to assess their financial viability. 46% of about 13,000 small law firms inspected in 1996 were classified as financially unstable. Mr SAYER supplemented that the Monitoring Unit would publish a report on its inspection annually. In this regard, Mrs CHOW suggested the Action Committee to provide a copy of the report for members’ information if available.

Action
Committee

II.Dates of future meetings

12. The Chairman reminded members that the next meeting would be held on Thursday, 9 January 1997 at 8:30 am to meet Mr Winston CHU and Mr Thomas TSE Lin-chung on abolition of scale fees in conveyancing. Members further agreed to schedule another meeting on Wednesday, 22 January 1997 to meet the Administration on provisions of the Bill relating to the same topic.

13. The meeting ended at 6:40 pm.

LegCo Secretariat
16 January 1997

Last Updated on 27 October 1997