Members noted that the Law Society of Hong Kong (the Law Society) had requested to address the Bills Committee on the following three issues in its letter dated 18 February 1997 (a copy of the letter had been issued to members vide LegCo Paper No. CB(2) 1279/96-97) :

the composition of the Costs Committee (clause 17);
the proposal to render void any provision requiring the purchaser to pay the vendors costs (clause 18); and
the entitlement to notary public to enter into partnership with persons who are not notaries (clause 14).

Members agreed to meet the Law Society on these issues on Tuesday, 4 March 1997 at 4:30pm.

Clerk

II.Meeting with the Administration on abolition of scale fees

Abolition of scale fees in England

2. At the invitation of the Chairman, Mr R ALLCOCK outlined the Administrations position on abolition of scale fees as set out in Appendix I. Mr ALLCOCK then proceeded to highlight the main points in the Administrations paper on "Abolition of Scale Fees for Conveyancing in England" as set out in Appendix II. The paper was attached to his letter dated 17 February 1997 to individual members of the Bills Committee. He stressed that impartial parties in England would conclude that abolition of scale fees had not been a disaster and that some of the allegations made about the abolition causing disastrous developments were unsubstantiated and self-serving.

3. With reference to the figures provided by Mr Robert SAYER, former Vice-president of the English Law Society, at the meeting held on 7 January 1997 which showed that the number of negligence claims in English had increased tremendously over the past 15 to 20 years after the abolition of scale fees, Mrs Miriam LAU asked whether the Administration was absolutely satisfied that the increase was not caused by abolition of scale fees. Mr ALLCOCK responded that the Administration relied on the official position in England which included the British Government, the Monopolies and Mergers Commission, the Office of Fair Trading in England and the English Consumers Association who did not accept such a causal link. Mr Ambrose LAU was concerned that the Administration did not seem to be certain that there would not be an increase in negligence claims after abolition of scale fees. Mr ALLCOCK reiterated that the Law Society, as the regulatory body over solicitors, was responsible for the quality of conveyancing services in Hong Kong, and the Administration was not in a position to guarantee the quality of services provided by individual professionals.

4. Miss Margaret NG opined that abolition of scale fees might be appropriate in England because of its overall legislative framework in which competition law existed. She therefore asked and Mr ALLCOCK agreed to provide information on the competition law (i.e. its content and operation) in England.

Admin

Case against scale fees for conveyancing

5. Mr ALLCOCK highlighted the main points in the Administrations paper on "The Case Against Scale Fees for Conveyancing" and responded to some of the points in the submissions to the Bills Committee as set out in Appendix III. The paper was attached to his letter dated 2 January 1997 to individual members of the Bills Committee. He reminded members that the system of scale fees in Hong Kong had a rather shaky foundation since many solicitors already charged below the scale fees. He further informed members that scale fees had been revised generally four times since their introduction in 1970 and all revisions generallyinvolved an increase in percentage. In addition to the rise in property prices over the years, the conveyancing fees had increased tremendously since the 1980s.

6. Mr ALLCOCK particularly drew members attention to the unreasonableness of scale fees for project conveyancing which involved duplication of identical documents. Even if a lower fee was to be charged for project conveyancing, it was still irrational to charge an individual a sum which was calculated by reference to the property price when the actual work involved was not related to that price. The Law Society had indicated in its submission to the Costs Committee last year that it was not feasible to conduct a meaningful and yet simple procedural analysis on project work due to the difficulty to identifying cost-bearers in each activity. In other words, the Law Society had produced no statistical information to support the level of fees proposed for project conveyancing. If there was no well-accepted formula to determine the level of conveyancing fees, it was difficult to see how mandatory scale fees without a rational basis could be justified. In light of the controversies, the Administration queried why the Costs Committee comprising only six persons should be given the task to set fees which the community must pay. Mr ALLCOCK reiterated that the Attorney General had written to the Law Society twice in 1991 and 1992 respectively, seeking a revision of the scale fees. The Law Society had responded with a paper justifying the principle and current level of scale fees. It was obvious that the Law Society, having 50% of the membership of the Costs Committee, could block any reduction in scale fees put forward by the Administration. The Administration also could not accept the justification for relating conveyancing fees solely with property prices, since: (a) the work involved might be less for the higher-priced property than for the lower-priced property; and (b) the contribution to the Professional Indemnity Fund was not dependent on the value of the properties dealt with. The Administration held the view that the quality of legal service depended upon the professional skill and integrity of the solicitors involved, and that solicitors were given the monopoly over conveyancing work because they had that skill and integrity.

7. Miss Margaret NG asked why the Administration did not follow England, Australia and Singapore to conduct an independent research on the possible impact of abolition of scale fees in Hong Kong.
Mr ALLCOCK pointed out that there was no public consultation paper preceding the Governments decision to abolish scale fees in England. He remarked that it was useful to refer not only to overseas jurisdictions where scale fees had been abolished, but also to the Hong Kongs experience before 1980, in respect of which time no evidence had been submitted of any adverse consequence even though mandatory scale fees did not exist. Mr ALLCOCK also stated that it was not feasible to conduct an empirical study on the future impact of abolition of scale fees. However, Miss NG held the view that the Administration should provide empirical data to support its propositions regarding the impact of abolition of scale fees.

8. Mr Ambrose LAU referred to para. 2 of the Administrations paper setting out the Case Against Scale Fees for Conveyancing and queried why scale fees could be related to planned economies. Mr ALLCOCK said that the paper did not suggest that having scale fees was equivalent to having a planned economy. Yet, scale fees were an exception to the way a free market economy operated, with most prices and incomes being determined by market forces.

Scale fees for conveyancing in overseas jurisdictions

9. Mr Wesley WONG drew members attention to the Administrations papers on "Solicitors Conveyancing Fees in Singapore" and "Conveyancing Fees in other Commonwealth Jurisdictions" which were attached to the Deputy Law Officers letter dated 19 February 1997 to individual members of the Bills Committee. Mr WONG reminded members that: (a) the Singaporean government regarded the recommendations of the Singapore Conveyancing Fees Review Committee as nothing more than interim measures prior to the total abolition of scale fees; (b) 87% of the total population in Singapore lived in flats provided for by the Housing and Development Board which would also provide legal services for sale, purchases and mortgage of these flats. The recommendations of the Singapore Conveyancing Fees Review Committee would therefore affect only a relatively small number of the population there; and (c) the prime concern of the Singapore Conveyancing Fees Review Committee was the possibility of over-charging by solicitors after abolition of scale fees, rather than protection against shoddy work.

10. Mr Ambrose LAU queried why the Administration did not follow the Singaporean government in adopting a gradual approach to implement abolition of scale fees, having regard to the fact that the proposal would have tremendous impact on the public interest and Hong Kong had been waiting for 25 years before it decided to follow England in abolishing scale fees. Mr ALLCOCK pointed out that the property market in Hong Kong was so volatile that even if scale fees were adjusted to a more reasonable level they could become out-dated very quickly, due to a sudden increase in property prices. If a gradual approach was adopted, consumers might only benefit for one or two years. Yet, they might soon find themselves in a position of having to pay conveyancing fees which were completely out of line with the actual cost of the conveyancing work.

11. With reference to the experience in Canada, Australia and New Zealand, Mr Wesley WONG informed members that: (a) anti-competition laws existed in these jurisdictions which covered solicitors fees; (b) recommended fees had replaced mandatory scale fees in some of these jurisdictions, and New South Wales and South Australia had actually replaced recommended fees with periodic fee surveys which would be announced to the public; (c) the Law Society of British Columbia and the Law Institute of Victoria were unable to substantiate any correlation between scale fees and quality of legal service and (d) the Law Society of Scotland confirmed that it had taken positive steps in governing advertising and increasing negligent solicitors contributions to the solicitors indemnity fund, and the figures of the Professional Indemnity Insurance showed no increase in claims after abolition of scale fees. He pointed out that although price-cutting was prevalent in New South Wales (and was so even before abolition), the Law Society there still considered the current level of conveyancing fees to be "fair and reasonable". Mr WONG added that rules similar to rule 5 of the Solicitors (General) Costs Rules in Hong Kong were in place in these jurisdictions to provide guidance on the determination of a "fair and reasonable" cost for non-contentious work performed by solicitors. Experience in other Commonwealth jurisdictions had shown that a pro-active legal profession could preserve their professional status by the quality of services they provided, and not by way of fixing scale fees.

12. Mrs Miriam LAU referred to the experience in New South Wales and queried whether it was a healthy phenomenon if price-cutting really happened in Hong Kong after abolition of scale fees. Mr Wesley WONG reiterated that the Law Society in New South Wales admitted that conveyancing fees were maintained at a reasonable level even though there was price-cutting after abolition of scale fees. The Legal Practitioners Ordinance also provided for the Court to order, after inquiry by the taxing officer, an agreement for remuneration for non-contentious business to be cancelled, or the amount payable thereunder reduced, if the agreement was alleged by the client to be unfair and unreasonable.
Miss Margaret NG asked and Mr WONG confirmed that solicitors would not be protected by these provisions if they were forced to charge an unreasonably low fee due to price-cutting. Mrs LAU remarked that it was also important that the conveyancing fees should be kept at a fair and reasonable level not only to the consumers but also to the solicitors. In this connection, Mr James TO asked whether it was indeed impossible to determine a fair and reasonable rate for conveyancing work in light of the existence of litigation taxation scales. Mr WONG explained that the Court could determine a fair and reasonable remuneration because it would do so only, having regard to all the circumstances of the case, after the work had been completed. For litigation fees, the Court was required to apply the principle of rule 5 of the Solicitors (General) Costs Rules to determine the cost for non-contentious work performed by solicitors. Taxing officers who had the expertise, market information and resources in determining the litigation fees would assist the Court. In the case of the Costs Committee, conveyancing fees were determined only by a judgement on how much should be charged for an estimated amount of work. It was also not possible for the Costs Committee to meet regularly with a view to reviewing the scale fees on the basis of market situation.

13. Mr Albert HO remarked that it might not be relevant for Hong Kong to refer to the experience of overseas jurisdictions if most of them had a title registration system. Mr ALLCOCK informed members that a large percentage of land titles in England was still unregistered when scale fees were abolished in 1972. At the suggestion of the Chairman and Miss Margaret NG, Mr ALLCOCK agreed to provide information on land registration system in overseas jurisdictions which had been referred to, and to provide information on the current situation of title registration in England for members consideration. Mr HO then asked when the Land Titles Bill would be introduced into LegCo. Mr ALLCOCK undertook to ascertain the latest position and revert to members after the meeting. However, Mr ALLCOCK stressed that it was the Administrations position that scale fees should be abolished regardless of the enactment of the Land Titles Bill. Although its enactment would affect the amount of work to be carried out by solicitors in respect of conveyancing work, it did not affect the question of whether conveyancing fees should be fixed by reference to the property prices.

Admin

III.Dates of future meetings

14. Members agreed to schedule two more meetings to discuss the Bill as follows:

Wednesday, 12 March 1997 at 8:30am; and
Monday, 24 March 1997 at 4:30pm.

15. The meeting ended at 6:35 pm.

LegCo Secretariat
12 March 1997

Last Updated on 27 October 1997

Minutes of the Eleventh Meeting of the Bills Committees on the Legal Services Legislation (Miscellaneous Amendments) Bill 1996

held on Tuesday, 25 February 1997 at 4:30 pm in Conference Room A of the Legislative Council Building

IInternal discussion

II.Meeting with the Administration on abolition of scale fees

Abolition of scale fees in England

Case against scale fees for conveyancing

Scale fees for conveyancing in overseas jurisdictions

III.Dates of future meetings

Minutes of the Eleventh Meeting of the Bills Committees
on the Legal Services Legislation (Miscellaneous Amendments) Bill 1996

held on Tuesday, 25 February 1997 at 4:30 pm
in Conference Room A of the Legislative Council Building