Members noted the following papers which would be referred to by the President of the Law Society of Hong Kong (the Law Society) in making representation to the Bills Committee -

a submission from the Faculty of Law of the University of Hong Kong (issued under cover of LegCo Paper No. CB(2) 653/96-97);
a submission from the ESSAR Insurance Services Ltd. (issued under cover of LegCo Paper No. CB(2) 1062/96-97);
a submission from Professor Francis LUI of the Hong Kong University of Science and Technology (issued under cover of LegCo Paper No. CB(2) 1073/96-97);
a letter from the Real Estate Developers Association of Hong Kong (issued under cover of LegCo Paper No. CB(2) 1078/96-97); and
a letter dated 22 January 1997 from the Hong Kong Coalition of Service Industries to Attorney Generals Chambers and a submission from the office of Mr Robert CHUNG Ting-yiu (issued under cover of LegCo Paper No. CB(2) 1087/96-97).

Position of the Law Society of Hong Kong

2. At the invitation of the Chairman, Mr Christopher CHAN addressed to the Bills Committee on the position of the Law Society (text of the address is attached).

3. The Chairman then invited questions from members and asked representatives of the Law Society to respond accordingly. The gist of the ensuing discussion is summarized in the following paragraphs.

A revised structure of scale fees to be proposed

4. Ms Emily LAU asked and Mr Christopher CHAN informed the meeting that the Law Society had been discussing with various political parties with a view to revising the structure of scale fees. The proposal of revising the scale fees would be submitted in three weeks time to the Costs Committee. The revised scale fees would also be subject to the approval of the LegCo in the form of subsidiary legislation. Although the revised scale fees had not been finalized, an "across the board" reduction by 50% - 60% of the existing scale in respect of first sales of units in project developments and that by 40% of the existing scale in respect of purchasers costs would be anticipated. In response to Mrs Miriam LAUs enquiry, Mr Christopher CHAN confirmed that the Law Society would only put forward its proposal on the condition that scale fees were to be retained. In this connection, Mr Ambrose LAU remarked that the Bills Committee might not need to consider the proposal if it supported the abolition of scale fees as a matter of principle. The Chairman said that the Bills Committee should consider all the relevant information available before making a decision on the matter. He therefore suggested that the Law Society could consider putting forward its proposal to the Bills Committee for members to consider, if necessary. Yet, it would be up to members to decide whether or not to accept the proposal. Mr CHAN undertook to forward the proposal to the Bills Committee for reference once it had been approved by the Council of the Law Society on 31 January 1997.

Law
Society

(Post-meeting notes : The Law Socity advised that the next Council meeting after the one on 31 January 1997 will be held on 25 February 1997 and any proposal cannot be approved by the Council before that date.)

5. Mrs Selina CHOW took the view that protecting consumers rights and reforming the legal profession were separate issues. To serve the public interest better, a right balance between the interest of the consumers and that of the legal profession should be struck by fine tuning the structure of scale fees, instead of by abolishing scale fees which would mean a fundamental change to the legal profession. She therefore would not support abolition of scale fees. However, the Bills Committee should not participate in the bargaining relating to the level of scale fees which should be a matter to be resolved in a situation free from any political consideration. Mrs CHOW also maintained that any fundamental change to the legal profession warranted careful and in-depth study.

Composition of the Costs Committee

6. Mrs Selina CHOW asked and Mr Christopher CHAN responded that the Law Society did not oppose to add representative(s) of consumers to the Costs Committee so long as there was a fair balance among the interests of the public and the profession. He explained that it was suitable for the Costs Committee to determine the scale fees because it had the expertise and knowledge to do so.

Correlation between abolition of scale fees and quality of service

7. Mr Albert HO was of the view that no correlation could be ascertained between scale fees and quality of legal service in conveyancing. Conveyancing experience in England had also failed to establish such a correlation without doubt. He therefore queried why Hong Kong should retain scale fees in the light that they had been abolished in many other countries. Mr Vincent LIANG responded that conveyancing fees in England had been decreasing since the abolition of scale fees. Abolition of scale fees had led to price competition and decrease in conveyancing fees, the effect of which was shoddy work. Although recession was the catalyst to the problems in conveyancing market in England, Hong Kong might experience the same in the future. He then drew members attention that (a) the compensation amount for negligence per conveyancing transaction was HK$37 in Hong Kong as compared with HK$1,141 in England; (b) the number of claims for every 10,000 conveyancing transactions in England was 12 times more than that in Hong Kong. In this connection, Mr Anthony CHOW referred to the submission from Professor Francis LUI of the Hong Kong University of Science and Technology which stated that fees, costs and quality of service would normally be in positive proportion to each other. If scale fees were retained, law firms would then compete with each other on the provision of professional services. Mr CHOW reminded members that lawyers had to check every legal document for property transaction because Hong Kong did not have a title registration system in place. Defective title might not be detected if lawyers were forced to cut corners due to price war.

8. Dr LAW Cheung-kwok remarked that open competition would be in the long-term interest of the consumers as well as the profession. Although confusion might arise during the process of introducing competitiveness into the market, abolition of scale fees was not necessarily undesirable if the decision was made after due consideration so that public interest was adequately protected. He therefore asked and Mr Christopher CHAN responded that the Law Society might consider abolition of scale fees if a title registration system was properly in place and public interest was adequately protected.

Feasibility of a recommended scale of conveyancing fees

9. Mr Albert HO asked whether a recommended scale of conveyancing fees would be feasible so that abolition of scale fees might not necessarily lead to widespread undercutting. Mr Anthony CHOW informed the meeting that there was a recommended scale of conveyancing fees in England during the first few years after the scale fees were abolished. However, it did not work in practice because law firms would be forced to enter into price war once recession commenced. Mrs Selina CHOW also opined that recommended scale of conveyancing fees would not be followed in view of the fact that some law firms had already allowed negotiations for conveyancing fees in order to compete for business.

Basis of the scale fees

10. Mr Selina CHOW asked whether the Law Society would conduct an overall review of the system of scale fees so that the fees would be calculated according to the cost of each property transaction instead of the property price. Mr Christopher CHAN explained that property price was only one of the factors in determining the scale fees. The Law Society would consider the estimated amount of legal work done for each standard property transaction in making its proposal of revising the scale fees. To a certain extent, scale fees still had to be pegged at the level of property prices in the light that insurance premium was linked to property prices.

II.Date of next meeting and item for discussion

11. Members agreed that the next meeting would be held on Tuesday, 25 February 1997 at 4:30 pm to meet the Administration on abolition of conveyancing scale fees. Clerk

12. The meeting ended at 4:10pm.

LegCo Secretariat
13 February 1997

Last Updated on 27 October 1997

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

held on Tuesday, 28 January 1997 at 2:30 pm in Conference Room A of the Legislative Council Building

I.Meeting with the Law Society of Hong Kong on abolition of scale fees