CONVEYANCING (MISCELLANEOUS AMENDMENTS) BILL

CONVEYANCING (MISCELLANEOUS AMENDMENTS) BILL: Order for Second Reading read.

4.20 pm

The Minister for Law (Mr K Shanmugam): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In previous years, the House has heard about lawyers who absconded with their clients’ conveyancing money. Such defrauding of money set aside to purchase a home often had a devastating effect on the people whose money was taken.

My Ministry, therefore, proposes to put in place, through this Bill, new measures which will provide greater protection for the public, while at the same time, balancing the commercial needs of the conveyancing market.

Sir, first, let me deal with the amendments to the Conveyancing and Law of Property Act.

_Rule-making powers to regulate conveyancing transactions
_

Clause 2(c) of the Bill introduces a new section 73D to empower the Minister to make rules to regulate conveyancing transactions and the receipt, holding and distribution of conveyancing money. In the main, these rules will:

(a) prohibit lawyers from holding conveyancing money except in the manner allowed in the rules;

(b) make a breach of this prohibition a criminal offence;

(c) require lawyers, who wish to receive conveyancing money, to deposit them with appointed entities or otherwise enter into an escrow agreement;

(d) prescribe the requirement of a two-party authorisation system in most circumstances, whereby any instructions for the withdrawal and distribution of conveyancing money deposited with an appointed entity will need to be countersigned by another party; and

(e) confer a limited level of protection from liability for persons who are required by the rules to countersign any document for the purposes of facilitating the payment of any conveyancing money.

New conveyancing accounts

Most of the changes will be detailed in the Rules. It will be useful for me to give a brief overview of the new regime to the House.

At present, conveyancing money may be banked into law firms' client accounts. Withdrawal may be made with two authorised signatures from lawyers in the law firm.

When the new Rules are in place, conveyancing money must be held in special accounts, termed "Conveyancing Accounts". These Conveyancing Accounts will be offered by banks appointed by the Minister. Clients also have the option of engaging the Singapore Academy of Law to hold such conveyancing money.

Where CPF money is involved, lawyers will similarly have to set up a CPF Conveyancing Account so as to prevent co-mingling of funds.

Money to be withdrawn from a Conveyancing Account or from the Singapore Academy of Law (SAL) would, in the majority of cases, require prescribed pay-out forms and two-party authorisation. Generally, the lawyer acting for the other party will serve as a check on the payment details and then counter-sign on the payment instructions. The appointed entities (SAL or the banks) will also seek to ensure that the countersigning party has counter-signed before processing payment.

The Minister for Law (Mr K Shanmugam): Various system enhancements have also been introduced to facilitate the new counter-signing process. The Singapore Land Authority has set up an electronic platform to enable a more efficient counter-signing process. Lawyers will use electronic signatures and instructions for funds will be automatically generated.

The Law Society will be providing a set of guidelines to assist lawyers in performing their role in the new regime. A new adjudication scheme, staffed by members of the profession, has been put in place. This will enable clients to seek a quick resolution should there be any disagreement between the lawyers involved.

Clause 2(c) of the Bill introduces a new section 73E to provide for the establishment of an adjudication scheme to be administered by Law Society, to enable parties to submit their case for adjudication. Adjudication can take place where the counter-signing party declines to facilitate the payment out and distribution of conveyancing money which has been deposited in a conveyancing account. Parties can go to the courts if they feel that the adjudication scheme is not appropriate in any particular case.

Scope of new measures

In order to ensure compliance with these measures, there will be a prohibition against lawyers receiving and holding conveyancing money other than in accordance with the new conveyancing rules. Breach of this prohibition will attract a criminal penalty, which could be a fine of up to $50,000, or imprisonment for up to three months.

Lawyers will also not be permitted to hold money for the general purposes of conveyancing, where the client has not identified the property he wishes to deal with.

The measures do not disallow the current practice of some buyers who make direct payments to sellers. Nor does it affect larger commercial transactions where the present method of holding conveyancing money is to set up escrow accounts jointly held by lawyers acting for both parties.

Consequential amendments to the Conveyancing and Law of Property Act

Clauses 2(a) and 2(b) of the Bill amend the existing sections 64 and 65A of the Act to effect technical changes necessary to update the current conveyancing practice relating to the completion of a conveyance under the new regime.

_Amendment of the Legal Profession Act
_

Consequential amendments have been made to the Legal Profession Act to bring the new conveyancing workflow into the existing rubric of a law practice. The two key amendments are:

(a) First, the current section 25A(1)(h) of the Legal Profession Act provides that if the Attorney-General or the Law Society Council is satisfied that a lawyer has failed to comply with the rules made by Council for the keeping of accounts, the Attorney-General or Council may request the Registrar of the Supreme Court to refuse that lawyer’s application for a practising certificate, or issue such a practising certificate subject to such conditions as Council may specify. Clause 3(a) amends section 25A(1)(h) to bring parity to include non-compliance with the rules made by the Minister pursuant to section 73D of the Conveyancing and Law of Property Act, as an additional ground on which the Attorney-General or the Council can make a similar request to the Registrar;

(b) Secondly, the First Schedule to the Legal Profession Act prescribes the circumstances under which one can intervene in a lawyer's practice, for example, when there is contravention of rules made by Council or when the sole lawyer of the practice has passed away. Clauses 3(d) to (i) seek to enable the Council to exercise its powers where there is a contravention of the rules made by the Minister pursuant to section 73D of the Conveyancing and Law of Property Act or where the practice of the sole lawyer that passed away has a conveyancing account.

Lawyers currently hold conveyancing money for practical and important reasons as stakeholders or as agents for their clients who may be overseas or otherwise unable to attend to legal completion. They perform a valued service within the conveyancing market; these new measures will help enhance public confidence in their role.

Sir, these measures have, as their object, the striking of a good balance between protecting the public, on the one hand, and ensuring, on the other, the efficacy of commercial life.

In formulating these measures, my Ministry has engaged key stakeholders including banks, lawyers, real estate players and the relevant Government agencies. Two public consultations, two pilot trials and multiple dialogue sessions have been conducted over a two-year period.

More than 110 law firms have tested the new system, in the course of nearly 700 conveyancing transactions. Close monitoring and assessment of feedback from our partners have enabled us to make substantial enhancement to the new workflows.

After the Bill is passed, we will continue to work in tandem with all affected parties to ensure a smooth transition for the public. We expect to bring the new system into operation, with phased refinements, starting from 1st August 2011.

Sir, no system can be absolutely secure against a determined person who chooses to flout the law. But we have made it more difficult for a lawyer to try to abscond with conveyancing money.

Sir, I beg to move.

Question proposed.

4:28 pm

Mr Lim Biow Chuan (Marine Parade): Sir, allow me to declare my interest in speaking on this Bill as a practising conveyancing lawyer.

Sir, this Bill seeks to introduce new rules to protect clients' money and to prohibit lawyers from holding conveyancing money in their clients' accounts. I understand that the Bill came about after several cases where dishonest lawyers had absconded with their clients' conveyancing money ranging $32,000 to $6 million to $11 million.

Many lawyers that I have spoken to have expressed great disappointment whenever they read about these cases of cheating or criminal breach of trust by lawyers because these cases affect adversely the reputation of many other honest lawyers.

Sir, the proposed rules make quite drastic changes to the way conveyancing has been practised. As a lawyer who has been practising conveyancing for more than 20 years, I found the changes quite difficult to adapt to. Nevertheless, I welcome these new rules as these measures will assist to protect innocent members of the public from being cheated of their hard-earned money which are intended for either their purchase or for the sale of their properties.

Many lawyers that I know have also expressed support for the new Bill and new regulations. In fact, some lawyers have expressed that they would rather not hold on to any client's conveyancing money as it is additional administrative work for them, with no benefits in holding such money.

Sir, section 73D of the Bill provides for the Minister to make rules. I understand that these rules have been drafted to prohibit lawyers from holding conveyancing money save in certain situations. The draft rules have been circulated to many law firms and two pilot trials have been conducted as the Minister has said. The draft rules have introduced a two-party authorisation for the withdrawal of conveyancing money from special conveyancing bank accounts. Thus, any withdrawal of money from this special conveyancing bank accounts would require the authorisation from two lawyers.

One concern which many lawyers have raised is the duty of the counter-signing lawyer for a Category "C" payee. Sir, this is a category of payees who are not Government agencies like the Stamp Office, CPF Board or discharging mortgagees. The question is whether the counter-signing lawyer is required to verify the identity and correctness of the Category "C" payee. What if the vendor solicitor directs that the entire balance of sale proceeds is to be paid to the housing agent or some third party whom he claims is his relative or a creditor? Is the counter-signing lawyer obliged to make further enquiries even after the vendor issues a statutory declaration to authorise such payments? Or is the vendor obliged to disclose more details when asked by the counter-signing lawyer? What if he deems the information to be confidential? Is the counter-signing lawyer obliged to make further enquiries as to whether there is any illegal moneylending transaction? What if the vendor refuses to disclose that he is indebted to some third-party payee for fear of embarrassment? Sir, I believe it to be useful for lawyers to understand more about their obligations as a counter-signing lawyer.

Sir, the proposed rules also cover the prohibition of the holding of stamp fees for tenancy agreements. Thus, for small value tenancies, for example, tenancies with very low rentals and the stamp duties are also very low, the housing agents or lawyers may not wish to be involved in the holding of such small sums of stamp fees and to e-stamp the tenancies for their clients. Is the Stamp Office prepared to handle increase of cases where the stamping of tenancies is handled directly by landlords or tenants at the Stamp Office?

Next, Sir, where there are disputes between parties and adjudication is required, may I ask who is expected to bear the additional charges and late interest payable during the period of delay whilst the parties seek adjudication? During the initial period where parties' areas of responsibilities are not clearly set out and the law in this area is not distinct or fully developed as yet, would it be fair for one party to be held responsible for the delay because he wished clarity by submitting to adjudication?

Finally, Sir, what is the intent of section 73D(2)(h) of the Act, where there is fraud or criminal breach of trust, the lawyers involved would inevitably be charged under the Penal Code? Would the Public Prosecutor charge lawyers for minor or technical breaches of law due to carelessness or inadvertence and, in some cases, incompetence? I hope the Minister can clarify these concerns so that lawyers have a better sense of the intent of the law.

Sir, with this, I support the Bill.

4.34 pm

Assoc. Prof. Paulin Tay Straughan: Sir, I rise in support of this Bill as it serves to safeguard conveyancing money of buyers and sellers of property. I have only one query for the Minister. This Bill would bar lawyers from holding conveyancing money in their regular clients' accounts. With the proposed new safeguards, who will bear the added administrative costs of setting up conveyancing accounts or engaging the new conveyancing money service of the Singapore Academy of Law?

Mr Shanmugam: Sir, I thank the two Members for their support of the Bill.

I will first respond to Assoc. Prof. Straughan's question about the added administrative costs. She is correct that there are costs associated with the enhanced protection. These new conveyancing accounts are special accounts that require banks and lawyers to do more to protect the public. The enhanced infrastructure will come at a cost, for example, IT systems of the banks have to be enhanced. Appointed banks and the Singapore Academy of Law may charge a fee for their services. This fee will, however, be very small compared to the size of the transaction and the value of the protection. With at least four banks slated to be appointed to provide the service, together with the Singapore Academy of Law, we expect competitive forces to keep the costs in check. Once the system is functioning smoothly, banks may well choose to provide this service as part of a package of services. The parties who wish to use the service are likely to be the ones who, in the first place, have to pay for that service.

I turn now to Mr Lim Biow Chuan's queries – stamp duties issues. Let me first deal quickly with Mr Lim's query about stamp duties for tenancy agreements. Not all forms of stamp duties are governed by the new measures. If the amount of duty in question for licences, leases and tenancies is $5,000 or more, then the stamp duty must be paid through the new accounts. For stamp duties below $5,000, which is the case for the small value tenancies which Mr Lim mentioned, these are at present often dealt with by estate agents or the landlords or tenants themselves, rather than with or through the assistance of lawyers, and that practice of direct payment will continue.

Next, Mr Lim asked a series of questions about the effect of measures on lawyers. The most important of these is the need for an offence under the new section 73D(2)(h). He rightly pointed out where the conduct is serious, there are other offences applicable, such as fraud or breach of trust. He asked if the Attorney-General would charge lawyers for minor or technical breaches of the law due to carelessness or inadvertence. The new offence envisaged under the Rules makes the new conveyancing accounts a mandatory method of holding conveyancing money. As such, it is crucial to the structure of the new framework and ensures its effectiveness. Plainly, as Mr Lim pointed out, there will be different degrees of culpability in the spectrum of misconduct. For the most egregious cases, prosecution under the Penal Code will be available additionally. The Public Prosecutor will take into consideration the facts and the circumstances of each case in deciding whether to charge a person. That a breach occurred through inadvertence or was de minimis, would be relevant to the exercise of that discretion. The Public Prosecutor is also empowered to compound the offence under the new section 73D(5) for minor and technical breaches of the Rules.

Secondly, Mr Lim asked about the role of the lawyer if he had to be named as a counter-signing party under the proposed rules when the payee is a Category "C" payee. Let me give the House a little background. Under the proposed rules, conveyancing money may be withdrawn from a conveyancing account only with the use of the prescribed payout forms which would identify the types of payees. Payees are divided into categories "A", "B" and "C". Category "A" payees are bodies such as the Commissioner for Stamp Duties, Commissioner of Lands, Comptroller of Income Tax. The lawyer acting for the other party need not counter-sign. Category "B" payees include the seller, buyer, mortgagee, other bodies closely associated or connected to the conveyancing transaction. Here, the counter-signing lawyer need only check if the identity of the payee is correct. Category "C" payees are all other payees, other than those in Categories "A" and "B". Such payees are not unusual in many conveyancing transactions, for example, a vendor might at the same time be purchasing another property with the proceeds of sale and require the proceeds to be paid onward. For this category, the counter-signing lawyer must check if the identity of the payee and the amount to be paid are correct. Understandably, lawyers may have some anxiety regarding counter-signing for Category "C" payees.

The role of the counter-signing lawyer when dealing with Category "C" payees is merely to ascertain the veracity of the seller’s instruction. Thus, he need only be sure that the seller wants to pay that particular Category "C" payee in the amount specified in the payout form. He does not need to enquire into the "why" of the seller’s instruction. Unless the counter-signing lawyer has reason to be suspicious of the statutory declaration or any other supporting documents tendered by the seller, he is not required to question the relationship between the seller and the Category "C" payees or the amount to be paid.

The Law Society will be issuing guidelines to assist counter-signing lawyers in performing this role. Lawyers are also advised to attend one of the many training sessions which the Law Society will be organising together with my Ministry from June, in the run-up to implementation on the 1st of August.

Lastly, Mr Lim also asked who, during the initial period where parties' area of responsibilities are not clearly set out, should bear the additional charges and interest payable during the period of any delay whilst parties seek adjudication. He was concerned that it would not be fair for a party who simply sought clarity through adjudication to be held responsible for the delay.

I have explained earlier about the Law Society's guidelines to assist counter-signing lawyers, and training sessions to educate lawyers in general. After several dialogue sessions with practitioners and the two pilot trials I spoke about earlier, involving more than 110 law firms and more than 700 transactions, we have worked through numerous scenarios which will be distilled into guidance, on websites, publications and so forth.

In the event that there are costs occasioned by a delay on the part of one party, the issue of who is responsible will have to be dealt with by the adjudicator, who will have the power to make orders relating to interests and costs. The Law Society is in the process of forming a panel of adjudicators.

Sir, I thank the two Members for their comments. My Ministry will continue to work with the public and key stakeholders to refine and enhance the new conveyancing processes.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr K.Shanmugam].

Bill considered in Committee; reported without amendment; read a Third time and passed.