The Bar Council’s Annual General Meeting is on Saturday, 12th March 2011. As part of the lead up to the AGM, LoyarBurok presents “LoyarBurokking for the Bar” – a random set of articles on the Bar Council, our system of justice, life as a lawyer generally and so on. Most involve practising lawyers taking pot shots at the Bar Council. Hey – they stood for election so they asked for it!
In this article, we see that the Bar Council bans lawyers from accepting fees from developers to pay for the legal fees of homebuyers. But it does not stop lawyers accepting fees from borrowers to pay for the legal fees of banks. Why this disparate treatment for two entities who are both in superior bargaining positions?
The conveyancing committee of the Bar Council has in place numerous restrictions on what lawyers acting in housing development transactions have to do.
One restriction in particular, encapsulated in Bar Council Ruling 14.18(2), says that the housing developer cannot pay the fees to a lawyer who acts for the homebuyer. In other words, the big developer cannot pay fees on behalf of the poor homebuyer.
There is also a certificate one has to get the homebuyer to sign if the homebuyer chooses not to be represented by a lawyer (entrenched in section 84(1) of the Legal Profession Act 1976).
All this for a home purchase agreement the terms of which are fixed by statute for the benefit of homebuyers pursuant to regulation 11 of the Housing Development (Control and Licensing) Regulations 1989 and cannot be changed (since any change is of no effect unless it benefits the homebuyer: see S.E.A. Housing Corporation Sdn Bhd v. Lee Poh Choo  2 MLJ 31, SC and Beca (Malaysia) Sdn Bhd v. Tan Choong Kuang & Anor  1 MLJ 390, SC.
There are no equivalent protections for lawyers acting for other parties who are in a superior bargaining position, and in particular banks.
Their retail loan documentation evades every conceivable defence open to a borrower or guarantor provided by the general law (statute and case law). Most banks reserve to themselves a right to unilaterally vary any term in their loan documentation at their absolute discretion.
Most borrowers have no independent legal advice when taking a loan. The banks will make borrowers pay the fees for the bank’s own lawyers. I am not sure how many borrowers think the lawyers are also their lawyers since the borrower is the one paying the lawyer?
Yet, despite the fact that these very onerous contracts are being imposed by banks, the Bar Council has no ruling prohibiting a lawyer accepting fees from a borrower to pay for a bank’s fees.
We just can’t accept fees from housing developers even though the homebuyer is already protected by an agreement imposed by law for the benefit of the homebuyer.
Then we have the the banks imposing on conveyancing solicitors onerous undertakings which are out of the lawyer’s control (eg to get documents registered and returned to the bank by a certain time).
I believe this indirectly contributes to corruption at land offices.
Banks also require lawyers to advance huge sums of money in stamp duties and so on (for “free legal fees” or “Zero Moving Cost” cases, which is such a misnomer: it’s not “free”, you’re probably paying the Bank a lot more in interest than you would be paying legal fees and stamp duty!), which again the Bar Council has no ruling on.
I believe this directly contributes to financial impropriety on the part of lawyers.
They are forced to pay out stamp duties and so take monies in their clients accounts from other purchasers which are not due to be paid out yet. They are essentially rolling the money in the client’s account. This situation, I believe, is also the reason for discounts — lawyers in this position are forced to get the work just to get the money to ensure the funds they are rolling in their clients account keeps replenished.
There used to be deference to bankers, since they were considered reputable and above the fray of business. They were considered an “institution”, and almost like professionals who could be trusted not to take advantage of their borrowers. Alas, most bankers nowadays are no longer the “gentlemen bankers” of yore (if ever such people existed anywhere other than in fiction and in the reasoning of pro Establishment Judges throughout the world) but are more like businessmen, whose main aim is to maximise profits for the bank no matter what.
Will the Bar Council be willing to stand up to the banks as strongly as they stand up to developers?
For a start, remove the inconsistency in how lawyers dealing with banking and housing development transactions are regulated. Make banks pay for their own lawyers.
Shanmuga K doesn’t know why he keeps writing for LoyarBurok. A purple banana emerges in his consciousness, and articles seem to be magically written. He hopes none of his banker clients are reading this. Follow his rants on Twitter via @shanmuga_k.