§ 5.9 p.m.
§ House again in Committee on Clause 37.
§ Lord Mishcon moved Amendment No. 178ZAA:
Page 30, line 4, at end insert —
("( ) requiring authorised practitioners to have one named person, who shall be either a solicitor who has in force a practising certificate or a licensed conveyancer, who shall be directly responsible for ensuring that conveyancing services are carried out according to any rules or regulations made under this Part;").
§ The noble Lord said: Before this important Statement was taken, your Lordships heard with some interest of the protection the public would need when going to someone who was not a solicitor, be he a licensed conveyancer or an authorised practitioner, when certain aspects which are treated usually with conveyancing might be relevant for the client concerned. In answering the concerns expressed, the noble and learned Lord the Lord Chancellor dealt with the power that he has under this clause to make regulations. I think that the inference which the Committee properly took from him was that he was well aware of the need for this public protection and that the regulations, after consultation, would be made as befits the duties that he thought were cast upon him.
§ Of course one of the safeguards as regards an "authorised practitioner" was contained in the Green Paper entitled Conveyancing by Authorised Practitioners. It provided that each authorised practitioner must have one named person who is responsible for ensuring that conveyancing services are carried out according to the code. Therefore, that is a most important provision and it is a safeguard in regard to the matters about which we were talking in relation to authorised practitioners but it is not written into the Bill.
§ In regard to previous amendments the noble and learned Lord referred to the power under Clause 37 to make regulations. I should tell the Committee, with respect, that I have looked carefully at the provisions contained in that clause and I am not sure as a person —although that would not be important but I am told that the Law Society is also not sure and that is much more important —that there is clear power under the clause to make a regulation covering this requirement. Therefore, I ask out of an abundance of caution, if the Committee so feels, that this provision should be included in the Bill so that if the regulation-making power is not contained in Clause 37 this important matter is not left to drift. I beg to move.445
§ Lord Stanley of Alderley
I rise briefly to express my support for this amendment. I share the doubts voiced earlier by my noble friend Lord Rippon about the efficacy of these provisions and their usefulness to those members of the public whom they are supposed to benefit. In the event, I think that members of the public would be less well protected than they were in the past. I believe that this amendment would go some of the way towards focusing responsibility for the advice given on those concerned.
I am much concerned that without such provision there is more than a danger that banks and building societies will lack the modesty to say that a particular case is beyond their knowledge and that it ought to be dealt with by a solicitor. For the reasons given by the noble Lord, I very much hope that my noble and learned friend will at least look again at the matter and will perhaps accept the amendment.
§ Lord Campbell of Alloway
I too support the amendment. It raises in the proposed regulations the other important principle. We have already dealt with the principle of fair competition but this is the principle of adequate protection of the public. These twin principles must be reflected, as I think my noble and learned friend accepts, in the regulations. I ask with the greatest respect, would not the amendment fall within the ambit of Clause 37(1)(a)? The noble Lord, Lord Mishcon, suggested that perhaps this could be, so to speak, the ultra vires power of the clause. I merely suggest, with respect, that it could fall within the scope of that paragraph.
§ The Lord Chancellor
As I said, the structure of the clause is that paragraphs (a) and (b) of subsection (1)) indicate the objectives which are to be secured. I think that it is implicit in the form in which the noble Lord, Lord Mishcon, has moved the amendment that he believes that this particular power would be within the scope of those objectives. However, what is in question is whether there are sufficient powers under subsection (2) to achieve that result.
As my noble and learned friend Lord Simon of Glaisdale said, strictly speaking the powers do not need to be spelt out in much detail, although I believe that it is helpful to do so. Moreover, so far as concerns this particular matter, I intended that it should be covered by the regulation-making power contained in subsection (2)(b), which reads:as to the supervision, by persons with such qualifications as may be prescribed, of such descriptions of work as may be prescribed".In other words, I have the power to say what the qualifications are that the people must possess in relation to each particular part of the work. I believe that by this method it is possible to make regulations covering all the matters referred to in the noble Lord's amendment. Indeed, it will do so with greater particularity than the terms of his amendment would permit, because I could make different descriptions in relation to different classes of work. It may well be that in practice more than one class of work may be in question.
I hope in the light of that explanation that the noble Lord will feel able to withdraw the 446 amendment. I should say that I certainly have in mind the desire to make regulations along the lines he described. Moreover, I have endeavoured to secure that the powers which are laid down will clearly cover that situation. Of course that is in accordance with advice that I have so far received.
§ Lord Mishcon
If the noble and learned Lord has said that he has sought advice on the matter, that he has the power, in his view, to make regulations covering the specific matters mentioned in the amendment and that he agrees with the spirit of what is proposed, it would be quite wrong for me to press the matter to a vote. I have accepted from what he said —and, I hope, properly so —that we have an assurance from him that the provisions of this amendment are very much in his mind. I understand that he feels that he has the power under Clause 37 to make a regulation covering the matters contained in the amendment. In those circumstances, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Lord Prys-Davies moved Amendment No. 178ZAB:
Page 30, line 5, leave out ("persons with such qualifications as may be prescribed") and insert ("solicitors having in force practising certificates, or licensed conveyancers,").
The noble Lord said: I listened carefully to what the noble and learned Lord said in replying to the previous amendment. On re-reading subsection (2)(b), it seems to me that it may be unsatisfactory on two grounds. However, our amendment only addresses one of the potential defects. If I read the paragraph correctly, it would seem that it may not be necessary for the entire conveyancing transaction to be supervised. The paragraph says that only,
such descriptions of work as may be prescribed",
will be subject to supervision. However, we all know that a conveyancing transaction consists of four main parts; that is, the contract stage, the title stage, the drawing up of the transfer deed and the completion stage. Perhaps the noble and learned Lord can tell the Committee whether it is intended that the work undertaken in respect of one of those stages may not be subject to supervision, or is it intended that every part of the transaction will be supervised, but by different supervisors, each with a different qualification?
§ Our amendment requires that all stages of the transaction should be supervised by a solicitor or a licensed conveyancer. Obviously the authority, if we need an authority, for that principle is to be found in paragraph 2 of the proposed code of conduct to which my noble friend has referred. It is also to be found in the Notes on Clauses. We are told there that the Government believe that the present state of the law relating to conveyancing is such that a legal qualification such as being a solicitor or a licensed conveyancer is necessary for proper supervision.
§ Therefore from these Benches we should be grateful if the noble and learned Lord could respond to the amendment and confirm whether or not it is envisaged that every stage of the conveyancing transaction will be supervised. Would he also 447 confirm whether or not it will be supervised by the same individual? I beg to move.
§ The Lord Chancellor
As concerns the individual, subsection (2)(c) endeavours to give sufficient detail of what I have in mind for this purpose,requiring authorised practitioners to arrange, so far as is reasonably practicable"—which is quite a strong form of obligation—for each transaction to be under the overall control of the same individual".That is intended to secure the individual's control, that the responsibility should be on an individual.
As I said in answer to one of my noble friends who asked me about this earlier, I believe that it is important in a body such as a building society or bank for a client to be able to go to a particular individual on the understanding that that individual carries the responsibility for that transaction. There is a need for practical considerations to be taken into account: the individual might be ill, on holiday or something similar and reasonable arrangements would require to be made. However, that is the idea and it is important, and that is the purpose of subsection (2)(c).
In subsection (2)(b) the idea is that I should be able to specify qualifications. The qualifications that I have in mind are the same, except that a barrister can do conveyancing at the moment. Perhaps the best known of these are the conveyancing counsel attached to the Chancery Division —recondite conveyancing indeed. The qualifications will be prescribed and those concerned would be solicitors, licensed conveyancers or barristers.
The phrase,of such descriptions of work as may be described",was put that way in order to make it possible to differentiate, if necessary —I do not know that it will be —between different types of work and to specify possibly in some detail precisely what work requires to be supervised. I have in mind that the conveyancing transaction as a whole should be under the supervision of a particular individual.
The point is that the qualifications of the individual might possibly vary between one type of transaction and another. As I stand here, I do not envisage that but if we are making powers that are intended to last, it may well be that, as matters develop, different types of work might merit different qualifications. For example, a conveyance might involve advice in relation to surrounding circumstances. The work there might appropriately be done by one class of practitioner —for example, a solicitor—but it might not be appropriate for a licensed conveyancer. Therefore it may be important to have the power to differentiate between different parts of the work or different types of work in regard to the qualification required to perform the work. My present intention is on the lines that have been described by the noble Lord, Lord Prys-Davies, in moving the amendment.
§ Lord Coleraine
When we are talking about supervision under Clause 37(2)(b) it does not seem 448 to me that it touches the question of who is giving the advice, whether it is the licensed conveyancer or the solicitor. That seems to be a different question. Regarding supervision, it seems to me that within the terms of the paragraph that supervision could be provided on the hot line somewhere. I rather feel that the two paragraphs which we are examining, subsection (2), paragraphs (b) and (c), suggest that a situation might be tolerable where a person with suitable qualifications was supervising the work of an organisation in, say, Halifax. However, at the various places on the ground where the client or customer wishes to be helped and where the work will be carried out, there may be nobody with such qualifications as we are seeking. If that is the intention behind this, I find it surprising and unacceptable.
§ The Lord Chancellor
That is certainly not the intention behind this. Clause 37(2)(c) requires that the transaction should be,under the overall control of the same individual".That is designed to link an individual to a transaction for the reasons that I specified. Subsection (2)(b) is intended to deal with the qualifications that such a person must have in order to supervise a transaction. The description of these qualifications has to be prescribed. Therefore, for example, my intentions as matters stand are that I require that there should be the same solicitor, licensed conveyancer or barrister in overall control of every ordinary conveyancing transaction. The only reason for having power to make different qualifications in respect of different descriptions of work is the one I have suggested.
§ Lord Prys-Davies
We shall obviously have to read the reply of the noble and learned Lord carefully. However, it seems to me that there is a clear difference between paragraphs (b) and (c). In the latter paragraph the Bill requires the transaction to be,under the overall control of the same individual".It does not define the qualifications required for that individual to exercise control, whereas Clause 37(2)(b) refers to "supervision". I should have thought that that was different. The person who exercises supervision needs to be qualified. But there is no assurance in paragraph (b) that the entirety of the conveyancing transaction will have to be under the supervision of a person with qualifications.
Looking to the future, one envisages a big organisation taking on board conveyancing transactions and the whole floor of a building could be a conveyancing factory, we go from stages 1 to 2, to 3 to 4 and I am not sure that throughout it must be under the supervision of a person who is legally qualified, although nominally the whole transaction is under the control of an individual, as required by paragraph (c).
I have listened carefully to what the noble and learned Lord has said. We shall have to consider whether this is a matter which we need to return to at another stage. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.449
§ 5.30 p.m.
§ Lord Tordoff moved Amendment No. 178ZAC:
§ Page 30, line 10, leave out ("same") and insert ("one").
§ The noble Lord said: I am conscious of the fact that I am a lesser man than the noble Lord, Lord Evans of Claughton, and I am also conscious at the moment that I am not a lawyer. I hope the Committee will forgive me if I stumble through this amendment. The noble Lord, Lord Evans, has asked me to offer his apologies to the Committee, but even Liverpool solicitors have to go and earn their money occasionally. He is about his lawful business in that great city. I call Liverpool a great city but as a Mancunian that rather sticks in my mouth.
§ In moving Amendment No. 178ZAC I thought it would make sense to speak also to Amendment No. 178ZB. They are not directly linked but I believe they can be dealt with together if the Committee will permit me to do so. I intend to speak mainly to Amendment No. 178ZB, the effect of which would simply be that the client would be told the identity of the person who is in overall control of his transaction. The amendment also seeks to permit the client to have reasonable access to that person at reasonable times. I understand that this provision has the support of the Law Society.
§ I believe that in a sense the noble and learned Lord the Lord Chancellor assisted me in this matter when he said that it was his intention that clients should be able to deal with one individual. I believe those were the words he used in relation to the previous amendment. People are afraid that they may only be able to see the person who is in the front office and they may find it difficult always to see the person in control of their case unless there is some provision to make the regulations state that they shall be able to get in touch with the person in overall control of their case. That is the simple concept behind these two amendments. I beg to move.
§ Lord Airedale
I wish to support the amendment. It seems to necessitate that in a large firm one person must supervise all the transactions for one individual. However, that may mean too great a work load for one person. In a large firm there may well be several partners with equal supervising skills who could divide up the work between them. One partner could supervise certain transactions while another partner could supervise others. If the amendment is accepted, all the transactions will be supervised by one individual, but in a large firm that person does not necessarily have to be the same individual as such a step may involve too much work for him. Therefore, I believe the amendment is an improvement on what is stated in the Bill.
§ The Lord Chancellor
The purpose of these two amendments and what we have in mind is very much the same. I have in mind that a particular individual who is qualified in accordance with the qualificaton regulations should have the overall control of a particular transaction. I envisage that the same person should carry out all the affairs relating to that transaction. In other words, when a client enters a firm's offices and gives his instructions to a Mr. X 450 he should see the same Mr. X later on if a problem arises as regards for example, completion of a transaction or some physical matters affecting a property. It is important that the client knows who is dealing with his transaction and has access to that person. That is necessary in the organisations that we are discussing. We have tried to set out in the White Paper what we have in mind. Paragraphs (b) and (c) are intended to produce that result.
As regards Amendment No. 178ZB, the power to make these arrangements is sufficiently contained in the clause as it stands. As I said in the White Paper, it is intended that a qualified person should offer to see the client at the beginning of a transaction and then explain all the circumstances in plain language.
The advice that I have received suggests that the arrangements that I have set out can be achieved under this clause. I appreciate the point about a client seeing the same individual and I shall consider that to see whether the wording can be improved, but the intention is that the client should see the same individual throughout the entire course of the transaction.
§ Lord Airedale
I am much obliged to the noble and learned Lord the Lord Chancellor for his comments. I understood the words "each transaction" to apply to every transaction. I believe others may read it in that way. If the clause can be considered and made easier to understand that should be a great help.
§ Lord Tordoff
I am most grateful to the noble and learned Lord. His advice is bound to be far better than mine on these matters. Nevertheless, I hope that he will reconsider this matter and consider the words "overall control" because they could be considered in certain circumstances to apply to someone who is remote from what I have described as the front office. I hope that when the wording of the regulations is drafted that point will be taken into consideration.
§ The Lord Chancellor
Before the noble Lord sits down I should make it clear that I have in mind that the person to whom the client will have access is the person who is in overall control of his case and that the client is not put off in the front office as it were. The person he sees should be the qualifed person who is in charge of the transaction. The words "overall control" are intended to signify that. Obviously typists, secretaries and other people will help in carrying out the transaction but the client should be able to see the qualified person who is responsible for his case and who is giving directions in it. I shall certainly look at the provision again in the light of what has been said, but that is the purpose that I was trying to serve.
§ Lord Tordoff
I am most grateful to the noble and learned Lord. We all accept that that is his purpose. However, I am still slightly worried that large organisations may need that purpose spelling out to them. No doubt the words that the noble and learned Lord has uttered today will spell it out for them. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 178ZB not moved]451
§ Lord Mishcon moved Amendment No. 178ZBA:
Page 30, line 10, after ("individual") insert ("who shall be either a solicitor who has in force a practising certificate or a licensed conveyancer").
The noble Lord said: I believe that I heard the noble and learned Lord correctly, and if I did not he will of course chastise me in his usual gentle and courteous way. I understood him to say that under Clause 37(2)(c) he sought to ensure that the qualified person who had overall control of the matter would be the person that the client would see. I caught the words "the qualified person". However, there is no mention in Clause 37(2)(c) of the person in control having to be a qualified person. For that reason my amendment states that the person:
shall be either a solicitor who has in force a practising certificate or a licensed conveyancer".
I heard, and the Committee will have heard, the noble and learned Lord very correctly mention a member of the conveyancing Bar. I certainly would have no objection to the words "solicitor with a practising certificate, a member of the conveyancing Bar or a licensed conveyancer" being inserted in the Bill. If I heard the noble and learned Lord correctly, that was his intention. May we have that stated clearly in the Bill? I beg to move.
§ The Lord Chancellor
I regard Clause 37(2)(b) as dealing with qualifications. Clause 37(2)(c) is intended to deal with the continuity of control. I intend to provide that the properly qualified person should be continuously in control of a transaction and that it should not pass from one qualified person to another.
The purpose of subsecton (2)(b) is to set out the qualifications. There could be 10 solicitors in an office, all fully qualified with up-to-date practising certificates and having paid their dues to the Law Society. However, I believe that the firm would not be providing a good service to the client if on his first visit he saw solicitor A, when he came for the second time he saw solicitor B, and so on. The fact that the person he sees must be a solicitor, licensed conveyancer or member of the conveyancing Bar is dealt with by paragraph (b). Paragraph (c) sets out the intention that the client should not see A, B, and C but he should see A all the time unless there is a very good reason why he cannot see him on a particular occasion, in which case there might be an arrangement for substitution. That is the point that I have tried to cover. I believe that it is a very important point in relation to the type of business in question.
I should like to retain that emphasis. To repeat the qualifications in paragraph (c) reduces its effect and is confusing. I believe that continuity is important. It should be the same individual who responds to the client. In an ordinary solicitors' or licensed conveyancers' firm in private practice one would hope and expect that that would normally happen. In a large practice it might not be easy. However, I should particularly like to see that emphasis in relation to corporate business. I have tried to set that out in the White Paper. I hope that the noble Lord will feel that to focus only on the identity of the individual is effective. That is what 452 is intended by paragraph (c). I should like to retain that emphasis.
§ Lord Mishcon
I should not dream of wasting the time of the Committee. Having regard to the clear statement of the noble and learned Lord that the qualifications under paragraph (b) will be clearly laid down in regulations, that they will be those of a solicitor, licensed conveyancer or member of the conveyancing Bar, and that those qualifications are also intended to apply to paragraph (c), I shall ask leave to withdraw the amendment. I am grateful to the noble and learned Lord for that clarification.
§ Lord Coleraine
Before the noble Lord withdraws the amendment, perhaps I may say that I am still worried about the drafting. My noble and learned friend has made his intention clear. That is why I raised the question earlier this afternoon. However, some Members of the Committee will regard paragraph (b) as relating to supervision and paragraph (c) as relating to what happens on the ground. I and other Members of the Committee will look very carefully at the drafting, and I hope that my noble and learned friend will also consider those points.
§ Lord Mishcon
I am most grateful for the observations of the noble Lord, Lord Coleraine, which, as always, are intended to be helpful. I now beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 5.45 p.m.
Lord Tordoff moved Amendment No. 178ZC:
Page 30, line 11, at end insert ("or potential conflicts of interest and for the purpose of this paragraph acting for two or more parties in one transaction shall constitute a conflict of interest").
§ The noble Lord said: The masquerade continues. I seek to insert in line 11 words the effect of which would be to enable regulations to be made preventing authorised practitioners from acting for two or more parties in one transaction. In addition to banning acting for vendor and purchaser, that could extend to acting for lender and borrower.
§ I am advised that the amendment embodies the policy that the Government adopted in 1985 —namely, that lending institutions should not be permitted to act for those borrowing money from them. The Law Society supported that policy. However, in the Green Paper the Government indicated that they had changed their mind on the issue. The Government claim that banning the conveyancer employed by the lending institution from giving financial advice to the client will eliminate the conflict of interest. However, it will do so only at the expense of the client, who will no longer be able to ask for independent financial advice. I beg to move.
§ Lord Boardman
It may be for the convenience of the Committee if I speak to Amendment No. 178AZC, which stands in my name. The issue is rather wider and, I suggest, more important than some of the discussions on drafting which we have 453 had earlier this afternoon, important though those were. It touches the heart of conflicts of interest.
I was delighted to hear from my noble and learned friend the Lord Chancellor that before producing the regulations he will initiate wide consultation and that regulations will be introduced under the affirmative resolution procedure. I shall not attempt to comment on drafting, particularly that of my own amendment, which I confess is somewhat amateurish. The principle at issue is that of conflict of interest.
I am particularly grateful to see my noble and learned friend Lord Hailsham in his seat, because I know that the matter is one in which he took a very active interest in 1985 and 1986 during the passage of the Building Societies Bill.
The purpose of the amendment is to create a presumption of a conflict of interest where an authorised practitioner acts for more than one party in a transaction unless the interests of each party are the same. The words:unless the interests of each party are the same",are intended to cover cases in which the practitioner is doing work for more than one party, each of whom has the same interest in the work being done and the result of the work. For example, it is intended to cover the case where a solicitor or licensed conveyancer is acting for the purchaser (mortgagor) and also for the mortgagee. I understand that that is usual practice in the case of building society mortgagees. The work for which the solicitor or licensed conveyancer is paid is to ensure that each of the parties has a good title to the property being purchased or mortgaged. I do not believe that a conflict of interest arises in such cases. It has always been accepted that that is so. It was certainly accepted when the Building Societies Act was debated in 1985 and 1986.
The position is very different if the authorised practitioner is also acting in other capacities for one of the parties. If that practitioner is a bank or building society, possibly with an estate agency subsidiary, and also a tied insurance agent, quite different considerations arise. First, the building society or bank acting as an authorised practitioner cannot give independent financial advice. Quite apart from what may be in the Bill, under the Financial Services Act it would be unable to do so because all of the major banks, with one distinguished exception, and almost all the building societies are tied agents and free only to offer their in-house product to their customer or client. No choice can be offered and no advice can be given. The independent solicitor is in a quite different position. He is not so constrained. He can advise on alternatives that are available. I understand that the rules of the Law Society prevent solicitors from being tied agents; they must be independent intermediaries.
Secondly, under the Bill an authorised practitioner could have a special interest in securing for the group of which he is a member fees that flow from services outside the conveyancing—estate agency fees, survey fees, commission on endowment policies or other insurance policies. In addition, there may be 454 the benefit of securing and investment of funds, a benefit for which institutions are often prepared to pay a commission to those who introduce the business. There are a number of benefits totally outside the conveyancing operation which would flow to the institution acting with an authorised practitioner.
There is a further point of considerable importance. At present there is no statutory requirement, and there is nothing in the Bill, requiring that any of those fees, insurance commissions, survey fees and the like must be disclosed to the client or customer, nor do they have to be accounted for. By that I mean that they must be paid over to the client.
In the case of the independent solicitor or licensed conveyancer the position is completely different. Any fees have to be disclosed and credited to the client. I believe that there is a quite different position in each of the two situations that I have outlined. The authorised practitioner, with his varied interests in the transaction, must be subject to tremendous conflicts of interest. Indeed, as I understand and recall it, that was the problem in the Building Societies Act 1986.
At that time a very real concern was the conflict of interest that could arise on the lines that I have mentioned in the present case. I suggest that those conflicts were the reason why the powers included in the Building Societies Act were not implemented. I have recently reread some of the debates that took place in this House and another place at that time in which the doubts that I have expressed were very clearly stated in the context of the Building Societies Act. Therefore I ask why the Government have changed their views.
Since 1986 the trend has rightly been strongly toward consumer protection. In fact legislation has been tightened up against conflicts of interest in a way that did not exist before. The Financial Services Act is an attempt at that, though perhaps it is not one of which we should be very proud. I see no justification today for relaxing the safeguards which at present exist against such conflicts. If it was unwise to do that in 1986, I ask why it should be wise to do so now when a far wider range of services is on offer.
I see the attraction of the one-stop shop but, as has been said many times, property represents the single biggest transaction that most people will ever enter into. Surely they should be quite clearly and independently advised on it. During the Second Reading debate I gave an example of how even today the innocent purchaser can be exploited. Under the Bill as it stands I believe that the position could be considerably worse.
I also fear that a consequence that is likely to flow from the Bill in its present form is that a few large chains of financial services firms, estate agents, insurance agents and authorised practitioners will be created, backed by massive television and press advertising to promote the one-stop conveyancing shop to which people are urged to go. The effect on the high street solicitor could be disastrous.
It will not be only those who require conveyancing who will suffer. Small and medium sized businesses 455 will also be affected. The CBI has expressed its grave concern about that possible danger. The people who will suffer are the deserted wives who want the high street solicitor to help them deal with their very severe problems, those people who want to make a will or those who need someone to defend them in the local court. Those and other such matters that come across the desk of the high street solicitor are cases in point. The high street solicitors are needed and they may not be there.
I feel that it must have been such considerations that persuaded the Government not to implement the powers in the Building Societies Act 1986. I believe that that was a wise precaution. I also like to believe that my noble and learned friend Lord Hailsham played a major part in the wisdom of that decision, but I know not.
However, as a solicitor who has not practised for upwards of 25 years and as a more recent banker, I do not put forward these views or support this amendment on behalf of either of those competing interests. I support the amendment on behalf of one section whose views have not been heard very much in this Committee in the past few days. I speak on behalf of the customer who I believe will suffer if these proposals go forward unamended. I support the philosophy that underlies this amendment.
§ Lord Templeman
There is a great problem here and I am not sure how the Bill will resolve it. I know that my noble and learned friend the Lord Chancellor wishes to resolve it.
As I understand Clauses 34, 37 and 48, there is nothing to prevent, and the Law Society could not prevent, a limited company being formed of, say, 150 accountants, 50 solicitors, 50 barristers and an assortment of builders and insurance advisers which also constitutes or is tied to a building society or insurance company. There is nothing to stop such a large firm having a small branch in Tolpuddle.
The local farmer who goes into that local branch is rather surprised that the solicitor with whom he used to deal has been driven out of business, but he is faced by a charming representative of that company. He asks, "What can you do for me?" According to Clause 37, he is told, "We can see that you borrow some money. We can see that you take out an insurance policy. We can see that your conveyancing is carried out. If you have any trouble with your vendor you can go to our solicitor's branch for it to carry out the litigation. If the litigation becomes very recondite and goes to the House of Lords, we can see that our barristers conduct your case for you. Eventually, my dear sir, you can apply to our funeral service at the end of the day".
The effect of that conglomerate must be borne by the client who will have to take it or leave it. He will have lost his own friendly solicitor. The effect on high street solicitors in general may be fatal; and if the high street solicitor goes, the independent Bar will go.
I accept that my noble and learned friend the Lord Chancellor does not intend that either branch of the 456 legal profession should be eliminated. He intends that they should be freshened up by competition and he hopes that by such means there will be reduced costs and less delay. I shall not debate the matter because nobody knows what the net result will be. However, I ask him to consider what the likely effects will be if such great conglomerates can come into existence. I believe that they are the only threat in this Bill. From my point of view I do not think that rights of audience raise a threat. The threat is the big conglomerate.
There are already enormous firms of accountants and large firms of solicitors. The only effect that I have observed is that when they are engaged, cases and appeals take much longer and become less meritorious and costs are increased. I myself have not seen any benefit to the public, although I assume that the great conglomerate clients and corporations get a good service from them. I find it very hard to believe that they will give a good service to the individual in the country.
If the net result is to drive out the local solicitors and damage the Bar it will be the very result that my noble and learned friend wishes to avoid. I have long felt that that is the only real danger in this Bill. If it is realised, it will be unintended and I hope that some of these amendments will enable precautions to be taken against it taking place.
§ Lord Coleraine
The intervention of the noble and learned Lord is most apposite. We had to wait a long time for his first intervention and I am glad that the second one has come sooner. I should like to say a few words about conflict of interest in support of the thrust of both the amendments.
I recall that during the passage of the Building Societies Bill when institutional conveyancing was being put forward the question of conflict of interest was very much in our minds. I drew to the attention of the House a case which had been brought to my attention. It concerned a solicitor in the Midlands. A client was offered an advance by a building society which was to be repaid by an endowment policy. The client came to the solicitor. The building society instructed the solicitor to carry out the mortgage side of the conveyancing. We always think that in these cases there is no conflict of interest involved. It has already been suggested in the debate that that is so.
However, in this case there was clear conflict of interest because the solicitor took one look at the details and saw that the repayment arrangements through the endowment policy proposed by the building society were not suitable for his client. The solicitor did what I like to think I would have done: that is, forget about any question of conflict of interest and tell the client that he would do better to get a different mortgage. The solicitor did this, and the building society was absolutely furious.
It seems that when one is in private practice it is one's privilege to be able to give such advice to a client. I pity the solicitor trained in this way, acting for an authorised practitioner, who, when he sees such a situation, has to keep silent.
§ 6 p.m.
§ Lord Hailsham of Saint Marylebone
I should like to say something about conflict of interest. I am very much less qualified than those who have spoken so far. However, I am much concerned about conflict of interest in relation to the one-stop shopping concept. Obviously, it has its advantages and its attractions. I put myself in the position of a young married couple who are trying to set up house. Although they have a little money they cannot buy the house out of their own resources. As matters now stand, they often go to a quite small firm of family solicitors where they happen to know one or more of the partners. They say what their situation is. The partner who knows the family affairs rather well may say, "Look, have you enough money to borrow at all? Ought you not for a time at least to have rented accommodation? Would you not be wiser to borrow the money off your father-in-law rather than go to the big business firm with the building society whose attractive advertisements appear on television? Do you realise that if you buy a house under mortgage you are liable to lose your home after five years if you cannot keep up your payments? The building society is all right. The mortgagee will re-possess. Do you not think that perhaps this company rather than that company offers you better terms of greater security?".
That is what a medium-sized firm of family solicitors will do for the ordinary young married couple setting up home together. I see a quite different picture emerging as the young man enters the shiny self-opening doors of a big conglomerate of one kind or another —my noble and learned friend on the Cross-Benches knows far more about that possibility than I do —to be offered a sequence of services but never to be told the facts of life in relation to his own financial circumstances and those of his fiancee.
What is worrying about this part of the Bill —and my noble and learned friend the Lord Chancellor knows that I have been worried about it for a long time —is that insufficient attention has been drawn to the inherent conflict of interest between a lender and a borrower which arises in the case of almost every borrower who is setting up house. This one-stop shopping concept is all very streamlined, attractive and modern, and will be backed by a great number of very useful services, and no doubt a very honourable set of people, but everyone who has acted in a professional capacity of any kind —whether he is a doctor, solicitor or anything else —knows at the bottom of his heart that one cannot advise somebody if one has an inherent conflict of interest involving that client or that patient and someone else with a different interest.
I have felt for a long time that the Government have not paid sufficient attention to this moral possibility. It is one of only a number of issues that give me great concern as a matter of principle. I do not know whether or not these amendments are well drafted. I am not competent to say that. I am however deeply concerned about the underlying professional morality of what is proposed in this part of the Bill.
§ Lord Mishcon
Perhaps I may be allowed to add a couple of sentences. The noble and learned Lord and many Members of the Committee will know that very strong representations have been made by the Law Society not for its own good or for the good of its membership but because of its worries about the very points that the noble and learned Lord has just made.
I should like to give another example. The instance of the young married couple is very typical. All of us know the problems that many such couples have in purchasing their first house. Will the Committee accept the example given by the noble and learned Lord and reflect for one moment? When that couple go through the portals so vividly described by the noble and learned Lord, would there be a temptation for the solicitor within the organisation we are discussing to suggest that it might be a good idea if both husband and wife entered into the mortgage deed? If the conveyance was made in their joint names, would there be a conflict of interest in the sense that there is obviously more security for the lender if there are the signatures of both husband and wife rather than one? If the couple walked into the independent solicitor's office that solicitor might explain what was at stake if both husband and wife did not have a purchase in joint names. What would be the situation if only one of them entered into the conveyance as the purchaser and only one of them entered into the mortgage with the lender, bearing in mind that in this day and age husband and wife are usually earners in their respective employment?
I am very perturbed —and the Law Society always has been perturbed —about conflict of interest. I would be lacking in duty to my profession, I believe, if I were not to echo those fears, worries and concerns on behalf of the public in the same way that the noble and learned Lord, Lord Hailsham, has done.
§ Baroness Carnegy of Lour
Before the noble Lord sits down, although I have not been taking part in the debate as a Scot —I have been listening to and taking part in discussion on the Bill relating to Scotland —I am very concerned about conflict of interest. I ask the noble Lord for information. Perhaps we may consider a young couple who are selling a house. They go to their family lawyer in a small country practice and ask him to act for them. They put the house on the market and a price is decided. In a small country town it may happen that the person to whom the owner wishes to sell his house is a long-standing client of a solicitor in the same firm. I understand that in Scotland solicitors are allowed to act for the seller and the buyer in the same transaction if both clients are long-standing customers of the firm. That is so in England. I see the noble Lord nodding his head.
Similar problems must arise in this case because the solicitor acting for the buyer may also be in a position to arrange for a mortgage to be provided for the buyer. He may attach an insurance policy —life and fire insurance —and receive commission for arranging it. Is there not a conflict of interest within that small solicitors' practice which is not dissimilar from that which we are discussing in the arrangements under the Bill?
§ Lord Mishcon
If the noble Baroness will permit me, and if the Committee will be indulgent, I shall endeavour to point out to her that, although in England and Wales it is the rule of practice that solicitors are not normally permitted to act for vendor and purchaser, they can do so if both are long-standing clients of the firm. That exception does not operate if the solicitor believes that there is the slightest chance of a conflict of interest. If he believes that there is such a chance the exception does not apply. If, knowing of the conflict, he continues to act for vendor and purchaser he will be acting wrongly and unprofessionally.
§ Lord Alexander of Weedon
Long before I became involved with a financial institution I felt great concern about the proposals that financial institutions should be entitled to provide those services together with lending services. I hope that it will not be thought disloyal to the financial institutions with which I am involved if I say that I still have the same reservations.
Essentially they are the twin reservations about the conflict of interest and the effect on the high street solicitor. I echo what was said by the noble and learned Lord, Lord Templeman. I believe that the high street solicitor, together with the independent Bar, is the most accessible face of justice. If he is diminished in terms of availability to clients the Bill will have a retrograde effect and will not advance the position in terms of access to justice.
As regards conflict of interest, I cannot attempt to put the matter as well or with as great experience as my noble and learned friend Lord Hailsham. However, I wish to pose the following illustration. Let us suppose that a bank or other major financial institution has offered a mortgage on particular terms to a potential borrower. Let us also suppose that, after being offered a perfectly appropriate choice, the borrower has decided to take the benefit of the conveyancing services of that same financial institution. It may be that the solicitor employed by that institution knows that better financial terms are available from another financial institution. What is to be the duty of that solicitor? In practice, is he to be able to say, "Don't take this building society's terms; you would do much better by going elsewhere"?
I recollect that in the White Paper the Government expressed the position by saying that the solicitor who was employed by the institution would, in law, owe the primary duty to the borrower or client. I have always wondered how practical and realistic that position is. I am bound to say that I still wonder.
I wish to add a further consideration in this area. We are all agreed that the transaction of the purchasing of property is probably the most important single financial transaction into which most people enter. I firmly believe that it does not necessarily call for advice only in regard to conveyancing. A number of other questions must also be raised when a couple or an individual have the conveyancing transaction carried out. Those questions may involve consideration of personal circumstances and decisions and advice given on 460 questions such as: in which names should the transaction be put? Is a will necessary at that time? Ought a trust to be created? In my view, it is almost imperative that the person who carries out the conveyancing transaction should be in a position to give such advice.
I am conscious that my question strays slightly outside the scope of the amendment, and I apologise. However, I should be grateful if, in response, my noble and learned friend would indicate whether he contemplates that those who are qualified to carry out conveyancing must in all cases be qualified to give the other advice that it is necessary to receive at the same time.
§ 6.15 p.m.
§ Lord Prys-Davies
I wish to ask a further question following on from the comments of my noble friend Lord Mishcon. If an employee of an authorised practitioner is also acting for the borrower, is there not a special need to protect the confidentiality of the information which the employee has collected in the course of a conversation with the borrower? Otherwise, is there not a possibility that the employee might be tempted to disclose that information to his employer in breach of privilege? I am conscious of the decision given by the Court of Appeal two years ago in the case of Goddard v. Nationwide Building Society. I wonder whether the Bill as it stands might reverse that decision.
§ The Lord Chancellor
Clause 37 provides that the regulations may in particular make provision designed to avoid conflicts of interest. My noble and learned friend Lord Hailsham has suggested that there is an inevitable conflict of interest between the purchaser and the person from whom he borrows in order to complete the purchase. That is the fundamental point made by my noble and learned friend.
That was a matter to be faced because Parliament passed the Building Societies Act in order that it should be implemented. I knew of no decision not to implement it until these proposals came forward to replace those in the Act. When I considered the situation I felt that there were difficulties about the arrangements contemplated in the Building Societies Act, particularly the idea that the Lord Chancellor should be responsible for licensing individual authorised practitioners. Following the advice that I have recently received from my noble and learned friend Lord Rawlinson, I do not think it right for the Lord Chancellor to have that responsibility. Therefore, the Bill intends to make the Lord Chancellor more remote from the individual grants.
The second point relates to the question of conflict of interest. I came to this matter and endeavoured to face it. I knew, as I am sure did many Members of the Committee, that it is very common —indeed, it is the commonest method of having professional conveyancing carried out in these cases —that the same solicitor acts in the conveyance for the borrower as the purchaser of the house in the conveyancing, and also as the solicitor for the lender in the transaction. In the vast majority of cases, that is the way it arises.
461 I know the legal profession well enough to know that it would not tolerate that if there was an inevitable conflict of interest. Therefore I believed that it was not maintainable to suggest that there is always or inevitably a conflict of interest in this situation. But I consider that there might be conflicts of interest depending on individual circumstances, as the noble Lord, Lord Mishcon, and other Members of the Committee have said. I asked myself how one can deal with that. I took the view that the way to deal with it is that the professional person should have the responsibility of saying whether there was a conflict of interest in relation to the transaction, and, if there was, the building society or the bank would not be able to act. That is the purpose, among other matters, of the initial interview; namely, that that be a matter for determination by the professional person in the light of his standards of competence and conduct as laid down by his own professional body.
As the noble Lord, Lord Mishcon, pointed out in answer to my noble friend Lady Carnegy of Lour, where a problem of that kind arises in relation to other transactions the professional person must consider that and decide whether there is any probability of such a conflict, and, if so, take the necessary action.
§ Lord Mishcon
Perhaps I disturb the noble and learned Lord in the middle of his statement; if so, I shall sit down at once. However, if he has concluded his thoughts on this matter, for the guidance of the Committee (because I am sure that he knows the situation) I raise this point. Independent solicitors find themselves acting for a client on a prospective purchase. As regards a number of building societies, there is a roll of solicitors of whom they have had experience and whom they are prepared to see act for them, although of course they realise that they are giving that permission not to solicitors acting regularly for them but to an independent solicitor whose client is the purchaser. Quite obviously they run the risk that the main loyalty is automatically owed to the client. They are merely the solicitor authorised to act for them because they appear on a roll of solicitors. That in no way compares in loyalty or duty or to the practicalities of somebody who is employed by the building society.
§ The Lord Chancellor
The noble Lord intervenes as I am seeking to develop the point. The point is that the noble Lord must therefore conclude, if solicitors do that and however they come to do it, that in relation to the actual conveyancing which is the subject of the statutory monopoly under Section 22 of the Solicitors Act there is no conflict of interest in the cases in which the independent solicitor acts for both sides; that is, both for the lender and for the borrower. He must accept that that is so; otherwise the profession would not tolerate that for a moment.
That demonstrates that as regards the actual conveyancing transaction there is frequently, at the very least, no conflict of interest which prevents the solicitor doing the necessary conveyance both for the purchaser and for the lender. As I said, I entirely 462 accept that there may be circumstances in which a conflict of interest will arise. In that situation it is for professional advice as to whether that has happened.
I have heard a great deal about independent financial advice and I am as concerned as anybody that people should have independent financial advice. However, there is no statutory monopoly associated with that. Under statute, one does not need to go to a solicitor in order to receive independent financial advice nor is a solicitor required, if conveyancing is sought, either to be in a position to give or indeed to give independent financial advice. I believe I am right in saying that recent surveys carried out by the National Consumer Council indicate that many people who go to solicitors for their conveyancing neither ask for nor obtain independent financial advice. In a great number of cases, young people who are seeking to purchase a house are referred to the solicitor in the first instance from the building society. Very often they go to the building society first in order to see what financial arrangements they can make which may be suitable to them.
§ Lord Boardman
I wonder whether my noble and learned friend has taken account of the fact that building societies and banks are mainly tied agencies as regards insurance and therefore are not allowed to give any other advice on a better policy, and so on. Most mortgages are now linked with endowment policies. Therefore, in that case the purchaser, or mortgagor, is not able to get the independent financial advice from one of those authorities which he could get and would get if he went to an independent solicitor.
§ 6.30 p.m.
§ The Lord Chancellor
I understand that point and I shall endeavour to come to it. However, at present I am dealing with the situation of a solicitor. In practice, according to the National Consumer Council surveys, the majority of those who go to solicitors for their conveyancing neither ask for nor are given independent financial advice.
There are, as the noble Lord said, tied arrangements of the kind to which he referred. Attention has been devoted to practices under which, for example, inappropriate insurance policies are given. That is in the market as it is. The mere fact that the law requires the conveyancing to be done by a qualified solicitor or licensed conveyancer in no way obliges the client either to ask for, or be given, independent financial advice. There is nothing in the Solicitors Act requiring that as a condition of carrying out the conveyancing.
If the situation is that all solicitors are in a position to give independent financial advice to anyone who comes to them about matters of that sort, then that is a very valuable service which I have no doubt they can bring to the attention of the public. That will perhaps make the public anxious to go to them rather than to the building society. However, as the Law Society itself demonstrated that sort of inappropriate financial arrangement can arise under the present situation. The purpose of the 463 conveyancing monopoly is to ensure that the conveyancing transaction is carried out by people who are properly qualified to do so. It is no part of that to require that independent financial advice be given or anything of that sort.
I agree entirely with the view that young people, and indeed older people, going to an institution, may well find it wise to take independent financial advice. They can see what are the different terms available. Some people do so quite effectively and are able to get the best that is available to them. However, that does not in any way detract from my view that if a client wishes, perfectly reasonably, to have his conveyancing done by a qualified person provided by the bank or building society, there is no inevitable conflict of interest which would prevent that happening. There is a substantial body of evidence which shows that that is what people want.
My noble friends Lord Boardman and Lord Alexander, and my noble and learned friend Lord Hailsham of Saint Marylebone, think it wise that those clients take independent financial advice. There is nothing in my proposals to prevent them from so doing. Indeed, one of the effects of my proposals will be that high street solicitors come to emphasise that aspect of the service they can provide which, as my noble friend correctly points out, the banks or building societies cannot provide.
Contrary to the somewhat dismal prognostications about high street solicitors that I have heard, they could make their services much more valuable, and appear much more valuable, to clients by advertising and by emphasising that aspect of their service if this form of conveyancing is allowed. It may well be that the tremendous resources —which are of value to the public —residing in the high street solicitor will become more apparent as a result of the proposals instead of less so. The high street solicitors have no reason to be afraid of competition from this quarter. They have plenty to offer in the form of independence and independent advice so long as they are prepared to give it. They are in a position, properly instructed, to advise as to what terms are on offer and so on. Their independence is surely an important selling point which will not be available to a bank or building society under this arrangement.
It is not possible to define completely all situations in which conflicts of interest arise. As the noble Lord, Lord Mishcon, explained in relation to long-standing clients, this is a matter on which a professional view must be taken. The solicitor must decide, in the light of his professional knowledge, whether or not such a conflict is likely to arise.
I envisage that the regulations under this clause —as set out in the White Paper —will provide that the qualified person in charge of the transaction should have a personal interview with the client at the beginning of the transaction. A number of points should then be considered, the most important being whether there is any likelihood of a conflict of interest. I also envisage that the qualified person will advise on the nature of the services he can provide and whether there are any other legal services related to the transaction which he is not able to provide.
464 He should then indicate to the client that those services are desirable but not available from him. That is a perfectly reasonable requirement to deal with the type of problem raised by my noble friend.
The interview should lead to a formulation in writing, as I said earlier in answer to my noble friend Lord Coleraine. The result would be not only a permanent record for the advice of the client but also the name of the professional person in charge of the transaction. That will give the kind of security which is required. With regard to independent financial advice, the proposals may help to concentrate the minds of the high street solicitors on the advantages that their services have to offer.
The information available to me about the ordinary people who wish to buy a house —first-time buyers of houses—indicates that many of them do not have a family solicitor. They find themselves in contact with a solicitor recommended by the building society. There are other matters in that area, in relation to estate agents and so on, which are the subject of concern and with which the Government are endeavouring to deal. The Financial Services Act authorities are concerned to ensure that adequate protection is available against such activities as the provision of inappropriate insurance policies. These are all matters for concern and for regulation, but they are not matters covered by, or in respect of which, protection is given by the existing conveyancing monopoly.
The other matter raised by my noble and learned friend Lord Templeman is certainly a matter for consideration. He envisaged the conglomerate that provided everything one needed until the time of one's tragic demise. It is certainly possible to envisage a number of scenarios, but I have sought to provide that those who grant the authority to be an authorised practitioner have to be satisfied that the applicant's business is, and is likely to continue to be, carried on by fit and proper persons or, in the case of an application by an individual, that he is a fit and proper person. I have no doubt that consideration of the probity and character of those in control, for example, of a limited company, would be a relevant consideration in that respect.
I am anxious to secure that the services provided under this aspect of the Bill are in accordance with what the public want and that the public are adequately protected. I have sought to indicate the nature of the protection I have in mind and to provide the necessary powers to enable that protection in detail to be provided. I am extremely open to proposals for improving that protection, but I cannot accept a suggestion which would go to the very root of the legislation by suggesting that invariably there is a conflict of interest between borrower and lender in respect of the conveyancing which is the subject of the monopoly.
In the light of my explanation I hope that the noble Lord, Lord Tordoff, who moved the amendment we are considering, of which I hope I have not lost sight —I think that I have dealt with the central point —will feel able to withdraw the amendment.
§ Lord Donaldson of Lymington
Before the noble and learned Lord the Lord Chancellor sits down, can 465 he help me with regard to the question of conflict of interest? I fully understand his answer to the noble Lord, Lord Mishcon concerning inherent conflict between the solicitor for the borrower and the solicitor for the lender, on the ground that, "Ah but in practice the same solicitor acts". I have considered that and I probably have the wrong answer but it seems to me that where the solicitor is advising a borrower in the ordinary house transaction, whether the borrower has found the solicitor himself or the building society has supplied the name from a panel, either expressly or impliedly the mandate from the building society to the solicitor is a very limited one; namely to make sure that there is a good title. It covers nothing else. In regard to the rest of the transaction, the building society looks elsewhere.
Provided the building society's mandate to its solicitor is sufficiently confined, there is no conflict of interest. I put forward for the consideration of my noble and learned friend the Lord Chancellor the question of whether he will have to provide that solicitors and others who are acting as employees or staff members of newly authorised practitioners in some way or other should have their mandate and responsibility to their employer similarly confined. If they are similarly confined, there will be no conflict of interest. The only problem about their advising a borrower as fully as a solicitor is that they will not know how to do it.
§ Lord Donaldson of Lymington
I mean that the conveyancer is not necessarily an expert on CTT. He is not necessarily a man of sufficient wisdom to say, for example, to someone of my age that you have to think twice before you put your house in the name of your grandchildren because you have to remember the position of your widow, and other matters of that nature. That is the kind of advice which a solicitor gives. I doubt whether a licensed conveyancer can deal with these matters, and not because he is less skilled. I do not see why he should be considering these factors because they are not in his field.
§ The Lord Chancellor
That is a somewhat different point. It might well be a point against having licensed conveyancers authorised to do conveyancing. The law has already dealt with that. One may now go to an independent licensed conveyancer under the Solicitors Act and perfectly lawfully he may provide the conveyancing services. I suggest to my noble and learned friend that obviously the best service you can get is the best service for you. As regards the question of the advice you ask for, that is one matter, but deciding to which person you go to get that advice depends on the advice that you wish to receive.
§ Lord Donaldson of Lymington
I only introduced the matter because I was asked. It was not part of my argument.
§ The Lord Chancellor
I am obliged to my noble and learned friend. I was wondering about the basis 466 of the last point he made. Perhaps I can now go to the major point, which can be answered in this way. We have provided, and I intend to provide, that if the solicitor employed by the building society undertakes a transaction for a client, then his primary duty will be to the client. There is nothing to prevent that happening merely because he is employed. The terms of employment can secure that position. Therefore, his mandate from the employer will be to secure for the employer a properly secured mortgage on the property in question.
If other matters are outstanding at the time that the solicitor is approached the situation will be different. The mandate would be on the basis that matters have been settled when the conveyancing transaction is undertaken. I therefore believe it is right that the matter should be dealt with by the arrangement under which the solicitor or licensed conveyancer, at the very opening of the relationship between the conveyancing department of the building society or bank and the client, explains the situation and determines on his professional judgment and competence whether or not there is a conflict of interest or likely to be one. He must not take on the transaction if there is any such conflict. If a conflict emerges during the course of the transaction that situation must be dealt with in accordance with their arrangement. I hope the noble Lord will feel that his amendment has been adequately dealt with.
§ Lord Prys-Davies
Following the valuable contribution made by the noble and learned Lord the Master of the Rolls, I wish to mention another aspect which causes me some concern. To some extent the interests of the employer and those of the borrower coincide because both are interested in acquiring a good and marketable title to the property. But unlike the building society or the borrower, the borrower-purchaser will be vitally concerned with the terms on which he acquires the title. The lender may be less interested in the terms provided he gets a good and marketable title.
It is my experience that solicitors spend a great deal of time and concentration advising on the terms of a contract by which the title is acquired. I wonder whether that will continue to be so under the new regime.
§ 6.45 p.m.
§ The Lord Chancellor
We are dealing with a conflict of interest. How far a solicitor serves a client's interests is another matter. Assuming the building societies take on the service, that service will be defined and quite extensive if it is to be successful. The precise service as regards the conveyancing monopoly is defined by that monopoly. There is nothing to prevent a building society's solicitor giving services over and above those covered by the monopoly if the building society wishes to make such an arrangement.
I certainly accept the view that it is of the greatest possible interest to the client that matters affecting the property should be in accordance with his wishes. That is the reason I say that the primary responsibility will be to the client. It will be the 467 business of the solicitor employed by the building society to make sure that the interests of the client in the matter are safeguarded and there is nothing to prevent him doing so arising out of the doctrine of the conflict of interest. There is no conflict of interest with the building society in securing these matters. I believe that the standard of service given will ultimately determine whether or not the building society gets business over the long term.
§ Lord Tordoff
When I sat down some 60 minutes ago, having moved what I had thought was a simple amendment, I expected to be on my feet withdrawing it within two or three minutes. Talking of conflicts of interest, when I see the noble Lord, Lord Evans of Claughton, next week I shall suggest that there may be a conflict of interest as regards all the houses that he has conveyed for me in saddling me with this amendment this afternoon.
It has been a fascinating debate. I sought not to go into the generality of the subject, though as a non-lawyer I should have been delighted to do so. I believe that far too often in the debates of the Committee on this Bill there has been a feeling that they are all about professionals looking after their own interests. As a layman who has bought and sold houses from time to time and as someone without any professional interest in maintaining the future of solicitors, I support many of the things which have been said today on both sides of the Committee.
One of the most remarkable comments that I have heard for a long time came from the noble and learned Lord, Lord Hailsham, when he said that everybody who had spoken before him was more qualified than he. He had clearly forgotten that I was moving the amendment. I believe that the noble and learned Lord the Lord Chancellor has been less than fair, not as regards the amendment itself, which does not matter, but concerning some of the things that have been said. For example, he said that solicitors do not need to be afraid of competition. That seems to be introducing into these discussions a note which was not intended to be there in the first place. We are talking not about competition but whether solicitors will exist in the future if they are completely subsumed within the large organisations that we have been talking about. The noble Lord, Lord Boardman, touched on this point very strongly. If the high streets and country towns are denuded of solicitors because of the changes arising from this Bill, it will be a sad day not just for lawyers but for lay people as well.
The noble and learned Lord the Lord Chancellor said that in most cases clients neither ask for nor get independent financial advice. I do not believe that Members of the Committee will dissent from that. However, there are cases when clients get such advice without asking for it because it is in their interests to be given it. The average solicitor deals with precisely the kind of people to whom the noble and learned Lord, Lord Hailsham, referred. They are treated by the ordinary high street solicitor with a great degree of respect, including respect for their lack of knowledge. In other words, a solicitor will act in an avuncular way in many of these cases.
468 I do not intend to divide the Committee although there is clearly great concern on all sides. I do not think that this is the right amendment to divide on but I am sure that we shall come back to this subject at a later stage. I hope that the noble and learned Lord the Lord Chancellor will look at this subject again and will take on board the genuine concerns expressed from all sides of the Committee and which are clearly felt outside not only by professionals but by ordinary people buying and selling their houses. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Lord Boardman had given notice of his intention to move Amendment No. 178AZC:
Page 30, line 11, at end insert ("or potential conflicts of interest and for the purpose of this paragraph benefits or rewards that would be receivable by an authorised practitioner in respect of services provided for more than one party to any transaction shall be deemed to create a conflict of interest unless the interests of each party are the same").
§ The noble Lord said: I have spoken at some length on this amendment and I should like only to respond to some of the remarks made by my noble and learned friend the Lord Chancellor in response to the earlier amendment. He distinguished the role in conveyancing and the lack of conflict that is likely to arise in a purely conveyancing transaction, where the common interest is to pass on a good title, from the other activities that may be carried on by the authorised practitioner. My amendment was designed to try to separate those two aspects of the transaction, to say that there was no conflict of interest when the interests of the parties were the same, as my noble and learned friend accepted they were in most cases with a purchaser and with a building society.
§ The conflict comes in a whole range of other transactions. For example, in buying a house, nine times out of 10 a person looks in an estate agent's window and eventually sees something he likes. If that estate agent is part of one great group of estate agents, conveyancers and insurance agents, he is unlikely to start separating the various pieces of the transaction. I made a point to which my noble and learned friend did not respond. I gave an example of a grave contrast between the solicitor and the financial institution. This concerned the declaration of commission and the accounting for it.
§ If a solicitor advises a client to take out an endowment policy, that solicitor will receive a commission. The solicitor is bound both to declare it and to account to the client for it. A building society, an insurance company or a bank has no such obligation. The client —in that case I call him the customer —may not be conscious of the commission. I wonder whether one is inclined to import into the commercial operations —by estate agents, insurance agents and, so on —the standards which lawyers believe they particularly possess to discharge their duty to their client. Their first and overall responsibility is to their client. The estate agent, the insurance agent and so on must act honestly and properly according to the rules but he does not have the same duty as the solicitor. There is a great distinction.469
§ For that reason, in drafting my amendment, albeit no doubt inadequately, I tried to distinguish between the conflicts that would arise in such non-conveyancing transactions and those others. The Committee has spent a long time on this debate. I do not propose to press the amendment but I hope that my noble and learned friend will feel able to consider the points raised in the debate and before Report come back with something to avoid the dangers or apparent dangers that some of us see in the Bill as it is now drafted. I shall not move the amendment.
§ [Amendment No. 178AZC not moved.]
§ Lord Prys-Davies moved Amendment No. 178ZCA:
Page 30, line 11, at end insert—
("( ) requiring authorised practitioners to offer to clients free personal interviews with a solicitor or licensed conveyancer;").
The noble Lord said: This amendment would require an authorised practitioner to offer clients a free personal interview with the solicitor or the licensed conveyancer. The Committee will probably recognise that this amendment rests on the authority of paragraph 5.13 of the White Paper. I quote:
The authorised practitioner's client must be offered at least one interview with the solicitor or licensed conveyancer, reasonably near either the client's home or the property being conveyed".
§ The paragraph goes on to specify matters which should be covered in that interview.
§ The Law Society supports this amendment but emphasises in particular that it should be a free interview. If the authorised practitioner could make a separate charge for the interview, that could readily deter clients or potential clients from taking advantage of the offer of an interview. Having followed the discussion on the previous amendment, I have a feeling that the noble and learned Lord the Lord Chancellor will be sympathetic towards this one. He referred twice to an initial interview or a personal interview. He did not refer to that interview being a free interview. I note that reference is also made in the Notes on Clauses to the importance of the initial interview. I shall not detain the Committee any further with this amendment. It is self-explanatory. I hope that the noble and learned Lord will be able to respond favourably to its terms. I beg to move.
§ Lord Hooson
I wish to ask the noble and learned Lord the Lord Chancellor one or two brief questions. During his remarks on the previous amendment, he said that research carried out by the National Consumer Council tended to show that first-time buyers, young couples, do not receive financial advice from solicitors or from anyone else. However, I would point out that from solicitors they receive legal advice, and legal advice has financial implications.
I have in mind the conflict of interest which is so often not apparent to young couples whom we assume are fairly ignorant of the law. I shall give an example. Of the couple, let us say that the woman is in a secure job with a good salary. The husband 470 is an entrepreneur, in a one-man business in a risky sphere. The implications for the young couple as to whether the conveyancing should be done in their joint name, their names in common or in only one of the names are considerable. Once the legal effect is spelt out to them, they can work out the financial implications for themselves. The research discloses that in most cases financial advice is not given. But if legal advice is given, it has important financial implications which the clients can work out for themselves.
§ Lord Coleraine
I support the amendment. If there is to be an initial advice session it should be free. The reason is plain. The initial advice session will be a promotional one put on by the corporation in order to stitch up the customer. It will make it quite clear that in aspects of the deal the conveyancer will close his eyes to the interests of the customer and that the customer must look elsewhere. On this basis, I am surprised that we feel it necessary to discuss the amendment. It is quite obvious that any corporation will make darn certain that the interview with the client in which all this takes place is the first thing that will happen.
§ The Lord Chancellor
The purpose of the interview is in order that a decision may be come to as to whether the client will be offered conveyancing services by the institution. It is an interview with qualified persons, a solicitor or licensed conveyancer, governed by the professional standards of his or her profession. That is the purpose of it. Of course the intention is that it will be free in the sense that it will not be determined until it is finished whether or not there should be a transaction on the conveyancing side at all.
If the transaction goes ahead it may well be that the information taken at the interview will be of value and the cost would be included in the conveyancing. But my intention certainly is to make a provision on these lines in the regulations. My understanding is —and I shall check this again —that the power to make such a requirement is already in the clause. It is my clear intention to make these provisions in the regulations.
§ Lord Prys-Davies
We are grateful to the noble and learned Lord for that encouraging reply. It seems to us that it is not clear from Clause 37 as it stands that the regulations would cover this point, but we are grateful for the response and beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Viscount Ullswater
I believe that this might be a good time to break for dinner. Therefore, I beg to move that the House do now resume. In moving this Motion may I suggest that the Committee stage begins again at five minutes past eight o'clock.
Moved, That the House do now resume —(Viscount Ullswater.)
§ Lord Simon of Glaisdale
May I ask the noble Viscount until what time it is proposed to sit to consider the succeeding extremely important 471 provisions of the Bill? I hope he will not say that a target has been fixed by the Whip and that the Committee must sit until that is reached, whatever the hour. In asking the question I would venture to ask him whether he noticed —I am sure he did —that although the House sat at three o'clock Starred Questions ran over time and there was a Statement which took almost 40 minutes.
§ Viscount Ullswater
In responding to the noble and learned Lord I would say that a target has been set. It is to take Amendment No. 186G, which gets to the end of Clause 43. I understand that that is a reasonable target. Further than that I cannot say.
§ On Question, Motion agreed to.
§ House resumed.