Licensed Conveyancers – Client Dumping

OPINION
by Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Imagine traveling in a taxi through an unfamiliar part of your city. Suddenly, the taxi driver confesses that he doesn’t travel in that area very often, he is too frightened to continue, and he is going drop you off at the next corner. He tells you that it will be up to you to find another taxi driver at that late hour – you will have you make your own arrangements. The taxi driver then takes payment for having delivered you to this dark and unfamiliar place, and drives off into the night. What would you do?

An increasing number of consumers who use Licensed Conveyancers are experiencing something similar to this. It was a common occurrence before the new Conveyancers Act 2006 was introduced, and it was expected that the new-found professionalism of the conveyancers’ industry would result in a more professional approach to client welfare. Unfortunately, old habits die hard, and client dumping is as prevalent as ever, if not more so.

Conveyancing client dumped

A few days ago I had a distraught woman telephone me with a typical example of client-dumping. According to the woman, she had engaged a Licensed Conveyancer at the very start of her conveyancing transaction, which involved the off-the-plan purchase of a city apartment.

Everything was fine while the matter involved no more than paper-shuffling processes, but when a few small difficulties arose this changed.

Apparently, the Licensed Conveyancer became quite flustered when questions arose regarding the conduct of the developer. When the conveyancer found that she was having to write to the vendor’s lawyers on behalf of her client, provide legal advice to the client, and assume responsibility for the client’s legal well-being, it all became a bit too much.

The conveyancer explained to the client that she charges a very low fee for "straight-forward" matters, and this matter was becoming anything but "straight-forward". Moreover, the matter involved legal issues that were beyond the capacity of the conveyancer, and a lawyer’s expertise would be required. And to cap it all off, the time and effort the conveyancer was having to invest in the matter was making it unprofitable for the conveyancer, so that she would be operating at a loss to complete it.

Why was the conveyancer complaining to the client? And what was the significance of all of this for the client?

The conveyancer went on to explain that she could no longer act for the client, and that the client would have to find a qualified lawyer to take the matter to settlement. Effectively, the client had been dumped, and settlement was just a few days away!

Why conveyancers dump their clients

Dumping the client, while quite illegal, is the reason why many Licensed Conveyancers are able to remain in business while offering cheap services. Client dumping allows the Licensed Conveyancer to deal only with "straight-forward" conveyancing matters, by culling out any that become problematic. It is essential to the continuing viability of the non-lawyer conveyancing industry. Here’s why:

• Licensed Conveyancers are perceived as "cheap"
  Conveyancers have always competed with lawyers on the basis of being a "cheap" alternative. In order to stay cheap by comparison to lawyers, conveyancers have to limit the time they spend on a conveyancing matter, and also their exposure to risk (the risk issue is explored further in relation to professional indemnity insurance below). Dumping the client allows the conveyancer to cut losses in terms of time spent on the matter, while passing responsibility for problems to the lawyer who takes over.
• Licensed Conveyancers have limited legal knowledge

Licensed conveyancers are trained in basic conveyancing law only, and this is recognised in the Conveyancers (Professional Conduct and Trust Account and General) Regulations 2008 (SR No. 49 of 2008) – Schedule 1, which states at rule 4:

"4. To only undertake work within competence – A licensee must only accept instructions to perform conveyancing work if the licensee is competent to perform the conveyancing work concerned."

Rule 4 is an acknowledgement that some conveyancing transactions are far too complicated for Licensed Conveyancers, and it puts the onus on the Licensed Conveyancer to investigate the matter carefully in order to determine whether or not it is within their competence. When a Licensed Conveyancer undertakes to complete a client’s conveyancing transaction, the client is entitled to believe that the Licensed Conveyancer has confirmed that he or she is sufficiently competent to complete the matter.

While lawyers have access to various professional services (such as the Law Institute of Victoria) and the expertise of barristers and senior counsel (for example, before considering whether court action is viable or advisable, a lawyer will usually brief a barrister for a specialist opinion), Licensed Conveyancers do not. Rather than admit their inability to deal with a complex matter, some Licensed Conveyancers will start the matter, and then simply dump the client when it becomes too difficult.

Even simple and straight-forward matters can go "off the rails" between the day of sale and settlement. When a simple matter becomes difficult the client becomes a candidate for dumping.

• Licensed Conveyancers have limited professional indemnity insurance

Like lawyers, Licensed Conveyancers are required to carry professional indemnity insurance. But in the case of Licensed Conveyancers, this does not cover areas of law that are not regarded as "conveyancing law" for the purposes of the Conveyancers Act 2006 or the conditions of their professional indemnity insurance cover. For example, clients regularly complain about real estate agent deception, but criminal law does not form part of the Licensed Conveyancer’s formal training and it does not fall within the definition of "Conveyancing Work" in the Conveyancers Act 2006. A Licensed Conveyancer may attempt to dump the client in order to limit risk when there is doubt about the client’s legal position.

• Licensed Conveyancers can use dumping as a means of controlling or threatening their clients

A notoriously nasty Eastern Suburbs conveyancer has a well-earned reputation for threatening her clients with dumping. A client who has the audacity to complain about delays, lack of service or mistakes can expect to be told, "If you don’t like the way I do things you can come and collect your file and take it to someone else." I am aware of at least one instance where the conveyancer actually pushed an incomplete conveyancing file into the client’s letter box, then rang to tell him that he had been dumped.

Some conveyancing lawyers will refuse to accept clients who have been dumped by Licensed Conveyancers, because the period between the dumping and settlement is so short that the client will inevitably be dissatisfied, and "cleaning up the mess" made by the Licensed Conveyancer tends to make the task infinitely more labour-intensive and expensive.

When threatened with dumping (and the inevitability of delayed settlement, with the likelihood of penalties, rescission and costs) very few consumers will risk the wrath of the Licensed Conveyancer.

Being a dumped client can be very costly

Being dumped by a Licensed Conveyancer can be very costly, not just in terms of having to engage a lawyer in the late stages of the conveyancing transaction, but also in terms of costs and penalties associated with a failed settlement. If settlement fails to take place on the appointed date, the vendor is entitled to demand the payment of penalty interest, calculated on the unpaid balance of the purchase price on a daily basis, and legal costs.

The vendor may also issue a Rescission Notice, which may entitle the vendor to forfeit 10% of the purchase price (i.e. the entire deposit) if settlement does not take place within 14 days.

Can a Licensed Conveyancer legally cease to act for a client?

Yes. As stated above, it is quite common for conveyancers to find themselves out of their depth as even the most simple of matters progresses to settlement, and the Regulations allow a Licensed Conveyancer who is approaching the limit of their competence to refer the matter to someone more able to protect the client, invariably a qualified lawyer.
Transferring a troublesome matter in this way differs from client dumping in that the Licensed Conveyancer must give the client 14 days’ written notice before ceasing to act:

"15. Termination of licensee’s services A licensee must complete the conveyancing work in respect of which the licensee has accepted instructions to perform for a client unless—
    (a) the licensee and the client have otherwise agreed; or
    (b) the client terminates the services of the licensee; or
    (c) the licensee terminates the provision of services to the client by giving 14 days written notice to the client."

The Regulations also require the Licensed Conveyancer to deliver the client’s file and documents to the lawyer no later than 14 days after the new lawyer has been appointed:

"16     Transfer of conveyancing work
If—
    (a) a licensee ceases to act for a client before completing the conveyancing work in respect of which the licensee has accepted instructions to perform for a client; and
    (b) the client instructs another licensee or a law practice to take over the performance of the client’s conveyancing work—
the first-mentioned licensee must, within 14 days after receipt of a direction in writing from the client, deliver to the second-mentioned licensee or the law practice all relevant documents to which the client is entitled and any information that is necessary for the proper performance of the client’s conveyancing work.quot;

Unfortunately, few conveyancers are prepared to admit to a client that they lack the capacity to complete the conveyancing transaction. The business imperatives associated with high-volume, cheap fee conveyancing businesses are such that the pressure to maintain a constant flow of conveyancing transactions is tremendous.

The average Licensed Conveyancer does not have time to carefully consider all of the implications of each conveyancing transaction, and so the requirements of Rule 4 (see above) are often ignored. Furthermore, most of the problems associated with a conveyancing transaction remain hidden until the fortnight leading up to settlement, leaving it too late for the Licensed Conveyancer to give the 14 days’ written notice required under Rule 15.

Client dumping is usually the last resort for a Licensed Conveyancer who can’t complete the client’s matter, and has run out of time to legally transfer it to a lawyer.

Why Consumer Affairs Victoria does nothing about client dumping

In an amazingly frank admission from a Consumer Affairs Victoria (CAV) employee, I was told that it is unlikely that CAV will take action against any Licensed Conveyancer who is accused of client dumping. This is because CAV now operates on a "triage" basis, dealing with the most serious of complaints ahead of those considered less serious. Apparently CAV has more matters of a serious criminal nature than it can handle, and client dumping is regarded more as a matter of incompetence than one of criminality.

What can a consumer do about client dumping?

The advice I have given to victims of client dumping is as follows:

• Consider the taxi analogy above. You would not simply exit the taxi in a dark and lonely area, and let the taxi driver off the hook so easily. Similarly, you have put your trust in the Licensed Conveyancer and you are entitled to hold him or her accountable for your situation.
• Do not pay the Licensed Conveyancer. Unless the Licensed Conveyancer has informed you in advance that they reserve the right to transfer your matter to a lawyer at your cost, you should not be required to pay for a service that has not been completed in its entirety.
• Demand completion by the Licensed Conveyancer. If the licensed conveyancer is dumping you because your matter has become too time-consuming to be profitable, you are entitled to require the Licensed Conveyancer to complete it. Of course, if the relationship has been soured by the attempted dumping, you may not want to continue with the Licensed Conveyancer anyway. (See below regarding costs.)
• Require a written explanation from the Licensed Conveyancer. Must dumpings occur by way of a telephone call, followed up by a letter from the Licensed Conveyancer stating that the the ending of the relationship is by "mutual agreement". It is important to require the Licensed Conveyancer to state in writing the reason for their ceasing to act further, and to clearly indicate how they propose to deal with the situation (see next).
• Require the Licensed Conveyancer to accept responsibility and cost. The Licensed Conveyancer may genuinely want to protect your interests, and may be dumping you for your own good, having recognised at the last minute that they simply cannot complete the matter. In such circumstances you would be entitled to:
  • Have the Licensed Conveyancer "outsource" the difficult component of the transaction to a lawyer at their cost; or
  • Have the Licensed Conveyancer transfer the entire matter to a qualified lawyer, and to cover any additional costs generated as the result of the transfer.

  Of course, it would be prudent to have the Licensed Conveyancer confirm the cost position in writing.

• Lodge a formal complaint with Consumer Affairs Victoria. Although I have indicated above that this may be a waste of time in terms of getting any result, it will help to support a later claim against the Licensed Conveyancer for costs associated with the dumping. The complaint should be lodged by Registered Post.

Conveyancing and Best Practice – LAW9000

Australian Standard – Legal Best Practice LAW9000

LAW 9000 – Legal Best Practice is a standard which uses the internationally recognised ISO 9001 as its foundation and contains best-practice criteria specific to a legal practice.

In order to achieve accreditation a law firm must develop systems and processes that ensure maximum client satisfaction, and risk minimisation. A crucial element of every process is to ensure that a conflict of interests check is done before a client’s matter is commenced.

The certification process involves development of specific, transparent and accountable processes over many months, and culminating in a rigorous audit conducted by external auditors.

The audit examines every aspect of the law firm’s operations to ensure that they meet high quality standards. Some of the key areas audited are:

• The firm’s commitment to quality;
• Commitment to ensuring client satisfaction;
• Processes for delivering legal services;
• Business and risk management plans;
• Human Resource practices;
• Professional obligations of the legal industry; and
• Continuous improvement of the firm.

Lawyers Conveyancing is accredited as a LAW9000 Legal Best Practice law firm.

A new direction for real estate and Conveyancing

In order for the conveyancing industry to shed the corrupt and improper practices that have dogged it for years, and which continue to bring it into disrepute, those offering conveyancing services must demonstrate that the services on offer are reliable and of high quality.

The most effective way for a conveyancing consumer to be satisfied that he or she will receive value for money when engaging a conveyancer is to ensure that the conveyancer is a lawyer conveyancer, certified as LAW9000 Legal Best Practice compliant.

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