Hudson says Separate Representation “Jaw, Jaw not War, War”
Desmond Hudson, Law Society Chief Executive, set out the case for dual representation to a sceptical audience at the Law Society on Thursday.
He was speaking at the first of a series of road shows where the Law Society will explain their rational for a pro dual representation policy.
They road shows will give critics an opportunity to debate the policy directly with the Chief Executive.
Despite the noise and rhetoric coming from some practitioners calling for the Law Society to do something about separate representation, only a handful of practitioners attended.
There were probably less than 15 people attendees, many of whom sounded thoroughly weary of the world of conveyancing.
Mr Hudson explained the historic reasoning behind what he called “this unique exception to our rule book in relation to conflict of interest”.
He also pointed out that a pro dual representation policy has been in force since 1970 and up until two years ago was generally widely accepted as good policy.
Mr Hudson argued that “much of the correspondence in the online version of the Gazette is factually erroneous” where people have been calling for the Law Society to take action that it no longer has the power to implement.
He explained that The Law Society is no longer a regulator and cannot make rule changes such as banning separate representation.
It is the role of the SRA to regulate, and any changes they wish to make must be approved by the LSB.
Mr Hudson explained that as a public interest regulator they would always put the public first second and third.
To this end he argued that separate representation was more costly and slower for consumers and it would be therefore challenging to convince the SRA that it would be in the public interest to change to a policy of enforced separate representation. H
e added that even if the SRA and LSB changed their rules Licensed Conveyancers would still be able to act on a dual representation basis.
Des Hudson explained that some critics of their support for dual representation had argued that dual representation made it difficult to argue that a mortgage was not in the borrower’s best interests.
He said trying to advise on appropriateness of mortgages was difficult and any firm trying to do so should consider their regulatory position carefully.
He said that it was “pious” to believe that imposing separate representation would reduce indemnity claims. He believes that a firm acting for a borrower would have to certify title to the firm acting for the lender. He said: “I do not believe you will gain any advantage of shifting liability.”
He went on to explain that the issue was less about conflict of interest and more what lenders have done with panels following the FSA thematic review and FSA requirements to enforce prudential risk management.
He said: “That is why we have seen a rapid and sudden change.” He explained that on detailed advice from competition law advisors there was no case to put to the OFT.
The outcome of any OFT referral would be very difficult to predict given that the OFT appear to consider that panel managers and referral fees payments are evidence of a properly functioning and efficient market.
He suggested that a boycott of lenders was difficult as wherever solicitors choose to bank the bank is likely to be actively managing its panel and reducing the number of firms that it is prepared to work with. In respect of calls to lobby the Government for change Des Hudson said: “Believe me we are trying”.
He explained that the Law Society is seeking to persuade Vince Cable that solicitors underpin the High Street economy.
However the Government and the Treasury in particular is determined to rebuild the banks’ balance sheets and are very unlikely to do anything that does not support banks.
Talking about what the Law Society has been able to achieve he said that they are aware that not everyone thinks that the CQS is a triumph but being a solicitor is no longer enough.
He said the alternative marks enhance solicitor status rather than diminish the kudos of being a solicitor. He explained that the CQS key aim is to build a trusted community and without CQS lender actions would have been harder and deeper than they have been.
In summary Des Hudson said the ability of the Law Society is to influence. It does not have direct power to impose separate representation or take other action against lenders that do things their regulator requires.
Des Hudson said it has to be “Jaw jaw not war war” From the audience Robin Shepherd of Shepherd and Co and Nicholas Gurney-Champion, Council Member and Partner, with Guerney-Champion and Co tried to argue that the conflict of interest inherent with dual representation merited a ban.
However in my opinion they were not able to put a particularly compelling argument of how dual representation acted to the detriment to either client by reference to specific examples.
Most of the argument appeared to be protectionists arguing that the way that solicitors have conducted conveyancing in the past should be the way it is done in the future.