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Meeting with the Association of Banks in Malaysia (Circular No 111/2018)

Circular No 111/2018
Dated 26 Apr 2018

To Members of the Malaysian Bar

Meeting with the Association of Banks in Malaysia

The Bar Council (“BC”) Conveyancing Practice Committee (“CPC”) held a meeting with the Association of Banks in Malaysia (“ABM”) on 4 Jan 2018.  Among the issues discussed with ABM were the following:

 (1)     Cost of bank’s change of name form or vesting order

(1.1)     Pursuant to a circular dated 8 Oct 2003 from Bank Negara Malaysia (“BNM”), banks were directed to pay the cost for preparation and registration of documentation for change of name of a bank and for a vesting order consequent on the merger of banks.

(1.2)     BC suggested that affected banks should, from the outset of a transaction, expressly inform solicitors that the banks would bear the cost of filing of the change of name form or vesting order.  In addition, the banks should not delay in paying the costs.

(2)     Fees charged for banks’ facility documents

(2.1)     BC raised the following issues relating to banks’ template documents for credit facilities:

(a)     Solicitors being asked to pay a fee for the documents, which fee varies in amount from bank to bank;

(b)     Solicitors paying such fee even though it is they who incur the cost of printing the documents; and

(c)     Solicitors being asked by some banks not to pass on to the borrowers the fee paid by the solicitors for the documents.

(2.2)     BC’s position, however, is that:

(a)   The charging of a fee by a bank for the sale of facility documents may be tantamount to a breach of section 37(2) of the Legal Profession Act 1976. That subsection states that any unauthorised person either directly or indirectly draws or prepares documents relating to any immovable property for or in expectation of any fee or gain shall be guilty of an offence under that subsection.

(b)   Such out-of-pocket expenses, if absorbed by a law firm, would be deemed to be a discount to clients, and thus be in violation of the Solicitors’ Remuneration Order 2005.  This may, in turn, implicate the relevant bank as an aider and abettor of the said breach.

(2.3)     Without prejudice to our objection to the imposition of documentation fees, BC requested that banks minimise such fees.

(2.4)     At the meeting, banks agreed to consider allowing solicitors to use the solicitors’ own template of the deed of receipt and reassignment, as some banks have a prescribed format.

(2.5)     Banks stated to BC that the contents of the facility documents are merely suggested templates while solicitors remain the final authors thereof.

(2.6)     Members are advised to review such documents when preparing them, as the banks’ position is that Members remain liable for them.  If Members intend to amend any template, they should notify the respective bank(s).

(3)     Fees charged by banks for checking facility documents

(3.1)     BC objected to the fees that the documentation unit of some banks charge for reviewing documents prepared by solicitors.  The banks’ justification is that solicitors often make mistakes in documents, thus incurring the banks’ time and cost in checking the work of solicitors.

(3.2)     Members must exercise diligence and extra caution in preparing facility documents to avoid gross errors, and not delegate the entire work process to unqualified persons.

(4)     Delay in issuing redemption statements

(4.1)     BC raised the issue of the delay by banks in issuing redemption statements and releasing discharge documents.

(4.2)     BC referred to a circular issued by BNM in 2010 (BNM/RH/CIR 007-10), which requires banks to expedite the issuance of redemption statements for housing loan / house financing, and the release of the original title of immovable property, in straightforward cases.

(4.3)     The BNM circular requires banks to:

(a)     issue the redemption statement for housing loan / house financing within two working days from the date of receipt of instruction; and

(b)     release the original title of immovable property within five working days from the date of receipt of the redemption sum.

(5)     Unclear requests for redemption statements in refinancing cases

(5.1)     Members have reported that in cases of refinancing a conventional loan to an Islamic facility, redemption statements are not sufficiently clear to enable the party concerned to seek a waiver of stamp duty.

(5.2)     Members are urged to specify clearly the items and information required, when requesting redemption statements from the financiers in such situations.

(6)     Notification by banks to solicitors of money disbursed by electronic transfer

(6.1)     Pursuant to a joint guideline issued by ABM and BC in 2014, banks are to notify (or instruct their solicitors to notify) the vendor’s solicitors or, as the case may be, the purchaser’s solicitors, by email, regarding money disbursed by electronic transfer, no later than two working days after disbursement.  Please refer to clause 3.2 of the guideline, which was disseminated to Members in Bar Council Circular No 028/2016 dated 3 Feb 2016 entitled “Reminder | Guidelines for Interbank E-Payment in Respect of Redemption or Disbursement of Financing Facilities”.

(6.2)     Members have complained that this is often not adhered to.

(6.3)     Some ABM members said that the notification is system-generated, and sent out the same day as the disbursement.

(6.4)     Members are urged to inform BC of any late notifications (with full details and documentary proof) in order for statistics to be gathered.

(7)     Bank officers asking for commissions from solicitors

(7.1)     Members are urged to report all incidents of bank officers asking them for commissions.  Details of the officers involved should be furnished to the relevant bank in order for action to be taken.

(7.2)     Banks informed BC that there is a complaint procedure on each bank’s website.

(7.3)     Banks also requested that Members not give any gifts whatsoever to any bank officer, even during festive seasons.

(7.4)     Members are reminded that both BC and ABM view touting as a serious offence, as per rule 51 and rule 52 of the Legal Profession (Practice and Etiquette) Rules 1978.  Members are also reminded that the practice of sending gifts to bankers is frowned upon.  Members are urged to protect and uphold the dignity of the legal profession, and to not engage in corrupt practices.

(8)     Firms with multiple branches

(8.1)     ABM raised the issue of poor coordination between partners in law firms with multiple branches.

(8.2)     Members are reminded that partners of a firm are jointly and severally liable for all branches.

(9)     Quality of solicitors’ work

(9.1)     ABM raised the issue faced by its members, of poor turnaround time on the part of law firms in forwarding and returning security documents, attending to perfection of transfer and charge, and collecting documents from land offices or registries.

(9.2)     Members are reminded to enhance the quality of their work, and ensure it is of a high standard.

(10)     Solicitors acting for both vendor and purchaser 

(10.1)   ABM said that its members have occasionally found solicitors acting for both the developer and the purchaser in the same sale and purchase agreement under a housing development.

(10.2)   Members are reminded to comply with section 84 of the Legal Profession Act 1976.  Any advocate and solicitor who contravenes this section may be liable to disciplinary proceedings.

(11)     General

(11.1)   On 9 Apr 2018, a few designated CPC members also held an informal discussion with representatives from BNM with regard to the above-mentioned issues. 

Thank you.

Roger Tan
Conveyancing Practice Committee