An explanatory memorandum has been circulated with the Bill. The memorandum begins by explaining that the Bill applies equally to both auctioneers and house agents but that for convenience the memorandum itself refers only to auctioneers, the understanding being that all the references are to be taken as applying to house agents as well. In the remarks I am about to make, I propose to adopt the same approach.
As explained in the memorandum, the Bill has two objects: first, to increase from £2,000 to £5,000 the deposit which an auctioneer is required to keep in the High Court, and, secondly, to require auctioneers to keep clients' moneys in a special bank account and to keep records of such moneys and of their dealings in them.
These two proposals are, of course, complementary: both are designed to give greater protection to the client. Both are necessary because neither, by itself, is a sufficient safeguard. May I say at this point that the Irish Auctioneers and Estate Agents Association not only agree with but have taken the initiative in advocating measures such as these. I do not mean to imply that the Association necessarily agree with every detail in the Bill—my discussions with them took place before the text was drafted and it may be that they will have some views to express on this or that provision— but the Association certainly support and, in fact, have asked for the proposed increase in the deposit. They agree also with the principle of separate accounts, which is only to be expected because, of course, the keeping of separate accounts ought to be an elementary precaution for anybody dealing with other people's money and any auctioneer who is not keeping such accounts already is in urgent need of being saved from his own carelessness.
The present deposit is £2,000. It has remained at that figure since 1947. I may say, however, that I am not proposing this increase just on the basis of changes of money values or the increase in property values since 1947. That would, I think, be an inadequate basis because the figure £2,000 in 1947 was necessarily experimental. I have, therefore, taken into account the available information about defaults of auctioneers in the meantime and also the level of premium which an auctioneer is likely to have to pay to get a guarantee bond which he can lodge as a deposit.
An immediate difficulty is the lack of complete information. The criminal records cannot provide adequate information because the great majority of defalcations do not amount to fraud —or, at all events, do not provide evidence sufficient to justify a prosecution. In fact, only a negligible proportion of cases in which there have been defaults ends in the criminal courts. I think it may safely be assumed too that this is, for the most part, not just a question of lack of evidence—carelessness and negligence rather than criminal intent can be the cause of the default.
Again, although we know the number of defaults as reflected in the number of cases in which the deposit is called on to meet unpaid liabilities, there is no way of finding out the extent to which the liabilities exceed the amount of the deposit in those cases where that occurs. However, it is, of course, common knowledge that there have been some defalcations on a very big scale—and this immediately brings us to the heart of the problem, which is that any system of deposit, whether by way of guarantee bond or otherwise, must be a compromise because if it were to be foolproof it would have to consist of an insurance bond without any limit of liability, which of course could not be obtained, or, at the very least, the deposit would have to be fixed at so high a level as to cover even a remote contingency, which would involve payment of a premium so heavy that it would be a serious and possibly insupportable burden on many auctioneers. So we must look for a compromise and the question is: what is it to be?
The records show that, on the average, five auctioneers default each year —that is to say in five cases each year, on average, the deposit is called on to meet liabilities. However, of these five cases, four are fully covered by the present deposit of £2,000, so that the number of cases in which there is a default in excess of the present limit of £2,000 is one a year, on the average. As I said earlier, we do not know how much the excess is in these cases but, if we bear in mind the pattern of defaults—that four out of every five come to less than £2,000—we can be reasonably certain that only very few indeed would exceed £5,000, which is the figure proposed in the Bill.
In proposing this figure, I naturally had to take account of what it would be likely to involve in terms of premiums. I should, perhaps, mention that these auctioneers who are members of the Association are able to secure the benefit of a lower "group" premium than others but I do not think that the Oireachtas can regard this lower "group" figure as the relevant one—we must keep in mind what the non-member who negotiates his own bond has to pay. At the present time, I am informed that the individually-negotiated premium for the £2,000 bond is usually in the range from £10 to £12 per annum. It is reasonable to assume, of course, that unless there were a change in claims experience—that is, in the pattern of defaults I referred to earlier—an increase in the liability from £2,000 to £5,000 would not cause a proportionate increase in the premium.
The House will appreciate that insurance companies do not like giving quotations in a vacuum so to speak and it has not been possible to obtain any firm figure of what would be the immediate effect, on premiums, of an increase in the deposit from £2,000 to any other specified figure. However, I did succeed in getting an informal estimate that, on present claims experience, a typical premium for an individually-negotiated bond of £5,000 might be around £22, as compared with the present £10 to £12 premium for a bond of £2,000. It is to be expected that a reduction for a group premium would continue to be available. I may say this figure of £22, as compared with the present figure of £10 to £12, was higher than I had expected but it was not given as a firm estimate but only as a rough guide.
This increase in the deposit should go a long way towards protecting the interests of clients but, quite obviously, as I have said, it does not protect them fully. In order to provide fuller protection, therefore, I am proposing in this Bill that auctioneers, like solicitors, should be required to keep clients' money separated from their own. May I make clear, in passing, that this does not mean that a separate account has to be opened for each client but if an auctioneer wishes to open a special account for a particular client, or for particular transactions with a client, he may do so.
The Bill also proposes to require auctioneers to keep properly written up such records as are necessary to show their dealings with clients' moneys. As I mentioned earlier, these are elementary requirements which any auctioneer should observe in his own interests, but no doubt there are some who are careless in these matters and what begins in carelessness can end in fraud. By requiring these accounts to be kept, the Bill will make it difficult for a person to drift into a situation from which he might find it impossible to recover. It would be foolish to claim that these provisions will make fraud impossible but we can reasonably hope that, by legislating against carelessness, we will reduce fraud as well.
The details in the Bill governing the payment of clients' moneys into the client account and the making of withdrawals follow the general lines of the Solicitor Accounts Regulations made by the Incorporated Law Society under the Solicitors Act, 1954. There are, however, some differences between the Bill and the Solicitors Accounts Regulations—in general, one can say that the provisions of the Bill are less elaborate. It is not necessary to have provisions in relation to auctioneers' accounts that are as elaborate as those relating to solicitors because an auctioneer, doing business as such, does not have to act in so many different ways on behalf of clients as a solicitor does. For instance, it is not necessary to have special provisions relating expressly to trust accounts or the like.
A requirement that separate accounts must be kept raises the question of enforcement. It is possible to envisage some kind of system of official inspection but I do not think such a system would be justified or necessary. Obviously it would involve the appointment of some kind of inspectorate as it is not the kind of job for which the Garda Síochána would be suitable. The proposal in the Bill is to adopt, with the necessary modifications, the system already incorporated in the Solicitors Act, 1960, for the submission annually of an accountant's certificate. This certificate would be submitted to the District Court when the annual application for renewal of the auctioneer's certificate of qualification was being made.
It goes without saying that this will involve some cost for auctioneers, but I think it will be generally agreed that the time has come when additional safeguards for clients are essential and, even from the auctioneer's own point of view, this proposal to require production of an accountant's certificate is the most satisfactory way of securing compliance with the law. It involves the minimum interference with his business and, by reducing the likelihood of defalcations, it will operate to the benefit of all auctioneers by helping to keep down the premiums which they are required to pay for the guarantee bond.
The other provisions of the Bill, governing such matters as the distribution of the available money in the event of bankruptcy can, I think, properly be described as matters of detail, though admittedly important detail for persons whose interests the provisions are designed to protect. Broadly speaking, these provisions follow the lines of the corresponding provisions of the Solicitors Act, though some additions and changes were needed to take account of the difference between the two businesses. I should like to mention here that I have had the benefit of the expert advice of the Bankruptcy Law Committee on these particular provisions, and I am most grateful to them.
I think that covers all the main points and it only remains for me to commend the Bill to the House.
