High Court’s e-Lelong: An Alarming Insight about Raising Integrity

I used to think live auction is just a show. However, I have since watched many auctions and I can safely say that if conducted professionally and publicised well to the public, an auction helps all stakeholders to maximise the value of the asset being auctioned. In fact this should be the sole reason for a public auction. It must be publicised and all members of the public must have the same access to the auction. This is the reason why auction announcements would be made in national media. Else, everything could have just been sold to anyone at any price. It would be faster but it would definitely not be fairer. Recently, the High Court of Malaya started e-Lelong. It was supposed to raise integrity and make the auctions be as open and as transparent as possible to the public. I think it is good to also understand that just making it online does not mean that it is more open and more transparent. Let’s read the press release from Mr. Stephen Soon the chairman of the Penang Auctioneers Association about the High Court’s e-Lelong.

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High Court’s e-Lelong: An Alarming Insight About Raising Integrity

“e-Lelong will raise integrity of court auction”, says the newly appointed Chief Justice, Tan Sri Md Raus Sharif as reported by TheEdgeProperty.com on 27 July. As an auctioneer for the past 13 years as well as in my capacity as the Chairman of Penang’s Auctioneer Association, allow me to ask for more clarifications professionally.

Court auction is a foreclosure procedure governed under the National Land Code 1965 which empowers high court to carry out public auction on behalf of the chargee (or lenders), mostly banks, to dispose off the defaulters’ encumbered real estate asset, assisted by its appointed licensed auctioneers. Licensed auctioneers are responsible to handle document preparation, checking and inspecting property, posting public notice, handling enquiry, customer service, sale and marketing, and so on. This profession acts as a medium between all the parties, especially the general public who needed advice and guidance to bid. During the auction day, the auction will be conducted by an auctioneer under the supervision of court officers and witness by the chargee and even the distressed borrower to uphold the primary principle of auction – open and transparent. I support fully the objective of the public auction which is to be open and transparent. As auctioneers, we are here to ensure the auction is fair to all parties.

The word Integrity is defined by www.dictionary.com and www.oxforddictionaries.com as adherence to moral and ethical principles; soundness of moral character; honesty. The definition is broadened in its synonyms as uprightness, rectitude, honorableness, good character, principle, decency, fairness, sincerity, truthfulness, trustworthiness, etc. Obviously integrity is beyond just being honest. For the Chief Justice to equate integrity with its e-Lelong system, Tan Sri must be having a high confidence with the e-Lelong system. However is e-Lelong worthy of the word integrity?

Please allow me to point out a few facts which needs some further clarifications using actual numbers. My aim is the same as what the Chief Justice is aiming to achieve; open and transparent.

 

The Chief Justice (CJ) said e-Lelong will attract more bidders to bid. Where online bidders are concerned, it is everything about exposure. The BEST website design is NOT effective if no one knows about it. With the right marketing and promotions, it should reach more buyers. My question is, do the High Court maintains a database of potential buyers? If yes, may I know which department is keeping and growing this database? If no, how can e-Lelong says that it will attract more bidders? Are there already processes in place to achieve this? Let us be fair to all potential buyers by telling everyone about it.

In terms of online bidder readiness, especially because of the big amount involved when it comes to property purchase, let me quote the Internet Users Survey 2016 by the Malaysian Communications and Multimedia Commission (MCMC). It shared that among the online activities by Malaysians, only 35.3% will do e-shopping. And within this percentage, the purchase is entirely for consumer products and property is not even listed. As an online shopper myself, I am very sure the number of buyers purchasing online may increase but seriously, I am not going to start my first online purchase with a property worth a few hundred thousands of Ringgit.

I have also randomly interviewed 20 general public with this question, “Have they ever participated in an auction bidding before.” 100 percent of their reply was an emphatic No. I think we do not need to ask them about online property bidding. Obviously I could not ask more when one does not even have a basic understanding about auction. It will be hard for e-Lelong to attract a larger participation from the general public for its 100% online auctions.

 

The CJ said the online system will have positive impact not only on the courts but also on the public who are bidders, the financial institutions and property owners (distressed owners). I hope that e-Lelong can provide more substantial evidence showing this to be happening. Bidders want to bid in a non-manipulative environment, financial institutions and property owners (distressed owners) would definitely prefer to have a higher number of bidders. There is one advantage of e-Lelong. The courts are becoming better administratively since online allows everything to be completed without lots of manual paperwork. The question is whether it is fair to all the stakeholders concerned? Does it help to recover more debts for the financial institutions when there are lesser bidder participation? Does it help the bidders who is non-internet user to own a house? Does it help the distressed owners to reduce more financial burden if his property is not selling at the highest possible price?

 

The CJ emphasized that e-Lelong will improve the efficiency of the entire bidding system. Frankly speaking, I have been dealing with the court auction administrative matter for years, it is nothing new that “system down” was a frequent occurrence even with the e-filing system, e-documents or instructions wrongly sent and mixing up of e-filing document delivery. All these are always causing huge inconveniences to the stakeholders and the general public who wants to become bidders.

Auction should be open to as many bidders as possible. If we limit it to only those with online access, this is no longer a “public auction.” I believe it could be called restriction with no liberty to bid. Article 8(1) of the Federal Constitution says that all persons are equal before the law and entitled to the equal protection of law. However, the abstruse and intricate e-LELONG is strictly discriminatory by nature. May we have a system which is more open and transparent at the same time?

 

The CJ further said that e-Lelong increases the chance for the public to own a property without pricing manipulation. Frankly I am trying to find a logic of this statement. According to the National Land Code 1965, court auction is managed, administered and controlled fully by the courts. And public auction is an open and transparency process that involve competitive bidding to be sold only to the highest bidder. As such how could pricing manipulation possibly arise under the court system? What would be the purpose for such manipulation since the court is only conducting the auctions as a neutral party to all stakeholders?

 

The CJ further said that with e-Lelong, the bidder’s identity is not disclosed to enable bidders to bid without interference. Under the current court auction system, bidder registration process is the sole responsibility of the court officers and auctioneers will only be revealed on the bidder’s identity upon commencement of auction. Therefore, even without e-Lelong, there is no question on bidding interference. However, technical interference may possibly happen to the e-Lelong platform with bugs, system malfunction, connection issues, slow network communications and intermittent disconnections.

 

The CJ claimed that the manual process involves many parties – court officers, bidders, licensed auctioneers and financial institutions. It is a complicated and time-consuming process. Well, be it online or manual process, the stakeholders are still the same stakeholders. Involvement of all the stakeholders are the requirement under law. Can the court do away with it for its own convenience? The courts are merely executing the order for sale that was filed by the financial institutions (the plaintiffs and the key stakeholder). Thus, their rights (all parties) must be protected under the law.

Claiming manual auction is complicated and time-consuming process is not a valid argument. Since we are talking about actual real estate properties, shouldn’t bidding or purchasing of real estate properties require more due diligence than bidding for a consumer item? Property buying needs more time for proper consideration. Does the Court ever consider the public perception towards e-Lelong when even the normal buying of a property takes time too? Any implementation of public policy should first consider its public accessibility, in this case, it is the stakeholders’ accessibility. Bidders must be prepared, understand the whole auction process well, feel positive and comfortable to bid. The property to be auctioned deserves to be given reasonable time to be marketed to reflect its real demand during an auction. It should not only to enable the court’s process to be faster.

With e-Lelong and without auctioneers, it will be like buying a property without any inspection, searches, consultation, guidance and advice. The court officers are well versed with the court procedures but certainly not the right people to guide buyers through a pleasant auction process. With the DO-IT-YOURSELF (DIY) process for e-Lelong, the entire risk falls on the bidder. This is unlike manual bidding where everyone could see for themselves what was really happening right before their eyes. e-Lelong is however operated from behind any scrutiny and the court will certainly not be responsible for any disruption, delay, failure, mistake or loss of information that is submitted via the electronic platform. Therefore, e-Lelong will certainly bring more benefits to court but not necessarily to the bidder. As such, will open and transparency prevail in e-Lelong?

Is e-Lelong really the best replacement for manual auction of properties? Until today, two of the world’s most famous auction houses, Christies’ and Sotheby’s are still conducting auctions manually and this has continued to help them set record-breaking auctions.

These two auction giants conduct their auctions using BOTH the manual and online. Even as the bidders are bidding at live events which is the main platform, those from faraway places would have access to an online bidding platform. These two modes, happening at the same time meant it is harnessing the benefits of accessibility for all; open and transparent at the same time. Bidders, whether those present at the live events or those who were bidding online were competing against one another for the same item, at the same time!

In Malaysia, this method has been officially and effectively implemented since two years ago when Bank Negara Malaysia started the auction of Malaysian Banknotes with Special Serial Number. It is true that each method, whether manual or online has their own advantages and disadvantages. Perhaps a better way is to expand and implement the dual-bidding mode from the successful banknote auctions to cover the property auctions as well.

In conclusion, I wish to say that we agree that there must be a higher degree of integrity for all auctions, not just for property or banknotes but any asset auction which is to be fairly implemented for the public. In fact, I think everyone would agree that regardless of the mode, it is important that all the stakeholders benefit from it. It should be more open and transparent too. Raising integrity? I agree. Doing it Legally, Completely and NOT with Exclusivity.

 

Stephen Soon (Call / Whatsapp 016-723 1440 for further clarification)

Chairman,

On behalf of Penang Auctioneers Association

— end of press release —

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