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Standing Committee D
Thursday 13 December 2001
[Mr. Eric Illsley in the Chair]
The Chairman: The Committee is suspended until 9.50 am.
The Chairman: I have to inform the Committee that I have selected Government amendment No. 88, even though the amendment is starred and it is not the normal practice of the Chair to select starred amendments. The amendment removes a clause that is inserted as a matter of course in Bills that originate in the House of Lords to ensure that the Lords cannot infringe the privileges of the House of Commons. Through an oversight, the Government tabled the amendment only yesterday. I hope that the Committee will agree that, in these circumstances, it is for the convenience of the Committee that I shouldwithout setting any precedentselect this entirely procedural amendment.
Mr. William Cash (Stone): On a point of order, Mr. Illsley. I am happy to accept the amendment. However, I hope that we can do a trade-off between this and the anti-terrorism amendments that are going through the House of Lords at the moment.
The Chairman: Fortunately, for the benefit of the Committee, that is not within my gift.
Duty to disclose unregistered interests
Mr. Cash: I beg to move amendment No. 57, in page 25, line 21, at beginning insert
'(1) Subject to subsection (2),'.
The Chairman: With this it will be convenient to take amendment No. 58, in page 25, line 32, at end insert
'(2) The obligations imposed by subsection (1) apply only to the extent that the information is within the actual knowledge of the person making the application or that person could reasonably obtain the information.'.
Mr. Cash: I am sorry to hear that the Minister is not well. I hope that nothing that I say today will make him feel any worse.
The object of the amendment is to ensure that no one should be obliged to give information that he has not got or could not reasonably get, particularly if failure to fulfil that obligation might prejudice him in later proceedings about the accuracy of the register. If the information that is supplied is patently deficient,
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the registrar will make an appropriate entry on the register. The amendment should really be by reference to a previous amendment, which says ''subject to subsection (2)''. It is purely a drafting matter.
It is reasonable that an applicant for registration should make full disclosure. The consequences of not disclosing something that should have been disclosed are serious. The applicant may not qualify for an indemnity if, as a consequence, the register is wrong. The Committee will appreciate that this is a serious matter. I understand that the Law Society is keen to ensure that, in fairness, the consequence should not follow from failure to disclose something that the applicant neither knew nor could reasonably have known. This might not be a very extensive amendment, but the matter is serious, and, unless I am satisfied by the Minister's response, I propose to divide the Committee.
The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills): I start by thanking you, Mr. Illsley, and all hon. Members, for your indulgence of my rather frail state of health. I apologise for any inconvenience that the delay has caused.
I understand the concerns of the hon. Member for Stone (Mr. Cash). However, we shall resist the amendment for a fundamental reason: the Bill is considerably clearer and more succinct than its predecessor. In many ways, it represents a triumph of drafting. It achieves that by stating only that which is necessary to achieve the intended aim. We want to create a register that is viewable online, and which is as complete and accurate a reflection of the state of title to land as is possible.
To help to achieve that objective, all express dispositions to registered land will have to be appropriately protected on the register, unless there are very good reasons for not doing so. Clause 71 creates for the first time a duty to disclose interests that are overriding, either on first registration or a disposition of registered land. There is no question of trying to make someone disclose material that they do not have.
The additional words that the amendment would add are unnecessary and go against our wish to keep the Bill as uncluttered as possible. We have no intention of imposing on conveyancing practitioners a greater burden to investigate matters affecting land than they already carry in representing their clients' interests.
I hope that that explanation will give the hon. Gentleman sufficient reassurance to enable him to withdraw the amendment.
Mr. Cash: I am not entirely satisfied by that, nor indeed by the non-appearance of my hon. Friends. No doubt they are approaching as fast as the American marines are trying to track down Osama bin Laden.
I shall reiterate my concern in the hope that it will have an impact on the Minister. No one should be obliged to give information that they have not got or
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could not reasonably get, especially if failing to fulfil the obligation might prejudice them in later proceedings about the accuracy of the register.
I am grateful to you, Mr. Illsley, for your indulgence in allowing me to repeat myself. As you will have noted, I have not done so before. Given the circumstances, I intend to divide the Committee.
Question put, That the amendment be made:
The Committee divided: Ayes 4, Noes 7.
Division No. 4]
Cash, Mr. William
Hoban, Mr. Mark
O'Brien, Mr. Stephen
Sanders, Mr. Adrian
Barnes, Mr. Harry
Marsden, Mr. Gordon
Stringer, Mr. Graham
Wills, Mr. Michael
Question accordingly negatived.
Clause 71 ordered to stand part of the Bill.
Clause 72 ordered to stand part of the Bill.
Mr. Cash: I beg to move amendment No. 60, in page 26, line 27, leave out from 'only' to 'may' in line 29 and insert 'a person who can demonstrate that he is entitled to be the benefit of the caution.'.
The Chairman: With this it will be convenient to discuss amendment No. 61, in page 26, line 27, leave out from 'only' to 'may' in line 29 and insert 'a person who can demonstrate that he is entitled to be the benefit of the caution.'.
Mr. Cash: This is a short point. In essence, the amendments would ensure that all those who are entitled to the benefit of a caution are in a position to object to an application to cancel a caution and that all those who are entitled to the benefit of a notice are able to object to an application to cancel a unilateral notice.
Mr. Wills: Amendments in another place widened clause 73 to enable the Lord Chancellor to make rules to specify who is entitled to make such an objection beyond the person who lodged the caution in the first place. Although detailed consideration has yet to be given to the content of those rules, I am happy to assure the hon. Gentleman that they will include those who can establish that they would be entitled to benefit from a caution. We must give careful thought to the detail. Where common situations arise it might be possible expressly to address the situation in the rules, listing the specific persons who will be able to apply. Equally, the rules might say instead or as well that objections may be made by any person who satisfies the registrar that they are entitled to object.
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I hope that the hon. Member for Stone will agree that in situations that are often complex it is important to preserve flexibility, and the clause as currently drafted provides that. For that reason and in the light of the assurance on the making of rules that I have given, I hope that the hon. Gentleman will now withdraw the amendment.
Mr. Cash: I am grateful to the Minister for that assurance. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 73 ordered to stand part of the Bill.
Clauses 74 to 90 ordered to stand part of the Bill.
Electronic dispositions: formalities
Mr. Cash: I beg to move amendment No. 64, in page 33, line 5, leave out paragraph (c).
The Chairman: With this it will be convenient to take the following:
Amendment No. 65, in page 33, line 15, at end insert
'', and, for the purposes of section 7 of the Trustee Delegation Act 1999 (c. 15), the agent is to be treated as the attorney of the principal appointed under a power of attorney.''.
Amendment No. 66, in page 33, line 15, at end insert
''only if he has previously obtained actual authority in signed writing from his principal; and in the absence of such actual authority, the principal may subsequently ratify the authentication of his agent.''.
New Clause 1Solicitors' Act 1974
''Solicitors Act 1974
Amendment. No. 67, in schedule 5, page 53, line 18, leave out paragraph (a).
For the purposes of section 22 of the Solicitors Act 1974 (c. 47)
(a) a document in electronic form is an instrument, and
(b) obtaining access to a network provided under section 92(1) for the purpose of seeking an alteration in the terms of the register or of submitting a document in electronic form is making an application or lodging a document for registration under this Act at the land registry.''.
Amendment No. 68, in schedule 5, page 54, line 16, leave out paragraph 6.
Amendment No. 69, in schedule 5, page 54, line 27, leave out paragraph 8.
Amendment No. 85, in clause 91, page 33, line 5, after ''certified'', insert
''( ) each electronic signature was made by, or with the authority of, the person whose signature it purports to be,''.
Mr. Cash: This is a substantial group of amendments, and it will take a little time to go through them.
The object of amendment No. 85 is as follows. Users of the conveyancing system, including not only members of the public buying a home but commercial enterprises and inward investors buying factories and offices in England and Wales, and the conveyancers
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acting for them, should not be left in doubt about whether a forged or impersonated signature might be held as binding on them. The law should make it clear that, in the case of electronic documents as in the case of paper ones, individuals, firms and companies are not liable when they have neither made nor authorised the signature.
Organisations that provide electronic access to facilities have developed a practice of transferring to the user of the facilities the risk of forgery of the access control code. By their examples, we offer the access terms of the providers of access to the national land information system, and the statutory terms applicable to electronic filing of income tax and value added tax returns. For example, Searchflow has said:
''The Customer warrants that it/he/she will keep confidential and secure all user names and passwords used in relation to the Services and accepts that use of a user name and password allocated to a Customer shall constitute sufficient authority to the Company to perform the Services and be entitled to payment for so doing.''
Teramedia has said:
''You [the customer] are responsible for all use, activity and charges associated with or arising out of your use of Territorium, including any unauthorised charges or use by a third party using your subscription, user name and/or password.''
MacDonald Dettwiler has said:
''You will be liable for all charges incurred through the use of your TransAction Online Password.''
The Value Added Tax (Amendment) Regulations 2000 (SI 2000 No. 258) state that
''the person making the return to the Controller shall be presumed to be the person identified as such by any relevant feature of the electronic return system.''
The Income Tax (Electronic Communications) Regulations 2000 (SI 2000 No. 945) as amended by the Income Tax (Electronic Communications) (Miscellaneous Amendments) Regulations 2001 (SI 2001 No. 1081) states:
''If it is necessary to prove, for any purpose, the identity of
(a) the sender of any information delivered by means of electronic communications to an official computer system, or
(b) the recipient of any information delivered by means of electronic communications from an official computer system,
the sender or recipient (as the case may be) shall be presumed to be the person recorded as such on an official computer system unless the contrary is proved.''
A common feature of all these examples is that if someone other than the user is able to impersonate the user successfully by obtaining control of a copy of the user's access mechanism, the user is either bound by the consequences, or in the last case, carries the burden of rebutting a presumption of responsibility.
Access mechanisms may take the form of a user ID combined with a password or cryptographic key, or a number of other mechanisms. For the purposes of any practical scheme of electronic conveyancing, all such mechanisms involve supplying the password, key or other security data to a PC which forms part of the computer network that also has access to the internet. There are no available secure operating systems for PCs and the security risks to which they are vulnerable are notorious, and have been authoritatively expounded by no less an institution than the National Security Agency in the United States. A book entitled, ''The Inevitability of Failure: The Flawed Assumption
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of Security in Modern Computing Environment. Proceedings of the 21st National Information Systems Security Conference HTTP://csrc.nist.gov/nissc/1998/proceedings/paperF1.pdf, October 1998.''
The risk of surreptitious copying of security information from a PC, or its subversion to carry out transactions other than those apparent to and intended by the user, are risks that solicitors' firms are in no position either to eliminate or to bear.
We are not aware of any cases where attacks of this kind have yet been carried out. By no means are all cases reported, but it should be noted that comparatively few systems are yet available to be attacked by these means, which offer opportunities comparable in value to those which would arise in electronic conveyancing. The criminal community is alert to use impersonation to exploit security weaknesses where they appear, as is illustrated by an article in the Financial Times on 16 October 2001, by James McIntosh, entitled, ''New code aims to help stamp out share theft''. He writes:
''In an attempt to eradicate a multi million pound crime involving the theft of shares, stockbrokers and share registrars have agreed on a new code of practice. More than GBP 2 million worth of shares have been stolen by criminals impersonating shareholders and telling registrars they have moved house so that they are given a replacement share certificate which enables the shares to be sold on. The code, which is being kept confidential, will list warning signs for brokers and registrars so that checks can be made more easily on suspicious transactions.''
For these reasons the Law Society would regard it as unacceptable for solicitors to carry the risk of their electronic signature keys being obtained and misused by third parties. The use of presumptions in statutory terms and their contractual equivalents, should be ruled out by clear statutory language such as we have proposed. The effect should be that, as is the case for paper documents and their signatures, it is for the relying party to prove that a disputed signature was made by or with the authority of the purported signatory. That is consistent with the law as it applies to paper documents, and with the Australian legislation to which we have referred. This provision should be of general application to conveyancing documents, whether or not they purport to be executed by solicitors or agents.
When the relevant amendment was moved in the House of Lords, my noble Friend Baroness Buscombe stated:
''If technology is developed which can effectively eliminate the risk of the user being impersonated, then relying parties will find their burden of proof easy to discharge. We believe that currently available technology is very far from succeeding in this objective, even having regard to proposals for smart cards or biometric identifiers. Relying parties face real risks in accepting electronic signatures, which may amount to undetectable forgeries, but it would be wrong as a matter of policy to allow them to solve the problem by transferring the risks to purported signatories. Where relying parties are major institutions, such as the Land Registry, other government agencies or financial institutions, they are far better placed than firms of solicitors . . . to promote the development of technology to eliminate the risks. That is a further reason for ensuring that they continue to carry those risks.''[Official Report, House of Lords, 8 November 2001; Vol. 628, c. 313.]
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Before turning to new clause 1, I shall deal with amendment No. 65. The Trustee Delegation Act 1999 reinforced the two trustee rules in the Law of Property Act 1925 by providing that it was not satisfactory for a single attorney to act for two trustees. That consumer protection should not be sacrificed when electronic transfers are executed. The 1925 Act put in place some ineffective consumer protection by ensuring that some transactions could only be done by at least two trustees, the idea being that one such person could not access somebody else's money. The Trustee Delegation Act sought to bolster that by preventing one person being appointed the attorney for two joint owners, which would mean that that person acted for two trustees and therefore nullified such protection as there was. The Law Society seeks through this amendment to ensure that electronic disposition arrangements do not undermine this recently strengthened consumer protection.
New clause 1 relates to section 22 of the Solicitors Act 1974. It aims to establish consumer protection that would limit technical Land Registry work to solicitors and certain other conveyancing professionals. Licensed conveyancers are authorised by section 22 of the Solicitors Act 1974 by virtue of section 11(4) of the Administration of Justice Act 1985. All professionals entitled to carry out conveyancing are therefore treated equally by the amendment, which would mean that consumer benefits are extended as widely as possible. Current registration restricts the right to do technical land registration work for payment to suitably qualified professionals. Although the restriction appears in the 1974 Act, licensed conveyancers and others qualified and authorised to do conveyancing are included. It would be wrong if the introduction of electronic conveyancing weakened this consumer protection. Although the Law Society proposal seeks to extend the current provision to ensure that it covers new forms of working, its intention is to maintain the status quo.
Rather than taking the Committee through every detail of amendments Nos. 67, to 69, I refer hon. Members to pages 53 and 54 of the Bill. Amendment No. 67 would leave out paragraph 2(2)(a) to schedule 5, which deals with questions relating to terms of access. It is not necessary for the Committee's convenience for me to read it all out because it is there on the record. Amendment No. 68 deals with the overriding nature of network access obligations and proposes leaving out paragraph 6 to schedule 5. Amendment No. 69 deals with presumptions of authority and seeks to leave out paragraph 8.
Amendment No. 85 is a new amendment dealing with electronic signatures. Although it was included as a later amendment, I opened my remarks with it because that was the natural sequence in which I wanted to discuss matters. We are dealing with complicated amendments. The manner in which you have grouped them, Mr. Illsley, has a certain amount of coherence, but that does not alter the fact that the
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topic is complicated. I hope that I have adequately explained to the Committee what we have in mind and I would be grateful for a response from the Minister.