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Baroness Buscombe moved Amendment No. 72:

The noble Baroness said: My Lords, I shall be even briefer. The amendment would simply ensure that all applications were protected, not just those for value. I beg to move.

Baroness Scotland of Asthal: My Lords, I shall emulate the brevity of the noble Baroness. I assure your Lordships that we intend to apply the clause to any application, whether or not of value, to which a priority period is attached.

Baroness Buscombe: My Lords, on that basis, I wish that the Minister would accept the amendment. However, as she is clearly not inclined to do so, with some sadness I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 [Objections]:

Baroness Buscombe moved Amendment No. 73:

    Page 26, line 32, leave out from "only" to "may" in line 33 and insert "a person who can demonstrate that he is entitled to be the benefit of the caution"

The noble Baroness said: My Lords, I shall try again, and shall speak to Amendments Nos. 73 and 75 together. Simply put, their purpose is to ensure that all those who are entitled to the benefit of the caution, in addition to personal representatives, may object to an application to cancel a caution. Indeed, Amendment No. 75 would ensure that all those entitled to the benefit of the notice may object to an application to cancel a unilateral notice. I beg to move.

Baroness Scotland of Asthal: My Lords, government Amendments Nos. 74 and 76, which we have already debated, deal better with the issue than would these amendments. The government amendments address the concerns raised by Amendments Nos. 73 and 75, but have the advantage of retaining a degree of flexibility further to clarify the application of Clauses 73(2) and 73(3) in rules. For that reason, I invite the noble Baroness to withdraw the amendment, and commend the government amendments to the House.

Baroness Buscombe: My Lords, I thank the Minister for her response and her reference to earlier amendments that cover rules that may be applied in future. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Scotland of Asthal moved Amendment No. 74:

    Page 26, line 33, leave out "his personal representative" and insert "such other person as rules may provide"

On Question, amendment agreed to.

[Amendment No. 75 not moved.]

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Baroness Scotland of Asthal moved Amendment No. 76:

    Page 26, line 36, after "relates" insert ", or such other person as rules may provide,"

On Question, amendment agreed to.

Clause 80 [Compulsory registration of grants out of demesne land]:

[Amendments Nos. 77 and 78 not moved.]

Clause 86 [Bankruptcy]:

Lord Bassam of Brighton moved Amendment No. 79:

    Page 31, line 6, leave out "limitation under section 284" and insert "effect"

The noble Lord said: My Lords, Amendments Nos. 79 and 80 amend the effect of Clause 86 and I shall deal with them together. Clause 86 addresses a situation in which a sole registered proprietor of land or a charge becomes the subject of a bankruptcy petition or a bankruptcy order. The clause ensures that the title registers on which it appears that that individual, the subject of bankruptcy proceedings, is the sole registered proprietor of a registered estate or charge for his or her own benefit contain an entry recording that fact. Such entries are routinely made under the present system.

Under the existing system, when a debtor is adjudicated bankrupt and a bankruptcy order is made against him, the registrar is then required to enter a bankruptcy inhibition which totally blocks any dealing with the property by the registered proprietor until the inhibition is removed. The Bill prospectively abolishes inhibitions and provides instead that the registrar will enter a restriction. A restriction is a more flexible entry than an inhibition and can be used to block all or only some of the owner's powers to deal with the land.

A restriction must be entered in any case where the owner's powers are limited. If no restriction is entered, a person acquiring title from the registered proprietor would take free of any limitation on the powers of disposal.

In the case of the making of a bankruptcy order, Clause 86 as drafted requires the registrar to note the effect of Section 284 of the Insolvency Act 1986 which prevents a sale by the registered proprietor during the period between the issue of the bankruptcy petition and the making of the bankruptcy order, unless sanctioned by the court.

What the amendments do is place the registrar under a wider obligation to reflect the effect of the Insolvency Act 1986 more generally. This means that the registrar must also record the fact that the registered proprietor is unable to deal with the property at all following the vesting of the title to the property and the trustee in bankruptcy. Although this action by the registrar was permitted by other provisions in the Bill and the intention of the registrar from the outset, this fact is now apparent on the face of the Bill.

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In the light of those observations and the clarity that the amendments bring, I commend them to your Lordships' House.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendment No. 80:

    Page 31, line 7, leave out from "(c. 45)" to end of line 8.

On Question, amendment agreed to.

Clause 91 [Electronic dispositions: formalities]:

Baroness Buscombe moved Amendment No. 81:

    Page 33, line 15, leave out paragraph (c).

The noble Baroness said: My Lords, in moving Amendment No. 81, I shall speak also to Amendments Nos. 83 to 87 and 89. They relate to Clauses 91 and 92 which deal with electronic conveyancing and the land registry network. It is a key area which goes to the heart of the Bill.

As the Government know, we on these Benches are most supportive of the introduction of electronic conveyancing. Our concerns relate to the mechanics of the system and the security of transactions. We note the Government's response to suggestions that we advanced in Committee and we welcome them. However, we continue to have concerns and I shall now turn to some of them in detail.

The system needs to be secure in order to retain the confidence not only of the public in their house-buying processes but of commercial enterprises and inward investors buying factories and offices in England and Wales. Therefore, individuals, firms and companies should not be liable where authority was not actually given.

Organisations which provide electronic access to facilities have developed a practice of transferring to the user of the facility the risk of forgery of the access control code. By way of example, we offer the access terms of the providers of access to the National Land Information System and the statutory terms applicable to the electronic filing of income tax or value added tax returns.

Searchflow, for example, states:

    "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, for example, states:

    "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 used by a third party using your subscription, user name and/or password".

Another, MacDonald Dettwiler, states:

    "You will be liable for all charges incurred through the use of your TransAction Online Password".

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

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the consequences or carries the burden of rebutting a presumption of responsibility. Access mechanisms may take the form of a user ID combined with a password, or a 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 personal computer which forms part of the computer network which also has access to the Internet.

There are no available secure operating systems for personal computers and the security risks to which they are vulnerable are notorious. The risk of surreptitious copying of security information from a personal computer or its subversion to carrying out transactions other than those apparent to and intended by the user are risks which solicitors' firms are in no position either to eliminate or to bear.

For those reasons, we can confirm that, for example, 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 and statutory terms and their contractual equivalents should, in our view, be ruled out by clear statutory language such as we propose. Its effect should be that it is for the relying party to prove that a disputed signature was made by or with the authority of the purported signatory.

In particular, the purpose of Amendment No. 81 relates to the Trustee Delegation Act 1999, which reinforced the two trustee rules in the 1925 legislation by providing that they are not satisfied by a single attorney acting for the only trustees. That consumer protection should not be sacrificed when electronic transfers are executed. The 1925 property legislation put in place some, though we suggest not very effective, consumer protection by ensuring that some transactions can be done only by at least two trustees so that one alone does not have access to someone else's money. The Trustee Delegation Act 1999 sought to bolster this by preventing one person being appointed the attorney of two joint owners (so that one person acted for two trustees and nullified such protection as there was). We seek to ensure that the electronic disposition arrangements do not undermine this recently strengthened consumer protection.

Amendment No. 85 is a probing amendment which seeks to ascertain the Government's reasons for making the system compulsory. Certain of these are understood, especially those relating to a time in the future when perhaps most conveyancers are using this system, but in the early stages who will be the pioneers if they are not able to return to using a paper system when it does not work as envisaged? What will happen by way of back-up when the systems go down? This was a matter to which my noble friend the Duke of Montrose referred in Committee.

I turn to Amendment No. 86 which is a probing amendment to seek confirmation that solicitors/conveyancers and conveyancers generally will not be obliged to override client confidentiality. I believe that I have covered the gist of Amendment No. 86.

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In Amendment No. 89 we propose a new clause after Clause 93, the purpose of which is as follows. The established consumer protection which limits technical land registry work to solicitors and certain other conveyancing professionals should be continued when a land registry network is established. Licensed conveyancers are permitted to undertake the acts authorised by Section 22 of the Solicitors Act 1974 by Section 11(4) of the Administration of Justice Act 1985. All professionals entitled to carry out conveyancing are, therefore, treated equally by this amendment, so extending the consumer benefits as widely as possible.

Current legislation restricts the right to do technical land registration work for payment for other people to suitably qualified professionals. Although the restriction appears in the Solicitors Act, licensed conveyancers and others qualified and authorised to do conveyancing are included. We believe it would be wrong if the introduction of electronic conveyancing weakened this consumer protection. Our proposal seeks to extend the current provision to ensure that it covers the new forms of working. The intention, therefore, is to maintain the status quo. I beg to move.

7.30 p.m.

Baroness Scotland of Asthal: My Lords, the difference between noble Lords opposite and the Government may be one of emphasis as opposed to substance. In speaking to Amendment No. 81 I shall speak also to Amendments Nos. 82 to 87 and Amendment No. 89 inclusive. The common theme of this group of amendments is the development and growth of electronic conveyancing. Within this broad theme there are several more specific topics. Amendments Nos. 81, 83 and 84 relate to the creation of electronic conveyancing documents under Clause 91 and Amendments Nos. 85, 86 and 87 to the use of the land registry network referred to in Clause 92. I understand the importance that noble Lords attach to these matters. I hope, therefore, to deal as fully as I can with all the issues that are of greatest concern to noble Lords.

I start with Amendment No. 82. This takes up a point raised by the noble Lord, Lord Goodhart, in Committee. The amendment will extend the application of Clause 91(6) to the authentication of an electronic document as agent by companies and other bodies corporate as well as individuals. For example, a firm of solicitors incorporated as a limited liability partnership will be able to benefit from the deeming provision in Clause 91(6). This amendment removes any artificial and unnecessary limitation on the scope of this clause. I express gratitude to the noble Lord, Lord Goodhart. Although he is not in his place, I hope that he will read my words. I thank him for spotting the point, and I commend the amendment to the House.

Clause 91(6) is also the subject of Amendments Nos. 83 and 84, but before I turn to them I should first like to consider Amendment No. 81. The amendment seeks to amend Clause 91(3). This subsection specifies the conditions that must be satisfied if an electronic document is to be effective under Clause 91. If

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accepted, the amendment would remove the requirement that the electronic signatures of the persons by whom the document purports to be authenticated must be certified. As such a condition could still be introduced in due course under Clause 91(3)(d), the amendment is clearly intended to probe what certification is intended to entail.

In replying I am very conscious that it is simply not possible to give a detailed account, still less a permanent account, of how certification processes will work in detail. It may, however, assist the House if I first explain the terms "electronic signature" and "certification" as used in this context. Both are taken from the Electronic Communications Act 2000. An electronic signature is so much of anything in electronic form as is incorporated into, or otherwise logically associated with, any electronic communication or data, and purports to be so incorporated or associated for the purpose of being used in establishing the authenticity of the communication or data or its integrity, or both. "Authentication" refers to the process of verifying whether a communication comes from a particular person or other source; whether it is timed and dated; and whether it is intended to have legal effect. "Integrity" refers to the process of identifying whether there has been any tampering with, or other modification of, the communication or data. "Certification" means a statement confirming, first, an electronic signature, and, secondly, the means of producing, communicating or verifying the signature, or a procedure applied to the signature which either alone or with other factors is a valid means of establishing the authenticity or the integrity of the communication or data signed electronically, or both.

The requirement of a certified electronic signature is a bare minimum. The definition is intended to allow for a multiplicity of forms of electronic signature and certificate, and it is an onerous one. Our present expectation is that electronic signatures will use "dual key", also called "public key", cryptography. It is perfectly possible that in time the market will find better or simpler methods. The requirements to be satisfied in any given transaction will be specified in rules. These rules will undoubtedly change as the market responds to developments in technology.

The essential point is that all these rules will be subject to consultation, because the system which we will put in place must be worked out by extensive consultation with conveyancers and those who will supply the technology to support the system. In the light of this explanation of the approach of the Bill to the development of electronic conveyancing, I hope that the noble Baroness will feel able to withdraw Amendment No. 81.

I turn now to Clause 91(6) and Amendments Nos. 83 and 84. Amendment No. 83 raises the relationship of subsection (6) and Section 7 of the Trustee Delegation Act 1999, while Amendment No. 84 seeks to undo the effect of subsection (6). I shall consider them in reverse order. Amendment No. 84 is intended to probe, as the noble Baroness said, the Government's intentions regarding the role of agents within the electronic conveyancing world. Clause 91(6)

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does not confer authority where none exists. Clause 91 does not create a general presumption of agency; nor does it compel agents to use electronic signatures. It is fundamental to the Government's approach that the electronic conveyancing system must be secure and trusted and that it will be developed in partnership with the stakeholders.

Clause 91(6) is a technical provision intended to remove the need to ask whether an agent had written authority. It is relevant to the statutory provisions that require an agent to be authorised in writing; for example, Section 53(1)(a) of the Law of Property Act 1925 states that no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or--these are the important words--by his agent thereunto lawfully authorised in writing.

Nor will subsection (6) operate in a vacuum. It is likely that, when electronic conveyancing is first introduced, many people will not have their own electronic signatures. They will therefore sign a standard form giving their solicitor or licensed conveyancer express authority to execute any electronic conveyancing documents on their behalf that they have approved. In other words, the only matter that they will be authorising will be the electronic signature on the document. The standard form and the requirements for its use will be specified in the rules relating to the network access agreements under which electronic conveyancing will be conducted.

Amendment No. 84 seeks to undo the effect of Clause 91(6). Essentially the amendment provides that if a document to which Clause 91 applies is authenticated by an agent, the agent will be deemed for the purposes of any enactment to be authenticated as the agent under the written authority of his or her principal if--I repeat, if--the agent had actual written authority to do so or subsequently obtained it. The end result of the amendment would be a regular request for evidence of the authority, making the procedure for electronic conveyancing somewhat less electronic and somewhat more cumbersome than it need be. I hope that in light of those comments the noble Baroness will feel able to withdraw Amendment No. 84.

I now turn to Amendment No. 83. I have listened with great interest to what the noble Baroness has said. However, I shall endeavour to persuade her that the amendment is not necessary and would, if accepted, have an adverse effect rather than providing any useful safeguards.

Section 7 of the Trustee Delegation Act 1999 was enacted by the Government to bolster the protection given to trust beneficiaries. The effect of the section is broadly that the rules of law that at least two trustees must both execute the conveyance and receive the capital proceeds of any sale cannot be circumvented by all the trustees individually delegating their functions to one person under a power of attorney pursuant to Section 25 of the Trustee Act 1925.

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I am happy to confirm that Clause 91 will have no effect whatever on the rule that the proceeds of any disposition must be paid to at least two trustees or to a trust corporation. That rule will continue to apply to protect beneficiaries. Nor does the Bill undermine the protection given by the rule that at least two trustees must execute any deed of conveyance.

I shall now explain why the Bill does not adversely affect the operation of Section 7 of the 1999 Act. It is necessary for me to outline certain legal rules by way of background so that Clause 91(6) can be understood properly.

First, Section 1 of the Powers of Attorney Act 1971 provides that a power of attorney must be made by deed. Secondly, it is a rule of common law that only an agent authorised by deed may execute a deed for his or her principal. However, a deed not only has to be executed, but it must also be delivered. At one time, an agent had to be authorised by deed to deliver a deed as well as to execute it on behalf of his or her principal. However, that rule proved to be highly inconvenient in practice, and it was changed by Section 1(5) of the Law of Property (Miscellaneous Provisions) Act 1989. Under that subsection a solicitor, notary public or licensed conveyancer or their agents or employees is conclusively presumed to have authority to deliver a deed in favour of a purchaser. Thirdly, an individual trustee may only delegate the exercise of his or her trustee functions by power of attorney.

Clause 91(5) of the Bill provides that an electronic conveyancing document authorised under Clause 91 is to be regarded for the purpose of any enactment as a deed. That means that the electronic document itself is not a deed and the rules relating to deeds do not therefore apply to it. It will therefore be possible to authorise an agent to sign an electronic document without the need for a power of attorney. That does not however prevent the parties from creating a power of attorney if they want to or from having to do so if there is another rule of law that applies--for example, if a trustee function is to be exercised by the agent. I think that that is as it should be.

As I explained in relation to Amendment No. 84, Clause 91(6) has a limited effect. It is concerned only with evidential requirements and not the substance of the agency relationship. The true effect of Amendment No. 83 would be to extend the application of Section 7 of the 1999 Act to every electronic document made by trustees under Clause 91. It would require every electronic conveyance or transfer by co-owners of land to be electronically signed by two different solicitors even if in the paper world a power of attorney would not have been necessary and so, Section 7 would not have applied. Some might say that this is just a charter for more lawyers to earn more money. I am sure that that is not anyone's intention.

The amendment would significantly and needlessly increase the expense and complexity of conveyancing. It would be at the very least as inconvenient as the old rule that an agent had to be authorised by deed to deliver a deed. Furthermore, it would provide little in the way of additional safeguards. Where trustees are

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making a disposition, each of them will have to sign a written authority to authorise a solicitor or licensed conveyancer to sign the document electronically on their behalf.

I have sought to reassure your Lordships that the amendment is unnecessary and to explain the reasons that also make it undesirable in the wider context. In the light of those comments, I invite the noble Baroness to withdraw the amendment.

I now turn to Amendments Nos. 85, 86 and 87. The amendments relate to Schedule 5 to the Bill. Amendment No. 85 seeks to remove the power of the Chief Land Registrar to specify, as a condition of access to the Land Registry network, that the network must be used for the transactions specified in the network access agreement. The provision is important because extending the use of the electronic conveyancing system as widely and as quickly as possible will maximise its benefits for practitioners, consumers and the Land Registry.

However, the power is not absolute. First, rules will regulate the terms on which access to the network is authorised. Those rules will only be made following proper consultation, consideration of the possible economic impact of any changes and an affirmative resolution. Secondly, the Land Registry will want to develop the system on an incremental basis with testing and piloting to ensure that the system is robust. It would not be in the interests of the customers or the Land Registry to risk the success of the e-conveyancing project or the integrity of the register by premature implementation. In short, the power in paragraph 2(1)(a) will be exercised only when the time is ripe.

In the meantime, the Government will work with their commercial partners to develop the infrastructure of electronic conveyancing using whatever business vehicles are appropriate to deliver the required outcomes. I cannot, however, emphasise too strongly that the noble and learned Lord the Lord Chancellor and I, and those responsible for detailed planning in the Land Registry, understand that the electronic conveyancing project depends for its success on a partnership with conveyancers. Both sides are confident that it will enable them to give the public a better service. Dragooning conveyancers into electronic transactions before they are ready to do so willingly is unlikely to be productive.

The Bill is intended to create a legal framework in which electronic conveyancing can be fully developed. The fullest development is of course a completely electronic system. The power to require users of the Land Registry network to use the system is a necessary building block. To accept the amendment would be to limit the way in which the system can be developed. In the light of my comments about how the system will be used and developed, I invite the noble Baroness not to move Amendment No. 85.

Amendment No. 86 also relates to the terms of network access agreements. It seeks to delete paragraph 6 of Schedule 5 to the Bill which provides for obligations under such agreements to discharge

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other obligations. I quite understand that this may appear rather striking, perhaps even startling, but when properly understood and taken in context, I do not think that paragraph 6 is unreasonable. Noble Lords may find it helpful to read the explanation provided in paragraph 13.58 of the recent Law Commission report on land registration. It explains succinctly the purpose of this paragraph and the Government share the views expressed. I commend it to noble Lords.

The rules governing network access agreements will of course be subject to parliamentary approval. The House will be aware that, under government amendments which we shall consider shortly, many of those rules will be subject to an affirmative resolution procedure in recognition of the complex and sensitive material with which they will have to deal. That approval will be sought only after an extensive period of consultation, which must include the professional bodies for conveyancing practitioners.

I hope that my comments have reassured the noble Baroness and that I have said sufficient to satisfy her queries in relation to the matter. I invite the noble Baroness not to move Amendment No. 86.

Amendment No. 87 would remove the deemed authority of an agent acting as an authorised person under a network access agreement to sign--that is, to authenticate--an electronic contract or disposition on behalf of his or her principal. This deemed authority exists only in favour of a third party and only if the agent has expressly claimed the authority in the electronic contract or disposition.

The reason for paragraph 8 of Schedule 5 is that there is no general implied authority that an agent may sign a contract or disposition for his or her principal. This means that where an agent signs as such, the other party to the transaction is entitled to call for evidence of the actual authority under which he or she claims to be acting. The requirement for paper evidence of that authority and its delivery would operate to defeat some of the benefits of electronic conveyancing. That reflects the issue that I raised earlier.

I understand that noble Lords are concerned about fraud, but fraud takes place now. Regrettably, it will not cease simply because conveyancing becomes electronic. When it does affect owners of registered land, their lot is indeed happier than that of many others. The Bill, just as the present law, provides a comprehensive system of indemnity and rectification, supported by rights of recourse to the Land Registry against the wrongdoer. Safeguards have been put in place.

I believe that paragraph 8 is a considered and proportionate measure. It will be of practical benefit and will not expose consumers to undue risk. I hope that, in the light of this explanation, the noble Baroness will feel able not to move Amendment No. 87.

I am cantering towards the end of my remarks. The primary purpose of Section 22 of the Solicitors Act 1974 is to protect the public from unqualified persons setting themselves up to act for the consumer in the

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conveyancing process. The criminal sanction acts as a deterrent and has been applied only very rarely. Notwithstanding that, there may well be other issues which would need to be addressed in relation to a successful prosecution under Section 22. Those matters can be addressed in the rules which will support the electronic conveyancing process, by regulating the use of network access agreements that govern the conduct of business with the registry electronically.

I mention also Clause (32) in this context because it provides that, when electronic conveyancing becomes compulsory, any conveyancing document which purports to be a disposition of registered land, or a contract for such a disposition, will be effective only if it is in electronic form and communicated electronically to the registrar at the time of completion. When electronic conveyancing is compulsory, network access agreements are therefore likely to be at least as effective a consumer protection mechanism as is Section 22, as well as being a useful additional protection mechanism in the mean time.

If the noble Baroness is not exhausted after having to listen to these long explanations, I invite her not to move Amendment No. 89. I hope that, as is usual, we shall be in total comity on this matter.

7.45 p.m.

The Earl of Caithness: My Lords, before the noble Baroness sits down, I am sure that she appreciates that we shall not be able to respond to all the points she has made in her remarks, but we shall certainly read them in Hansard.

When the noble Baroness commented on Amendment No. 84, she gave a comparable. I did not jot down where that comparable came from, although I did note that when written authority was given in the comparable cited by the noble Baroness, she added the words, "lawfully given". Can the noble Baroness consider whether that could be put into subsection (6) of Clause 91? It would provide a further reassurance to noble Lords on this side of the House.

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