Land Registration Bill [Lords]

Public Bill Committee, 13 December 2001.

Standing Committee D

Land Registration Bill [Lords]

Eric Illsley (Labour, Barnsley Central)

The Committee is suspended until 9.50 am.

Sitting suspended.

On resuming—

Eric Illsley (Labour, Barnsley Central)

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 should—without setting any precedent—select this entirely procedural amendment.

Bill Cash (Conservative, 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.

Eric Illsley (Labour, Barnsley Central)

Fortunately, for the benefit of the Committee, that is not within my gift.Clause 71 Duty to disclose unregistered interests

Clause 71 - Duty to disclose unregistered interests

Bill Cash (Conservative, Stone)

I beg to move amendment No. 57, in page 25, line 21, at beginning insert—

'(1) Subject to subsection (2),'.

Eric Illsley (Labour, Barnsley Central)

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.'.

Bill Cash (Conservative, Stone)

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,

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.

Michael Wills (Labour, North Swindon)

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.

Bill Cash (Conservative, Stone)

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

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.

Clause 73 - Objections

Bill Cash (Conservative, Stone)

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.'.

Eric Illsley (Labour, Barnsley Central)

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.'.

Bill Cash (Conservative, Stone)

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.

Michael Wills (Labour, North Swindon)

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.

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.

Bill Cash (Conservative, Stone)

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.

Clause 91 - Electronic dispositions: formalities

Bill Cash (Conservative, Stone)

I beg to move amendment No. 64, in page 33, line 5, leave out paragraph (c).

Eric Illsley (Labour, Barnsley Central)

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 1—Solicitors' Act 1974—

''Solicitors Act 1974

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. 67, in schedule 5, page 53, line 18, leave out paragraph (a).

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,''.

Bill Cash (Conservative, Stone)

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

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

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.]

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

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.

Michael Wills (Labour, North Swindon)

In speaking to amendment No. 64, I will also speak to the other amendments in the group: amendments Nos. 65, 66, 67, 68, 69, 85 and new clause 1. I will crave your indulgence, Mr. Illsley, to detain the Committee on this for a little while. As the hon. Member for Stone said, the amendments are technical and complex, but they are also fundamentally important and in many ways they go to the heart of the Bill.

The amendments relate to electronic conveyancing and, in particular, to the authorisation of electronic documents, their authentication by agents, remuneration for their creation and network access agreements. Much of the ground here has already been covered in another place, but it is such an important subject that it will bear some repetition.

Amendment No. 64 would, as the hon. Gentleman explained, remove the condition that each electronic signature to an electronic document in clause 91 must be certified. The concepts of electronic signature and certification are taken from the Electronic Communications Act 2000. The definitions there are wide and technologically neutral. Certification is, basically, any

''valid means of establishing the authenticity''

or ''integrity'' of the signed electronic document.

It is important to understand what we mean by that. The present probability is that the system of electronic signatures for electronic conveyancing will be some form of public key infrastructure. Electronic or digital signatures are something of a misnomer. They are not an electronic facsimile of a manuscript signature, but a block of information derived mathematically from the document being signed and a private encryption code or key unique to the individual who is going to sign or authenticate the document. A digital certificate is the means by which recipients of electronic messages can be assured of their provenance. The certificate associates a person or organisation with that person's unique but publicly available encryption code or key.

To cut a very long story short, under the system the originator uses a signing or private key to sign a message, then sends the complete message with its digital signature to the recipient. The recipient then uses a verification or public key to verify the origin of the message. As long as the originator has kept his private key secure, the recipient knows that the message came from the originator.

During implementation consultations, detailed discussions will need to take place with conveyancers and, no doubt, their insurers about measures that can practically be put in place to ensure key security. However, additional arrangements are needed to ensure that public keys are exchanged securely, and to assure recipients as far as possible that originators are indeed who they claim to be. To achieve that, third parties need to be introduced in order to act as certification authorities. Their role will be to vouch that a particular public key has been given to a particular individual. That assertion is made in

another electronic document, the digital certificate, which is itself digitally signed by the trusted third parties and owner certification authorities.

The question arises of who such authorities might be. The Electronic Communications Act 2000 makes provisions for a statutory scheme of cryptography service providers, but so far it has not proved necessary to implement them. Nor are there are plans to do so, given the Government's support for the formation of a voluntary industry co-regulatory scheme for certification authorities, which was established as a limited company in April 2000. The Government have agreed that certificates issued under the scheme that meet their identification requirements can be accepted as satisfactory evidence of the identity of an originator in an electronic transaction with Government. Five different companies are now registered under the scheme and are undergoing the approval process. Those or future companies are likely to be the certification authorities for individuals who will themselves acquire electronic certificates.

As electronic conveyancing is at the forefront of e-commerce, it has wisely been assumed that the number of individuals who will themselves acquire digital signatures in the short term is likely to be comparatively small. That is why the Bill envisages the possibility that conveyancers will sign documents electronically on their clients' behalf. Although conveyancers could doubtless use one of the commercial certification authorities approved under the scheme, there is an obvious possibility that their professional regulatory bodies might think it appropriate to assist the profession by acting as the certification authority. A similar scheme is already operating in British Columbia, where the Law Society is the certifying authority.

During recent consultation on electronic conveyancing, 75 per cent. of respondents agreed that certification should be required, so the provision does not lack general support. Overall, response to certification as a condition was very positive. There were obviously concerns about how the system will work in practice, but that is hardly surprising given the system's present embryonic state.

The Law Society did express doubt about the workability of certification, but that view does not appear to be widely shared. It may have been influenced by the thought that only electronic signatures of solicitors can be trusted. From that point of view, electronic signatures themselves are unnecessary, but we think that too narrow an approach.

Having said that, I should make it clear that we do not underestimate the very real challenges that the Land Registry and practitioners face in adopting, and adapting to, electronic conveyancing. I am confident, however, that both the Land Registry and forward looking practitioners who are eager to provide the best services for their clients will work constructively with the Government to develop a system that works. That is in everyone's interests, and in the light of those comments I hope that the hon. Gentleman feels able to withdraw the amendment.

I turn to amendment No. 85. The hon. Member for Stone mentioned the Australian precedent. I appreciate that the Commonwealth of Australia's Electronic Transactions Act 1999 expressly restates Australian common law in relation to the attribution of communications. However, in this Bill, which relates to land registration rather than e-commerce in general, we have adopted a different approach. We have left the general law alone and dealt with only the specifics of land registration. I also note that the Australian statute provides a default position from which the parties may derogate, and that it is concerned with the question of who is bound, rather than whether an electronic communication is acceptable. For those reasons, I do not think that it provides a compelling precedent.

Amendment No. 85 seems to imply that different consequences should flow from the creation of an unauthorised electronic document than flow from the creation of an unauthorised paper document. Such a distinction is completely unacceptable. It is fundamental to the protection of consumers and businesses that established principles of law that already apply to paper transactions should apply to electronic documents.

To explain how the Bill deals with the concern about unauthorised electronic documents that the amendment seeks to address, we should consider—briefly—the story of Mr. Smith, a go-ahead but rather careless conveyancer acting for the seller of Swindon Fields, which, as members of the Committee will remember from previous encounters, is a prime piece of registered land. Mr. Smith intends to transfer the land electronically. He has the details of his electronic signature clearly posted on his office wall. Unfortunately, his senior clerk is the dishonest Mr. Creep, who uses Mr. Smith's signature to authenticate the transfer as agent for the seller. The transfer is then registered at the Land Registry and the purchase moneys disappear into a bank account somewhere else in the world.

As a result, Mr. Smith's client is no longer the owner of the land; the owner is someone who has not paid Mr. Smith's client for it. That is not as it should be. The way to remedy the situation is to apply the long-established principles of rectification of the register and indemnity. Rectification and indemnity allow the Land Registry or the courts to put matters right by applying the general law in a way that is fair to all parties involved. Swindon Fields—the example that I cited—might be the buyer's home, and if so it is unlikely the register would be rectified. Instead, it is likely that the seller would be indemnified by the Land Registry, even though the registry had done nothing wrong.

The remedies of rectification and indemnity are two of the greatest advantages of registered land over unregistered land, and they will apply in the electronic world. Of course, having paid the seller, the registry could then exercise its right of recourse against Mr. Smith, whose carelessness is the root of the problem. As a matter of practice, the registry would do so only if Mr. Smith had been negligent or fraudulent. Innocent,

competent practitioners have nothing to fear. If they have acted in accordance with the terms of their network access agreement and have taken the sensible steps needed to preserve the system's security, they should not bear the liability for harm caused by the careless, malicious or criminal actions of others.

As indemnity is paid by the Land Registry, we can be confident that the terms of network access agreements will be constructed in a way that will minimise the opportunity for fraudulent behaviour. In creating the terms for these agreements, the registry will, as always, work with conveyancers to create a system that is acceptable to the registry, and to practitioners and their insurers. The rules relating to network access agreements will, of course, be subject to an affirmative resolution procedure.

I have repeatedly made it clear that the Government are determined to work with stakeholders to develop robust and secure electronic conveyancing systems. We believe that that is the way ahead, rather than amendment No. 85. When the same amendment was moved by the Baroness Buscombe in the House of Lords, she stressed the need for conveyancers, consumers and businesses to have confidence in the robustness and security of the electronic conveyancing system. That is right, and the Government are confident that it will be achieved. Equally right is the likelihood that no system will ever be completely fraud-proof. Where we part company with Opposition Members is that we do not conclude from the fact that solutions have not yet been designed that they can never be designed or that practitioners cannot be expected to bear any liability for the use, or abuse, of their own electronic signatures.

Bill Cash (Conservative, Stone)

On amendment No. 67, which is analogous, I understand the Government's reasoning for making the system compulsory in relation to a future time when most conveyancers are using it. However, in the early stages they will be pioneers, and they should be able to return to using a paper system if the system does not work as intended or envisaged. What will there be in the way of back-up for times when systems go down, as they frequently do?

Michael Wills (Labour, North Swindon)

I shall come to amendment No. 67 in a moment. Of course, it is in everyone's interests that we work together with practitioners to deal with all eventualities. Systems do go down, but as time passes they become increasingly secure and reliable, and we must work with practitioners to ensure that they are robust. Things go wrong in the paper world as well.

I hope that I have done enough to reassure the hon. Gentleman on amendment No. 85 and that he will feel able to withdraw it.

Amendment No. 65 is rather technical. It would deem that an agent authenticating an electronic document under clause 91 is acting under a power of attorney. The purpose of that is not to extend the authority of the agent, but to bring the agent within the scope of section 7 of the Trustee Delegation Act 1999.

That section was enacted on the recommendation of the Law Commission to bolster the protection given to trust beneficiaries. It is intended to ensure that delegation by trustees to one person will not allow that one person to satisfy the long-standing rules of law that at least two trustees must execute a conveyance and receive the capital proceeds of any sale. The amendment is unnecessary because the Bill does not adversely affect the operation of section 7 of the 1999 Act.

Bill Cash (Conservative, Stone)

Will the Minister raise his voice slightly in case Opposition Members do not hear every word he says?

Michael Wills (Labour, North Swindon)

I am sorry, I shall do my best to speak up.

I hope that I have given the hon. Gentleman sufficient reassurance to enable him to withdraw amendment No. 65.

Amendment No. 66 would undo subsection (6) of clause 91. I assume that it is intended to probe the Government's intentions regarding the role of agents in the electronic conveyancing world. Let me say at once that clause 91(6) 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 must be developed in partnership with the stakeholders.

Subsection (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. The amendment would undo the effect of the subsection. Essentially, it would provide 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 the agent had actual written authority to do so or subsequently obtained it. The end result 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 know that the hon. Gentleman is always anxious to avoid unnecessary bureaucracy and encumbering the processes of business, so I hope that he will feel able to withdraw the amendment.

Amendment No. 67 would remove the power of the chief land registrar to require, as a term of a network access agreement, that the person authorised to use the network for transactions would have to use it for specified transactions. The intention of that power is to maximise use of the network and thereby the benefits that it will bring. Network access agreements are the agreements that the Land Registry will enter into with people who want access to the Land Registry network.

As I understand it, the fear is that the power will be used to lock practitioners, especially those who sign up in the early days, into a system that does not work as it was intended. That fear is misplaced for several reasons. It is strongly in the interests of the Land

Registry to ensure that all users, especially early users, have all the help that they need. If early users have a successful experience of the system, more will follow more quickly, which is what we want to happen. Even in the long term, it may be necessary to have some kind of phasing-in arrangements for firms as they join the network.

Bill Cash (Conservative, Stone)

On a point of order, Mr. Illsley. The hon. Member for Torbay (Mr. Sanders) is asleep.

Michael Wills (Labour, North Swindon)

We should resume our discussion of amendment No. 67. I shall be happy to bring the hon. Member for Torbay up to speed in due course.

The system's development process will include testing and piloting, and the roll-out programme will be incremental, allowing experience to be gained and lessons to be learned.

The Government will develop electronic conveyancing in consultation with conveyancing stakeholders and will work with their commercial partners through whatever corporate, joint venture or partnership structures may be required to develop the infrastructure of electronic conveyancing. As the Land Registry will be moving into new waters, some of the arrangements may be relatively novel. Some of those being contemplated have given rise to a re-examination of the legislative cover for joint public-private ventures by the Land Registry. To ensure that those in the private sector can have complete confidence in the powers of the Land Registry to enter into whatever commercial arrangements might be necessary, and to ensure that it has the flexibility to do so, the Government will table some extremely technical amendments at the next stage of the Bill.

Electronic conveyancing will succeed only if practitioners are willing to use it. The power can be constrained by rules that can be made only under the affirmative resolution procedure. In the light of the events of the past three months, we are all increasingly aware of the need to have back-up systems in place to cover any eventuality. The electronic conveyancing system will be designed with this in mind.

There are also positive reasons why the power proposed is necessary. It will help drive conveyancing towards the desired end of the fully electronic system, it will maximise return on investment for the Government and users. It is a building block on the way to a full electronic system. I hope for that reason the hon. Member for Stone will feel able to withdraw amendment No. 67.

Amendment No. 68 seeks to remove from schedule 5 the provision that places fulfilment of obligations under a network access agreement ahead of all conflicting obligations. This may be surprising at first sight, but it is in fact essential, because the requirements of a network access agreement may create conflicts of interest. The precise scope of the potential conflicts will be ascertained only when the rules governing network access agreements have been framed. This will, of course, only be after extensive consultation and affirmative resolutions in both Houses of Parliament. The Bill must therefore provide

a solution. It provides that the obligation under the network access agreements prevails and discharges the other obligation to the extent that the two conflict.

Discussing conflicts of interest in the abstract may be rather alarming, but the sorts of obligations that might conflict with obligations owed to clients will be limited to those which seek to make the register more up-to-date or complete. Those are matters where there is a strong public interest in having the information available. The provision is fundamental to the hoped for gains in relation to the transparency and management of chains of transaction. Without this provision clients could, in effect, contract out of the system of electronic conveyancing that the Bill seeks to put into place.

Stephen O'Brien (Conservative, Eddisbury)

The Minister will be aware that I have not been able to participate in a good deal of the Committee's deliberations. As a solicitor who has not practised for 14 years, I do not think that it is a declarable interest, but I am concerned that the absolute sanctity of the solicitor-client relationship and the obligations of confidentiality should be fully taken into account in all that the Minister is saying. I can well understand, for efficacy reasons, the thrust of some of the arguments that he is putting forward, but I am concerned that we have not discussed confidentiality in this context.

Michael Wills (Labour, North Swindon)

Of course we recognise that. In the sense that the hon. Gentleman is concerned, it is not a threat at all. We are concerned to make sure that we realise the full gains of what is possible out of this. We have discussed on previous occasions the full value of having a more transparent market. It is in everyone's interests that that should happen. We think that this amendment would actually damage that possibility. I hope that I have given enough reassurances to enable the hon. Member for Stone to withdraw this amendment.

Amendment No. 69 removes the deemed authority of an authorised person under a network access agreement acting as an agent 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 disposition. The person claiming the authority would of course be bound by the terms of his or her network access agreement.

The reason for the provision of schedule 5(8) 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 claimed to be acting. The requirement for paper evidence of that authority would operate to defeat some of the benefits of electronic conveyancing by reintroducing a paper document. This is simply not necessary in the regulated environment of the electronic conveyancing network.

Of course there will be fears that honest practitioners may be innocently caught up in the snares of some clever fraudster. I have already confirmed that the present self-denying practice of the Land Registry in relation to its right of recourse will continue.

The anxieties about what we might call the agency provisions have, perhaps, been heightened by the possibility that electronic signatures might not be commonplace for some time to come. It could follow that conveyancers will have to act as agents in the signing of documents more frequently than at present, but time alone will tell whether that will be the case. In any case, as I mentioned in another context, the underlying principles in the electronic and paper worlds remain the same.

Deeming one person able to do something on behalf of another is a serious matter but in this case, I think that it is a reasonable and proportionate step to take. I hope that, in the light of those comments, the hon. Member for Stone will withdraw the amendment.

We acknowledge that new clause 1 raises an important consumer protection issue. Section 22 of the Solicitors Act 1974 makes it a criminal offence for an unqualified person to undertake certain conveyancing tasks for reward. The new clause seeks to ensure that section 22 will still apply when communication with the Land Registry is undertaken electronically and the documents that transfer or charge interests in land are accepted, or required to be, in electronic form.

Those are legitimate concerns. I am pleased to be able to confirm that electronic documents in clause 91 will come within section 22. Similarly, an application to the Land Registry or the lodgement of electronic documents with the Land Registry through the network will still be an application or lodgement if done electronically.

Before I invite the hon. Gentleman to withdraw the new clause, I thank all hon. Members and you, Mr. Illsley, for bearing with me in what, I am afraid, has been a long and technical explanation of a long and technical list of amendments dealing with important aspects of the Bill. The hon. Gentleman has raised important issues and I am grateful to him for that and for allowing me to put comments about them on the record. I hope that, in the light of my explanation, he will feel able to withdraw all the amendments and the new clause.

Bill Cash (Conservative, Stone)

I am deeply grateful to the Minister for that exposition. He will appreciate that those who are engaged in such matters professionally have an enormous amount at stake, as does the Land Registry. As he said, the matter goes to the heart of the Bill, addressing questions such as will the system work, how will it work, and what circumstances will apply if there is a collapse in the system. I do not think that any of us have the slightest doubt that the Bill takes us into a new age. As we have said several times, much credit must be given to those who put it together.

My former partner drafted the Solicitors Act 1974, soon after I had arrived in the office, as I recall. He died quite recently, so I mention that as a small memorial to him.

Given all the considerations and complications of the proposals—not because I want to be curmudgeonly or even simply because I want to be sure that every Committee member is alive and aware of the debate that has happened—I am reluctant to withdraw the amendment. I am sorry if I disappoint the Minister, but I think that he knew that this was coming. I press the amendment to a division.

Question put, That the amendment be made:—

The Committee divided: Ayes 3, Noes 10.

Clause 93 - Power to require simultaneous registration

Bill Cash (Conservative, Stone)

I beg to move amendment No. 70, in page 34, line 13, after ''consult'', insert—

''the Law Society and the Council for Licensed Conveyancers and''.

This is a simple but important amendment. It relates to detailed consultation with the society and council who will be the operators of this process, adding a requirement to consult with the Law Society and the Council for Licensed Conveyancers. It is pretty obvious what that means. I do not need to go into all the details, but I would be grateful to hear what the Minister has to say.

Michael Wills (Labour, North Swindon)

We have already discussed the general approach taken in drafting the Bill and the problems that might arise from specifying particular individuals or bodies for consultation. The duty to consult in various parts of the Bill has deliberately been worded very loosely to enable the Lord Chancellor to consult such persons as he or she feels should be consulted at that time.

We cannot know at this stage what changes could alter any list of consultees that we prepare now and it would be inappropriate and undesirable to create a partial list. Flexibility is important. At present, it is inconceivable that either the Law Society or the Council for Licensed Conveyancers would be left out of a consultation process under clause 93, which, as the

hon. Member for Stone said, is an important clause. I happily undertake to ensure that they will be consulted when the time comes.

It remains our view that it would not be appropriate or desirable to highlight those groups by mentioning them in the Bill. There will be other consultees whose contributions will be equally important to the decision-making process. In light of the need to maintain flexibility and of the undertaking that I have given, I hope that the hon. Gentleman will withdraw the amendment.

Bill Cash (Conservative, Stone)

I am a little disappointed with the Minister. The Law Society is the chartered body with specific responsibility here, and which, through the Solicitors Act 1974, has specific requirements imposed on it with regard to conveyancing. Licensed conveyancers are also subject to statutory requirements. I am not suggesting that the Minister would not end up consulting the Law Society, as he said, but this still seems extraordinary. I am waiting with bated breath in the hope that the Minister will listen to what I am saying and respond properly.

Michael Wills (Labour, North Swindon)

I will just repeat something that the hon. Gentleman might not have picked up. Of course we understand the importance of the Law Society and the Council for Licensed Conveyancers, and I gave a specific undertaking that they will be consulted. I also said that the views of other consultees will be equally important and will have to be taken into account. We need to maintain flexibility, and I hope that my specific undertaking, which I now repeat, will enable the hon. Gentleman to withdraw the amendment.

Bill Cash (Conservative, Stone)

I heard what the Minister said extremely clearly and I am familiar with the formulas frequently used in respect of questions of consultation. As the Minister knows, as a matter of law, consultation does not necessarily mean that what the person seeking the consultation wants will be done. It is a matter of, ''I hear what you say; I will do so in a responsible way.''

I do not want to enlarge on what I have said, because the point is obvious. However the consultation process is conducted and whoever it is conducted for or with, in reality one is dealing definitely and specifically with a chartered body with statutory functions and licensed conveyancers. I would be repeating myself if I mentioned that again, so I shall return to the serious business of dividing the Committee.

Question put, That the amendment be made:--

The Committee divided: Ayes 2, Noes 10.

Clause 106 - Jurisdiction

Harry Barnes (Labour, North East Derbyshire)

I beg to move amendment No. 86, in page 37, line 18, at end insert—

'(c) determining appeals concerning the boundary of a registered estate, as referred to in section 60.'.

I believe that there has not been a specific debate in the other place or this House on matters relating to clause 106, except that Lord Goodhart in another place moved a probing amendment to clause 60, which refers to boundaries, in an attempt to clarify the role of the adjudicator. The functions of the adjudicator are covered by clause 106 and my amendment relates to those. The noble Lord said when moving his amendment that it

''would clarify that situation''--

on registration--

''and make it clear beyond any doubt that the adjudicator will have jurisdiction to determine the question of fixing boundaries.''--[Official Report, House of Lords, 19 July 2001; Vol. 626, c. 1606.]

I referred to those matters when I spoke on clause 60.

I am attempting in the amendment to add to the functions of the adjudicator. I welcome the setting up of the office of the adjudicator by the Lord Chancellor. The adjudicator takes over certain functions that are currently undertaken by the solicitor for Her Majesty's Land Registry but is completely independent of the Land Registry and will continue to provide certain determinations cheaply, swiftly and more informally than court hearings. The independence, informality and relative cheapness of the arrangement is welcome when the registration of land and property involves issues that are often fraught with disputes.

The clause defines the areas of the adjudicator's jurisdiction. They are important but limited areas, and I hope that they will be extended and developed in future. The function provided for in the clause first deals with certain objections raised against applications for registration, which are described in clause 73(7). Secondly, it deals with determining disputes about what are known as network access agreements and thirdly, with making orders required by the High Court to correct or set aside certain dispositions and transfers of interest. If those functions were added to over time, the adjudicator could become the first port of call in a wide number of disputes before anything appeared before the courts. That would be beneficial because it would provide uncostly, quick informal decisions closely based on the records of the Land Registry.

During debates on clauses 11 and 60 I have been worried about two points. The first is boundary disputes and is addressed in the amendment, which would include such matters in the adjudicator's role.

The second relates to access ways over land, on which I tabled an amendment that has not been selected. My concerns would be addressed by amendment No. 86 because cross deeds that affect boundaries also involve areas with access problems. I dealt with a case in which three people shared access ways and certain details were included in one set of deeds, but not in another so their rights were limited. The ability to ask the adjudicator to sort out a boundary dispute would have been valuable.

I am grateful to the Minister for considering the points that I have raised and sending me a detailed letter on them on 12 December. Although he considers the cases that I raised as matters for the courts to resolve—I hope that I have correctly interpreted what he has written—he recognises that they are relevant to the consultation process when drawing up rules provided for in clause 126. He also recognises that there are possible extensions to the role of the adjudicator, particularly after the introduction of electronic conveyancing, that can be further addressed when the provisions are reviewed. I am grateful for the airing of that and the fact that the Minister has taken it seriously.

I tabled this as a probing amendment in order to place on record what has arisen during my correspondence with the Minister. I hope that we are at the start of a period in which the role of the adjudicator, when it is up and running and has acquired experience, can be extended and developed because it will be a handier way in which to deal with a dispute, and better than dragging things to the courts. Sometimes solicitors might be over-keen to encourage clients to take something to court, but that is extensive, costly and may come up with peculiar results. Being able to decide a case in a different atmosphere—one linked into but independent of Land Registry—would be of great benefit.

Bill Cash (Conservative, Stone)

This is an interesting amendment and I should be interested to hear what the Minister has to say about it because the issues it raises will be immensely important in relation the role of the adjudicator. The Government advisers who are listening to the debate should take into account that a role similar to that of an ombudsman that deals with questions related to complex matters that affect many people should be given as much publicity as possible so that its functions are known to those people who could take advantage of them. A huge number of people own their own properties and leases, and they should know exactly what the adjudicator can do for them. That information should be made available as soon as land is registered. It should be incumbent on advisers to ensure that the people who need to know are informed that this service is available to them. That is a simple point on which the amendment allows us to touch.

Adrian Sanders (Liberal Democrat, Torbay)

I have two practical questions on the amendment, which the hon. Gentleman rightly described as interesting. Indeed, it was moved in the other place by one of my noble

Friends. Is there capacity within the Land Registry to answer the number of inquiries that may come to it? Will the Land Registry be able to offer such a service without a comprehensive land register?

Michael Wills (Labour, North Swindon)

I hope that I am right in saying that this is the amendment on which we have had the most contributions from members of the Committee. That reflects its importance, and I am grateful to my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) for bringing it to our attention. These disputes can be troublesome for the individuals concerned and can cause a great deal of grief and stress, so anything that can help to resolve them is welcome. However, the amendment is unnecessary because the Bill already sets out procedures that will achieve my hon. Friend's objective.

Before I go on to address those issues, perhaps I can reassure the hon. Members for Stone and for Torbay that the Land Registry has the capacity to register every square inch of land in this country, which is a goal that we are well on the way to achieving. In the interim, the adjudicator will provide a valuable service, and the Land Registry will do everything it can, as it usually does, to bring its services to the attention of everyone who may benefit from them. I shall detain the Committee briefly on this subject because it is an important issue and I want to put my view on the record.

Clause 60 creates a rule-making power that will govern procedures for determining the exact line of a boundary. Those procedures are quite flexible, and they will not be limited to applications by those with an interest in the land, so the registrar will be able to take steps to fix a boundary where, for example, that seems to be the sensible way to resolve a dispute. However, it will be possible to apply to the registrar for a boundary to be fixed, and that may well be the most usual way in which the procedure is started. Under clause 60(4) applications for fixing boundaries must be made to the registrar.

That is as far as clause 60 needs to go because the provisions for handling disputes on applications are now to be found in clauses 73 and 106. Under clause 73, anyone may object to an application to the registrar. The registrar must tell the applicant that an objection has been lodged, and may not determine the application until the objection has been disposed of. The registrar may attempt to do that either by encouraging the parties to negotiate or by discussing the matter with them. If it is impossible to dispose of the objection by agreement, under clause 73(7) the registrar must refer it to the adjudicator. Clause 106 gives the adjudicator the jurisdiction to determine such appeals, and provides wide powers to do so.

The Bill therefore already achieves what the amendment sets out to do. It creates a range of ways, of escalating formality, in which disputes can be handled before they must go to the adjudicator. The provisions reflect the wide range of circumstances that can arise in land registration disputes, and the Government believe that they provide the flexibility

needed in the vast majority of cases. In the light of my explanation, I hope that my hon. Friend will feel able to withdraw the amendment.

Harry Barnes (Labour, North East Derbyshire)

The amendment would clarify and extend the provisions of the adjudicator whom I recognise will be newly established. Some areas with which the adjudicator will be involved relate to my concerns, and I hope that through the consideration of rules and later review we may move to a position in which this begins to be contained in statute. However, I am happy with the Minister's response, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 106 ordered to stand part of the Bill.

Clauses 107 to 125 ordered to stand part of the Bill.

Clause 126 - Rules, regulations and orders

Bill Cash (Conservative, Stone)

I beg to move amendment No. 78, in page 42, line 32, leave out from 'is' to end of line and insert

'subject to annulment in pursuance of a resolution of either House of Parliament'.

Eric Illsley (Labour, Barnsley Central)

With this we may discuss amendment No. 79, in page 42, line 38, leave out from beginning to 'House' and insert

'may only be made if a draft of the statutory instrument has been laid before and approved by a resolution of each'.

Bill Cash (Conservative, Stone)

I shall be brief because the amendment is straightforward. With respect to rules regulations and orders, it provides that a statutory instrument that falls within clause 126(3) shall be subject to annulment. With respect to subsection (4), the statutory instruments in question shall be subject to affirmative resolution procedure. It is unnecessary for me to take the Committee through that because we know that it would enhance the status of the statutory instruments and would provide for proper scrutiny of the proposals.

Michael Wills (Labour, North Swindon)

I shall endeavour to be brief, and I shall address the two amendments simultaneously.

Amendment No. 78 seeks to subject the regulations and orders referred to in clause 126(3) to negative resolution procedure. As a result of careful consideration of the recommendations of the Deregulation and Regulatory Reform Committee, the Bill provides that the secondary legislation and regulations in question are to be laid after being made. My noble Friend Baroness Scotland explained the Government's policy in another place, and it is unnecessary to repeat it at length.

Briefly put, the regulation and orders under clause 99 referred to in subsection (3) relate to the internal administration of the Land Registry. Both in relation to this and to the setting of fees, the Land Registry needs the greatest flexibility to be able to respond to changing circumstances without compromising the high standard of services that it supplies. The level of parliamentary scrutiny proposed is the same for the analogous provisions in relation to the courts, which

have been the subject of recent parliamentary debate. I therefore hope that the hon. Member for Stone will feel able to withdraw the amendment.

Amendment No. 79 seeks to increase the degree of parliamentary scrutiny of secondary legislation made under the Bill to levels that would disrupt the working of both the Land Registry and Parliament. The Government have carefully considered the recommendations of the Deregulation and Regulatory Reform Committee, and we have accepted the majority of them. The amendment would require an affirmative resolution procedure for every change in land registration rules, which are, of course, important, but I cannot believe that negative resolution procedure is inadequate or inappropriate in this case. The general scheme of the Bill now follows that applicable to the court and it was subject to recent parliamentary discussion.

I am firmly of the view that following the Government amendments in another place, the balance between administrative efficiency and parliamentary control is adequately drawn. Given those comments, I hope that the hon. Member for Stone will withdraw the amendment.

Bill Cash (Conservative, Stone)

In the light of what the Minister has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 126 ordered to stand part of the Bill.

Clauses 127 to 129 ordered to stand part of the Bill.

Clause 130 - General interpretation

Bill Cash (Conservative, Stone)

I beg to move amendment No. 80, in page 43, line 41, leave out from 'under' to end of line 42 and insert

'Part 11 or section 119'.

The amendment relates to the interpretation of the Bill as a whole. We propose amending the definition of land registration rules so that it would read: ''Land registration rules means any rules under this Act other than rules under part II or section 119'', deleting the other provisions that are included within the definition of land registration rules. The Minister knows what that would entail, and we have already been over related matters in the past, but it would be helpful to know where he stands at the present time.

Michael Wills (Labour, North Swindon)

The Bill makes a clear distinction between land registration rules that relate to the detailed operation of the current land registration system and the new rules on electronic conveyancing supported by network access agreements. Land registration rules made under the Bill will continue to be prepared as they are under the current system by Land Registry lawyers internally and approved by the Land Registration Rule Committee. They will then be submitted to the Lord Chancellor and be subject to the negative resolution procedure.

Greater scrutiny is needed to support the novel arrangements for e-conveyancing. There will need to be wide consultation with stakeholders at various stages during the design process and greater scrutiny of the supporting rules. The Bill provides that the Lord Chancellor will consult such persons as he considers appropriate. The members of the rule committee, with their expertise in land registration, will be among the consultees. Their involvement may actually begin at an earlier stage than in the normal process.

The Bill's drafting allows for greater flexibility to produce the rules in the most appropriate way. I remind the hon. Gentleman that the rules will be subject to the affirmative resolution procedure. There is therefore no need for additional controls to ensure that the appropriate steps are taken to consult with all the appropriate people. I hope that he will withdraw the amendment.

Bill Cash (Conservative, Stone)

In the circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 130 ordered to stand part of the Bill.

Clauses 131 to 133 ordered to stand part of the Bill.

Clause 134 - Short title, commencement and extent

New Clause 2 - Completion of register

Eric Illsley (Labour, Barnsley Central)

With this it will be convenient to discuss the following: New clause 3—Registrar to create public record of unregistered titles—

'.—The registrar shall create a public record of all unregistered titles known to him by 30th December 2003.'.—[Mr. Sanders.]

Mr. Sanders: I beg to move, That the clause be read a Second time.

The Bill will be used for the purposes of registering land, and I am confident that it will ensure that more land is registered than ever before. The Minister said more than once that he hopes that it will encourage the eventual registration of all land. The question is, when will that be? Will it be in 10, 20 or 100 years' time? It could be 1,000—although it is nearly 1,000 years since the Domesday book, so perhaps we should not worry about another 1,000.

As I said on Second Reading, there have been several attempts to record land ownership, most notably the 1872 return of owners of land, which

achieved without computers or lawyers, but with quill pens and ink, a 90 per cent. return within four years. That is 90 per cent. of acreage, not just title. Our country is 50 million acres in size and some 59 million of us live on those acres. The area taken up by the homes of those people takes up less than 10 per cent. of the land—a maximum of 6 million acres, but more probably just 4.4 million acres. It is impossible to settle on a more accurate figure, as the statistics for most of the UK are estimated, and the Northern Ireland Administration has no figures available at all for residential usage.

The scale of the discrepancy has been estimated, with 2.6 million acres of England unaccounted for and a further 1.2 million acre gap between the total that Government think is farmed and the amount that the European Union thinks is farmed. Despite the discrepancies, that still leaves a great deal of country uncovered by bricks and mortar—at least 55.6 million acres. Of that, between 12 million and 14.5 million acres are mountain, forest, moorland, water, roadways and industrial land, which leaves some 40 million acres of often beautiful, sometimes productive countryside, which is owned by just 189,000 families.

Are these figures important? Should we need or want to know who owns the country that we live in? Does it really matter who owns which parts of Britain? In my view, the answer is yes, it matters a lot—certainly a lot more than the tiny minority of those who own most of the land would like us to realise. The fact that the rich and powerful do not seem to want us to know who owns the country is encouragement enough to try to find out what they are hiding from us.

One obvious and instinctive link that many people have to the land that they inhabit is patriotism—an often incoherent and emotional bond, but hugely real for all that, and one that I am sure that is shared by everyone in this Room. Loyalty to one's land and community has frequently been used by Governments and monarchs to motivate people to take up arms and to die for their country, yet the vast majority of Britons who died in the two world wars of the 20th century owned not a square yard of their country's soil. Indeed, many ordinary soldiers fought in both world wars in the hope that one day their heirs would become owners of the land that they had fought to keep free.

After the second world war, those who had survived the conflict voted in a Labour Government to share out the land between all the people, not just the privileged few. In 1945, the redistribution of land was a manifesto commitment of the Labour party, similar in many respects to Lloyd George's promise to those returning from the first world war to make Britain a country fit for heroes to live in. They were betrayed then, as they so often have been.

Land also matters to those who own it, but for different reasons. Those reasons are not often heard, at least not in public, which makes the words of the 15th Earl of Derby in the 19th century all the more illuminating. One of the greatest landowners of his age, he explained in 1881 why people want to own land. He said:

''The object which men aim at when they become possessed of land in the British Isles may, I think, be enumerated as follows. One, political influence; two, social importance, founded on territorial possession, the most visible and unmistakable form of wealth; three, power exercised over tenantry; the pleasure of managing, directing and improving the estate itself; four, residential enjoyment, including what is called sport; five, the money return—the rent.''

He should have known, because he owned 68,942 acres in five counties, making him the 20th largest landowner in England and the seventh richest man in

the UK, with an annual income of £163,000, which is about £16 million today. The current heir to the estate, the 19th earl, owns about 30,000 of the acres attributed to the estate in 1872.

In his book, ''Who Owns Scotland'', Andy Wightman argues that the ownership and use of land is one of the most fundamental issues—

Debate adjourned.—[Mr. Stringer.]

Adjourned accordingly at twenty-five minutes past Eleven o'clock till this day at half-past Two o'clock.

Standing Committee D

New clause 2 - Completion of register

Eric Illsley (Labour, Barnsley Central)

I remind the Committee that with this we are taking the following: New clause 3—Registrar to create public record of unregistered titles—

''The registrar shall create a public record of all unregistered titles known to him by 30th December 2003.''.

Adrian Sanders (Liberal Democrat, Torbay)

I was making the point that there should be a comprehensive register of land.

The book ''Who Owns Scotland'' by Andy Wightman states that

''the ownership and use of land is one of the most fundamental issues in any society.''

Whereas that book did much to place land ownership on the political agenda in Scotland, it is clear that in general, in Britain, land is not a fundamental issue, nor has it been for most of the 20th century. One reason for that is that in the late 19th century, the register of returns of owners of land threatened to highlight the issue of land ownership. Once they were aware of that, the return was buried by the landowners that it had exposed.

Admittedly, the landowners were threatened by more than exposure in the return. They were disturbed by land agitation in Ireland. The extent of landlessness among the English population in 1876 was not hugely different from that in Ireland. The potential for a revolution in land ownership in England existed, but it simply never happened.

Bill Cash (Conservative, Stone)

I hope that the hon. Gentleman will not mind if I mention the fact that my great, great uncle happened to be the secretary of the Tenant Rights Association in the 1840s.

Adrian Sanders (Liberal Democrat, Torbay)

That was a helpful intervention, because I was not aware of that association. I am aware of another organisation that no doubt the hon. Gentleman will intervene and say that another member of his family was a member of.

The return was pulled back and, in a sense, buried, partly as a result of the events in the Republic of Ireland, where land was being redistributed to the landless peasantry. That redistribution began in the 1880s and finally ended only a few years ago. It proved so effective that, by 1921 and independence, large landowners as a class in most of that country had largely been eliminated.

This is where the history links into the Bill. There is reason to believe that that redistribution of land is one of the essential underpinnings of the Irish economic success of the 1990s, when that comparatively tiny state of fewer than 4 million people drove its gross domestic product above that of the United Kingdom. Without a comprehensive land register, we cannot begin to tackle that issue.

The Republic of Ireland does not require its citizens to pay a council tax or water rates. It provides a far higher level of old-age benefits than almost any other European state. Despite the huge and very British style of intense urbanisation around the capital, Dublin, the community of the Republic of Ireland remains largely rural, although most farms are now adjusted to the post-European-integration reality of deriving one quarter of their income from subsidy, one quarter from farming and a full half from other activities. What has never been analysed is the ''credit accelerator'' based on land ownership, which has drawn money and investment into the Irish economy, as opposed to the economy created in Ireland by foreign investment.

Understanding the way that credit was generated for Irish families through the possession of land on a widely distributed basis is central to understanding why the British economy stalled, not in the last 50 years of the previous century, but possibly as far back as the late 1800s, when economic decline first set in. Another lesson for Britain is hidden in the Irish economy. As real wealth has spread and the value of land and its potential as collateral has risen, so has the pace and nature of housebuilding in the Irish economy.

Bill Cash (Conservative, Stone)

On a point of order, Mr Illsley. I am fascinated by this essay on the relationship between the Irish and British economies, and the question of land in Ireland. However, I ask you whether it is entirely in order, given that we are talking about a Land Registration Bill for this country. Whatever Sinn Fein may be up to in attempting to get into this House, I wonder whether this is the right way to go about it.

Eric Illsley (Labour, Barnsley Central)

That is a valid point. The hon. Member for Torbay (Mr. Sanders) has strayed rather wide of the terms of the Bill, which deals with registration rather than ownership, and I hope that in his subsequent remarks he will return to the issue of registration.

Adrian Sanders (Liberal Democrat, Torbay)

Yes, the issue of registration is fundamental if we are to change the way in which our economy has developed over the years. My argument is that we cannot deal with other linked issues without some form of comprehensive land register. In essence, the issue is not legal but economic. We cannot begin to

deal with, say, the housing crisis unless we first establish a comprehensive land register. In the UK, the importance of home ownership is widely understood, yet the Treasury remains locked into neo-classical industrial economic models that produce not real growth but only a gentle level of decline, along with appalling levels of pay and job security in a so-called service economy. It is from our small neighbour, which is building more than twice as many houses a year per head of population, that we can learn the most crucial lesson about creating a viable economy for our people.

In essence, a land register would help us to redistribute land more widely and raise money on its value. We could do away with the council tax, improve many available social benefits and find land for the houses that are so desperately needed. Having already gone through that process, the Irish pay no council tax yet still benefit from local services. Surely that could be done in this country, too. Between £12 billion and £17 billion could be raised—more than sufficient to cover the £10.4 billion currently raised by the council tax. A revision of land subsidies should not seriously affect farmers. On the contrary, the system might well be more efficient if it ensured that subsidies were paid to those who could assist agricultural output, rather than to the landed aristocracy.

I hope that I have given members of the Committee an inkling of the present situation, which is undesirable and cannot begin to change until there is a comprehensive register of land ownership. As I have said, the implications for generating wealth, housing the homeless and really tackling poverty are so obvious and profound that one might ask why no one has tried it before. The answer is that they have. In 1911, Lloyd George wanted to introduce site value rating, or land value taxation, as others call it. What stopped him was opposition to a comprehensive land register. Other countries—Ireland, New Zealand, Canada, Australia, Sweden and parts of the United States—have been more successful, and it is time that we followed suit.

Michael Wills (Labour, North Swindon)

I thank the hon. Member for Torbay (Mr. Sanders) for a fascinating and radical insight into the way in which Liberal Democrat policy is evolving. If I understood him correctly, he is calling for the nationalisation of land, widespread redistribution and, as a consequence, the abolition of most other taxes—all of which is to be brought about through completion of the land register. That is remarkable. I look forward to seeing those policies develop, and to combating my Liberal Democrat opponent on their fine detail.

I do agree with many of the hon. Gentleman's points about the importance of registering land. In case there is any doubt, however, I should make it clear for the record that, although registration is valuable, we do not see it as a precursor to the nationalisation of land. We share his views about the importance of completing the register, but I am afraid that we must resist the new clauses. Unregistered land should of

course be phased out as soon as possible—indeed, that is the purpose of the Bill. However, to proceed in the way envisaged in the new clauses would be fraught with difficulties. The vast majority of events that result in changes to the legal owner of the land are already caught by the existing trigger mechanisms. As I think I said on Second Reading, it would be hard to devise a system that naturally picked up further registrations, and now is not the time to do so. The Bill as drafted and the way in which it will be implemented will fully match the resources of the Land Registry and its customers for many years to come. We think that they can cope with the current proposals, but they would be hard pressed to deal with much more than that.

The issues surrounding completion of the register need to be considered very carefully. Due account must be taken of human rights, which the hon. Member for Torbay seemed to overlook in his survey of future developments. The Law Commission has suggested that that issue be reviewed in about five years' time, when the Bill has bedded in, and in my view that is a sensible course to adopt. Moving towards the goal of total registration is of course important, but we may not need drastic measures of the sort that the hon. Member for Torbay would like to see. If we allow time to discover the Bill's impact on the level of voluntary registrations, such information could help us to design the measures necessary to complete the register.

New clause 2 is unnecessary, ill-timed and misconceived. The creation of a record of unregistered interests would not result in a meaningful public register without a corresponding investigation of legal titles to those interests. To be meaningful, such a record must involve the investigation of title process that currently precedes first registration of title. The new clause is untimely, in that we anticipate the Bill's encouraging a far greater level of voluntary registrations. The new clause would also result in much additional work for, and adjustment by, the Land Registry, and occupy those involved in the conveyancing process for some time to come. Regrettably, we must therefore resist it.

Adrian Sanders (Liberal Democrat, Torbay)

I thank the Minister for his comments, but I should place it on the record that I would not advocate the nationalisation of land. Ireland, America, Canada and New Zealand have all achieved a comprehensive register without the nationalisation of land, which never formed part of my proposal.

I accept that the Minister genuinely wants a comprehensive register. People perhaps do not think enough about this matter and the potential opportunities to which a comprehensive register could give rise. My purpose is to put the issue on the public record, widen people's horizons and open their eyes to what might be achieved in future. In that spirit, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Schedules 1 and 2 agreed to.

Schedule 3 - Unregistered interests which override registered dispositions

Bill Cash (Conservative, Stone)

I beg to move amendment No. 36, in page 49, line 24, leave out 'obvious on' and insert 'disclosed by'.

Eric Illsley (Labour, Barnsley Central)

With this we may discuss the following amendments: No. 38, in page 49, line 38, leave out 'obvious on' and insert 'disclosed by'.

No. 39, in page 50, line 3, at end insert—

'( ) For the purposes of sub-paragraph (1)(b), an easement or profit shall be taken to be such as would be disclosed by a reasonably careful inspection if such an inspection would reveal that acts had been done on the land, or advantages had been enjoyed over it, which were in fact done or enjoyed in the exercise of the easement or profit, whether or not such an inspection would also show whether those acts were done or those advantages were enjoyed as of right and not merely by permission of the owner or occupier of the land.'.

Bill Cash (Conservative, Stone)

The amendment deals with a number of matters relating to unregistered interests that override registered dispositions, specifically with reference to paragraphs 2 and 3. In relation to persons in actual occupation, there is an exception in respect of a number of interests and a question concerning the wording. That is clear from amendment No. 36, which would omit the word ''obvious'' and substitute for it the words ''disclosed by''. It may seem to be no more than a drafting matter, but there is a distinction between what is ''obvious'' on a reasonably careful inspection of land and what is ''disclosed by'' a reasonably careful inspection of land at the time of disposition. The amendment relates not only to paragraph 2(c)(i), but to paragraph 3(1)(b), which refers to easements and profits a prendre and in which the same point arises. I should be interested to know the Minister's response because it is obvious to me that ''obvious'' is not the right word to use.

Amendment No. 39 covers a more important point and refers to easements and profits a prendre. Paragraph 3(1) relates to leasehold interests in land, but does not apply under paragraph 3(2)

''if the person entitled to the easement or profit proves that it has been exercised in the period of one year ending with the day of the disposition.''

An easement or profit could include rights of way and all sorts of other rights such as shooting rights. A whole raft of matters could conceivably fall into this category, which is very large and of enormous practical importance to landowners. People may buy estates and find that they are subject to rights of way, rights of light, rights of passage and other rights that I mentioned earlier arising under private Acts, such as rights of piscary and so on, on which I received a very helpful letter from the Land Registry. We are suggesting that

''For the purposes of sub-paragraph (1)(b), an easement or profit shall be taken to be such as would be disclosed by a reasonably careful inspection if such an inspection would reveal that acts had been done on the land, or advantages had been enjoyed over it, which were in fact done or enjoyed in the exercise

of the easement or profit, whether or not such an inspection would also show whether those acts were done or those advantages were enjoyed as of right and not merely by permission of the owner or occupiers of the land.''.

I could spend a long time on this, Mr. Illsley, but you can be assured that I have not the slightest intention of doing so. The law on the subject is extensive and interesting, and includes matters relating to shooting rights, riparian rights, who owns what up to certain points in a river, and whether it is for navigation or a cut. There are many books on the subject and it would be invidious to go through the whole matter. However, the amendment should be given proper consideration and I have no doubt that the Minister will do so. I look forward to hearing what he has to say.

Michael Wills (Labour, North Swindon)

I agree with the hon. Member for Stone (Mr. Cash). At one level, amendments Nos. 36 and 38 cover drafting matters, but they could have important consequences, which is why I shall resist them. In speaking to those amendments, I shall also speak to amendment No. 39.

The Government share a common objective with the hon. Gentleman: that the Bill should provide that if a buyer knows of a person's occupation or a legal easement or profit because it is patent, he should be bound by it. The issue is: how can that common objective be best achieved? The hon. Gentleman believes that the words ''disclosed by'' will achieve that objective better than the words ''obvious on''. We disagree, and to explain why I must say a little about the way in which the Bill was drafted.

Many areas of the statutes that the Bill replaces have been subject to considerable litigation over many years. When there has been doubt about important provisions and that doubt has been resolved, the answers now form part of the common law. When the answers are clear and satisfactory, the Bill has deliberately been drafted neither to incorporate nor to change the substantive law. That is in the interests of a shorter Bill and avoiding the risk of having been taken to have changed the law.

In the Bill as originally drafted, paragraph 2 represented a partial exception to that rule. There are many practical difficulties in establishing the steps that a prospective buyer needs to take to discover whether land is occupied and whether the person occupying it has acquired rights that will override the sale. The first version of the Bill tried to give some additional explanation. During debate in another place, the Government were convinced that that was a mistake and that the words that had been inserted were not self-evidently clear. Although they were not intended to change what had been established by the leading cases on the matter, there was an unacceptable risk that they might have been thought to do so and thereby give rise to avoidable litigation.

After careful consideration and hard thinking to see whether the wording could be made more helpfully explanatory, the Government decided that the safest way was to use the shortest wording that was closest to the current statutes, because there would then be less risk of attempts to revisit common law decisions that had been found to be clear and workable.

I hope that Conservative Members will accept that approach. Their amendments would, arguably, change the existing law and they are no clearer than what they would replace. Little may turn on the two phrases, but I am not aware of any judicial gloss on the word ''discovered'' in this context, while the word ''obvious'' has been the subject of judicial use.

In the leading cases of Ashburner v. Sewell and Yandle and Sons v. Sutton, the test applied by the judges was whether a defect in title was obvious to an intending purchaser. We consider that the safest course is to use the word ''obvious'' in the Bill because it is a word that has been considered by the courts in a similar context. As far as I am aware, the phrase ''discovered by'' has not had such judicial consideration.

Bill Cash (Conservative, Stone)

Disclosed by.

Michael Wills (Labour, North Swindon)

Of course, the hon. Gentleman is right.

The final amendment in this group, amendment No. 39, is unnecessary because, as I have just said, there is already judicial guidance on how to interpret what is obvious on a reasonably careful inspection. The approach to interpretation is the same as for the case law on the question of what does not have to be disclosed to a buyer of land prior to contract. The courts have held that patent defects in title do not have to be disclosed. In the Yandle case, the learned judge said:

''I think he''—

the purchaser—

''is only liable to take property subject to those defects which are patent to the eye, including those defects which are a necessary consequence of something which is patent to the eye.''

If a legal easement or profit is one that a seller of the burdened land would have to disclose to a buyer before contract, it will override a registered disposition.

Bill Cash (Conservative, Stone)

I do not know whether the Minister has any interest in land, or in rights of way, but can he tell me how a right of way can be identified by looking at it?

Michael Wills (Labour, North Swindon)

The hon. Gentleman raises an interesting question to which I will return in a short time, if I may. First, I will continue to make the point that I was making.

Bill Cash (Conservative, Stone)

I will offer the Minister another example. How does he know that a shooting right exists unless he sees birds strutting around the land and people popping at them with guns?

Michael Wills (Labour, North Swindon)

The hon. Gentleman makes that point extremely well. There will be circumstances where rights such as those will be self-evident. It one sees a shooting party—

Bill Cash (Conservative, Stone)

Robert de Niro or someone like that.

Michael Wills (Labour, North Swindon)

If one sees a shooting party, with everyone banging away at the pheasants as they wing across the land, and the beaters, as I understand it, beating the pheasants out of whatever they are beaten out of—

Bill Cash (Conservative, Stone)

They are beaten to within an inch of their lives.

Michael Wills (Labour, North Swindon)

The hon. Gentleman is rendering me valuable assistance. I have never fired a shot at anything in my life, and he obviously has much greater knowledge of such things than I do. In those circumstances, I think that it would be a reasonable assumption that those people were occupying the land as a result of some sort of right. I will return to the point about rights of way very shortly.

A legal easement, such as I was discussing, might occur if at the time of a registered transfer there were a private right of way, the existence of which was patent to the eye. The words ''patent to the eye'' and ''inspection'' cover a multitude of terms here. Someone could be sent to look at the land to see whether paths were clear and maintained. One might see posses of ramblers rambling over it, presumably in pursuit of some existing right of way, or people shooting, as we have already discussed. There are ways in which one might reasonably assume that a right of way existed. If that were patent to the eye, the buyer would be bound by it, even if they did not know details of the particular right under which the way was used, or who the users were.

I hope that that addresses, to some extent, the hon. Gentleman's point and that, in the light of that, he will consider withdrawing the amendment.

Bill Cash (Conservative, Stone)

I am not convinced by that argument, and I was getting slightly worried about whether the Minister could read the handwriting on the piece of paper that came across, which was patent, obvious and disclosed. I think that we might need to come back to this issue on Report, so I will give the matter some careful consideration. In the meantime, with the proviso that I intend to consider tabling further amendments on Report, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 3 agreed to.

Schedules 4 and 5 agreed to.

Schedule 6 - Registration of adverse possessor

Bill Cash (Conservative, Stone)

I beg to move amendment No. 72, in page 58, line 14, after ''5'', insert ''(2) and (3)''.

The amendment seeks to limit the applicable conditions to exclude the conditions set out in paragraph 5(4). I do not know whether all hon. Members have looked at the amendment, but it arises under the general heading of the effects of registration.

Paragraph 9(3) states that where a squatter—for a moment I thought that I might get a glimmer of interest from the other side of the Committee—is registered as proprietor, he takes the property free from any mortgage that is registered against it. Paragraph 9(4) goes on to specify certain exceptions; in other words, cases where the squatter will take the property subject to any existing mortgage. Such situations could crop up quite easily; a lot of squatting goes on in relation to land, so I hope that we will get a coherent response, of the sort to which we are used, from the Minister. The question is whether a squatter should take subject to a mortgage when paragraph 5(4) applies.

One of the requirements is that the squatter reasonably believes that the land is already his. With the greatest respect to squatters, I have to say that they often believe that the land is already theirs, for reasons that, I suspect, have much to do with the arguments that we heard during debates on new clauses 2 and 3. Irrespective of whether or not land is actually owned by someone, a belief is prevalent in certain parts of the world that it should belong to everyone. Squatters fall into that category. They are sometimes driven to illegal occupation of land in circumstances in which many people are sympathetic to their plight. However, I suggest that, in most cases, they have a reckless disregard for the land that they are invading.

In this case, a requirement is that the squatter reasonably believes that the land is already his. That requirement exists to cope with genuine boundary confusions. I shall give an illustration of what is likely to happen. It sounds a little like the questions put to me in my Law Society final examinations, so the Committee must forgive me if I read it with some nostalgia. A takes out a mortgage on his house and large garden. Unknown to him, the deeds include, and therefore the mortgage covers, a strip of land at the edge of the garden actually occupied by his neighbour, B. B thinks that that land is his. When he discovers that it is not, he successfully applies the registration of his title acquired by adverse possession. That only confirms the position that has existed for at least 10 years.

In such circumstances, why, asks the examiner—and the official Opposition—should B be saddled with a slice of A's mortgage? I see that the student Minister is passing a note to his tutor to ensure that we get the right answer. I do not say that with any disrespect, because I am sure that we need, and will get, the right answer. The amendment would exempt B. Will the Minister please comment?

Michael Wills (Labour, North Swindon)

The amendment is interesting and relates to situations that could arise frequently. Undoubtedly there will be applications where a squatter has gained title to a large proportion of the estate. Sometimes, the sums of money involved will be large, whether the proportion of the estate is small or large. In such circumstances, were the amendment adopted, former registered owners could find not only that they had lost a proportion—perhaps a valuable one—of their land,

but that they still remained subject to any charge on the land that had been lost. Additionally, a lender could lose a significant part of its security. It seems to me that that would be an injustice for both the former owner and the lender.

We face a choice. The Bill as it stands imposes the inconvenience of an additional stage in working out what should happen when a squatter is successful. That often involves comparatively small sums of money, but undoubtedly fairly apportions the remaining financial liabilities and any charge on the land. The amendment would remove that stage for many, but would be unfair for the few cases in which there was a large charge. The existence of the apportionment rule could discourage some from making unmeritorious applications. There is a possible argument—it may not carry much weight with the hon. Member for Stone—that, were the amendment made, it would place the Bill at the risk of being challenged under the Human Rights Act 1998. The general arguments are in favour of the Bill as it stands.

Bill Cash (Conservative, Stone)

The Minister has just walked into some curious territory. Human rights for whom; the squatter or the owner of land?

Michael Wills (Labour, North Swindon)

That is an interesting philosophical point.

Bill Cash (Conservative, Stone)

It is a legal one.

Michael Wills (Labour, North Swindon)

It is, and, if the amendment were made, the Bill might fall foul of article 1 of the European convention on human rights as it relates to the Human Rights Act.

Bill Cash (Conservative, Stone)

At the dying stages of the Committee, I do not want to enter into an arid discussion. However, with whom do the legal rights lie? If the rights lay, by adverse possession, with the ownership of the squatter, he would be able to sustain human rights vis-a-vis the owner of the land. That would be a perfect example of the nonsense that is thrown up by some parts of the Bill.

Michael Wills (Labour, North Swindon)

Quite simply, the human rights would be those of the chargee. The amendment throws up certain problems in that respect. After taking in the other arguments for a balance of fairness, I hope that the hon. Gentleman will withdraw the amendment. I recognise his point, but a balance of fairness must be struck and we think that the Bill strikes it.

Bill Cash (Conservative, Stone)

Would the Minister be good enough to consider my point before the Bill is considered on Report? If he does so, we may be able to come to an agreement over wording; if he does not, we may table an amendment on Report.

Michael Wills (Labour, North Swindon)

I am always happy to consider anything that the hon. Gentleman says, but can give no guarantee as to the outcome of that consideration. I hope the fact that I will give consideration will enable him to withdraw the amendment.

Bill Cash (Conservative, Stone)

In those circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 agreed to.

Schedule 7 agreed to.

Schedule 8 - Indemnities

Bill Cash (Conservative, Stone)

I beg to move amendment No. 73, in page 61, line 23, at end insert ', or

( ) the exercise by the court of its powers under section 46'.

The object of the amendment is to ensure that priority is maintained in all but the most extreme circumstances, and that circumstances in which priority is lost be indemnified. Questions of indemnification are important and I would be grateful for the Minister's explanation of why he opposes that; if, indeed, he does.

Michael Wills (Labour, North Swindon)

The hon. Gentleman is quite correct in saying that we will oppose the amendment, and I am happy to give him our reasons. The schedule, which refers to clause 102, deals with the question of indemnity, embodies the principles on which the state guarantee of titles is based and gives confidence to the conveyancing process. It is important that the provisions are comprehensive. The structure of the arrangements was reviewed in detail quite recently and amendments were introduced by the Land Registration Act 1997. Those provisions have been in operation for several years and I understand that they are working well.

Although the Bill is couched in a different style, it does not change the legal position in any material way. Schedule 8(1) lists all the circumstances in which the registrar must indemnify a person for loss; it is a no-fault system. The amendment would add a new circumstance to the list of those in which indemnity will be payable. It seeks to make the registrar liable to compensate a person who suffers loss because the court has exercised its power to enter a restriction and it has chosen to give that restriction priority over existing entries or applications that are protected by the priority searching mechanism.

I understand why the amendment has been tabled, but it is not appropriate. In deciding whether an order should be made to enter a restriction, the court will consider the rights and other matters affecting the title, especially if it had signed to give the restriction overriding priority. Under clause 46(5), the court may exercise its power to direct that a restriction is the overriding priority, subject to such terms and conditions as it thinks fit. It is, therefore, appropriate for the courts—not a registry—to consider the issue of compensation to be paid to persons adversely affected by the order. The amendment is unnecessary, because the rights of third parties must be addressed within the court proceedings that give rise to the order.

Bill Cash (Conservative, Stone)

I am intrigued by that answer. The fact that the court may, under clause 46(5), make

the exercise of its power under subsection (3)—subject to such terms and conditions as it thinks fit—does not include the power to be able to impose what would effectively be the indemnity that is referred to in the arrangement that we are proposing, which is an entitlement to an indemnity for someone who suffers loss by reason of the exercise by the court of its powers under clause 46.

I am glad to say that another note is being passed to the Minister, and I hope that it comes to his rescue on this occasion. Where the court finds that it has to make an entry, it does not take that decision for a frivolous reason; it takes it because, having listened to the arguments, it has come to the conclusion that that is necessary. If that is necessary, and loss is incurred by someone under schedule 8(1), and if the power to impose conditions is not enough to provide an indemnity but the court thought that the matter was important enough to do that in any case, why should not the person be able to obtain the indemnity that he would, otherwise, have been able to get? That is illustrated by a glance at the other entitlement provisions, such as a mistake in the cautions register, a mistake whose correction would involve rectification of the register, and a mistake in an official search. My point is that there is a category within which clause 46 falls that is not dissimilar to those that are set out in the indemnity provisions relating to entitlement.

I am open to further persuasion, and I suspect that another note is making its way to the Minister that might help me to understand the matter better. However, I will not withdraw the amendment until the Minister has had a chance to read the note in front of him.

Michael Wills (Labour, North Swindon)

It will not take long to read.

I am advised, by people who are in a far better position than I am to know the facts of the matter, that the court will require an undertaking in damages from the applicant, and that, if there is a mistake, an indemnity is payable. I hope that the hon. Gentleman can add that to the reassurances that I have already given him, and that he will withdraw the amendment.

Bill Cash (Conservative, Stone)

That just goes to prove the beauty of our democratic system. As a result of pursuing the matter a little further as we reach the dying moments of the Committee, the Minister has said something that provides me with enough reassurance to be able to withdraw the amendment, although I had told my troops—or, rather, troop—that we would press the matter to a Division. However, we might return to it on Report, because I shall seek further advice on the question. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 8 agreed to.

Schedule 9 agreed to.

Schedule 10

Miscellaneous and general funds

Bill Cash (Conservative, Stone)

I beg to move amendment No. 75, in page 66, line 19, leave out paragraph 3.

This important provision relates to the manner in which rules will apply with regard to implied covenants. The amendment is probing. Why does the Minister consider the provision to be necessary? We suggest that it should be omitted, with a view to finding the reasons for its inclusion.

Michael Wills (Labour, North Swindon)

As always, I am delighted to respond to the hon. Gentleman's probing. Paragraph 3 of schedule 10 fulfils an important function in the conveyancing process. As the hon. Gentleman said, it relates to implied covenants. An obligation to deduce title to land in accordance with a contract of sale comes to an end on completion of the sale. The establishment that there has been a breach of implied covenants for title is the only way in which a transferee can attempt to remedy defects in title that emerge after completion.

Rule 77A(2) of the Land Registration Rules 1925 currently provides that a person will not be liable for a breach of most implied covenants in respect of matters set out on the register of title. I hope that the hon. Gentleman is paying attention to this important point.

Bill Cash (Conservative, Stone)

He is paying great attention, and can hear with both ears.

Michael Wills (Labour, North Swindon)

I am anxious to reassure the hon. Gentleman about this important point and he will not be reassured if he is not fully engaged.

Bill Cash (Conservative, Stone)

I was seeking advice from the Clerk with respect to the termination of our proceedings, which is coming. I listen with great and avid interest—as ever—to what the Minister is saying.

Michael Wills (Labour, North Swindon)

That was the only moment during our proceedings when I saw the hon. Gentleman's attention flag for even a second. I thought that I should bring him back to the task that faces us all.

I mentioned the provision in the Land Registration Rules 1925. The Bill addresses that by inserting a new subsection into section 6 of the Law of Property (Miscellaneous Provision) Act 1994. That insertion does not exactly replicate existing law but the differences are not material. As a consequence, the law is made clearer, more coherent and more accessible. The rule-making powers in schedule 10 are fairly limited in scope but are, nonetheless, important. They are designed purely to ensure that everyone knows when implied covenants have been given in relation to a transaction and whether the statutory form of covenant has been modified in any way.

There is no intention—I suspect that the hon. Gentleman may fear that there is—to tinker with the precise wording of implied covenants that have been developed and refined over the centuries. I hope that that reassurance will enable the hon. Gentleman to withdraw the amendment.

Bill Cash (Conservative, Stone)

Having heard the Minister's exposition from beginning to end, I am glad to assure him that I will withdraw the amendment. However, as we are reaching the end of our proceedings, I should tell the Minister that there are further points on which I may correspond with him or table further amendments on Report. However, subject to that, I am grateful to the Minister for his explanations, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 10 agreed to.

Schedules 11 to 13 agreed to.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Michael Wills (Labour, North Swindon)

It is my happy lot to say thank you, Mr. Illsley, for chairing the Committee. I wish to thank in particular my officials, as well as all other members of staff who have assisted during the Committee's proceedings.

Mr. Cash: I would like to thank the Minister and all other members of the Committee, as well as you, Mr. Illsley.

Adrian Sanders (Liberal Democrat, Torbay)

May I echo the comments of the Minister and the hon. Member for Stone, and offer my thanks to all concerned with the Committee?

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at twenty-one minutes past Three o'clock.