Orders of the Day — Land Registration Bill
House of Commons, 11 February 2002.
New Clause 1 — Electronic settlement
Michael Martin (Speaker, Glasgow Springburn)
With this it will be convenient to discuss the following: Government new clause 2—Incidental powers: companies.
Government amendments Nos. 1 to 6.
Bill Cash (Conservative, Stone)
The Law Society and others have considered the new clauses and amendments. We understand why it is proposed that the registrar be given these powers. We have no objection to the Government's proposals.
Adrian Sanders (Liberal Democrat, Torbay)
The Liberal Democrats have no objection to the new clause either.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 2 — Incidental powers: companies
Clause 69 — Historical information
Clause 91 — Electronic dispositions: formalities
Bill Cash (Conservative, Stone)
I beg to move amendment No. 9, in page 33, line 5, after "certified", insert—
'(ca) each electronic signature was made by, or with the authority of, the person whose signature it purports to be,'.
Michael Martin (Speaker, Glasgow Springburn)
With this it will be convenient to discuss amendment No. 12, line 13, leave out subsection (6) and insert—
'(6) A document to which this section applies is to be regarded for the purposes of any enactment as authenticated only if it was sent by the purported originator or with the authority of the purported originator.'.
Bill Cash (Conservative, Stone)
We examined the clause's provisions in Committee, but the Law Society remains concerned that the Government have not yet given the right assurances.
A number of assurances have been given that as a matter of what is described as "practice" the Government would not pursue solicitors if matters went wrong—if an electronic signature was not made by or with the authority of the person whose signature it purported to be and the issue became highly contentious, which could easily happen. The Law Society would be extremely glad to hear an acknowledgment on the Floor of the House that, as a matter of law, the Government do not intend to create new rights of subrogation against solicitors and that they will not pursue them under existing arrangements.
Michael Wills (Labour, North Swindon)
indicated assent
Bill Cash (Conservative, Stone)
I am glad that the Minister nods. I am sure that he appreciates that this is an important question. We support the new arrangements because they will modernise the process of land registration, but the fact remains that we must ensure not only that the public have the advantages, but that unnecessary difficulties are not caused for the profession—solicitors and others in the conveyancing sector. They should not be unfairly and unreasonably pursued where the circumstances covered by my amendment arise.
Users of the conveyancing system—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 any doubt about whether a forged or impersonated signature may be held to be binding. The law should make it clear that with electronic documents, as with paper ones, individuals, firms and companies are not liable where they have neither made nor authorised a signature.
The Law Society has made it clear that it would be unacceptable if solicitors had to carry the risk of their electronic signature keys being obtained and misused by third parties. The use of presumptions and statutory terms, and their contractual equivalents, should be ruled out by clear statutory language. The relying party should have to prove that a disputed signature was made by or with the authority of the purported signatory. The amendment would bring the law on paper documents into line with Australian legislation.
The provision should apply generally to conveyancing documents, whether or not they purport to be executed by solicitors acting as agents. If technology is developed to eliminate the risk of a user being impersonated, relying parties will find their burden of proof easier to discharge, but currently available technology, including smart cards or biometric identifiers, is far from being able to achieve that objective. Relying parties therefore face real risks in accepting electronic signatures, which might be undetectable forgeries, but it would be wrong to allow them to solve the problem by transferring the risk to purported signatories.
Relying parties that are major institutions—for example, the Land Registry, other Government agencies or financial institutions—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. I hope that the Minister will be able to give me an assurance on the proposals.
Our system must be secure if we are to retain the confidence not only of the public in their house-buying processes but of commercial enterprises and inward investors buying factories and offices in England and Wales. Individuals, firms and companies should not be liable where authority was not given. The wording used in amendment No.12 is adapted from an Australian statute—section 15 of the Electronic Transactions Act 1999, entitled "Attribution of electronic communications".
For the purposes of electronic conveyancing, the process envisages that conveyancers will execute documents on behalf of their clients as agents. There is an absolute warranty of authority by the solicitor as agent. With a paper-based system, if the solicitor has doubts about the identity of his client or is unwilling to sign on his behalf, the solicitor simply ensures that the client signs the relevant documents himself. If there were to be a compulsory electronic system, the solicitor would not have that choice.
It would not necessarily be a problem if at the beginning of a transaction solicitors were able to identify clients on whose behalf they were not prepared to sign as agents, but if matters occurred pre-exchange that made the solicitor concerned or uneasy about signing on behalf of a client, that would cause problems for all the parties to an entire chain of transactions in domestic conveyancing and, where applicable, the commercial business of the commercial tenant.
The Minister has acknowledged that conveyancers must be able to work with the system or systems that are introduced. If a solicitor is not willing to execute on behalf of his client because he or she perceives the risk to be too great, the system simply will not operate as envisaged, or at all.
The Government have said that if a solicitor executed on behalf of a client who was not who he purported to be, the instrument should not have been registered because it was a mistake, and that Her Majesty's Land Registry would indemnify those who suffered loss by relying on the register, but would not exercise its rights to claim its loss against solicitors—in other words, the whole thing would be dealt with by the Land Registry. The fact that the Land Registry has rights of subrogation, which it says it will not exercise unless conveyancers are fraudulent or negligent, does not, I am afraid, satisfy me or give comfort to conveyancing professionals.
In the other place, it was made clear that the Land Registry believes that it is the arbiter of whether it should seek recourse against conveyancing professionals. To say the least, that is not conducive to ensuring that conveyancers are able to accept the risks of operating the Government's new system. Having the Land Registry put on record that it will decide whether to seek recovery of moneys paid out on the basis of bad cases, such as fraud or negligence, does not meet the concerns of those in the profession, particularly the Law Society, for two reasons.
The first is that the policy of the Government or the Land Registry could change, perhaps after conveyancers have committed substantial resources to the adoption of electronic conveyancing. The profession would be much better protected by the need for such a change to be reflected in primary legislation. Secondly, the provisions that would be affected by the amendment would apply not only to documents to which the Land Registry would be required to give effect, such as the transfers of registered land, but to documents that operate between private parties, such as contracts relating to land. Conveyancers need a provision binding not only on the Land Registry, for which the Government can speak, but on private parties to land transactions, for whom they cannot. I hope that the Minister will give me the assurances that I seek, and I shall be glad to hear what he has to say.
Michael Wills (Labour, North Swindon)
In speaking to amendment No. 9, I shall also speak to amendment 12. I am grateful to the hon. Member for Stone (Mr. Cash) for his explanation of amendment No. 9. We discussed the issue at some length in Committee, and I understand the concerns that have given rise to the amendment, so I hope that I will not try the patience of the House by covering familiar ground in an effort to provide genuine reassurance on this matter.
I wish to deal with one thing straight away: the hon. Gentleman referred to the Australian Electronic Transactions Act 1999, which expressly restates the Australian common law in relation to the attribution of communications. It is a general statute that relates to e-commerce; it provides a default position from which the parties may derogate, but it does not provide a compelling precedent in this case.
The purpose of the amendment is ostensibly to add an additional paragraph to clause 91(3). That subsection specifies the conditions that an electronic document must satisfy to be as effective as its paper counterpart. The proposed new subsection would require each electronic signature to be made by, or with the authority of, the person whose signature it purports to be. In other words, a person should only be bound if he or she intended to be bound. That may sound reasonable enough, but it is not the way to achieve a fair result.
As has been said on several occasions during the passage of the Bill, the Bill amends the general law only where necessary. In respect of forged or fraudulent electronic documents, the same general law will apply as applies to their paper equivalents. The same remedies of rectification and indemnity under the land registration system will also be available. The circumstances in which the register will be rectified are designed to ensure the protection of innocent purchasers who take possession of registered land under a disposition that happens to be a forgery—for example, where the electronic instrument that transfers the title is electronically signed without the authority of the landowner. The landowner whose land has been transferred under the forged transfer will, in those circumstances, recover indemnity from the registry for his or her loss.
It seems more likely that the amendment would change the current position. Arguably, it would distort the operation of the principles of fairness that underpin the law to give greater protection to the person whose electronic signature is abused, most likely a conveyancer, at the expense of the innocent buyer, probably an individual home buyer. I am not sure that that change can be justified. It is fundamental to the protection of consumers and businesses that the established principles of law that apply to transactions in paper form should apply to electronic documents.
Underlying the amendment is the concern—I hope I do not caricature it—that solicitors and other practitioners will not be able to administer their affairs in such a way that the perceived risk of using an electronic signature can be properly managed. I am happy to repeat the assurance that I gave in Committee that, as a matter of practice, the Land Registry will exercise its right of recourse only against negligent or fraudulent parties. 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 a system's security, they should not bear the liability for harm caused by careless, malicious or criminal action taken by others. That is an important point.
Bill Cash (Conservative, Stone)
The Minister will recollect that I dealt with what he said about a matter of practice. My purpose is to nudge him towards acknowledging on the Floor of the House that the Government do not intend to create new rights of subrogation against solicitors and would not pursue them under existing law. It is not simply a case of having something that is a matter of practice. What I am driving at is confirmation by the Government that they do not want to create a new right of subrogation against solicitors.
A huge number of people are involved in this important arena. We often discuss general principles when we legislate, but we then have the problem of how something will work in practice. In this case, we have to consider what concerns the individual practitioner who wants to give a good service to his client. We have new and ingenuous methods of achieving efficient land registration and, in such circumstances, it is difficult for the professionals not to be worried that they might be put in an invidious position. Just as there are benefits to the clients of lawyers who engage in conveyancing, so there is a reasonable footing on which practitioners themselves can be reassured.
Michael Wills (Labour, North Swindon)
I am listening carefully to the hon. Gentleman and can reassure him that there is no intention to create new rights against conveyancers. However, I must make it clear that there is no justification for giving conveyancers blanket protection from the consequences of their actions if they have not complied with access agreements or have failed to take the sensible precautions of information technology security that clients would expect in other areas of business. That is what the amendment would achieve at the taxpayers' expense.
I am happy to confirm that the principles that have guided the Land Registry in relation to the paper system will continue to operate in the new world of electronic conveyancing. In particular, the Land Registry accepts that the burden lies with it to satisfy itself that there has been a bad case of fraud or negligence before seeking recourse against a conveyancer.
The use of electronic signatures will not be confined to electronic conveyancing, nor will the signature of electronic documents by agents occur only in the context of electronic conveyancing. Electronic signatures are a developing product, and no one knows what form they will take in five, 10 or 20 years' time. What is clear now is that the challenge of creating a secure and trusted way of conducting electronic business is a huge prize to be won, and in developing the new electronic conveyancing system, the Land Registry will, as has been said many times in this House and in another place, work with the professions and the industry to develop a system that is robust and secure. The rules governing the terms of use of that system under network access agreements will be subject to the affirmative resolution procedure and will be built on consultation with practitioners and others.
Some practitioners may be reluctant to enter the electronic age. It is for them to decide on the benefits and burdens, but the Government are determined to develop electronic conveyancing as a means to a better conveyancing system and we are confident that we will find partners willing to work with us in achieving that end. I hope that in light of my comments the hon. Gentleman will feel able to withdraw amendment No. 9.
Amendment No. 12 covers much the same ground as amendment No. 9, and takes a similar form, although it is restricted to authentication by agents. It was discussed as amendment No. 66 in Committee. It seeks to replace clause 91(6) with a provision specifying that electronic documents that comply with clause 91 are to be regarded as authenticated only if sent by, or with the authority of, the purported originator. "Authenticated" in this context refers to the method of indicating that the electronic message really came from the stated source.
In the paper world, the process of authentication is often almost subliminal. In many cases, a handwritten signature of a firm's business name on a piece of printed stationery is taken as sufficient, whether or not the signature is recognised from previous exchanges or indeed is legible. The electronic world may be more secure but the advantages of electronic commerce are not without cost. Part of the price of preserving the integrity of any computer system is continual vigilance. Electronic identities will have to be carefully guarded and internal management systems made as robust as possible and enforced as rigorously as possible.
There will always be a risk of successful attack, but let us remember two things. First, there is at least as great a risk in the paper world, where forgery is more readily accomplished and standards of checking many times less absolute. Secondly, there is every incentive for the Land Registry, conveyancers and their clients to make the system as secure as possible.
In tabling the amendment, the hon. Gentleman raises the spectre of the unauthorised electronic document. The amendment is intended to limit clause 91 by introducing a condition that a document that would otherwise be effective under the clause will be effective only if was sent by the purported originator or with the authority of the purported originator. The result would be to complicate the conveyancing process by encouraging conveyancers to require proof of where a communication was sent from and with whose authority.
My other objections to the amendment are basically the same as my objections to amendment No. 9. It would create an unnecessary difference between the paper and the electronic systems of dealing in conveyancing. Even worse, it would introduce an undesirable distinction between the rules applying to conveyancing and those to be found in the general law. It would distort the operation of the principles of indemnity and rectification in land registration law.
I also suggest to the House that the amendment represents an undesirably absolutist approach to the use of electronic systems. In effect, it suggests that they should not be used unless they can be absolutely guaranteed to be secure for all eternity. That is simply not realistic, even in the hon. Gentleman's world. What we have to look for instead, as in all other areas of electronic commerce, is a sensible and balanced approach to the management of risk, with a regulatory framework that is proportionate to the actual dangers.
The Land Registry will of course seek to strike such a balance in devising arrangements for ensuring proper authorisation by clients where conveyancers are to sign electronically on their behalf. Those arrangements will be the subject of detailed consultation on the basis of actual and practical proposals, and they will be piloted. That is the way, I suggest, in which we should seek to meet the legitimate concerns that the hon. Gentleman has raised.
I would add that the loss of subsection (6) would be unacceptable, since it will fulfil a small but useful technical purpose in the facilitation of electronic conveyancing. I hope that in light of those extensive comments the hon. Gentleman will not press amendment No. 12.
Adrian Sanders (Liberal Democrat, Torbay)
I am glad that the Minister has already answered some of the questions that I was going to ask—he must have a crystal ball. The way in which the technology is advancing and some of the assurances given in Committee make it clear that an electronic system is as secure as a paper-based system, if not more so. I think that the hon. Member for Stone (Mr. Cash) is getting at what lies behind any system—public confidence. The public recognise the paper-based system and the security within that, and it will be some time before they accept that electronic security systems protect their interests perhaps even better than a paper-based system. Confidence is therefore everything.
Who will determine who is guilty of negligence or fraudulent behaviour within the system? I understand from the Minister's comments that that will take place within the Land Registry, but at what point does the law take over? Who investigates? Who determines? Is it a matter for the police? Is evidence gathered by the Land Registry, or is the whole matter passed over to the constabulary?
I have a great deal of sympathy with both amendments, but I think on balance that we will have to wait and see. The Minister mentioned further technological advances: they will come and they will build confidence in the system. The Government must avoid a dual system of both paper-based and electronic conveyancing, as that would cause confusion. At some point the electronic system will take over from the paper-based system, but building in an inhibitor to electronic conveyancing, which I think would be the effect of the amendments, will not allow the idea to fly, confidence to be built, and the public to be won over. I hope that the Minister can answer my questions.
Bill Cash (Conservative, Stone)
I am grateful to the Minister for his assurance on amendment No. 9. We have on a mutually satisfactory basis edged the issue along a little bit. The assurance he has given—
Michael Wills (Labour, North Swindon)
rose—
Bill Cash (Conservative, Stone)
I gather he has yet another assurance to give. Let us hope for the best.
Michael Wills (Labour, North Swindon)
Before the hon. Member for Stone concludes that he feels able to withdraw the amendments, as I hope he will, I should like to answer the questions asked by the hon. Member for Torbay (Mr. Sanders) about the determination of guilt of fraudulence. He is right that it will be, in the first instance, for the Land Registry to determine what it thinks—
Michael Martin (Speaker, Glasgow Springburn)
Order. The best way to proceed would be to allow the hon. Member for Stone (Mr. Cash) to finish his comments.
Bill Cash (Conservative, Stone)
That is very kind of you, Mr. Speaker. It is always an enormous satisfaction to anyone standing at the Dispatch Box to know that he will be allowed to complete his speech.
I thank the Minister for edging the matter a little further forward. I hear what he says about amendment No. 12, but would like to add that we are dealing with a new technology. The profession as a whole—and its clients—are faced with a new system that, for obvious reasons, has not been tested. No one is sure how it will all pan out. I have no doubt that we shall all be extremely grateful to the experts, whom we heaped with praise in Committee. None the less, only time will tell.
It would be a pity if the Minister created a blot on his own landscape—if our concerns about the way in which the system will operate in practice were borne out.
Given the unbelievable and extraordinary number of Members attending the debate, it would be invidious of me to seek to divide the House. However, I have made my point, and the Minister has responded. He has given me half a cake, which I am glad of. On the principle that Marie Antoinette got it wrong when she said, "Let them eat cake", I shall have to settle for that.
Without prejudice to what I have said and what the future may hold, I beg to ask leave to withdraw the amendment.
Michael Wills (Labour, North Swindon)
rose—
Michael Martin (Speaker, Glasgow Springburn)
Order. Because of the procedures of the House, and as the hon. Member for Stone has sought to withdraw his amendment, I cannot say that it would be best if the Minister did not speak, but I think that he knows what I mean.
Amendment, by leave, withdrawn.
Clause 101 — Fee orders
Clause 104 — Consultancy and advisory services
Clause 126 — Rules, regulations and orders
Bill Cash (Conservative, Stone)
I beg to move amendment No. 10, in page 42, line 39, at end insert—
'(4A) Before making any order under any provision of this Act, the Lord Chancellor shall consult the Rule Committee.'.
Among other things, the clause prescribes certain powers that are conferred on the Lord Chancellor to make not only rules and regulations but
"different provision for different cases."
Furthermore, any such power is to be exercisable by statutory instrument. The clause then explains the procedure to be followed, where the statutory instrument is laid before Parliament.
Subsection (4) states that a statutory instrument concerning land registration rules, certain rules under part II or section 119, regulations under paragraph 5 of schedule 9 or certain orders
"is subject to annulment in pursuance of a resolution of either House of Parliament."
However—the Minister has heard me express a view on this before—there is no explicit provision that, when any such order is made, the Lord Chancellor is under an obligation to consult the rule committee.
Significant practical implications arise in respect of a number of the important changes that are being made, such as extending compulsory registration of title or varying the length of time required for upgrading a possessory title by order. The principle on which consultation operates as a matter of law is no doubt well known to the Minister and, for that matter, most emphatically to the Lord Chancellor, who is required to consult all and sundry, much as Gilbert and Sullivan have required him to sing many a song for his sins since the composition of "Iolanthe" or any other great opera. The lord high executioner in this case, the Lord Chancellor, has that facility. He should be required, in my judgment and that of professionals, to consult the rule committee. It would be astonishing if the Government wanted to resist any such provision. I am interested to learn whether the Minister has an ingenious way of satisfying me that the lack of consultation in the Bill is compensated for by the fact that the consultation will take place in practice. He knows that consultation means no more than "I hear what you say." There is substantial case law on the subject; one does not have to comply with the arguments made during consultation, but one is required to listen.
I know that the Government are a listening Government; at least, I am told that they are. I believe that the Minister is a listening Minister; it would be progress if he assured us that the Lord Chancellor will consult the rule committee, even if he is not prepared to accept my simple amendment. If he is not prepared to give that assurance, it follows that, astonishingly, the Government have no intention of consulting the rule committee. I am engaging in this didactic exchange entirely on my own and am waiting for him to respond. I am sure that he understands that this is an important matter, and will want to consult the rule committee.
Michael Wills (Labour, North Swindon)
indicated assent
Bill Cash (Conservative, Stone)
I am glad that the Minister has just indicated that he will do so. However, if he does not wish to entrench my proposal in legislation, I trust that he can give me an assurance that the rule committee will be consulted as a matter of course. I should be delighted if he would do so, and shall not to try to pre-empt or anticipate what he has to say. It is not only members of the rule committee who expect an assurance, but everyone in the professions, as well as the many millions of people concerned about the way in which the rules, regulations and orders will operate. If the Minister can give that assurance in the best spirit of transparency, to which, I know, he is patriotically committed, that will guarantee that the measure can go ahead as smoothly as possible.
Michael Wills (Labour, North Swindon)
I know that the hon. Member for Stone (Mr. Cash) takes these matters extremely seriously, so I shall try, at some length, to reassure him.
There are two types of order-making power in the Bill. I will deal first with the administrative orders for running the land registration system, of which there are three: a power under clause 99, as the hon. Gentleman will recall, to designate a particular land registry office as the proper office for certain applications; a power under clause 101 to make fees orders for dealings with the registry; and a power under clause 111 to make fees orders for dealings with the adjudicator.
The power to designate where particular applications are handled is an internal matter for the Land Registry, allowing the registrar to even out the levels of work, and therefore processing times, at different offices. It also allows him to set up specialist teams to deal with complex or rare types of applications. Those orders are often made at relatively short notice to address difficulties as they arise. As now, it is intended that they should be made swiftly, and merely laid before Parliament afterwards. There is no need to create any greater scrutiny or delay in their implementation by involving the rule committee; the Bill as drafted reflects that.
The second power is to make a fees order for dealing with the registry itself. Fees orders are currently made by the Lord Chancellor with the advice and assistance of the rule committee; I am pleased to be able to confirm to the hon. Gentleman that that situation will continue under clause 101.
The other rule-making power that I mentioned is that relating to the fees of the adjudicator. As I explained in the Second Reading Committee on 29 November 2001 at column 9 of Hansard, the adjudicator provisions are designed to establish a new and independent judicial officer to determine registration disputes between individuals. Responsibility for the administrative arrangements for the new office will lie with the Lord Chancellor's Department, not the Land Registry. It is not appropriate to jeopardise that independence by subjecting the adjudicator rules or the fees order to the scrutiny of the Land Registry's own rule committee.
Of the three administrative order-making powers under the Bill, only one should fall within the scrutiny of the rule committee, and the Bill as drafted achieves that already.
I turn to the second category of order-making powers, which cover a number of rather disparate areas. First, there will be orders to extend beyond the changes introduced by the Bill the triggers for compulsory registration of land in general, and for demesne land. Then there are orders to adjust the period after which upgrading of title can occur. Finally, there will be orders to extend the system to cover submarine land, and to adjust the qualifying term of leases for compulsory registration of title. All these order-making powers are subject to the negative resolution procedure.
As the powers involve not the running of the land registration system, but adjustments to the statutory framework under which it operates, it is Parliament rather than the rule committee that should direct the order-making process.
The changes that will be brought about by orders made to extend triggers for compulsory registration of title and to reduce the length of leases requiring registration will have a particular impact on the operation of the property market. The relevant clauses therefore impose duties on the Lord Chancellor to consult before exercising those powers.
The Government made a commitment in another place to consult the rule committee during the consultation process under those clauses, a commitment which I was happy to repeat during Committee debates. The rule committee members will, however, be consulted as individuals who have useful background knowledge and expertise to add value to the discussion, but the responsibility for the scrutiny of the orders remains with Parliament.
With regard to these more fundamental order-making powers, the Government believe that the involvement of the rule committee members is already ensured when and where it is of value, and in a way befitting their role in that order-making process.
Given my explanation and the importance which I know the hon. Gentleman attaches to scrutiny by Parliament, I invite him to withdraw his amendment.
Bill Cash (Conservative, Stone)
As usual, the Minister has gone to some length to explain the Government's arguments, and I am grateful to him for his competent explanation of their approach. I believe that it is still desirable for the provision to be included in the Bill, but I gather—I would be grateful if the Minister could at least nod, if he thinks that I have got the message right—that for practical purposes, the rule committee will be engaged in a proper consultative process, notwithstanding the fact that he does not want that to be set out in the Bill.
Michael Wills (Labour, North Swindon)
indicated assent
Bill Cash (Conservative, Stone)
I was a little concerned when I heard the Minister say—I do not want to misquote him—that perhaps it would be more appropriate for the matter to be left to Parliament than to dealings with the rule committee. Enthusiastic as I am about the democracy that lies at the heart of our system and on the Floor of the House, having served for some years on the Statutory Instruments Committee—a burden that I was invited to sustain by the Whips of the time, which gave me an opportunity to see the workings of that Committee, and the manner in which statutory instruments then move inexorably to the Floor of the House and receive such detailed examination, as we all know—I would have much more faith in the Minister's assurance that the rule committee would be involved in the consultative process, in the knowledge that its members have their feet on the ground and would deal with these matters in a practical manner.
The issues will indeed crop up and will be far better dealt with by those who are engaged in professional practice and who have hands-on dealings with the consequences of the matters covered by orders and regulations. I would not mind betting that I will turn out to be right, and that a good deal more consideration will be given to these matters by the rule committee than would ever be contemplated by the great authority of the Statutory Instruments Committee or by Members of Parliament. Without wishing to be cynical, I would qualify what the Minister said. In practice, these matters will be sorted out on the ground with the rule committee. I am glad that he has indicated that that is how he thinks it will work in practice, and I hope that he is right.
On the basis that the Minister and I have arrived at something of a mutual understanding, and that there will be a degree of consultation in practice, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 5 — Land Registry Network
Schedule 8 — Indemnities
Bill Cash (Conservative, Stone)
I beg to move amendment No. 7, in page 61, line 23, at end insert—
'(i) the exercise by the court of its powers under section 46.'.
The amendment relates to schedule 8, which deals with indemnities and the entitlement to them. In turn, the schedule is connected with clause 102. The reason for the amendment boils down to the fact that there appears to be an omission in respect of those circumstances in which a person should reasonably be entitled to be indemnified by the registrar if he suffers loss. Under the schedule, those circumstances include
"rectification of the register . . . a mistake whose correction would involve rectification of the register . . . a mistake in an official search."
Those things really happen. We may not be overwhelmed by the attention of many hon. Members this afternoon, but they would be deeply concerned if they found that a mistake in an official document affected their home, and they might all come flooding back into the House.
Michael Wills (Labour, North Swindon)
I wish that they would all turn up.
Bill Cash (Conservative, Stone)
So do I.
Other circumstances include
"a mistake in a document kept by the registrar which is not an original and is referred to in the register".
Alternatively, there might be
"the loss or destruction of a document lodged at the registry for inspection or safe custody",
or
"a mistake in the cautions register".
Let us imagine that happening in the Whips Office. There might also be a
"failure by the registrar to perform his duty under section 50."
We propose that there should be a further category of entitlement to indemnity in circumstances in which the power of the court to order entry was involved. To the provisions whereby a person would be entitled to be indemnified by the registrar if he suffered loss because of the other matters to which I have referred, the amendment would add:
"the exercise by the court of its powers under section 46."
As I said, that refers to the power of the court to order entry. Under clause 46, that could arise
"If it appears to the court that it is necessary or desirable to do so for the purpose of protecting a right or claim in relation to a registered estate or charge".
The court could then
"make an order requiring the registrar to enter a restriction in the register."
Such circumstances could give rise to a mistake or something similar.
Clause 46(2) adds:
"No order . . . may be made for the purpose of protecting the priority of an interest which is, or could be, the subject of a notice."
Although the court may exercise its power subject to such terms and conditions as it thinks fit, that power would not extend—I do not think that the Minister would argue that it would—to a person having the entitlement to being indemnified by the registrar if that person suffered as a result of the court exercising its powers under clause 46.
The object of the amendment is to ensure that priority of interest is maintained in all but the most extreme circumstances. In circumstances in which priority is lost, the person involved should be entitled to indemnity. At present, the Bill contains insufficient safeguards for the public, but the amendment would help to rectify that problem. At present, there is an absolute right for a person whose position has been prejudiced to receive an indemnity, but citizens will be powerless unless that point is clearly spelled out.
If the Bill is enacted in its current form, will the position of a totally innocent person be prejudiced? Will the person who has priority on the search have locus standi in the subsequent proceedings? That is the key question, because that person must be heard. If he is not, that would be against the rules of natural justice and human rights.
Just in case the Minister wants further reassurance from those who may be able to amplify the points that he wishes to make, I repeat my questions. Is it intended that the person who has priority on the search will have locus standi in the subsequent proceedings? Is it not right that that person be heard? If he is not, is that not against the rules of natural justice and human rights?
Harry Barnes (Labour, North East Derbyshire)
I am interested in the amendment because I am interested in cases in which courts make decisions that adversely affect those who believe that their rights were established by Land Registry entries that were correct. In some cases, however, the decisions of a court are perverse. Such decisions may require a land registrar to alter the recorded material and that may not be in the interests of the purchaser of the property. That is because courts sometimes make decisions in which they say what is being purchased is not what is described in the deeds, but what was seen by the purchaser. There may be a distinction between the two.
I cited such a case in Committee, but I appreciate that there is much in the Bill to ensure that the evidence provided by the Land Registry will usually hold sway with the courts. The law will be tightened up by the Bill. Its provision for indemnity for errors committed by the Land Registry are important, but knock-on consequences may arise as a result of decisions made by the courts. The Bill might reduce the effect of those consequences, and I am interested in any provision that means that someone adversely affected by a court decision receives indemnity. I am not sure that the amendment would deal with the cases that interest me, but I wish to flag up my concerns.
Michael Wills (Labour, North Swindon)
The amendment would impose on the registrar a liability to pay indemnity when the court exercised its powers under clause 46 and the person in question suffered loss as a result. I understand the concerns voiced by the hon. Member for Stone (Mr. Cash) and my hon. Friend the Member for North-East Derbyshire (Mr. Barnes), who want to ensure effective protection for those whose interests might, through no fault of their own, be adversely affected by use of the powers in clause 46. However, as I explained in Committee, there is a way to achieve that other than through invoking the registrar's indemnity powers. The litigation in question would be beyond the registrar's jurisdiction, so another, more appropriate method would be available.
Of course, as I said in Committee, if a person suffers loss outside of litigation through a mistake that falls within the scope of schedule 8—for example, if a restriction is mistakenly entered against the wrong title—indemnity will be payable. In the first circumstance to which the hon. Member for Stone referred, indemnity would be payable. The registry, not the courts, is involved in such matters, for which it should make payments and for which, in some cases at least, it may be responsible. However, the amendment deals with a completely different issue—when there is no mistake on the register and litigation is instigated by one of the parties.
Clause 46 empowers the court to require the registrar to enter a restriction. It is likely that that power will be used where an inhibition is currently entered in the register—for example, where the court grants a freezing injunction. The power to require a restriction to be entered may be exercised, even where an intending purchaser has protected himself or herself by making a priority search under clause 72. Under clause 46(3), the court may direct that an entry made under clause 46 shall have overriding priority. Under subsection (5), the court may make the exercise of its powers under subsection (3) subject to such terms and conditions as it thinks fit.
One of the most likely uses of that power is made clear in paragraph 6533 of the joint Law Commission and Land Registry report, "Land Registration for the 21st Century: A Conveyancing Revolution". Paragraph 6533 explains that the court would probably make an order under subsection (3) only if the applicant undertook to indemnify any person who suffered loss in consequence.
We consider subsection (5) sufficiently wide to enable the court to require such an undertaking, but discussion of the issue in Committee caused the Government to register the fact that the Civil Procedures Rules Committee would be invited to consider drawing the matter to the court's attention if there were doubt about the court's considering use of subsection (5).
In reality, the matter is akin to cases in which the court grants an interim injunction. In such cases, the court will invariably require the applicant to give an undertaking in damages, should he or she lose when the case comes to trial. In other words, it will be for the applicant for an order under clause 46(3) to provide the necessary indemnity, not the registrar. The Government consider that the preferable course, because the registrar has no interest in the matter. It is difficult to see why the taxpayer should pick up the tab for litigation over which the registrar has absolutely no control and from which the public derive no benefit.
In the light of my comments, I hope that the hon. Member for Stone will withdraw the amendment.
Bill Cash (Conservative, Stone)
I welcome you to the Chair, Mr. Deputy Speaker, if I may.
I listened with care to the Minister and I am extremely interested in his concluding remarks, which seem to acknowledge that the issue is not all that simple and that the circumstances to which I referred could arise. I am happy to withdraw the amendment, with this qualification: if things go wrong—we cannot read a crystal ball or be certain of how the provision will work in practice—and matters do not proceed quite as the Minister and his advisers hope, the problem will be rectified.
With respect to the question of indemnities in general and the remarks of the hon. Member for North-East Derbyshire (Mr. Barnes), I simply say that what he referred to is not directly relevant to clause 46, but he is right to be concerned that titles and matters that go on the register lead to serious problems from time to time. Courts are not infallible, nor is the Land Registry. The greatest possible care must be taken to ensure that the most important aspect—not the creation of the law, but the right solutions for the public at large—is delivered in respect of contention over, for example, a boundary dispute or a title's validity.
Bearing in mind all those matters, it is right to withdraw the amendment in the light of what the Minister said, but subject to the reservations that I expressed as to the manner in which the Bill may apply. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent, on behalf of the Duchy of Cornwall, signified.]
Motion made, and Question proposed, That the Bill be now read the Third time.—[Jim Fitzpatrick.]
Michael Wills (Labour, North Swindon)
I, too, welcome you to the Chair, Mr. Deputy Speaker. I thank the members of the two Committees who examined the Bill, which is unusual in a number of ways. First, it is the product of an extensive programme of work undertaken jointly by the Law Commission and Her Majesty's Land Registry. Both here and in another place, the result has been widely welcomed as an admirable balance between looking back and looking forward. Secondly, it provides a re-examination of the legislation from first principles—a task for which the Law Commission is particularly suited and one that the draft Bill achieved with particular distinction. I have already paid tribute to the achievement of Charles Harpum, the former law commissioner responsible for the report, and to the distinguished parliamentary counsel who worked with him, and I happily do so again. We are extremely grateful for their work on the Bill.
It is unusual, if not unprecedented, for a Department to collaborate with the Law Commission on a report, but the way in which the Bill benefits from the Land Registry's unparalleled knowledge of the operation of land registration and its aim of improving the registry's service to its customers shows how successful such collaboration can be. Much credit for that must go to the solicitor to Her Majesty's Land Registry, Chris West. Mr. West is shortly to retire and his work on the Bill represents the crowning of a long and distinguished career of public service. I want to put on record the Government's appreciation of that.
The Law Commission believes that the Bill represents its single largest law reform achievement since its establishment in 1965. It follows, therefore, that the Bill is the most substantial to be considered on Second Reading by a Committee. I certainly felt that the debate in Committee was particularly helpful and constructive, and it showed the effectiveness of the special procedure for such Bills.
The Bill represents a thorough spring cleaning of the existing legislation, almost all of which dates from 1925 or half a century before. We examined in Committee how necessary simplification and clarification has been achieved and tested the scope for further change. We also spent much time looking into the future.
Above all, the Bill is radical and forward thinking. It sets out a framework for electronic conveyancing and so opens the way for the benefits that that will bring to the still excessively protracted and painful business of buying and selling property.
The hon. Member for Torbay (Mr. Sanders) asked a question about which I shall now reassure him. In the first instance, the Land Registry will assess what has happened, but substantial disputes will be decided by the civil or criminal courts.
A great deal remains to be done to put flesh on the skeleton. In addressing concerns expressed by the hon. Member for Stone (Mr. Cash), I make it absolutely clear that the Land Registry will seek to strike a balance in devising arrangements for ensuring proper authorisation by clients where conveyancers are to sign electronically on their behalf. I understand the concerns that have been raised on many occasions during the Bill's passage through the House. The arrangements will be the subject of detailed consultation on the basis of practical proposals, and they will be piloted. We shall thus seek to meet the real concerns that the hon. Gentleman has raised, and I believe that we shall do so.
The helpful and constructive approach taken in the debate highlighted some of the areas where the profession and customers have concerns. Above all, there is a need for a system that can be short yet meet high requirements for reliability and security. The Land Registry is well aware that in planning the next stages it must work with everyone involved in the property market. That will be essential if the ultimate solution is to meet all the needs of the various groups that will benefit. The task will be a considerable challenge to the Land Registry, and the Government will do all we can to help meet it fully.
Bill Cash (Conservative, Stone)
We embarked on this odyssey on Second Reading, and moved on to consideration in Committee. The Minister was right to contend that the procedure was justified for a Bill such as this. The procedure provides us with an opportunity to consider the consequences of proceedings both in Committee and subsequently on Report. We can now wrap up, as it were, the arguments on Third Reading.
The Bill is monumental. It is not a vast Bill by current standards, but it contains a huge amount of complexity. As I said on Second Reading, during the heady days when I was sitting my conveyancing examinations—too long ago for me to care to remember—the law was complicated and made no better by the fact that the Acts, which have now been axed by the Bill, were deficient. I am sure that that is something that my tutors would have told me, rather than something that would have I observed for myself at the time. However, difficulties and complications arose, and the Bill goes a long way to solving them.
I pay tribute vicariously to the Minister's advisers and to the Law Commission. The Minister has been ably assisted throughout on the various points that I have had the temerity to raise from time to time. Consideration of the Bill in Committee was conducted in a good spirit. Mr. Charles Harpum's time at the Law Commission has only recently concluded. He worked throughout with the parliamentary counsel who was seconded to the commission; they both deserve tribute.
I do not want to test your patience, Mr. Deputy Speaker, but we shall shortly consider the Commonhold and Leasehold Reform Bill on Report. I hope that the criteria that led the Law Commission to be so effective in relation to this Bill will be borne in mind when we discuss the Commonhold and Leasehold Reform Bill, in which a number of unresolved issues remain. I hope that we can arrive at some satisfactory conclusions before our consideration is concluded.
This Bill lays the foundations for a system of electronic conveyancing that will bring the whole system up to date, providing a faster and more open mechanism for the buying and selling of homes, which will benefit consumers. Indeed, it will affect many millions of people. I notice that the Minister looked up when I mentioned millions of people. That is a lot of people, and we want to be sure that they are all satisfied by the way in which the Bill is enacted.
The Land Registration Act 1925 had to be disposed of, and the Government are engaging in a sensible pace of reform here. To begin with, the new system will apply only to certain simple registered transactions; other transactions will be drawn into it as time goes by. The system will, in the end, have to be compulsory if the full benefits are to be enjoyed, but as clause 5(4) makes clear, that will be feasible only when electronic conveyancing has by common consent become the most effective way of dealing with transactions.
There was considerable argument in Committee about the provisions on the length of leases. Our difficulty with clause 91 has been addressed again today, and we have dealt with a significant number of the points made not only here but in the other place. I pay tribute to those in the other place who took the initial phases of the Bill through in such a competent fashion.
I also want to put on record, however, the fact that the Bill contains a vast number of rule-making powers. I have already expressed concern about the extent to which such powers are becoming the norm. I looked the other day at the array of statutory instruments that have been introduced in any given year. If we aggregate them with European directives, the burdens that over-regulation can impose and the lack of scrutiny given to all such matters, we realise that the appearance that, because the procedures are followed, these matters are given sufficient consideration is not really justified. I do not mean that the consideration is not justified. I mean that it would be an exaggeration to believe that, when statutory instruments and rules are made, they are given the kind of consideration that the Minister was suggesting they are given. I do not believe that that is the case. The way in which we deal with subordinate legislation needs to be much tighter; far too much goes through on the nod.
On the compulsory registration of leases in excess of seven years, the profession—by which I mean, broadly speaking, the Law Society—generally believes that such compulsory registration is neither necessary nor desirable at this stage. I said in Committee:
"The Law Society and other bodies have made it clear that they would prefer a system of compulsory registration of leases with terms of 14 years or more. In the event that that were successful, the term of registrable leases could be reduced and the Bill contains the power to do that."—[Official Report, Second Reading Committee, 29 November 2001; c. 12.]
Concerns have been expressed about whether there will be a vast increase in applications for registration. We discussed that in Committee and it was also considered in the House of Lords. My noble Friend Baroness Buscombe tabled an amendment that would have reduced the length of leases that must be registered from 21 to 14 years, instead of to seven years. She was strongly supported in the background by the Country Landowners Association, among others. As the Member of Parliament for Stone, which is a rural constituency, I can confirm that people are worried about the complexity of the system. I hope that that will be borne in mind.
It is important to ensure that client confidentiality is sustained, especially between solicitors and their clients; we raised that in Committee and we remain concerned about it.
Having reached the dying days of the Bill, we have, after some argument, obtained assurances from the Minister about the way in which it should operate in practice. The Government have tabled amendments to the Bill, and by and large it has been improved, both in Committee and in the other place, so as to benefit the public as a whole.
We support the Bill and we are glad that the Law Commission and the Land Registry played such a distinguished part in helping it to reach the statute book. If and when any glitches occur in practice, I hope that the Government will enthusiastically ensure that they are rectified as soon as possible.
Adrian Sanders (Liberal Democrat, Torbay)
I promise not to take up much of the House's time. I shall not go on until 10 o'clock tonight or drag out the debate. I want merely to note a concern that we raised in Committee. We accept that the Bill is the first step towards achieving a comprehensive Land Registry, but it could have been introduced more quickly. That is a lost opportunity.
The debates on Second Reading, in Committee and today on Report and Third Reading have been good natured and they have clarified the provisions. We hope that the Bill will succeed in speeding up conveyancing, which is important to any prospective house buyer or vendor. We also hope that it will encourage people who might not otherwise have registered their land to do so. Perhaps one day there will be proposals to speed up the system even further; we shall have to wait and see.
I thank hon. Members for the way in which business has been conducted. It has been civilised, enjoyable and educational. We have all learned something from the process.
Angela Watkinson (Conservative, Upminster)
I rise to speak in support of the Bill, although I was not a member of the Committee that scrutinised it. I should have preferred it to include tougher remedies against squatters and the creation of a more effective land register for empty public sector property. As with most Bills, the devil is in the detail.
I want to draw hon. Members' attention to clause 115, which is entitled "Reduction in unregistered interests with automatic protection", in relation to manorial rights. Essentially, it means that owners of manors will have 10 years from the appointed day to register any interests in the land that they hold as lords of the manor. If registration is contemplated after the 10-year period, it will be too late, and any rights or potential rights in the land will be lost. Any unregistered rights will not be capable of registration, and therefore incapable of enforcement.
Although it may seem that 10 years is a long enough period for everyone to register, that presupposes that everyone knows of the change in the law. Experience of the Commons Registration Act 1965, under which a period of seven years was allowed for registration of an interest, showed that after 1972 many people had not registered because they did not know that they had to. In fact, discretion was granted to the Commons Commissioners to register after the final date, but there is no discretion contemplated in the Bill, as one of my constituents thinks there should be.
My constituent, Mr. John Hornchurch, purchased the lordship of the local manor of Hornchurch hall some years ago, and gave it to his family's charitable trust, the Hornchurch hall trust, as a foundation asset. He writes on behalf of the trust: his only personal interest is that he is the trustee whom the other trustees have nominated to use the title "lord of the manor" for life.
Only a small part of the Bill affects manorial rights, but unfortunately the manorial provisions seem to be adverse and unfair. Under one provision, where a title is registered, it will be possible to have it deregistered, so that future proof of title will depend on title deeds rather than on a register. Mr. Hornchurch believes that that provision is an unfair step. At considerable personal time and expense, he registered the Hornchurch hall trust as the proprietors of the title of lord of the manor of Hornchurch hall. His aim was to obtain benefits of registration, and to make the title and its ownership certain. Clearly, he does not want the trust's position to be arbitrarily weakened.
Another provision will require unregistered manorial rights to be registered within 10 years of the Bill coming into force, or the rights will be lost. Many rights are uncertain, and become evident only when particular circumstances arise. It seems unfair that the time limit should be imposed, and Mr. Hornchurch feels that it should at least be longer or that there should be provisions for exceptions.
In the case of the lordship of Hornchurch hall, there is a degree of uncertainty about rights, which Mr. Hornchurch doubts could be removed without considerable further expense. Neither the trust nor the trustees of Hornchurch hall, who provide all the income of the trust, have ever benefited financially from those rights. They make financial gifts to deserving causes. They have wide discretionary powers, and conform to the Charity Commissioners' rules. The trust is entirely philanthropic.
The Bill will revise and bring up to date much of the law on the way in which the ownership of land is recorded. However, there is an incidental consequence for lords of the manor, which may not have been intended. Land registration works through a register, which now exists in computerised form and records many details of the land. It also includes rights belonging to lords of the manor. The general rule is that, if anyone is registered as the owner of land, that is free of any third-party rights unless a note is made on the register of title that it is subject to such rights. That rule is subject to certain exceptions.
One of the important exceptions relates to overriding rights, which are rights that affect the land even if they are not noted on the register. As the law stands, if someone owns land that is subject to the rights of the lord of the manor in relation to these matters, the rights of the lord will continue whether or not the matter is mentioned on the register. Under the Bill, if rights are not registered within 10 years from the date of the legislation coming into force, they will cease to bind the land. If the law comes into force in the way suggested, lords of the manor will have to register their rights within 10 years or, for practical purposes, they will lose them. That may be fair if the lord of the manor knows what his or her rights are, but the rights may often be difficult to ascertain. Anyone who knows about their rights will need legal advice on protecting them.
The Bill also contains other provisions on manors. One is that when the title to the manor itself is registered, as distinct from the land over which the manorial rights can be exercised, it will be possible to have the title deregistered so that from then on proof of title will depend on the title deeds rather than on a register.
Another factor that will affect owners of roadside verges or similar areas is that after the Bill comes into force it will no longer be possible to lodge a caution at the Land Registry. A lord of the manor may register a caution when he or she is unable to provide evidence of ownership of the verge to the satisfaction of the Land Registry, but still claims ownership. If someone else, such as the owner of an adjoining field, applies to be registered as owner, the Land Register will tell the person who has lodged a caution, and the matter can then be resolved. It will not be possible to lodge such cautions in the future, however.
It seems that there is a fundamental principle of human rights here. Under the European convention on human rights, now incorporated in United Kingdom law, it is unlawful for citizens to be deprived of their property without due process. The Bill will deprive some citizens of their property simply because they will be unaware of the relevant provision. They will lose their property by default, which cannot be right.
Michael Wills (Labour, North Swindon)
With the leave of the House, I shall reply briefly. I echo the thanks others have expressed to all who have been involved with the Bill.
The hon. Member for Upminster (Angela Watkinson) raised the complex and technical issue of manorial rights. I will write to her in detail in response to the concerns raised by her constituent, but I can say now that there is an effective network for the spreading of information about new developments among lords of the manor and their professional advisers.
There is another side of this coin. Members have complained to me about the many anxieties, and the costs, that can arise from uncertain rights held by lords against them. We must strike a balance, and 10 years seems about right to us; but as I have said, I will write to the hon. Member for Upminster with a detailed response to the complex and technical issue that she raised.
The task of the Land Registry remains to ensure that the legislation is implemented effectively. I repeat my assurance that the Government will do all we can to help it to rise to the challenge.
Question put and agreed to.
Bill accordingly read the Third time, and passed, with amendments.