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3.45 pm

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

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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.

Mr. Wills: 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

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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.

Mr. Cash: 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.

Mr. Wills: 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

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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.

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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.


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