§ Mr. CashI 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,'.
§ Mr. SpeakerWith 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.'.
§ Mr. CashWe 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.
§ Mr. CashI 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.
25 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.
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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 26 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. WillsIn 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 27 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. CashThe 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. WillsI 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 28 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.
29 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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§ Mr. SandersI 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?
30 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.
§ Mr. CashI 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—
§ Mr. WillsBefore 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—
§ Mr. SpeakerOrder. The best way to proceed would be to allow the hon. Member for Stone (Mr. Cash) to finish his comments.
§ Mr. CashThat 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.
§ Mr. SpeakerOrder. Because of the procedures of the House, and as the hon. Member for Stone has sought to 31 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.