HL Deb 19 July 2001 vol 626 cc1599-645

4.23 p.m.

The Parliamentary Secretary, Lord Chancellor's Department (Baroness Scotland of Asthal)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Baroness Scotland of Asthal. )

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Geddes) in the Chair.]

Clause 45 agreed to.

Clause 46 [Power of court to order entry]:

Viscount Bridgeman moved Amendment No. 68: Page 18, line 36, leave out "have overriding priority" and insert "rank in priority ahead of such estates, interests and claims as are specified in the order, if it is necessary or desirable to give such a direction for the purpose mentioned in subsection (1)

The noble Viscount said: The amendment is designed to clarify the extent of the "overriding priority", which is not a defined term, that a court can give to a restriction that it orders under Clause 46(1). For example, if a registered title were subject to a registered charge created long before the events giving rise to the court application and if there were a recent estate contract that was protected by a priority search, the circumstances might be such that it was appropriate to impose a restriction that prevented completion of the contract but there would be no justification for interfering with the exercise of a chargee's powers of realisation, if occasion for such exercise arose.

The amendment also makes it clear that the power to freeze the register with "overriding priority" is to be exercised in accordance with the general law. It should not be taken as conferring any wider power to make an asset- freezing order in respect of registered land rather than in respect of any other assets in relation to which a claimant alleges that the defendant is about to dissipate or conceal his property.

The report discusses overriding priority for restrictions in paragraphs 6.52 and 6.53. Paragraph 6.52 indicates that consultation produced a slight preponderance among responses in favour of a power to give an order such priority, if it was coupled with straight safeguards". There do not appear to be any such safeguards in the Bill. I beg to move.

Baroness Scotland of Asthal

I understand the concern that the noble Viscount outlined but I may be able to assist him. It may help if I explain what "overriding priority" in Clause 46(3) refers to. Members of the Committee know that that can be found on page 18 at line 35. "Overriding priority" is not a free-standing statement about priority. That is because Clause 46(3) has to be read with Clause 72(4), which can be found on page 25 at line 35. Both provisions are new.

Subject to rules being made as to detail, Clause 72 will (as under the current Act) enable a buyer of registered land to apply for priority protection. That will give the buyer a priority period. If he or she lodges a transfer application within that period, any entry made in the register during the same time will take second place to the entry made in respect of the transfer. The clause also provides for priority protection in other circumstances.

Clause 72(4) sets out an exception to priority protection. If the earlier entry is one to which a direction under Clause 46(3) applies, the entry will not have priority over the earlier restriction entry.

To make that a little easier to comprehend it might be of assistance if I give an example of the way in which that arrangement may work. A claimant seeking substantial damages in a court case is anxious that the defendant does not dispose of assets, including a house which has a registered title, so that if the claimant wins, the defendant will have the means to pay the damages. The claimant believes that the defendant intends to sell the house and to place the sale money in a bank account overseas. He or she is aware that an intending buyer has priority protection under an official search. So the claimant applies to the court for a freezing order to prevent the defendant disposing of the house.

If the court makes the order, it might, as ancillary to it, order that a restriction be entered that prevents the registration of any dealing with the registered estate of the house. The court might go on to direct, under Clause 46(3), that the restriction overrides the priority protection enjoyed by the intending buyer.

Once the restriction was registered together with an entry as to its overriding priority, the direction would prevent the registration of any subsequent transfer to the intending buyer. That would be the practical effect that would he brought into play as a result of Clause 72(4).

So, to the extent that the amendment seeks to empower the court in relation to restrictions and priority periods, we genuinely believe that no amendment is required in view of the interaction between Clauses 46(3) and 72(4).

If, by referring in the amendment to ranking in priority ahead of estates and interests, the noble Viscount has in mind priority ahead of existing entries, we consider that that would amount to a form of rectification, and any order for rectification should be in accordance with Clause 65 and Schedule 4.

We know that the two clauses are new, but they work together. Although we understand the concerns expressed, we respectfully suggest that they are met by those two clauses working together.

4.30 p.m.

Baroness Buscombe

Before the Minister sits down, perhaps I may ask her about rectification and whether one is talking about safeguards, which is really what we are asking for, and which is also referred to in the consultative document.

Baroness Scotland of Asthal

We would argue that Clauses 46(3) and 72(4) operate as safeguards. I also invite the noble Baroness to look at Clause 65, which refers to Schedule 4. She will know that it is possible to apply for alteration of the register under Schedule 4, which is on page 49 of the Bill. I suggest that those three clauses together give the assurance that both the noble Lord and the noble Baroness seek.

Viscount Bridgeman

I am grateful for that full explanation and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 46 agreed to.

Clauses 47 and 48 agreed to.

Clause 49 [Tacking and further advances]:

Baroness Buscombe moved Amendment. No. 69: Page 20, line 2, at end insert— ( ) This section applies to the priority of further advances on the security of a registered charge—

  1. (a) as against a subsequent charge notwithstanding that it is either registered or protected by a notice under section 32, and
  2. (b) as against any other subsequent disposition, notwithstanding that it is either registered or protected by such a notice, as it applies to the priority of such advances as against a subsequent charge."

The noble Baroness said: The amendment is designed to ensure that the new and improved tacking rules apply uniformly in favour of the proprietor of a registered charge against all other interests in the land which are created subsequently, of whatever sort, and whether they are substantively registered or protected by notice. It is important to make it clear how far a chargee may tack as against the holders of derivative interests which are not charges, for example, tenants or contracting purchasers, because their interest in the proprietor's equity of redemption entitles them to redeem the charge. They may wish to do so in order to avoid being sold up by the chargee if the proprietor fails to repay what he owes. To give effect to their rights to redeem, it is necessary to work out how much of the amount secured in favour of the chargee has priority to their interests. I beg to move.

Baroness Scotland of Asthal

I hope that I can assist the noble Baroness. I can deal with paragraph (a) of the amendment relatively briefly. It is intended to apply the provisions relating to further advances to all subsequent charges. However, we respectfully suggest that this is already the effect of Clause 49(1) because it refers to a subsequent charge. Clause 129(1) defines a charge as any mortgage, charge or lien for securing money or money's worth". It therefore appears that paragraph (a) of the amendment is unnecessary.

With regard to paragraph (b) relating to further advances to all subsequent dispositions, it is not clear which dispositions are covered. For example, is the paragraph limited to registrable dispositions, or will, say, a contract for the sale or an option on such dispositions be covered? It is difficult to see how the amendment will work. In any event, it appears to be unnecessary.

Let us suppose that Miss Smith charges her land. The legal charge is registered and she subsequently grants Mr Brown an easement over the land. Clearly, if Miss Smith fails to keep up with her mortgage payments, the lender can exercise its power of sale and sell free of Mr Brown's easement. But let us also suppose that there is a further advance, subsequent to the grant of the easement, and Miss Smith then repays what was due under the legal charge at the time of the grant of the easement, but not under the further advance. The chargee could still sell free of Mr Brown's easement. In other words, the lender will always have priority for everything that is advanced under its legal charge over any subsequent disposition that is created after the legal charge.

I am assuming that if disposition includes a subsequent registered disposition, the legal charge is registered before then. The lender could ensure that such a legal easement is not entered as benefiting another registered estate and that it was not the subject of a notice against the borrower's title. That could be done by the legal charge providing that a restriction should be entered in the ownership part of the register, prohibiting the registration or noting an easement without the lender's consent.

If the amendment were capable of working, it would go beyond the provisions of the present Act and could lead to injustice, particularly as there would be no provision for the person granted the interest under the disposition to serve notice on the proprietor of the charge even if it were practicable.

I hope that that helps to explain why we say that it would not be a helpful amendment and that the noble Baroness will feel able to withdraw it. I hope that I have dealt with the concerns that she expressed.

Baroness Buscombe

I thank the Minister for her full response to the amendment. On reflection we almost questioned ourselves whether paragraph (a) of the amendment was strictly necessary in view of the definitions of "charge" and "registered charge" under Clause 129(1). We were more hopeful about paragraph (b), but having listened to the Minister, I would now like to consider what she has said. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 49 agreed to.

Clause 50 [Overriding statutory charges: duty of notification]:

Baroness Buscombe moved Amendment No. 70: Page 20, line 7, after "effect" insert ", or is claimed by that person to have effect,

The noble Baroness said: This amendment would require the registrar to give notice, to the persons affected, of a claim that a statutory charge had priority over existing entries where priority is unclear or disputed, as may happen. Paragraph 7.38(2) of the Report refers to the existence of situations in which the relevant statute makes no express provision as to priority. If the proprietor, and especially chargees with securities that are earlier in date than the statutory charge, are given notice of claims for statutory priority, it will be possible to resolve any disputes forthwith. I beg to move.

Baroness Scotland of Asthal

I understand the reasons for tabling these amendments as it is important to have clarity as to what these provisions mean. I hope that I can again assist the noble Baroness. It seems that the amendment's intention is to relieve the registrar of the need to satisfy himself that the statutory charge has postponing effect before giving notice. I see that the noble Baroness is nodding.

Clause 50 is an important provision relating to the interaction of the different statutes. Statutory charges arise over a person's land. For example, a local authority may carry out work to protect public health or safety and then charge the land so that the money can be recovered. The charges arise under a variety of statutory provisions, and those provisions govern whether or not a charge has priority over existing interests in the land.

Clause 50 ensures that where the priority of existing rights is affected, the people affected are told of the application to register the statutory charge. They can then respond if they feel that the statutory charge has not arisen or they do not believe that the charge affects the priority in the way indicated.

I am able to reassure the noble Baroness that the clause as originally drafted will operate to cover the situation envisaged by the amendment. It is also open to those affected, even at a later stage, to contest the issue of priority should that become material to them. That would be achieved by an application for rectification of the register.

As I say, I quite understand why the noble Baroness and those opposite have tabled the amendment. It is helpful for us to have clarification on how the Government believe that the measures interact. On that basis, I invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

I thank the Minister for that very helpful clarification of Clause 50 on that particular point. I have pleasure in withdrawing the amendment.

Amendment, by leave, withdrawn.

Clause 50 agreed to.

Clause 51 [Effect of completion by registration]:

Baroness Buscombe moved Amendment No. 71: Page 20, line 17, at end insert "(no account being taken for the purpose of this section, and of section 87(1) of the Law of Property Act 1925 (c. 20) as applicable for the purpose of this section, of the prohibition in section 23 of this Act of the creation of mortgages and sub-mortgages by demise or sub-demise)

The noble Baroness said: This amendment, in relation to Clause 51, is a technical amendment. We hope to prevent any difficulty or confusion arising from the fact that the meaning of a charge by deed by way of legal mortgage is not directly defined by the Bill but must be derived from Section 87(1) of the Law of Property Act 1925. That section specifies the effect of such a charge by reference to a mortgage by demise or sub-demise. But Clause 23(1) of the Bill will forbid such mortgages in relation to registered land.

There appears to be a logical difficulty in defining the effect of a permitted dealing with registered land in terms of the effect of a disposition of a type which is not permitted. I beg to move.

Baroness Scotland of Asthal

The Government believe that this amendment raises an interesting point on the wording of Section 87(1) of the Law of Property Act 1925. As Members of the Committee will know, that subsection puts a mortgagee in the same position as if there was a mortgage by demise or sub-demise. As the Bill abolishes mortgages by way of demise or sub-demise, it is a good idea to amend that subsection if suitable wording can be devised. I shall return to that point on Report. I am most grateful to the noble Baroness for bringing that matter to our attention.

I turn now to the amendment. Clause 23 abolishes mortgages by demise and sub-demise. The Law Commission's consultation exercise found that they are no longer used. If that is the case, then there is no need for the saving provision proposed by the amendment.

There is also a more important issue. Clause 23 should not be robbed of its teeth. If such mortgages cannot he granted then they should be completely ineffective. They should not be given legal effect because they have been inadvertently registered.

I invite the noble Baroness to withdraw the amendment but obviously we shall return to the matter at a later stage.

Baroness Buscombe

I thank the Minister for her very positive response to the amendment. I understand entirely what she said in relation to, first, Section 87(1) of the Law of Property Act 1925. I am grateful that on Report she will return to that point. I am grateful also for what she said in relation to Clause 23(1). On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 51 agreed to.

Clauses 52 to 58 agreed to.

Clause: 59 [Dependent estates]:

Baroness Buscombe moved Amendment No. 72: Page 21. line 24. leave out "that" and insert "the registered

The noble Baroness said: Perhaps I may read out Clause 59(1) to clarify the purpose behind the amendment. The subsection states: The entry of a person in the register as the proprietor of a legal estate which subsists for the benefit of a registered estate must be made in relation to that estate". Simply put, this amendment seeks confirmation as to which estate is being referred to; namely, whether it is the legal estate or the registered estate. I beg to move.

4.45 p.m.

Baroness Scotland of Asthal

It gives me great pleasure to say that I absolutely agree with the noble Baroness. I am grateful to her for her helpful suggestion. We believe that it improves the clarity of the Bill. It gives me even more pleasure because we seem to be celebrating comity, which is very good.

Baroness Buscombe

I thank the Minister for her very positive response to that amendment.

On Question, amendment agreed to.

Clause 59, as amended, agreed to.

Clause 60 [Boundaries]:

Lord Goodhart moved Amendment No. 73: Page 22, line 2, after "determined" insert "on an application to the registrar

The noble Lord said: The purpose of this amendment is not, I am afraid, very obvious on the face of the Bill. Its purpose is to obtain clarification of the jurisdiction of the adjudicator.

Under Clause 106(1), the adjudicator has jurisdiction to determine matters which are referred to him under Clause 73(7). Clause 73(7) requires a registrar to refer to the adjudicator any objection to an application made to him, the registrar, unless that application is either groundless or disposed of by agreement.

Most clauses in the Bill which refer to applications refer specifically to an application being made to the registrar; for example, Clause 3(2) is the first example of that in the Bill. But Clause 60 simply requires rules to be made enabling boundaries to be determined. It is true that Clause 60(3)(c) refers to procedure in relation to applications for determination but it does not refer to applications being made to the registrar.

It is my understanding that it is the Government's intention that the determination of fixed boundaries, as opposed to general boundaries, should be made by the adjudicator, and that is certainly an objective with which I entirely agree. But I suggest that as drafted Clause 60 is not adequately clear about that. For example, it is not clear that any application must be made to the registrar and unless that is clear it is uncertain whether the adjudicator has jurisdiction. I suggest that my amendment, which would simply insert the words, on an application to the registrar", would clarify that situation and would make it clear beyond any doubt that the adjudicator will have jurisdiction to determine the question of fixing of boundaries. I beg to move.

The Earl of Caithness

I support the noble Lord, Lord Goodhart. This was a point I raised on Second Reading and received a favourable response from the Minister. I believe that the noble Lord's words make the matter somewhat clearer and every bit of clarity will help.

Baroness Scotland of Asthal

Having listened carefully to the noble Lord, it may be necessary to reconsider this matter to ensure that it is absolutely clear. We believe that it is clear, but the aim, as the noble Lord rightly says, is to allow jurisdiction for both the registrar, the adjudicator and other proceedings, which we intend to do.

This clause seeks to address the difficult matter of boundary disputes. We hope that the mapping techniques that even now are being developed will improve with time, and that they will make it easier to overcome such difficulties in the future. One of our concerns is that we should not restrict, too rigidly, this provision so as to prevent the required flexibility to enable that technical advancement to take place. As the noble Lord has put his finger on an interesting point, we shall reconsider it. If it has to be overcome, we shall try to ensure that it is overcome.

Lord Goodhart

I am grateful to the Minister. One or two other clauses raise this problem, although not quite as acutely. In one, there is a reference to an application without mentioning that it is an application to the registrar. No doubt if the Government feel that there is a point here, they can deal with the other references to "application" as well. In view of the Minister's reply, I am more than happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 60 agreed to.

Clause 61 [Accretion and diluvion]:

Lord Goodhart moved Amendment No. 74: Page 22, line 11, leave out subsection (1) and insert— (1) Subject to any agreement to the contrary, accretion or diluvion do not alter the boundary of a registered estate.

The noble Lord said: We now come to the arcane world of accretion and diluvion. Accretion is the addition to the bank of the river or the shore of a lake or sea of soil that raises it above the water level and, in effect, creates new land out of what previously was water. Diluvion—a word with which I am sure all noble Lords are familiar—describes the opposite process by which banks or shores are washed away by the action of water so that they disappear under the water.

It is desirable that the boundaries on the register should be conclusive unless there is strong reason to the contrary. Allowing accretion and diluvion to change boundaries will mean that boundaries on the title plan are not decisive, at any rate on inland waters. I believe that this process is fairly rare but it does happen. I believe that the operation of this clause could be reversed: unless the parties on opposite banks of the river agree to allow accretion and diluvion to affect their boundaries, and that agreement is entered on the register so that any purchaser is aware that accretion or diluvion may have changed the boundaries, it should not apply.

As the law is proposed in Clause 61, that will produce uncertainty as to the validity of the plan boundaries whenever there is a water boundary, even if it is quite a small stream. In such a case, the boundaries will need to be inspected, even if the result shows that there is no accretion or diluvion. So far as transactions are concerned, I believe that it would be simpler to accept the amendment that I have proposed and reverse the effects of accretion and diluvion on boundaries so that it takes effect only if there is an agreement between the owners of the opposite bank. I beg to move.

Baroness Scotland of Asthal

I thank the noble Lord for including in the amendment an issue of such enticing complexity. I shall first give a short answer, but the point raised by the noble Lord deserves a longer answer with which I shall weary the Committee in a moment.

This issue is one of great importance, particularly when one considers coastal erosion and accumulation. An example of that is if X owns the coastal land, but not the foreshore—the noble Lord knows that in most cases the Crown owns the foreshore—and in time erosion occurs. In such a situation, that which appears on the register will, of course, not be accurate, because it will not reflect the fact that there has been movement of the land. If the amendment were allowed, the owner would own not only the land, but also the land under the sea, which would mean that the owner would also own the foreshore.

Members of the Committee will know that the Crown is zealous in its protection of the foreshore, not least for the protection of the public, so that piers, and other constructions that may encroach on the foreshore, will be subject to regulation. I do not mean the Peers in your Lordships' House, but the more wooden, steely variety or perhaps I should say inanimate variety, which could never describe Members of this House.

A great difficulty would be that, if the amendment of the noble Lord were accepted, the Crown would not be able to protect the foreshore, in the interests of the public. I am sure that the noble Lord, Lord Goodhart, would not contemplate that because he would not want any of us to engage in such a sin.

Clause 61, as the noble Lord rightly says. deals with accretion and diluvion. The words of the noble and learned Lord, Lord Wilberforce, who is not in his place, but who is with us in spirit, are important. I am sure that the noble Lord, Lord Goodhart, will remember what he said in the Privy Council case of Southern Centre of Theosophy Inc v. State of South Australia: The doctrine of accretion recognises that where land is bounded by water, the forces of nature are likely to cause changes in the boundary. Where these changes are gradual and imperceptible, the law considers the title to the land. as applicable to the land as it is changed from time to time. Except where a substantial and recognisable change has suddenly taken place, it is both convenient and fair to regard the boundary between land and water as being where it is from day to day or year to year. If part of an owner's land is taken from him by erosion, or diluvion (that is by the advance of the water), the landowner is treated as losing a portion of his land. So, if an addition is made to the land from what was previously water, it is only fair that the landowner's title should extend to it. The doctrine of accretion, in other words, is one which arises from the nature of land ownership from, in fact, the long-term ownership of property inherently subject to the gradual processes of change". The Bill gives effect to those well and long-established principles. Subsection (1) provides that the registry's plan showing a particular boundary, whether a fixed or a general boundary, does not affect the operation of the common law principles of accretion or diluvion.

I respectfully say that the effect of the amended clause would not, however, be totally clear. It raises questions as to the ownership of coastal land that has emerged by accretion, as I have already indicated, and it suggests that areas of foreshore could fall into private hands— I have already referred to this—rather than to the Crown Estate.

That uncertainty would be likely to cause real problems for a significant number of people. It would be very easy to think that the changes brought about by accretion and diluvion are comparatively minor and comparatively slow. But that is not the case. One has only to think of Poole Harbour where a significant amount of land has been reclaimed from the sea, both by human intervention and accretion, to realise that there are major and sometimes catastrophic situations to be dealt with.

I am able to tell Members of the Committee that five or six years ago a number of disputes arose in the Poole Harbour area with which the Land Registry had to deal. They centred around a retained footpath from which the sea had receded. Indeed, the boundaries of the properties along many large estuaries are changing all the time. In the past few years, several disputes have been heard by the Solicitor to Her Majesty's Land Registry arising from such boundary changes. The floods of recent years give every reason to think that it may be more, rather than less, important that the law should be able to provide a quick and clear answer to the effect of accretion and diluvion.

One of the principal aims of the Bill is to clarify and improve the law. In this clause it achieves those aims by allowing the familiar common law principles to be applied to registered land. The Land Registry's practice in this area is well established and has been effective for some time. Title registers will record in appropriate cases that the boundary of the property is the high water mark as it exists from time to time. Current Land Registry practice is to record on the register when an alternative arrangement, disapplying the normal principles, has been entered into by the local landowners. The Bill also allows landowners the freedom to come to an alternative arrangement, provided that that arrangement is clearly recorded on the register.

The Government believe that in order to achieve both fairness and convenience, that is the most appropriate way forward. I invite the noble Lord to withdraw the amendment, although I thank him for giving the House such rare entertainment.

Lord Goodhart

I am grateful to the Minister for giving such a full answer to this interesting question which is of wide general concern to the Committee. I recognise the importance of maintaining the rights of the Crown to the foreshore in the public interest. I am not so sure that the same problems arise in connection with inland waters, where there is no foreshore.

However, in the circumstances, I beg leave to withdraw the amendment. It is unlikely that I shall want to bring it back again; it has had its outing.

Amendment, by leave, withdrawn.

Clause 61 agreed to.

Clauses 62 and 63 agreed to.

Clause 64 [Use of register to record defects in title]:

5 p.m.

Baroness Buscombe moved Amendment No. 75: Page 23, line 18, after "become" insert "and remains

The noble Baroness said: Amendment. No. 75 is intended to clarify that even if the right to determine has become exercisable, if that right has been waived or relief against the determination or forfeiture has been granted so that the right to determine can no longer be exercised, no power remains to enter the fact on the register.

Put another way, the right to determine has arisen, but supposing that it comes to an end because, for example, there is a waiver or acceptance of rent by the landlord. Why then should the registrar enter that right to determine in the register, given that it has been satisfactorily dealt with? As currently drafted, the registrar can therefore put a blot on the title, even if the blot has been erased. I beg to move.

Baroness Scotland of Asthal

Once again, I am grateful to the noble Baroness, Lady Buscombe. As she says, Clause 64 gives the registrar a new and significant power to record on the register any right to determine a registered estate which has become exercisable.

We respectfully agree that the amendment draws out an important issue. Before making the entry, the registrar must be satisfied that the right to determine is still exercisable. It is unlikely that in practice the registrar would record a spent right on the register, but the clause as drafted does not make that clear. I am therefore grateful to the noble Baroness for having raised the issue.

I hope that she will not mind if, having said that I take her point, I prefer to take the matter away. I believe that there is scope to improve the drafting of the Bill still further and on that basis I am not able to accept the amendment in its present form. I accept the need for it and the principle behind it and therefore undertake to introduce a government amendment at Report stage. I hope that the noble Baroness will be content with that explanation.

Baroness Buscombe

I thank the Minister for her response. I am grateful to her for taking the point on board. I understand that the drafting of the amendment may not be perfect and I know the Minister appreciates that we were under great pressure of time. On that basis, I am pleased to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 64 agreed to.

Clause 65 agreed to.

Schedule 4 agreed to.

Clauses 66 to 79 agreed to.

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

[Amendment No. 76 not moved. ]

Clause 80 agreed to.

Clauses 81 to 90 agreed to.

Clause 91 [Electronic dispositions: formalities]:

The Deputy Chairman of Committees

Before calling Amendment No. 77, I must advise the Committee that if it is agreed to I cannot call Amendments Nos. 78 or 79 because of pre-emption.

Lord Goodhart moved Amendment No. 77: Page 33, line 6, leave out subsection (6).

The noble Lord said: Amendments Nos. 77 and 78 have been grouped together and relate to the same subsection of Clause 91. However, they have been tabled for different purposes and I shall deal with them successively. I can do so briefly.

As regards Amendment No. 77, the Law Society has expressed concern about Clause 91(6). It says that it is wholly unacceptable because it will not be possible to raise any question as to whether an agent had written authority to make the authentication.

Having attended the exhibition last week and heard the discussion, it may well be that there is an answer to that problem. If so, I should be grateful if the Minister could explain and put on record in the Committee why the concern of the Law Society is ill-founded.

Amendment No. 78 raises a different but small point. Why does Clause 91(6) apply only where the agent is an individual? Corporate bodies can be agents just as much as individuals. Although it is intended that the agents in this case will be conveyancing practitioners, if the agent is to be a solicitor the agent might well be a firm of solicitors incorporated as a limited liability partnership rather than an individual solicitor. I should have thought that in that case to avoid any problem it would be appropriate to delete "an individual" and insert "a person" to make sure that a corporate body can, if appropriate, be an agent. I beg to move.

5.15 p.m.

Baroness Scotland of Asthal

Before I deal with these issues in detail, the authentication of documents will be scrutinised with great care by the rule committee. As the Committee will be aware, on that committee will sit representatives of the Law Society, conveyancers, members of the Bar, mortgage lenders and consumers. As a result of a suggestion of the noble Lord, Lord Goodhart, earlier in Committee, we intend to add surveyors to that list. That committee is chaired by a High Court judge, Mr Justice Blackburne, who is known for his impeccable judgment and the care with which he scrutinises rules generally. Historically, we have found that the committee jealously guards the efficacy of the rules and generally has been able to ensure their very high quality. We have no reason to believe that it will relax its attention to detail. I make that comment in parenthesis before I turn to amendments.

I deal first with Amendment No. 77. I am grateful to the noble Lord, first, for his presentation and, secondly, giving me the opportunity to put on the record the Government's response to this issue. The Committee will be aware that Amendment No. 77 seeks to remove in its entirety subsection (6) of Clause 91. Perhaps it is helpful to explain what Clause 91 is intended to achieve before considering the specific and rather narrow role of subsection (6). Clause 91 is part of the preparation for electronic conveyancing. Under that clause electronic documents will be introduced into the conveyancing process gradually. At first, there may be only a few electronic documents. Perhaps the first will be charges which are signed only by one party and do not give rise to stamp duty. The idea is to learn through that limited experience as we move further into the electronic world.

Eventually, we may all have our own electronic signatures. That appears to be the way that it will develop in future, but we are not there yet. That is, however, too far into the future for that contingency to be built into the first electronic conveyancing process. We may, therefore, have to rely in the early stages on the authentication of electronic documents by the person who has been instructed to carry out the conveyancing process on an individual's behalf, typically a solicitor or licensed conveyancer.

The prospect of professionals having their own electronic signature is not quite so far into the future. We believe that that will happen relatively soon. The professionals will have access to a secure network established by the Land Registry. Access will be permitted by means of a network access agreement between the professional and the Land Registry. The terms of that agreement will regulate the conduct of electronic transactions. The standards of conduct required will be high, whether the party to the transaction electronically signs in person or through his or her agent.

We appreciate the concern that to permit agents to sign electronic documents on behalf of their clients where those clients would themselves sign the equivalent paper document will increase the opportunity for fraud. However, perhaps I may assure the Committee that proper procedures to ensure that the terms of the agency are clearly understood will be necessary. The terms of network access agreements will provide an opportunity for control, and rules of professional conduct may well need to be developed. The detailed terms will be worked out in consultation with professionals and the industry.

We are not yet in a position to cross every "t" and dot every "i". Therefore, I am not able to explain precisely how it will work. However, I am happy to outline the area with which we are dealing. At the moment a significant and thorough development process is being undertaken. Constant vigilance will be required to ensure that standards are maintained.

If a transaction involves the authentication of an electronic document by an agent to prevent difficulties for the agent and the system as a whole, it is important, subject to proper safeguards, to minimise the occasions on which the action taken by the agent can be questioned. For example, electronic transactions will be made more cumbersome if an agent must supply hard copy evidence that his or her authority was given in writing. Whether or not the agent is acting within his or her authority will, as now, be a matter for the general law of agency. In this context Clause 91(6) is intended to facilitate electronic conveyancing in a very specific way. It makes clear that where statute requires an agent's authority to be in writing objections cannot be raised as to whether a solicitor or licensed conveyancer who had signed an electronic document had written, as opposed to merely oral, authority to do so. The agent will need authority from his client before proceeding with authentication, and he can be held to account to his client if he fails to acquire it. However, this subsection prevents the need for other parties to investigate if the associated formalities that should be observed have been complied with.

I hope that my comments have clarified why there is a need for this assumption to be built into the provisions relating to electronic documents. I also hope that I have dealt with the concerns raised by the Law Society and enabled the noble Lord to withdraw this amendment.

Amendment No. 78 moves in the opposite direction. It seeks to extend the benefit of the deeming provision in Clause 91(6) from individuals to both individuals and artificial legal persons, such as companies incorporated under the Companies Acts and other bodies corporate. Clause 91(6) was drafted with the authentication of electronic conveyancing documents by solicitors and licensed conveyancers very much in mind, because, as I have said, it is expected that in the early days of electronic conveyancing electronic signatures will not generally be held by members of the public. Signing electronic documents is, therefore, likely to be one of the services that professionals providing conveyancing services will offer to their clients. Under present dispositions those professionals are likely to be individuals.

However, I believe that the noble Lord has a point in relation to corporations. I am very grateful to him for pointing out in his amendment that it is possible that in the future corporations may offer the service of authenticating documents on behalf of others. Whatever kind of person authenticates the document, it is important to remember that he will be required to comply with the terms of the relevant network access agreement to be able to send the document to the Land Registry. These agreements are likely to include provisions to ensure that proper procedures are followed by agents in regard to authentication. There may well also be professional rules which better support that.

The detailed terms of these arrangements will be a matter for consultation and careful consideration in the coming years as electronic conveyancing is developed, and they will have to change and he flexible to respond to those needs.

I understand the concern expressed about electronic signatures. It is our belief that the security and safeguards which will be inherent in the electronic system will be far greater than are currently available with a paper signature. Many of your Lordships will know that, regrettably, people are often asked to sign documents. Those signatures are not witnessed but are transposed. It is very difficult to have a proper trail to be able to verify whether that signature is actually the signature of the person signing. Therefore, it is our reasonable expectation that whatever the difficulties that may be inherent in the electronic system, it is likely to be much more secure than the present system.

The noble Lord, Lord Goodhart, was also concerned about the authentication not being capable of being challenged at all. His concern was that the agent's principal, in this case the conveyancer's customers, could not challenge an erroneous, negligent or fraudulent signature. We can reassure him that this will be possible and does not affect the law of agency, although the rules under the Bill will state how authentication should be done. The clause merely stops a buyer challenging the seller's authorisation. We believe that the Law Society will be reassured once it has seen the demonstration that the noble Lord had the advantage of seeing earlier. I hope that what I have said in relation to Amendment No. 77 assists. We shall consider Amendment No. 78.

Lord Goodhart

I am most grateful to the Minister for her reply to both amendments. Obviously, I want to hear further from the Law Society on Amendment No. 77 before deciding whether to bring it back again. For the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 78 not moved. ]

Baroness Buscombe moved Amendment No. 79: Page 33, line 8, leave out "written authority of his principal'. and insert "authority of his principal conferred by deed

The noble Baroness said: An electronic document under Clause 91(5) is treated as a deed for the purposes of any enactment. Under the general law an agent can only make a deed if authorised to do so by deed. The amendment avoids a doubt about whether subsection (6) is sufficient to treat an electronic document made by an agent as authorised to take effect as a deed.

It could be argued that the amendment is not necessary because the electronic document is not actually a deed; it is only treated as one. However, the amendment saves having to be certain about a not entirely straightforward point. I beg to move.

Baroness Scotland of Asthal

The Government believe that the amendment is not necessary. Perhaps I may explain to the noble Baroness why. Amendment No. 79 relates to the authentication of electronic documents by agents, as outlined by the noble Baroness. But it seeks to upgrade the deeming provision in subsection (6) of Clause 91. It would provide that where an electronic document permitted by Clause 91 is authenticated by an individual as an agent, the agent's authentication is to be regarded for the purposes of any enactment as having been carried out under the authority of his principal conferred by deed. As drafted, subsection (6) deems only written authority. It therefore operates at a lower level of formality.

The reason that this lower level is more appropriate is that the electronic document under Clause 91 is not a deed; it is only to be regarded as a deed for the purposes of any enactment. That is provided for by subsection (5) of Clause 91. The common law rule that an agent can only execute a deed if he or she is authorised to do so by deed is therefore not applicable. All that is required to facilitate electronic conveyancing in this respect is therefore an assumption that the document was executed under a written authority. I hope that on the basis of that explanation the noble Baroness feels able to withdraw Amendment No. 79.

Baroness Buscombe

I thank the Minister for her response. I think that I understood it. I am not sure that I entirely agree with it. On that basis I would prefer to read what she has said in Hansard. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 91 agreed to.

Clause 92 agreed to.

Schedule 5 agreed to.

Clause 93 agreed to.

Clause 94 [Supplementary]:

The Earl of Caithness moved Amendment No. 80: Page 34, line 13, at end insert "including documents relating to the conduct of electronic land auctioneering

The noble Earl said: In moving Amendment No. 80 I shall speak also to Amendment No. 81. In addition, I declare an interest as a surveyor and a Fellow of the Royal Institution of Chartered Surveyors. In the briefing that we received on the Bill and in the letter that the noble Baroness kindly wrote to me, it is said that the Land Registry wants to introduce a world-class, up-to-date and modern system. We are all in favour of that. However, I detect a slight lacuna in the Bill; it omits electronic online auctions of land. That system will become increasingly used in the future but I cannot find anything in the Bill that deals with it. That is the purport of Amendment No. 80.

I raised this point at Second Reading and received a kind letter from the Minister. That allayed my fears somewhat; nevertheless I felt that it was worth tabling the amendment. It is also a matter of concern to the RICS property auction group. It has approached the Lord Chancellor's Department for clarification of the impact of the law on this particular sector of the property market. Currently, English law allows online auctioneering until the stage of exchange of contracts. That action must still be done in the traditional area of the auction room. The RICS and others are keen to develop electronic auctioneering to its fullest potential and has established guidance for its members on the best practice in undertaking such transactions. Amendment No. 81 refers to the rules concerning this measure and states that no rules should be brought in without the RICS and, indeed, the Law Society being consulted by the Lord Chancellor in order to develop the best practice.

Having listened with care to our discussion on Clause 91, and indeed the rest of the Bill, it occurs to me that it is time that I beat another drum. It is rather an old drum; nevertheless, it is a tune that is growing increasingly loud.

Given the responsibility that there will be on agents—I do not use the word "agents" as did the noble Baroness in relation to Clause 91, but "estate agents"—they will have huge responsibilities and access to a great deal more information than now. They will be dealing with matters which traditionally have been handed straight to solicitors. If I am instructed to sell a property now I immediately advise the owner to start getting his documents in order and contact the solicitor. The more that that is done online, the quicker the process will be and the more the agents will able to do for themselves without bringing in solicitors. But the agents are not licensed and it terrifies me that some of my fellow agents will have this power and responsibility. I therefore hope that the Government will give urgent consideration to implementing the licensing of estate agents. As the noble Baroness will know, provision is already made for that under the 1979 Act. Given the added responsibilities that agents will have, particularly with regard to online auctioneering, I hope that we, too, can be licensed. That would add a good deal to our credibility and ease some of the concerns of those who will be using our services. I beg to move.

5.30 p.m.

Baroness Buscombe

I rise briefly to support my noble friend Lord Caithness. To repeat what he had to say would be otiose, but it is important to him and to all of his profession that we understand the Government's intention in relation to the auctioneering of land.

Baroness Scotland of Asthal

I am grateful to the noble Earl, Lord Caithness, for returning to the topic of electronic auctioneering that he raised at Second Reading. It provides the common theme for Amendments Nos. 80 and 81. At Second Reading I promised to write to the noble Earl about the topic and, as he indicated, I have done so. In my letter I explained that the full details of the actual electronic conveyancing systems and services that are to be used to carry out transactions have not yet been settled.

The present position is that the Land Registry has built a model demonstrator of a potential electronic conveyancing system for consultation purposes. The current model was of course demonstrated on the committee corridor of the House last week. I am very sorry that for quite understandable reasons the noble Earl was not able to be with us. The current model is creative and effective and demonstrates how quickly and easily the system could be made to work. But the final system will be the product of detailed consultation with stakeholders in the professions, the IT industry and consumers over a period of years. Experience suggests that the only certainty is perhaps that the final system will be different from the model. We hope that the prototype will be the basis for creative discussion which will better hone the system in the long term.

The Bill provides the primary legal framework for the development of electronic conveyancing. It does not specify either the particular transactions that may, in due course, be carried out electronically or the method by which those transactions are to be carried out. Those details will be contained in secondary legislation and the network access agreements referred to in Schedule 5. However, auctions have special requirements and I quite understand why the noble Earl therefore raises them. In relation to sales of land, the most striking is perhaps that the contract is formed on the fall of the hammer rather than by exchange of written, signed documents. Fully electronic auctions will presumably require instantaneous electronic commitment by the successful bidder on the fall of the virtual hammer.

In traditional auctions the bidders are quite likely to be unknown to the seller and the auctioneer. Whether that will also be the case in electronic auctions remains to be seen. The pattern of an auction sale is therefore very different from that of a sale negotiated by private treaty. Electronic auctions in England and Wales are still in their infancy but electronic bidding over the Internet is growing in popularity. The noble Earl indicated as much in his earlier comments. At present, the creation of the sale contract still occurs in the real auction room. Electronic signatures seem to offer a way in which the small, but crucial, step to electronic auction contracts could be taken.

Auctions can be a very efficient way to sell property. We certainly do not wish to impede their operation by the creation of electronic conveyancing. Rather we will have to accommodate them within the systems to be created. We believe that the legal framework created by the Bill is sufficiently flexible to achieve this and we have therefore no reason to think that electronic auctions will need separate treatment in the Bill to fit within the new systems as they develop.

These systems will, of course, relate to contracts for the sale of registered land. In so far as auctions of unregistered land are concerned, the Land Registry's systems will not be appropriate. It may be the case that if it is necessary or desirable to make general legal provision for online auctions of land a different legislative vehicle may be required. I can assure the noble Earl that the Government are giving the matter detailed consideration. He may be interested to know that our officials will be meeting in early August with representatives of the Royal Institute of Chartered Surveyors to discuss the issues. I shall consider the amendment and the issue of online auctions generally between now and Report. I hope that on the basis of my reassurance the noble Earl will feel able to withdraw Amendment No. 80.

Amendment No. 81 is intended to ensure that appropriate representative organisations, including in particular the Law Society and the Royal Institute of Chartered Surveyors, are consulted by the Lord Chancellor before any land registration rules are made relating to online auctions. While I wholly agree with the sentiments underlying the proposed amendment, I do not think that it is necessary. First, as a matter of general policy electronic conveyancing will be developed in collaboration with the stakeholder organisations. Secondly, land registration rules, such as those to be made under Clause 94, are already subject to a requirement of consultation with the rule committee established under Clause 124. That committee includes representatives of the Law Society, the General Council of the Bar, the Council of Mortgage Lenders and the Council of Licensed Conveyancers. There is also provision for the Lord Chancellor to nominate additional members for specific purposes. We are very happy to do that. I can think of few more obvious uses of that power than to obtain expert representation from the Royal Institute of Chartered Surveyors in relation to any rules that may be made regarding online auctions. That is entirely sensible.

In relation to the noble Earl's final point, the licensing of agents is well outside the scope of the Bill, though I understand that the temptation to raise it was irresistible. We hear what the noble Earl says and we understand his concerns. The quality of service is a matter for network access agreements. That may meet some of the noble Earl's concerns. I can certainly reassure him that network access agreements will be entered into and then completed only by those who satisfy the Land Registry and others that they are competent and have the necessary skills to have that facility. As the noble Earl may know, the Land Registry has jealously guarded that in the past and I do not feel that it will change very quickly.

The Earl of Caithness

I am extremely grateful to the noble Baroness for that full reply. Perhaps I may he a little pernickety and take up on one point: she might think that I belong to an institute—I probably deserve to do so—but in fact it is an institution. I am also grateful for the support of my noble friend Lady Buscombe. How nice that she is feeling 100 per cent better than was the case two days ago and to hear her in fine voice.

The Minister mentioned that the legal framework is already contained in the Bill. I am reassured by that. However, she went on to say that if it is not, there would be different legislation. Does that legislation already exist or will further primary legislation be required? Alternatively, could this be achieved under the secondary legislation provisions of another Act of Parliament?

I should like to take this opportunity to apologise for being unable to attend the demonstration. I wrote to the noble Baroness to explain why I could not do so. It is clear that I missed an important meeting which would have helped me with this amendment.

Perhaps the noble Baroness could respond to the question that I have put to her in the fullness of time. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 81 not moved.]

On Question, Whether Clause 94 shall stand part of the Bill?

The Duke of Montrose

Before we agree to the inclusion of Clause 94, I should like to ask the Minister for clarification. This clause deals with the storage of documents. I should like to know whether what might be contained in the rules will be adequate and whether a further amendment should be considered at a later stage.

First, I apologise to Members of the Committee for the fact that, owing to other duties, I was not able to attend the Second Reading debate. Furthermore, I should declare my interest as a landowner with an interest in land registration.

I shall paraphrase Section 8 of the Electronic Communications Act 2000: "The Minister is not to authorise electronic communication or electronic storage unless he considers that … the extent to which records will be available … will be no less satisfactory in cases where use is made of electronic communications or electronic storage than in other cases". This seems to suppose that electronic recording could be the only form of recording under the provisions of that Act.

So far as I understand the Bill before the Committee, it does not depend on the provisions of the Electronic Communications Act, although it runs on fairly similar lines to it. Furthermore, it does not require that electronic recording should be no less satisfactory than in other cases, as stated in Section 8 of the Act. In the question of land title, a great deal of satisfaction comes from being able to go back to the deed in 50 or 100 years' time.

I was grateful to be able to attend the demonstration which took place on the committee corridor. From what I saw, in the initial stages a paper document will be produced by the Land Registry. However, so far as I can see, there is no requirement for it to do so. Problems may arise in that electronic communication, as well as being subject to the usual hazards of fire, water, civil disturbance and a number of other risks, faces other dangers. In particular I refer to the continual updating of operating systems—something that I have come across even with my own limited experience. In 50 years' time a situation could arise where a problem occurs when attempting to interpret an electronic document. The outcome could be unfortunate: "We had a man here who was very good at updating this system, but he died 10 years ago". I should like to draw the Minister's attention to the fact that it might be better, possibly when the rules are framed or at another level of authority, to lay down some requirement and status for an old-fashioned paper record which could be consulted if the electronic version had become garbled.

5.45 p.m.

Baroness Scotland of Asthal

I say straightaway that I understand the noble Duke's concern. In particular for those of us who have grown up with paper, there is something reassuring about holding it in one's hand. I can sympathise and empathise with that concern. However, the whole purpose underlying electronic transmission is that all the records will be held electronically. Back-up systems will also be available so that we shall not have to rely on only one. We all know how dangerous that can be. That is particularly the case for any noble Lord who knows the feelings of joy when one's PC crashes. I can certainly reassure the noble Duke that the intention is that any system put in place will have proper back-up.

Although a paper record will not be kept, the computers will still be capable of creating paper. Anyone will be able to request a paper copy of their entry in the register. Indeed, for only a very few pounds anyone can request such a record. We have taken on board any concerns that might be felt in this area.

The Bill stands on all fours and its provisions are free of the Electronic Communications Act 2000 mentioned by the noble Duke, although it is right to say that this legislation is better informed by virtue of the fact that an Act similar in nature had already been passed to which reference could be made. For registered conveyancing, ultimately it will be the register and not the original deeds that will matter. The register already is almost wholly electronic.

I should like to take this opportunity to applaud the Land Registry for having achieved a great feat. It has converted many of those beautiful but dusty and deteriorating documents into electronic form. We now have a safe record of them. I am sure that many historical libraries will be happy to have other records in due course. Guidance will be made available from the Public Record Office. We respectfully hope and suggest that a paper back-up will not be necessary. However, I understand that for those of us born before 2001, we shall probably bemoan its passing.

The Deputy Chairman of Committees (Baroness Serota)

The Question is whether Clause 95 shall stand part of the Bill?

Clause 95 agreed to.

Clause 96 agreed to.

Schedule 6 [Registration of adverse possessor]:

The Deputy Chairman of Committees

Schedule 6. Amendment No. 89, Lord Goodhart.

Lord Goodhart

I think that the noble Baroness wished to oppose the Question that Clause 95 shall stand part of the Bill.

Baroness Buscombe

I wish to oppose the Question that Clause 95 shall stand part of the Bill.

The Deputy Chairman of Committees

I have already dealt with Clause 95 stand part.

Baroness Buscombe

I am sorry.

The Deputy Chairman of Committees

I have already called Clause 95 stand part and the Committee agreed that it was content. I have also put the Question whether Clause 96 shall stand part and the Committee agreed that it was content. We have now reached Schedule 6 and Amendment No. 89 tabled by the noble Lord, Lord Goodhart.

Lord Goodhart

I think that this problem has arisen because the Question whether Clause 94 shall stand part was not put to the Committee.

The Deputy Chairman of Committees

Yes it was.

Lord Goodhart

The question was put to the Committee, but I do not believe that the Members of the Committee were asked to say "Content". I shall proceed with Amendment No. 89.

Lord Goodhart moved Amendment No 89: Page 56, line 11. leave Out sub-paragraph (4).

The noble Lord said: This amendment seeks to leave out paragraph 5(4) to Schedule 6. This sub-paragraph confers a right to registration on the traditional basis of adverse possession where a boundary on the ground does not coincide with a boundary on the register. The report from the Law Commission refers specifically to this. It may happen in the course of the development of a new estate. Frequently the developer of the estate may draw up a plan which is divided into neat plots. The plan is then used as the basis for registration, but the boundaries between the different houses on the estate do not coincide with the boundaries as shown on the plan. I understand the thinking behind paragraph 5(4), but I do not agree with it.

The reason I do not agree with it is that if the boundary as shown on the register is paramount, it reduces the chances of boundary disputes arising. Speaking from personal experience, I can remember a case in which I had a marginal involvement which appalled me. It concerned a dispute over a boundary which had arisen in exactly the circumstances where the boundaries on the plan did not coincide with the boundaries on the ground. There was therefore a claim based on adverse possession.

The dispute involved, I think, some 10 days of hearings in a county court, spread over a period of 18 months. This was followed by an application for leave to appeal, which was rejected by one judge at the Court of Appeal. But there was then a re-application to a three judge court, which gave leave. That appeal was subsequently successful.

There were three parties involved, the two landowners and the developer, who was brought into the case. At the stage at which I was involved—which was after the county court decision but before leave to appeal had been given—each party had already incurred costs of approximately £40,000 over a strip of land worth at the most a few hundred pounds. If the landowners in that case had been told that the boundary on the register was decisive, there would have been no litigation.

Of course there may be cases where, for example, a garage has been built on land which one owner believes to be his but which was in fact on the wrong side of the boundary as shown on the plan. In such a case, it would obviously be undesirable that the boundary should be changed and that a garage—and possibly, in some circumstances, even a building—should have to be knocked down at great cost because it had been built on the wrong side of the boundary. But that particular problem is covered already by subparagraph 5(2) on the ground that it would be unconscionable for one owner to claim land from his neighbour where the neighbour had spent a substantial sum in the belief that he owned the land, and where no objection was made at the time the building was going on.

Boundary disputes are the worst kinds of litigation. It is always difficult to find clear evidence and it leaves neighbours in a state of permanent hatred and warfare. I believe that the elimination of subparagraph 5(4) would make boundary disputes significantly less likely because there would be less opportunity to challenge the plain boundary shown on the plan. I beg to move.

Baroness Scotland of Asthal

I have listened with considerable sympathy to the circumstances described by the noble Lord. It is not surprising that his experience in that case stays forever in his memory. It is certainly an excellent illustration of the problems that can arise when boundaries are fiercely disputed. However, we believe that the solution proposed by the noble Lord would lead to many more disputes and, indeed, to some considerable injustice.

Perhaps I may start by explaining the problem with which the paragraph deals. The Land Registry has found that it is very common indeed for there to be small differences between the legal boundaries of an estate and those laid out on the ground. Much more rarely, as we have heard, the differences are significant. Problems are often particularly marked, in number and in kind, in relation to new estates, where, I am advised, it is rare indeed for properties to be exactly in the spot marked on the original plan. It is quite usual for a developer to have built a whole estate some three or four inches or three or four feet in the wrong place. That causes the quite significant difficulties that we are talking about changing.

The most obvious example is a series of fences put up in the wrong place. Those who move into a new house tend—perfectly naturally—to take their new fence as the boundary of their territory. Few will go to the trouble of comparing their new property in detail with its entry on the register. One can see how that occurs. If one has a 50-foot garden, and one measures it and it is 50 feet, one tends to think that it is the 50 foot garden one purchased, as opposed to thinking it is three inches the wrong side of a particular fence. Certainly such persons do not go to what can still be a matter of considerable inconvenience and expense of getting the general boundary of their property fixed by the land registry.

Such new owners, having made assumptions about the location of their boundaries, proceed to treat all the land within the fences as theirs. They will often plan their gardens accordingly; they may build garden sheds and greenhouses against that boundary. A position can then arise where, for whatever reason, one party examines the actual boundaries, and the legal position turns out to be something very different from what it had up to that point been thought to be. In the circumstances I have described, it is simply unreasonable that someone who has enjoyed territory through a mistake which was no fault of his or her own, should not be able to apply to have the position regularised.

The best assessment we can make—and this is clearly not capable of being precisely quantified—is that there are a large number of boundaries which may be in the wrong place. There could therefore be a large number of strips of land, which could be subject to serious dispute, without means of acquiring the title contained in the sub-paragraph. But—and this must be emphasised against the exceptional example described by the noble Lord, Lord Goodhart—the overwhelming majority of these estates involve comparatively small error.

Without the simple procedures of the kind laid out in the schedule, the only recourse would be expensive litigation, with all the uncertainty and stress that that would bring. One envisages, for example, an estate with 20 houses, where all 20 houses are one foot in the wrong position. Although all 20 houses have got the direct proportions the owners thought that they were buying, the man or woman on the end could say "You have got a bit of my land". To get his or her bit of land back, everyone would have to perform a very interesting dance.

That is the kind of situation which the Land Registry, which sees documents all the time, knows is likely to occur. As it is currently phrased, the Bill takes that kind of situation into account; it is an attempt to operate a degree of balance. I hope that, in the light of that explanation, the noble Lord will feel able to withdraw his amendment.

I should add one point. The noble Lord is saying in essence that the boundary should be paramount. I gently remind him that it is not paramount under the law as it currently stands, and it will not be paramount under the terms of the Bill. The registry operates a general boundary rule and, unless there has been an application to fix detailed boundaries, that avoids many disputes. We believe that the provision in the Bill deals with the matter efficaciously.

Lord Goodhart

I am grateful to the noble Baroness for her full reply. I shall consider what she has said. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Baroness Buscombe moved Amendment No. 90: Page 57, line 24, after "charge" insert ", and of any charge protected by a notice under section 32,

The noble Baroness said: This amendment is designed to ensure that where an adverse possessor is registered as proprietor, the extent to which he takes free of a charge is not affected by whether that charge is substantively registered or merely an equitable charge protected by notice. The way in which a particular security happens to have been protected is irrelevant to the substantive issue of whether the adverse possessor should take subject to it or free from it.

Paragraph 14.74 of the report—relating to registration of the squatter and the effect on registered charges—points out that registered chargees are to be notified of an adverse possessor's application to be registered—paragraph 2(1)(b) of Schedule 6—and are therefore able to object to it. Paragraph 2(1)(e) of Schedule 6 allows rules to be made for notice of such an application to be given to other persons; it will be possible and appropriate to require such notice to be given to a chargee whose security is protected by a notice rather than by substantive registration. I beg to move.

Lord Bassam of Brighton

Under the provision in the Bill, a squatter who has made a successful application for registration is registered in place of the registered proprietor. Unless the Bill provides otherwise, the squatter will take subject to the matters which affect that registered estate.

The effect of paragraph 9(3) of Schedule 6 is to make the registration of an adverse possessor as proprietor of a legal estate free of any registered charges which affect that estate immediately before the registration, subject to one qualification. I shall explain the reason why this exception has been made.

When an adverse possession application is lodged, notice of the application will be served on both the registered proprietor and the registered chargee. As that chargee has the right to possession, his position has been improved under the Bill, since he will have two years in which to take action to evict the unlawful occupier (the squatter). If he does not do so, however, he loses his charge.

The position of a chargee whose interest is noted on the register is, however, significantly different. Even if notice of the adverse possession claim is served upon that chargee, he is unlikely to be able to take any action against the squatter. It is unfair that he should be singled out to lose his charge when he can do nothing to stop the squatter obtaining title. I hope that in view of that explanation the noble Baroness will feel able to withdraw the amendment.

Baroness Buscombe

I have listened to the noble Lord's response. I am not sure that I am entirely happy with it; however, I shall read his words in Hansard and give them careful consideration. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Buscombe moved Amendment No. 91: Page 57, line 25, leave out from beginning to "in" and insert "Where a person is registered as proprietor

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 92.

These amendments are intended to ensure that when an adverse possessor is registered as proprietor because he establishes one of the conditions in paragraph 5 of Schedule 6, he takes free of registered and noted charges which on general principles would not bind him, because they were created by the proprietor at a time when the adverse possessor's claim had already acquired priority.

It is doubtful, at best, whether the adverse possessor can claim priority over chargees because he had an overriding interest as an occupier of the land at the relevant time, as the report suggests (at paragraph 14.76, note 258). Before being registered, the adverse possessor's interest is the independent "wrongful" fee-simple which arises from the fact of his possession; but when he is registered, that interest is extinguished by the provision in paragraph 9(1) of Schedule 6; therefore, it cannot subsequently be relied on, even if at some former time it was an overriding interest. If in a "paragraph 5 conditions" case the adverse possessor cannot rely on having had an overriding interest, paragraph 9(2) of Schedule 6 will make him subject to all charges whenever created—even the day before the application under paragraph 1 of Schedule 6 is made— because paragraph 9(3) will be disapplied by paragraph 9(4).

Again, we are not entirely certain that the amendment is ideally drafted in the terms necessary to achieve our intention. However, I hope that my remarks have made clear the purpose and intention behind both amendments. I beg to move.

Lord Bassam of Brighton

In discussing this amendment we are concerned with only one specific instance of an adverse possessor being registered as owner of the land. That is when the adverse possessor is registered after only 10 years, having successfully established that one of the three conditions set out in paragraph 5 of Schedule 6 applies.

The combined effect of sub-paragraphs (3) and (4) of paragraph 9 of the same schedule is that the adverse possessor, in this instance only, does not automatically take the estate free of any registered charges which affect that estate immediately before his registration.

I understand the concern that has been raised. Taking paragraph 9 in isolation, it seems that an adverse possessor can be registered as proprietor after 10 years, but only by paying the penalty of being subject to existing charges over the estate. I can reassure the noble Baroness that that does not reflect the complete picture.

At first sight, every adverse possessor, whether registered as owner after 10 years or after a further two-year period has expired, should take free of all registered charges and, as we discussed in relation to the previous amendment whether he or she should take free of any noted charges as well.

However, if the adverse possessor does not take free of the charges under paragraph 9, it does not mean that the story ends there. If the basis of registration is one of the first two conditions set out in paragraph 5 there exists an independent right or other reason justifying the squatter's registration as owner. That independent right or justification will, under wider property law principles, either have priority over the charge or it will not. The fact that the claim to registration has been made by way of the adverse possession procedure should not affect that priority. In such cases the apparent unfairness that the amendment seeks to address does not arise. The scheme does not make an arbitrary decision as to whether the charge still bites, but leaves the general law to determine the answer to the question. I suggest that this is probably the fairest solution to apply.

This leaves the third condition in paragraph 5 to be considered; namely, where there is a boundary dispute. In such cases, the claim relates to only part of the property. The adverse possessor may have successfully claimed a very small part of a very large estate; and that estate could have a substantial mortgage on it. The provision in paragraph 10 deals with the practical problem that this may cause: it enables the proprietor of the land to seek an apportionment of the charge between the land acquired and the remaining land. This is an important point. I say that because, in most normal circumstances, lenders would seek repayment of the entire loan before releasing any part of the property from their charge. In some cases, the apportionment exercise will result in a charge being secured entirely on the remaining land.

In the light of that slightly complex explanation, I hope that the noble Baroness will feel that the unfairness that the amendment, understandably, seeks to address has already been considered and that it is, indeed, covered by the Bill's provisions. In those circumstances, I invite the noble Baroness to withdraw her amendment.

Baroness Buscombe

I thank the Minister for a very full response to the proposed amendments. Indeed, his reply will certainly help to clarify and reassure us on the points raised. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 92 not moved.]

Lord Goodhart moved Amendment No. 93: Page 58, line 21, leave out paragraph 12.

The noble Lord said: This amendment seeks to delete paragraph 12 to Schedule 6, which says: A person is not to be regarded as being in adverse possession of an estate for the purposes of this Schedule at any time when the estate is subject to a trust, unless the interest of each of the beneficiaries in the estate is an interest in possession".

Therefore, in a situation where the property is held on trust for a parent for life and then, on the parent's death, for a child, it is not until the death of the parent that the time for adverse possession would begin to run.

I see no justification whatever for including paragraph 12. One of the benefits of registration is to make it easier to ignore the interest of beneficiaries under a trust. Indeed, that has been the aim of property legislation since well into the 19th century when the existence of trusts of land was making it increasingly difficult to sell such property.

Why should the interests of beneficiaries be relevant to the question of whether or not there is adverse possession? Land will be registered in the name of the trustee. The trustee has a fiduciary duty to protect the interests of a beneficiary. If the trustee has failed to prevent someone acquiring trust land by adverse possession, the trustee is in breach of trust and is liable to make good the loss suffered by the trust fund. Under existing law, there is a problem; namely, that land may be in the personal occupation of a current beneficiary, who has only a life or rather limited interest. In those circumstances, the trustee is unlikely to pay any close attention to what is actually going on as regards the land, and may not be aware that adverse possession has taken place.

However, the new system set out in Schedule 6 requires a notice to be given to the proprietor—the trustee—before registration of an adverse possessor can take place. At that point, the trustee will have notice of the adverse possession and it is not too late for him to act; indeed, he has two years within which to put an end to the adverse possession. The trustee can and should take the necessary action at that stage. As far as I can see, paragraph 12 is entirely unnecessary under the new system. I can see no good reason why land held in trust should be any harder to acquire by adverse possession than land which is in absolute ownership. I beg to move.

6.15 p.m.

Baroness Scotland of Asthal

I listened with particular care to the comments made by the noble Lord. This is certainly a difficult and complex area of property law. However, I am very far from being convinced that the noble Lord is right in this instance; or, indeed, that his amendment is in tune with the general scheme created by the Bill.

As the noble Lord rightly acknowledges, under the current law it is not until all the equitable interests under the trust of land have been successfully barred that the legal estate of the tenant for life, or, as the case may be, the trustees of land, is extinguished. Where there are successive interests under the settlement or trust, a squatter must, therefore, bar each equitable interest in order before he or she can claim the legal estate.

In accordance with this rule, the registrar will not register as proprietor a squatter who has take adverse possession against the tenant for life under the Settled Land Act 1925. The registrar will only do so when satisfied that all beneficial interests under the settlement have been barred.

I am a little troubled in this respect because the noble Lord said that he cannot see why the beneficiaries in such a situation should be given protection. Perhaps I may give the Committee a not too far-fetched example because, regrettably, this kind of situation arises from time to time. Let us take, for example, a couple who are involved in a car or an aeroplane crash. Unfortunately, the husband dies, leaving property of some considerable nature in trust for his wife for life and for his child upon her death. The wife, who is distressed and overcome by what has happened to her husband and, indeed, to her situation, becomes mentally ill. As a result, the child is removed from her care and placed into the care of the local authority. This tragic situation continues for some time.

During the time that the child in question is in the care of the local authority and the wife is housed in an appropriate mental institution, squatters take up residence on the child's property and remain there for some considerable time. Nothwithstanding the fact that the person with the life interest has done nothing wrong—or, indeed, has not been able to control the property—and the fact that the child is also innocent of any wrong, the noble Lord's amendment proposes that the squatter who takes up adverse possession of the property should thereby deprive the rightful beneficiary of his or her interest. That has never been our law; it is not our law now; and it is not proposed that that particular injustice should be visited by the Bill.

The Bill's provisions aim to fit the situation of trusts into its new scheme. It provides wholly new arrangements for squatters to apply to be registered as the proprietor of a registered estate in place of the existing proprietor. The application will succeed in the limited circumstances set out in the schedule. But the provisions of the Bill should not prejudice the rights of beneficiaries who are not yet in possession. We must have a balance: a squatter will not be regarded as being in adverse possession at any time when a registered estate is held in trust, as long as there are successive interests in the land. It is only when the interest of all of the successive beneficiaries of the estate have actually taken possession that a squatter can begin to clock up adverse possession that will qualify under the Bill.

The effect of the noble Lord's ammendment is very different. Squatters would be able to count time against the 10 years of qualifying possession as soon as they entered the land. They would be able to apply for a first time to be registered as proprietor after 10 years, against whichever of the beneficiaries under the trust was then entitled. If the beneficiary failed to remove the squatters after an unsuccessful application, they would be able to apply again two years later and their application would succeed.

We could apply the latter situation to the example that I gave earlier to the Committee. If, tragically, the mother was still in the care of an institution of some sort and the child was also not of age—he or she being of tender years when the father died—both the mother, suffering from her incapacity, and the child would be deprived of their rights by virtue of the noble Lord's amendment. That situation would be very much easier to achieve, as the noble Lord said, than under the provisions in the Bill, or indeed under the current law. It would represent a very significant shift of the balance of interests away from the successive beneficiaries of the trust, in land which is registered, towards a squatter. That is very much against the general scheme of the Bill, which sets out to clarify and strengthen the position of a registered proprietor.

It also significantly shifts the balance between current and future beneficiaries. The general law would serve to prevent a tenant for life acting in a way which would frustrate the trust by alienating the land by normal means. I used the example of a mother suffering from incapacity because it does not even go to the situation where the tenant for life has behaved badly. But if a tenant for life took no action to resist an application for registration by an adverse possessor, the life tenant would lose not only his or her own but their successors' rights as well.

Indeed, it is perhaps not too fanciful to envisage circumstances in which the amendment if accepted might create a loophole in the law which would enable a life tenant to bring the trust to an end in favour of the selected ad verse possessor, frustrating the intentions of the trust. I am sure that that was not the noble Lord's intention. For the reasons I have given, I hope that the noble Lord will accept that, notwithstanding the initial attraction of his amendment, it would be undesirable, and quite possibly unjust, to amend the Bill in that way. I invite the noble Lord to withdraw the amendment.

Lord Goodhart

I am grateful for the answer of the noble Baroness. However, it is not an answer to my amendment. What it does is to raise a different problem. Let us take the example that the noble Baroness has raised of a car accident in which the husband is killed and the wife to whom he has left a life interest in his property is severely injured as a result of which she has to be confined in an institution. Even if the wife has been named as the sole executor of the estate in the will, she would probably be unable to take out a grant and someone else would have to be found to take out a grant of representation to the estate. That person would become the trustee and it would be that person to whom notice would have to be given. That person would be the person who would be in a position to remove the people in adverse possession.

The point raised by the noble Baroness would therefore only arise in the somewhat improbable situation where the wife, having been fit to take out a grant as sole executor of the estate, then. as a result of delayed reaction, becomes unfit and no steps are taken to remove her as trustee of the estate. The problem that that throws up is that of the trustee who becomes unfit. Just as much injustice would be caused if the property had been left outright to the wife, so that she is the absolute owner of the estate, but, as a result of her injuries, she is unable to authorise action to be taken against the adverse possessors.

What one needs here to protect the situation is not paragraph 12 at all. What one needs is some provision for preventing adverse possession being acquired in cases where the registered proprietor is under an incapacity. That is the problem. What is needed here in my view is not paragraph 12—I believe that paragraph 12 can safely go—but something which will ensure that adverse possession cannot be acquired in cases where the registered proprietor, whether a trustee or an absolute owner, is incapable of taking action within the two-year period. In the case of absolute ownership, it would be just as much an injustice for the registered proprietor to be deprived as it would for a beneficiary to be deprived because of the incapacity of the trustee. If there is a trustee and if that trustee has full capacity, I continue to be of the view that paragraph 12 is unnecessary. In the circumstances, although I shall, of course, withdraw the amendment today, it is one which I may well bring back on Report, coupled, perhaps, with a further amendment to ensure that time does not run against a proprietor who is suffering from an incapacity.

Baroness Scotland of Asthal

Before the noble Lord sits down, I used that extreme example to soften his heart in relation to some beneficiaries. The noble Lord will know that we have made provision in terms of a disability in paragraph 8 to Schedule 6. However, the comments I made in relation to beneficiaries and tenants who have full capacity stand. The law as it stands is the law we intend the Bill to reflect.

Lord Goodhart

I respond to that point briefly. The fact is that nowadays under a trust of land it is very rare that the person who is the tenant for life—in the perhaps technically inaccurate sense of being a person who has the current life interest under the settlement—and has the current life interest under the settlement is also the sole trustee of that settlement. I simply do not see that where there is a settlement of that kind that situation is likely to arise.

Although I did not expect the noble Baroness to raise the point that she did I take the point that paragraph 8(2) to Schedule 6 deals with the question of incapacity. I accept, therefore, that no further amendment is necessary. However, that strengthens the case for saying that paragraph 12 is not necessary. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 agreed to.

Clauses 97 and 98 agreed to.

Schedule 7 agreed to.

Clause 99 agreed to.

6.30 p.m.

Clause 100 [Annual report]:

Baroness Buscombe moved Amendment No. 94: Page 36, line 10, leave out "must" and insert "may

The noble Baroness said: Clause 100 imposes a duty on the registrar to produce a report. However, it also gives him a discretion as to its form. In that context, we suggest that the word "may" is more appropriate. Clause 100(2) states: The registrar must publish every report under this section in such manner as he thinks fit".

It is the intention of the Government that the registrar has a duty to publish a report but that the report itself should be produced in such a manner as he thinks fit, thereby giving him discretion as to its form and content. We propose that the registrar may publish every report under this section in such manner as he thinks fit. I beg to move.

Baroness Scotland of Asthal

I understand the import of the noble Baroness's remarks. Clause 100 provides that the registrar must publish an annual report in the way that he considers appropriate. That is already what happens. Although it occurs at present without the benefit of statute, the Lord Chancellor lays that report before Parliament. So that reflects the current position.

The annual report is distributed widely to many organisations interested in the way in which the land registration system works. Those who are stakeholders in the registry use the information to monitor how the registry is functioning and to raise issues on its performance. The publication of information about the land registry's operation as a business is, therefore, important. Although it can be left to the registrar to decide the method of publication—for instance, in addition to printed copies the report is currently made available through the registry's website—the registrar should be obliged to publish that information. I therefore invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

I thank the Minister for her response and clarification that the registrar should be, rightly, under a duty to publish a report. However, the English is not clear. I suspect that I shall bring forward a different amendment to clarify the use of English and retain the meaning that the registrar is under a duty to produce the report but that he may do so in such a manner as he thinks fit. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 100 agreed to.

Clauses 101 and 102 agreed to.

Schedule 8 [Indemnities]:

Baroness Buscombe moved Amendment No. 95: Page 60, line 35, at end insert "or section 86, or (i) any other negligent act or omission on the part of the registrar in the performance of his duties under this Act

The noble Baroness said: In moving the amendment, I speak also to Amendment No. 97.

The amendments are directed to a similar point. Members of the Land Registry enjoy immunity from suit save where bad faith is proved. Perhaps I may direct the Committee to paragraph 4 of Schedule 7 which re-enacts, albeit in slightly different language, the provisions of Section 131 of the Land Registration Act 1925. In principle it is objectionable that the Land Registry cannot be sued for negligence. By contrast a local authority may be liable for the negligent acts of its employees in carrying out local searches. I draw attention to the Ministry of Housing v Sharp. This means that the scope of the indemnity provisions in Schedule 8 are of critical importance. At the moment they are not wide enough to protect the innocent citizen in all circumstances in which the registry has been negligent.

One example is provided by Clause 86(2) and (4) which impose a duty on the registrar to enter in the register relating to registered estate a notice of a bankruptcy petition which may affect it and to enter a restriction where a bankruptcy order has been made, in both cases as soon as practicable. Clause 86(5) provides that where no such notice or restriction has been entered in the register and a registered disposition is made in favour of a purchaser for valuable consideration without notice of the bankruptcy petition or order, the title of the bankrupt's trustee is void as against the purchaser.

What if the registrar negligently fails to enter a notice or restriction as soon as practicable and the bankrupt's creditors lose? No rectification of the register is appropriate so that paragraph 1(1)(a) does not apply and the other sub-paragraphs do not seem to apply either. If so, there is no remedy. The proposed amendment to paragraph 1(1)(h) of Schedule 8 is designed to cure this defect. But there may well be other situations in which there should be a remedy and there is not. The suggested new paragraph 1(1)(i) is a "mop up" provision designed to cater for these. This is not a particularly elegant solution but it will at least serve to raise this important point of principle.

I turn to Amendment No. 97. The references to "mistake" in Schedule 8 are ambiguous in that they do not in terms refer to intentional as distinct from unintentional error. The position under the 1925 Act is much clearer. Section 82(1)(d) permits rectification where the court or the registrar is satisfied that an entry has been obtained by fraud and Section 83(1) provides for any person suffering loss by reason of any rectification to be indemnified. A person suffering loss in consequence of the register being rectified by reason of fraud is thus clearly entitled to be indemnified. The proposed amendment is designed to produce the same clarity. I beg to move.

Baroness Scotland of Asthal

I hope that I shall be able to reassure the noble Baroness that the difficulties she outlines are already covered. The issues involved in relation to Amendments Nos. 95 and 97 are the same. I shall therefore deal with them together.

Paragraph 1 of Schedule 8 sets out the circumstances in which a person who has suffered loss can seek to be indemnified for that loss by the registrar. This is an important area. It was considered by the Law Commission fairly recently and the law changed by the Land Registration Act 1997. Although the Bill recasts these provisions into the current style, it makes no significant change to the provisions that were contained therein.

The fundamental premise on which the title guarantee system is based is that it is a no-fault indemnity system. The underlying policy is that no one has to prove that someone is at fault. All that has to be shown is that, first, a mistake exists in certain documents kept by the registrar; secondly, a mistake exists in the search, result or register created by the registrar; or, thirdly, a document lodged with the registrar has been lost. The only exception to that is the failure to serve notice under Clause 50.

Clause 50 is a special case. Under that clause, a lender may lose out as a result of the registrar's failure to serve notice but not because an incorrect entry has been made. I absolutely appreciate the concern behind the amendment: that failure to enter details of a bankruptcy petition or order, or a negligent act or omission on the part of the registrar, may result in loss for which indemnity is not payable.

I share the belief that people who suffer loss in either of those circumstances should be compensated for that loss. However, I hope that I shall be able to reassure the noble Baroness that the Bill already addresses those concerns to the extent that it needs to do so.

If the registrar fails in his duty to make an entry in relation to bankruptcy matters, a resulting error will appear on the register. In other words, if a bankruptcy entry of some kind should appear but does not, that will be the error. The registrar's failure would therefore be a mistake, the correction of which would involve rectification of the register. Such a mistake entitles the person who suffered loss to claim the indemnity.

I now turn to the question of negligent acts or omissions by the registrar. Perhaps I may say respectfully that issues of this kind have no place in a no-fault indemnity scheme. If the negligent act or omission results in a mistake in a document or in the loss of a document, then indemnity is payable. It is not a matter of how the mistake or the loss arose. If a negligent act or omission does not fall within the indemnity scheme, the complaint is likely to be based on delay in achieving the right result. The registry is, and will be, held to account for maladministration through its complaints procedure. In such circumstances, compensatory payments can be made outside the indemnity scheme. It is certainly our view that it is more appropriate to handle those payments in that manner.

In the light of those comments, I hope that I have been able to reassure the noble Baroness, Lady Buscombe, that the amendment is not needed and that, without it, the system will operate fairly in a similar way to the current system. The interpretation of Schedule 8 defines the scope of the term "mistake" for the purposes of the payment of indemnity under the schedule. Again, I appreciate the concern behind the amendment. For these purposes, a mistake should include one that results from forgery or fraud. It is only right that a person who has suffered loss should be able to claim indemnity if the mistake results from forgery or fraud.

However, as I have already said, the fundamental principle on which the success of the indemnity system is based is that it is a no-fault system. Indemnity is payable however the mistake that gave rise to the loss was caused. It would cover mistakes resulting from the two specific types of event described as well as mistakes caused by other factors. As I said earlier, the important and legitimate concern raised by the amendment is already addressed in the Bill. I hope that I have been able to clarify that for the noble Baroness, and I invite her to withdraw the amendment.

Baroness Buscombe

I thank the Minister for her full and helpful response and reassurances in relation to both Amendments Nos. 95 and 97. I should like to consider with care what she said in Hansard and study the references that she made covering the points that we have raised. However, for the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 96 and 97 not moved.]

Schedule 8 agreed to.

Clauses 103 to 105 agreed to.

Schedule 9 agreed to.

Clauses 106 to 115 agreed to.

6.45 p.m.

Clause 116 [Power to reduce qualifying term]:

Baroness Buscombe moved Amendment No. 98: Page 40, line 9, at end insert "the Rule Committee and".

The noble Baroness said: Amendment No. 98 relates to a very important power under Clause 116 in Part 12—that is, the power of the Lord Chancellor to reduce the qualifying term. It is our belief that that power must be exercised with great caution. We discussed in some detail its implications in relation to earlier amendments.

This clause puts one in mind of the Regulatory Reform Act. A significant power exists here without, we fear, sufficient constraint because the Lord Chancellor need only consult as he considers appropriate. I say that with all due respect to the current noble and learned Lord the Lord Chancellor, who, I am sure, would consult all appropriate parties. However, we must remember that this Bill replaces an Act that has lasted since 1925. Therefore, we are looking to cover all eventualities for the long term.

We believe that it is simple to do so because we have a ready-made rule committee that is, we are assured, constituted to reflect upon and take account of all interests affected by the Bill. Yet, when it comes to an issue that goes to the heart of the Bill and, indeed, as we stated when dealing with earlier amendments, affects so many people who are involved in conveyancing, small business, farm tenancies, and so on, that important committee will not be consulted. We believe that to be a serious omission. We hope that it is accidental, but, if the omission is intended, I hope that the Minister will explain to us the policy behind it.

Perhaps I may refer the Minister to col. 1395 of Hansard wherein she makes reference to an earlier amendment dealt with in Committee. Perhaps I may repeat her words: Confidence in the system is necessary. Once that confidence has been established, it will be possible for the Lord Chancellor of the day to look again at whether a further reduction"— that is, in the qualifying term— is merited, but that would be done at a time that was in line with what the market, the profession and the registry could tolerate with ease". —[Official Report, 17/7/01; col. 1395.]

We on these Benches believe that that test would be met if properly applied by consulting fully with the ready-made rule committee. I beg to move.

Lord Goodhart

I believe that the noble Baroness has made a rather good case for what has not been done—that is, that an order made under this clause should be subject to the affirmative resolution procedure. I believe that there is a strong argument for that— perhaps stronger than the argument for requiring consultation with the rule committee, whose field of action in this case is slightly different.

Baroness Scotland of Asthal

As Members of the Committee will know, the Bill was drafted on the basis that leases of seven years or more will be subject to compulsory registration. In the longer term, it is intended to reduce that period to three years or more. The Committee will already be aware that that will happen only when both the registry and its customers can cope with the change, as the noble Baroness reiterated from our earlier deliberations.

As the noble Baroness said, Clause 116 enables the Lord Chancellor to substitute in various clauses throughout the Bill a shorter qualifying period for leases. That will enable related provisions to dovetail with each other by adjusting the length of the leases to which they refer. The clause imposes a duty on the Lord Chancellor to consult before that change is made. That will be a significant change and a wide consultation exercise will be undertaken with all representative groups.

Members of the rule committee have professional expertise and experience of serving on that committee and they will undoubtedly have a valuable contribution to make in this area. However, the rule committee as a committee has a very specific function in relation to land registration rules and fees orders; namely, to ensure that the procedures that are set down function well and operate fairly for the benefit, ultimately, of the Land Registry's customers. It is not the committee's function to represent the public interest generally in relation to changes to primary legislation; as Members of the Committee know, that is the role of Parliament.

Orders that are made under the clause will be subject to the negative resolution procedure, in the same way as orders to extend compulsory registration in relation to shorter leases will be. I give proper weight—I am very much thinking on my feet—to the comments of the noble Lord, Lord Goodhart, about the proposed change. I cannot give a positive answer on that matter but it needs—or deserves—further consideration.

The approach throughout the Bill has been to impose on the Lord Chancellor a duty to consult without attempting to list all the different bodies and stakeholders that might have an interest. As Members of the Committee know, that list may change from time to time. It might be inelegant and inappropriate to prescribe or limit it in any fixed way. It may also depend to some extent on the proposed change. It would be very unlikely that the noble and learned Lord the Lord Chancellor would wish to consider the exercise of the power in the clause without considering whether he—or she—should consult the rule committee. Equally, I should expect the answer usually to be, yes. However, that does not make it necessary or desirable to single out the committee in the Bill. I therefore invite the noble Baroness to withdraw the amendment.

I can say that the matter will be given further consideration. At the moment we believe that that arrangement suffices and that it would be inappropriate to so restrict it, but the matter perhaps needs more thought. However, I obviously cannot guarantee that I shall come back with a positive answer.

Baroness Buscombe

I thank the Minister for her response and her assurance that more thought will be given to this matter. I do not quite understand why the rule committee's remit could not be extended to include such an important issue as the power to reduce the qualifying term. We should like the noble and learned Lord the Lord Chancellor to consult the rule committee as a minimum and, in addition, as much as possible with other organisations that and individuals who will be affected by such an important issue, which will go to the heart of conveyancing. I wait to hear what proposals the Minister will return with on Report. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 116 agreed to.

Clauses 117 to 123 agreed to.

Schedule 10 agreed to.

Clause 124 [Exercise of powers]:

Lord Goodhart moved Amendment No. 99: Page 41, line 39, after "Conveyancers," insert— ( ) a person nominated by the Royal Institute of Chartered Surveyors, ( ) a person nominated by the National Consumer Council,

The noble Lord said: The proposal in the amendment has already been touched on in this debate; it is that—in addition to representatives from the Bar Council, the Law Society's council, the Council of Mortgage Lenders, the Council for Licensed Conveyancers, a judge from the Chancellery Division and the registrar—the rule committee should include a person nominated by the Royal Institution of Chartered Surveyors. If the noble Earl, Lord Caithness, were in his place, I should apologise for getting its title wrong. The amendment also proposes that the committee should include a person nominated by the National Consumer Council as a representative of consumer interests.

I should mention that when, some years ago, I was a member of the conveyancing committee of the Law Commission, that committee included a representative from the National Consumer Council—she was a valuable member of the committee. I presume that that is the appropriate body to represent consumers' interests. I beg to move.

Lord Bassam of Brighton

It should be plain that we have some sympathy with the amendment. Clause 124 deals with the membership and role of the Land Registry Rule Committee, which assists the Lord Chancellor with the development of land registration rules and fees orders. As the committee is currently composed, it is chaired by a High Court judge. He in turn is supported by the Chief Land Registrar and representatives from the Bar Council and the Law Society. Additionally, a surveyor is appointed by the Ministry of Agriculture, as it was then called.

As it is drafted, the Bill will remove the requirement for the appointment by what was called the Ministry of Agriculture and extends the committee to include a person nominated by the Council of Mortgage Lenders and the Council of Licensed Conveyancers. That reflects the impact that the rules have on the different stakeholder interests. We are most grateful to the noble Lord for raising the issue of representation by consumers and surveyors. It must be right that in important discussions about the content of land registration rules the interests of both should be represented. I have in mind the large number of rules that will need to be made following the Bill's enactment.

In addition, the Bill will give the Lord Chancellor the power to appoint to the committee anyone who it appears to him can make a valuable contribution on any matter. I am beginning to think that the noble Lord, Lord Goodhart, might fit that bill, as would the noble Baroness, Lady Buscombe. Including in the Bill those two additional nominees as members of the committee will enable them rather than the Lord Chancellor to decide on which matters they wish to be heard. That is an important point in this regard. It seems to us to be the most appropriate way forward.

However, I have concerns about the way in which those additional members are identified in the amendment. I have therefore turned to the legislation relating to the membership of the rule committee overseeing county court procedures, which is perhaps the nearest equivalent body to this rule committee. One of their members is chosen for his or her knowledge of consumer affairs. I prefer that more generalised wording. I am also attracted to that approach for the selection of the surveyor. I should prefer it if the Bill stated that the Lord Chancellor will appoint someone with experience in surveying matters. That would cover the point. I say that because even now the Royal Institution of Chartered Surveyors is not the only eminent body in the surveying profession. The change of wording is not intended to prevent the Lord Chancellor from consulting the RICS on the appointment. It is likely that a nominee from RICS will be best placed to sit on the committee while the vast numbers of rules that will come into force alongside the Bill are made. The revised wording is designed merely to provide and ensure greater flexibility in future. The specific areas covered by rules might be more specialised. I have mentioned the additional power given to the Lord Chancellor to appoint other members of the committee in relation to specific matters. That power can be used to ensure that the relevant interest groups in the surveying profession are represented whenever the need arises.

To conclude, the amendment is accepted in principle and we undertake to table a government amendment on Report, incorporating wording along the lines that I have suggested. In light of that, I hope that the noble Lord will feel able to withdraw his amendment.

7 p.m.

Lord Goodhart

I accept what the noble Lord, Lord Bassam, says about the position of representatives of consumer groups, but I have difficulty about not including the Royal Institution of Chartered Surveyors in the Bill. That body is incorporated by Royal Charter and while I accept that there are other associations involving surveyors, they are mostly organisations of a different kind. They are not groups of surveyors who deal regularly with conveyancing issues. I should have thought that the RICS was plainly the pre-eminent body with regard to surveyors involved in conveyancing and that it was an appropriate body to include. It is somewhat inappropriate to specify the four named organisations in the clause without including the RICS.

The matter is not vital, but I should like to hear the views of the RICS before deciding whether to table another amendment naming that organisation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 124 agreed to.

Clause 125 [Rules, regulations and orders]:

Lord Goodhart moved Amendment No. 102: Page 42, line 17, leave out from "instrument" to end of line 20 and insert "made under this Act

The noble Lord said: The purpose of the amendments is to give effect to the recommendations of the Delegated Powers and Deregulation Committee, which recommended that the rule-making powers should be made subject to parliamentary procedure through the negative resolution procedure.

In my enthusiasm, I went a bit too far. The effect of my amendment would be to require a parliamentary negative resolution procedure for matters such as fee orders and commencement orders, which are not customarily subject to such procedure. That was not my intention and I do not wish to press that issue.

With regard to the rule-making powers, there is provision to lay statutory instruments before Parliament but to provide for no other parliamentary procedure. That procedure seems to be unique to the Land Registration Bill. I recognise that some Acts of Parliament have provisions requiring certain documents, such as codes of conduct, to be laid before Parliament. Those are not statutory instruments, of course, and do not contain rules. We in the Delegated Powers and Deregulation Committee believe that the land registration rules should be brought into line with the general practice of rules of court and should be made by statutory instruments which are subject to the negative resolution procedure. I beg to move.

Baroness Buscombe

I shall speak to Amendments Nos. 101 and 103A. I thank the Minister, representatives of the Land Registry, Charles Harpum and others for an informative demonstration of the electronic conveyancing model. It is always helpful to have in one's mind's eye some practical experience of how a system will operate. There is no question but that we are very supportive of this development, which will, when it is fully operational and the teething problems are ironed out, clearly transform conveyancing for the benefit of all.

Part 8 and Schedule 5 of the Bill set out the principles and outline the parameters of the new system which, to a large extent, are welcome. It is clear that the detail of the system and its operation will be covered by rules under Clause 93 and Schedule 5. It is our view that the detail, when drafted, should be discussed in Parliament because it will be of such fundamental importance to the operation of electronic conveyancing, and thus everything that impacts on the future of land registration.

It would be nice to discuss today the regime that will be in place for the next 100 years, but we cannot. It was conceded during the demonstration of the e-conveyancing model that a pilot study will be crucial to ensure that the current system is workable in practice for a multitude of applications. It must be said that it is extraordinary the speed with which the Government have brought the Bill to Parliament in contrast with the lack of detail with regard to the most important point.

We know that the pilot scheme is expected to last for five years, which is a sensible period. We hear the Government's argument against specifying the detail in the Bill because technology may, and probably will. progress in that time frame. However, whatever process is finally determined by the Land Registry to be the right one following the pilot scheme, that is no argument for not allowing us the opportunity to debate the finer points in Parliament. The detail is too important.

I refer the Minister to her speech on Second Reading when she stated: The power referred to exactly replicates the current law".—[Official Report, 3/7/01; col. 798.] That is true, but we are now introducing a very new system which requires new law. We therefore believe that we should not be bound by current law that relates back to 1925.

Amendment No. 103 is consequential on Amendment No. 101. Clause 129(1), referring to general interpretation states: '"land registration rules' means any rules under this Act, other than rules under section 93, Part 11. section 119 or paragraph 1, 2 or 3 of Schedule 5". All the rules that are specifically excluded relate to rules for electronic conveyancing. Clauses 123 and 124 relate to land registration rules. Clause 124(1) provides that, Power to make land registration rules is exercisable by the Lord Chancellor with the advice and assistance of the Rule Committee". Therefore, all land registration rules can be made by the noble and learned Lord the Lord Chancellor, as the Minister made clear when speaking to a previous amendment, but only with the advice and assistance of the rule committee and excepting those rules relating to electronic conveyancing.

Why is that? Our amendment would remove that exception because it is entirely consistent, logical and sensible for rules relating to electronic conveyancing to be made by the noble and learned Lord the Lord Chancellor in conjunction with the advice and assistance of those who understand the market and who are in touch with the practicalities of operating the system.

Remember that it is the Government's intention to have comprehensive electronic conveyancing in a few years from now. With all due respect to the noble and learned Lord the Lord Chancellor and his advisers, it is a nonsense to exclude the advice and assistance of the rule committee regarding the most important elements of this new system.

I respectfully remind the Minister of the speech of the noble and learned Lord the Lord Chancellor on Second Reading. He stated: The Land Registry has now begun an intensive campaign of consultation with conveyancers and with all other people involved in buying and selling property. That is necessary because conveyancers themselves must work with the system". —[Official Report, 3/7/01; col. 778.] We are pleased that there is now a campaign of consultation. However, that consultation should continue for the long term because, as the noble and learned Lord the Lord Chancellor recognised, it is those who are and will make up the rule committee who must work the system and who will best understand its strengths and shortcomings.

7.15 p.m.

Baroness Scotland of Asthal

I shall now reply to Amendments Nos. 100, 101, 103 and 103A. It may be for the convenience of the House if I start by explaining that I have listened very sympathetically indeed to what has been said, and, as I mentioned when we last met in Committee, I shall be undertaking to bring forward amendments at a later stage.

As the Explanatory Notes on the Bill and the Lord Chancellor's Department's memorandum to the Delegated Powers Committee explained, the Bill has adopted an improved version of the approach to rule making to be found in the current legislation.

As Members of the Committee will already know, the Select Committee on Delegated Powers and Regulatory Reform has recommended a different approach. It points out that the general power to make rules regulating land regulation procedures dates back to 1925, and has always been subject only to the requirement of their being laid before Parliament after being made. It points to the example of rules of court, which are subject to negative procedure, and suggests that all land registration rules should be so subject. The committee also recommends the extension of that procedure to rules under Clauses 107, 108 119, regulations under Schedule 9, and orders under Clause 99.

The Government are happy to agree that the rule-making powers should be modernised. We are of the opinion that the Committee's comparison with rules of court is appropriate, and we think that the model which should be adopted is the one which is now followed for the civil courts, and which has recently led to the wholly reworked civil procedure rules. The Government will therefore bring forward amendments which would subject all land registration rules to negative procedure.

I was glad to hear the noble Lord, Lord Goodhart, clarify that he did not intend to include fees orders and so on. There are, however, some aspects of internal court administration which, as the noble Lord knows, are not subject to that procedure, but are simply laid before Parliament after being made. Although fees orders are made on the advice of the relevant rule committee and with the consent of the Treasury, they are also simply laid. There are powers of this kind in the Bill: for example, the powers under Clause 99 to make provision on the carrying out of functions during any vacancy in the office of the registrar. Clearly, any delay in such regulations created by the procedural requirements of negative procedure could have a very serious operational implications for the Land Registry. The Government's provisional view is therefore that the regulations which are brought forward should follow as closely as possible the scheme of rules for the civil courts.

Amendment No. 101 would go considerably further than the recommendations of the Select Committee on Delegated Powers and Regulatory Reform. The Select Committee did not recommend that any of the delegated powers under the Bill should be subject to affirmative resolution. Apart from subjecting the great majority of delegated powers under the Bill to negative procedure, this amendment would also make the most important rules relating to electronic conveyancing subject to affirmative procedure.

Rules under Clause 93 would prescribe the transactions for which the use of electronic conveyancing would be made compulsory. Rules under the first three paragraphs of Schedule 5 would govern not only who was allowed to have access to the Land Registry electronic network but also the terms on which that would be permitted. Those rules will therefore be central to the regulation of the system. It really is fundamental to the success of electronic conveyancing that it should be able to command the confidence of customers, and of conveyancers. The noble Baroness acknowledged that those rules may need to be changed rapidly if technology improves and I thank her for that acknowledgement because it is quite clear that that is the way we shall go in the future.

The Government certainly see the value of ensuring proper parliamentary scrutiny, and a full public airing, for the draft rules. The amendments which the Government will bring forward at a later stage will therefore include provision for affirmative resolution in relation to rules dealt with under the current amendments. In the light of that undertaking, I hope that the noble Lord and the noble Baroness will not press their amendments.

Finally, I turn to Amendment No. 103A. It seeks to remove certain words from the definition of the phrase "land registration rules" in Clause 129, which is the general interpretation clause to the Bill. As drafted, the phrase "land registration rule" is used to identify the rules which must be considered by the rule committee before being made by my noble and learned friend the Lord Chancellor. In the form of the Bill as introduced, those rules were to be made and then laid before Parliament.

As we have already indicated, the Government will be reconsidering the degree of scrutiny to be applied to the rule-making procedure. The effect of Amendment No. 103A would be to extend the rules that must he considered by the rule committee to include rules relating to simultaneous completion and registration in electronic conveyancing under Clause 93 and network access agreements under paragraphs 1, 2 and 3 of Schedule 5 to the Bill.

It would also draw into scrutiny by the rule committee rules under Part 11 of the Bill relating to the proceedings before the adjudicator and rules relating to the forwarding of certain applications by the Land Registry to the registrar of companies under Clause 119.

We do not believe that that would be appropriate. Applications to the registrar of companies are matters of joint interest to Companies House and to the Land Registry. Therefore, we suggest that they should not depend upon the advice and assistance of the rule committee alone. Similarly the new adjudicator to Her Majesty's Land Registry is an independent office and, therefore, it would not be appropriate for consideration by the rule committee to be a formal stage in the creation of rules applicable to proceedings before the adjudicator.

As originally drafted, the Bill subjected the rules to be made in relation to electronic conveyancing under Section 93 and paragraphs 1, 2 and 3 of Schedule 5 to a negative resolution procedure following consultation by the Lord Chancellor. The Lord Chancellor is required to consult on the rules governing electronic conveyancing, and that would include the rule committee where relevant. However, the amendment would have the effect that the rule committee would include the Chief Land Registrar in the rules governing the adjudicator, and that may not be appropriate for reasons of independence.

Given the wide and important ramification of the rules, we consider that the wider provision of general consultation is more appropriate. I have already indicated that the Government will bring forward amendments to include provision for affirmative resolution procedure. Clearly, we could not involve the rule committee as a formal step in the making of the rules if this higher level of parliamentary scrutiny were adopted.

In the light of those comments and that explanation, I hope that the noble Lord, Lord Goodhart, and the noble Baroness, Lady Buscombe, will feel able to withdraw their amendments.

Lord Goodhart

I am grateful to the Minister. In view of what she has said, I shall ask for the leave of the Committee to withdraw Amendment No. 100 and I shall not move Amendment No. 102. As I understand it, the Government agree to most, although not quite all, the recommendations of the Delegated Powers and Deregulation Committee. The outstanding one is orders under Clause 99. I am unsure whether there are any others. Having had a quick look I believe that Clause 119, which simply deals with transmission between two registrars, perhaps falls into the same category. No doubt the delegated powers committee will have a chance, before the Bill is dealt with on Report, to consider the arguments put forward as to why there should be no changes in those limited respects. I cannot speak for the Committee, but I do not have any particular problems with those. Therefore, I ask leave to withdraw Amendment No. 100.

Amendment, by leave, withdrawn.

Baroness Buscombe had given notice of her intention to move Amendment No. 101: Page 42, line 17, leave out subsection (4) and insert— (4) No rules under section 93 or paragraphs 1, 2 or 3 of Schedule 5 shall be made unless a draft of the statutory instrument has been laid before Parliament and approved by a resolution of each House. (5) An order under any provision of this Act other than section 99, 101. 111, 131 or 133 is subject to annulment in pursuance of a resolution of either House of Parliament.

The noble Baroness said: I thank the Minister for a full response in relation to Amendments Nos. 101 and 103A. I am pleased by her undertakings in relation to Amendment No. 101 and look forward to considering the government amendments on Report.

I also want to consider with care what has been said in relation to Amendment No. 103A and earlier amendments in relation to the remit of the rule committee and its relationship with the Land Registry. Of course, the matter of independence is important, but on that basis I shall not move Amendment No. 101.

[Amendment No. 101 not moved.]

[Amendment No. 102 not moved.]

Clause 125 agreed to.

Clauses 126 to 128 agreed to.

Clause 129 [General interpretation]:

[Amendments Nos. 103 to 103A not moved.]

Clause 129 agreed to.

Clause 130 agreed to.

Schedule 11 agreed to.

Clause 131 agreed to.

Schedule 12 [Transition]:

[Amendments Nos. 104 to 108 not moved.]

Lord Goodhart moved Amendment No. 109: Page 80. line 40, leave out "section" and insert "paragraph

The noble Lord said: This amendment is intended to correct what appears to be a minor drafting error. The word "section" appears in the Bill and I believe it should read "paragraph". I beg to move.

Baroness Scotland of Asthal

We have arrived at the final amendment. I am delighted that it has been moved by the noble Lord, Lord Goodhart. Again, he has demonstrated that even the smallest of drafting slips in any part of the Bill are not safe from his keen eye. As he has noted, the reference in paragraph 18, subparagraph (3) to "this section", should read "this paragraph". I am pleased to accept the amendment.

It has been a pleasure to participate in the second day of the Committee stage. The amity with which the Bill has been dealt with is a matter of some pleasure. We have had a good debate today and I am grateful to all noble Lords who have contributed to the debate. I thank the Committee.

On Question, amendment agreed to.

Schedule 12, as amended, agreed to.

Clause 132 agreed to.

Schedule 13 agreed to.

Clause 133 agreed to.

House resumed: Bill reported with amendments.