Clause 91 - Electronic dispositions: formalities
Land Registration Bill [Lords]
10:00 am
Mr William Cash (Stone, Conservative)
This is a substantial group of amendments, and it will take a little time to go through them.
The object of amendment No. 85 is as follows. Users of the conveyancing system, including not only members of the public buying a home but commercial enterprises and inward investors buying factories and offices in England and Wales, and the conveyancers
acting for them, should not be left in doubt about whether a forged or impersonated signature might be held as binding on them. The law should make it clear that, in the case of electronic documents as in the case of paper ones, individuals, firms and companies are not liable when they have neither made nor authorised the signature.
Organisations that provide electronic access to facilities have developed a practice of transferring to the user of the facilities the risk of forgery of the access control code. By their examples, we offer the access terms of the providers of access to the national land information system, and the statutory terms applicable to electronic filing of income tax and value added tax returns. For example, Searchflow has said:
''The Customer warrants that it/he/she will keep confidential and secure all user names and passwords used in relation to the Services and accepts that use of a user name and password allocated to a Customer shall constitute sufficient authority to the Company to perform the Services and be entitled to payment for so doing.''
Teramedia has said:
''You [the customer] are responsible for all use, activity and charges associated with or arising out of your use of Territorium, including any unauthorised charges or use by a third party using your subscription, user name and/or password.''
MacDonald Dettwiler has said:
''You will be liable for all charges incurred through the use of your TransAction Online Password.''
The Value Added Tax (Amendment) Regulations 2000 (SI 2000 No. 258) state that
''the person making the return to the Controller shall be presumed to be the person identified as such by any relevant feature of the electronic return system.''
The Income Tax (Electronic Communications) Regulations 2000 (SI 2000 No. 945) as amended by the Income Tax (Electronic Communications) (Miscellaneous Amendments) Regulations 2001 (SI 2001 No. 1081) states:
''If it is necessary to prove, for any purpose, the identity of—
(a) the sender of any information delivered by means of electronic communications to an official computer system, or
(b) the recipient of any information delivered by means of electronic communications from an official computer system,
the sender or recipient (as the case may be) shall be presumed to be the person recorded as such on an official computer system unless the contrary is proved.''
A common feature of all these examples is that if someone other than the user is able to impersonate the user successfully by obtaining control of a copy of the user's access mechanism, the user is either bound by the consequences, or in the last case, carries the burden of rebutting a presumption of responsibility.
Access mechanisms may take the form of a user ID combined with a password or cryptographic key, or a number of other mechanisms. For the purposes of any practical scheme of electronic conveyancing, all such mechanisms involve supplying the password, key or other security data to a PC which forms part of the computer network that also has access to the internet. There are no available secure operating systems for PCs and the security risks to which they are vulnerable are notorious, and have been authoritatively expounded by no less an institution than the National Security Agency in the United States. A book entitled, ''The Inevitability of Failure: The Flawed Assumption
of Security in Modern Computing Environment. Proceedings of the 21st National Information Systems Security Conference HTTP://csrc.nist.gov/nissc/1998/proceedings/paperF1.pdf, October 1998.''
The risk of surreptitious copying of security information from a PC, or its subversion to carry out transactions other than those apparent to and intended by the user, are risks that solicitors' firms are in no position either to eliminate or to bear.
We are not aware of any cases where attacks of this kind have yet been carried out. By no means are all cases reported, but it should be noted that comparatively few systems are yet available to be attacked by these means, which offer opportunities comparable in value to those which would arise in electronic conveyancing. The criminal community is alert to use impersonation to exploit security weaknesses where they appear, as is illustrated by an article in the Financial Times on 16 October 2001, by James McIntosh, entitled, ''New code aims to help stamp out share theft''. He writes:
''In an attempt to eradicate a multi million pound crime involving the theft of shares, stockbrokers and share registrars have agreed on a new code of practice. More than GBP 2 million worth of shares have been stolen by criminals impersonating shareholders and telling registrars they have moved house so that they are given a replacement share certificate which enables the shares to be sold on. The code, which is being kept confidential, will list warning signs for brokers and registrars so that checks can be made more easily on suspicious transactions.''
For these reasons the Law Society would regard it as unacceptable for solicitors to carry the risk of their electronic signature keys being obtained and misused by third parties. The use of presumptions in statutory terms and their contractual equivalents, should be ruled out by clear statutory language such as we have proposed. The effect should be that, as is the case for paper documents and their signatures, it is for the relying party to prove that a disputed signature was made by or with the authority of the purported signatory. That is consistent with the law as it applies to paper documents, and with the Australian legislation to which we have referred. This provision should be of general application to conveyancing documents, whether or not they purport to be executed by solicitors or agents.
When the relevant amendment was moved in the House of Lords, my noble Friend Baroness Buscombe stated:
''If technology is developed which can effectively eliminate the risk of the user being impersonated, then relying parties will find their burden of proof easy to discharge. We believe that currently available technology is very far from succeeding in this objective, even having regard to proposals for smart cards or biometric identifiers. Relying parties face real risks in accepting electronic signatures, which may amount to undetectable forgeries, but it would be wrong as a matter of policy to allow them to solve the problem by transferring the risks to purported signatories. Where relying parties are major institutions, such as the Land Registry, other government agencies or financial institutions, they are far better placed than firms of solicitors . . . to promote the development of technology to eliminate the risks. That is a further reason for ensuring that they continue to carry those risks.''—[Official Report, House of Lords, 8 November 2001; Vol. 628, c. 313.]
Before turning to new clause 1, I shall deal with amendment No. 65. The Trustee Delegation Act 1999 reinforced the two trustee rules in the Law of Property Act 1925 by providing that it was not satisfactory for a single attorney to act for two trustees. That consumer protection should not be sacrificed when electronic transfers are executed. The 1925 Act put in place some ineffective consumer protection by ensuring that some transactions could only be done by at least two trustees, the idea being that one such person could not access somebody else's money. The Trustee Delegation Act sought to bolster that by preventing one person being appointed the attorney for two joint owners, which would mean that that person acted for two trustees and therefore nullified such protection as there was. The Law Society seeks through this amendment to ensure that electronic disposition arrangements do not undermine this recently strengthened consumer protection.
New clause 1 relates to section 22 of the Solicitors Act 1974. It aims to establish consumer protection that would limit technical Land Registry work to solicitors and certain other conveyancing professionals. Licensed conveyancers are authorised by section 22 of the Solicitors Act 1974 by virtue of section 11(4) of the Administration of Justice Act 1985. All professionals entitled to carry out conveyancing are therefore treated equally by the amendment, which would mean that consumer benefits are extended as widely as possible. Current registration restricts the right to do technical land registration work for payment to suitably qualified professionals. Although the restriction appears in the 1974 Act, licensed conveyancers and others qualified and authorised to do conveyancing are included. It would be wrong if the introduction of electronic conveyancing weakened this consumer protection. Although the Law Society proposal seeks to extend the current provision to ensure that it covers new forms of working, its intention is to maintain the status quo.
Rather than taking the Committee through every detail of amendments Nos. 67, to 69, I refer hon. Members to pages 53 and 54 of the Bill. Amendment No. 67 would leave out paragraph 2(2)(a) to schedule 5, which deals with questions relating to terms of access. It is not necessary for the Committee's convenience for me to read it all out because it is there on the record. Amendment No. 68 deals with the overriding nature of network access obligations and proposes leaving out paragraph 6 to schedule 5. Amendment No. 69 deals with presumptions of authority and seeks to leave out paragraph 8.
Amendment No. 85 is a new amendment dealing with electronic signatures. Although it was included as a later amendment, I opened my remarks with it because that was the natural sequence in which I wanted to discuss matters. We are dealing with complicated amendments. The manner in which you have grouped them, Mr. Illsley, has a certain amount of coherence, but that does not alter the fact that the
topic is complicated. I hope that I have adequately explained to the Committee what we have in mind and I would be grateful for a response from the Minister.