 I welcome members to the 25th meeting in 2014 of the Delegated Powers and Law Reform Committee and asked members to switch off any mobile phones. We have apologies from Richard Baker in his place, I welcome Mary Fee. Agender item one is a decision on taking business in private. It is proposed that committee takes item six in private. Item six is consideration of committee's approach to the delegated powers in the community empowerment Scotland Bill at stage one. Does the committee agree to take that in private, please? We do, thank you very much. Agender item two is the Legal Writing, Counterparts and Delivery Scotland Bill. This item is oral evidence on the Legal Writing, Counterparts and Scotland Bill. Today's session allows us to take evidence from the Law Society of England and Wales, who along with the City of London Law Society are responsible for the practice note outlining the modern English law on execution in counterpart, which informed the bill. Joining us via video conferences, Warren Gordon, Member of the Law Society of England and Wales, Convincing and Law Committee and the Head of Real Estate Know-how at Oldsland, LLP. Can I welcome Mr Gordon again and invite him to make an opening statement, please, sir? Yes, but thank you very much for giving me the opportunity to speak today. As you say, my name is Warren Gordon. I'm Head of Real Estate Know-how at Oldsland LLP. We're a law firm in London and with other offices in England and around the world. I'm also a Member of the Law Society's Convincing and Land Law Committee and will become chair of that committee from September. As a Member of the Convincing Committee, I have saw that some involvement in the production of the Law Society's practice note in February 2010 on execution of documents by virtual means. My specialism is in the real estate area and my experience of execution of documents, virtual silence and counterparts is in that context, although I'm happy to comment on this application in other areas. Many thanks again to the committee for giving me the opportunity to provide some information to you about how the mission experience is, which hopefully will be of use to you as you formulate your legislation. Without further ado, perhaps we can take questions. Indeed, thank you for that introduction. We'll go slightly slowly because our cameras need to be able to move. I'd like the first question to come from Margaret McCulloch, please. Thank you. Good morning, Mr Gordon. My question is on the background to the English law of counterparts. I wonder if you can explain to us the extent to which counterparts are used in commercial settings in England and the role which law firms play in the process. Thank you very much for that question. So, a doctorate of counterparts in English law has got a couple of meanings which I will explain in my answer. The first one relates to deeds and counterparts in our interpretation are deeds executed as duplicates or identical. So when a deed is executed in duplicates, all the parts are regarded as one deed, so you might accept it as one deed, and each part is equally affected. I'm talking here about written documents, as opposed to virtual electronic and sign documents, which I'll talk about in a short while. And the concept of the original deed and the counterpart duplicates constitute one deed and each part being equally affected. That legally is a part of the individual counterpart's relationship to written documents, certainly in a real estate property context, which is what I'm most familiar with. So the biggest example of that would be something like a lease, where the two parts of the lease, the part executed by the land and the part executed by the tenant, are identifiable. The part of the land of execution is called the original or the principle deed, and the part executed by the tenant and the guarantor is called the counterpart. And the counterpart does not have to be signed by all of the parties to be valid. It doesn't have to be signed by the tenant and any guarantor of the tenant. The land is signed as a separate part for the original. And as this is the original deed, which is usually the part executed by the party doing the disposal, so I'm guessing this would be a similar way in the proper context, but the party is actually selling the property or letting the property, the one who's carrying out a disposition before the individual term. That is always going to be the original document, and that would be the document that, for example, in the land registry context, is sent to the land registry and registered there. If the land registry is registered in this position, and it's the original document in this position, so that's what it's doing. In terms of the counterpart, the land registry doesn't need to be the counterpart. What the counterpart is doing there is it's essentially evidence of the tenant executing the document, and then that would use that counterpart if it wanted to sue the tenant, if we need to have that document to go to court and bring it to proceedings. So the counterpart doesn't have a role, but ultimately the original prevails over the counterpart. If they're not identical in that period, it should be added to court, but sometimes maybe the WP systems don't work properly in their tidy effort, and in that scenario, the part executed by the land would prevail as the original over the counterpart. But if it's not when you've had, perhaps in one scenario, the original counterpart, the counterpart could have been used as evidence of the document existing. Now what are the issues that the committee is using? Is one of the advantages of having an original counterpart? That there's a third, I come on to a separate concept of counterpart's generally emotional experiences, which also happens as a part of a similar conversation, but in an absolute real space context, keep it fairly obvious that if the counterpart is executing separate identities of parts, it's much quicker. There's a much quicker speed of execution, and that has to improve the efficiency of the transaction. If you have to get all of the parties of land that tend to gather at all to execute both parts of the document, it would slow up the transaction, particularly if it's part where you're talking about parties that are based over cities, and it might be much more difficult, much more time consuming, especially if you're able to file out a signature of the collect to get those documents executed. So if the original counterpart, in a real space context that's related to cities, is a much more effective way of executing documents, it has to be said that sometimes people like all of the parts of the execute in different parts, just to make the approval for, but usually in a property context that doesn't happen. So that's a property, but then broadening out a bit through the kind of concept of counterpart, which I think is more particular to virtual signings, and to your bill, commercial agreements. So in commercial agreements we often have what are called counterpart visions as a clause of the document related to counterparts, and it is quite similar to what I've just been talking about, although it's slightly different as you'll see. We don't have a concept of original counterpart in that context. It's a concept of counterparts, but similar to what I was saying previously, it still means that those counterparts are identical parts of the document. They're exactly the same, but they are signed, each one is signed by a different party. So you don't have all of the parties signed in one document. It has the same effect as if all of the signatures on the counterparts have been on one document. So with all the parts physically assigned to that document, legally you're treating together as one document. Each counterpart is an original, which can be taken or sued upon. All of the counterpart together, similar to an original counterpart, constitutes one document. Now, what I think is statistically relevant to the concept of virtual signing as dealt with in the Law of Practice note, so in relation to your bill, is again highlighting the efficiency of each party being able to do their own electronic and virtual signing once all of those have been done that can constitute together one document. So that flexibility of each party signing by themselves, without everybody having to sign one document, provides a lot greater flexibility which can be utilised in an electronic virtual signing context. So that is the benefits. Do you have any questions on that at this stage because my next comments relate to your question too? Forgive me, I'm just, Stuart Stevenson had an observation please. Thank you very much, convener. I've listened carefully to what's said and I hopefully am understanding that. In particular, I'm looking to submission the committees received from the Faculty of Advocates. The one thing I didn't hear in your contribution, Mr Gordon, and of course it may be the difference between English and Scottish law that accounts for my not hearing it. That was the delivery of documents which is part of our legislation. It seemed to me that you were suggesting that particularly in relation to property there was not necessarily a delivery to the primary signer. I'm using that as my term because you clearly made a differentiation between the status of the two versions of the document signed one in counterparty and one otherwise. Is the junior document, my phrase, actually delivered so there is an opportunity for the two and confirm that they are identical because you did make mention of any difficulties that would arise worthy to be different. Is there a delivery process in what you do? There is a concept of delivery, but as I understand it and I'm not an expert on Scott's law, one way of delivery in Scott's law is to physically deliver the documents. Is that right? There is a parolary of what we do, but in practice what happens is one firm of solicitors produces both documents and then gets the parties to execute and ultimately one party ends up with each part of the document and so in terms of them comparing it the solicitors will check that they are the same, but the physical delivery of it isn't integral to the legal effect. Concept of delivery in English law as I will come onto on virtual signings is a document under English law. The delivery in our interpretation is that at that point in time they are legally bound by virtue of the fact that they have signed the document unless the parties agree otherwise and normally we agree otherwise. Normally we don't want a party to be bound merely at the point of execution we say that they will only be bound when the document is dated and the dating will take place after the respective parties have executed. The parties isn't relevant to English law but we do have a concept of delivery whereby if a party signs they will be bound unless the solicitors and the parties agree otherwise then it will normally be at the date the document is dated. Do forgive me, I just want to try and be as clear as a lay person can be. The concept of dating in relation to this the legal effect of the two signed copies only starts when the documents are dated. Now could you describe how dating happens who's party to dating and have there been any cases where the absence of dating or questions around dating have led to difficulties in your jurisdiction the way you do things? What happens is the parties execute the documents and they don't want to be legally bound until it is dated so the documents will be undated and what will normally happen in my experience of transactions is the respective solicitors will usually speak on the phone and they will agree at a particular point in the day at a specific time and a date that the document will be dated at that point in time and from that date from that time the parties will be legally bound. So with contracts which are not under deed again they are executed because there's no concept of delivery in the concept of non-deeds the parties aren't necessarily bound at the point they sign it then goes to the solicitors and the solicitors at that point use a law society formula to exchange the contracts and there are various elements of that and again being specific when it is dated it is from then that the parties are bound. The comparison is with a deed where there is the danger as I say that a party can be bound merely by virtue of the fact that they've signed the document even if it has not been dated at that point. Now of course that could create quite a lot of uncertainty and for that reason and I'm not saying every document like this but any well-drafted document will have a specific statement that says delivery as we understand it takes place on the date of this deed therefore the fact that the parties have signed the document does not mean that they are bound at that point because what can happen sometimes is a party may sign something and then they may have second thoughts they don't want to proceed so they don't want to or even they might sign something and there might be a three month gap till it's completed so they sign it but they're not legally bound until it's dated and dating all that means is there's a gap in the front page that says you put the date in and the solicitors agree this is the date we're going to complete so where we use complete this deed once it's dated from that moment the parties are legally bound there is a contract implicit or explicit between the signatories and the lawyer who is acting on their behalf because it is the lawyer who is giving effect to the dating correct correct and the lawyer is in effect acting as the agent of the client to bring effect to the legal completion and the dating sorry to be so pernickety but I'm kind of known for it so you have a if I understood you correctly this is a third lawyer who has a responsibility to both sets of parties to the contract is that my understanding no no no no no no so basically each party I mean some parties will sometimes not have a lawyer representing them in which case we'd advise them to get independent legal advice but normally in commercial transactions each party has its own lawyer and the lawyers between themselves no third lawyer involved just the lawyers to the parties between themselves work out the arrangements for exchange if it's a contract or for completion if it's a D being completed and they agree between themselves no other party involved how and when it's going to be dated thank you thank you I can see the advantage of having the opportunity for businesses to actually be able to sign the documents if they live and work in different parts of the country or internationally is there any other advantages for companies to actually go down this route I would say at the moment there's probably a little bit of reluctance and caution on the part of people to actually go down the electronic route I'll come on to the land registry's change of practice and meaning that possibly we can do deeds by virtual signings but people I think still feel slightly uncomfortable with doing transactions virtually and I make that point really to say that the advantage that I highlighted is probably one of the main things that we think of at the moment in relation to doing virtual signings in terms of the concept of different parties executing different parts of the documents that is something that we in English law have been familiar with for decades if not hundreds of years so it's not something that we really think of as an advantage but it is I have to say in practice a bit of a hassle where you can't use take advantage of the part arrangement and you have to have get maybe sometimes on our large commercial transactions five or six parties executing the same document it is a total nightmare because people aren't around when you need them to be and knowing the way the typical commercial transactions go they've got to be done yesterday and it is a real disadvantage so I stress for me that is the main advantage I can't think of any other particularly obvious advantage of separate execution by counterpart original but it is an advantage that is well merited and I think hopefully the benefit of that can be seen in virtual signings and lastly any practical difficulties with English law of counterparts and have you identified any areas where improvements could actually be made well so this is I think coming on to your second question isn't it the main disadvantage I think is the actually arguably a corollary of the main benefit is its own part of the document if that part is lost and these things do happen documents get lost it can cause problems if it was necessary to use that part for example to bring proceedings in court clearly if all the parties had executed each part of the lease that wouldn't be a problem because you could then get a certified copy of the document showing both parties having it executed for the other party having said all of that in terms of it is it a disadvantage it is quite rare that parties lose their documents it does happen but I would say that the rarity of that occurrence doesn't make it a significant enough disadvantage to outweigh the benefits of the efficiencies of having separate execution another disadvantage would be and we picked up on this already is if the documents are not in identical form now in the olden days before my time where people used to sort of manuscript scribe these documents together one could see that as potentially a disadvantage but with modern technology and IT processing even with people having different versions of documents it would be pretty negligent on the part of the solicitor producing the counterpart in original all the counterpart documents for them not to be in identical form and actually there's an argument even to say that let's say you had counterparts where you were getting all the parties to execute each part but let's say the two parts themselves or you executed getting three parties execute each part stands to reason you have three documents because you want each party to have one copy let's say when they came to the IT processing that the three parts were not identical between themselves so even if you're executing of all parties executing each part you've always got the danger that if you've got more than one copy of that document that the documents could be different between themselves so the concern about not being an identical form is I put forward simply because you've asked me for disadvantages of it although in practice with IT it shouldn't be an issue because what you're doing is you're literally pushing the print button so you have two copies of that please it's not like you're having to go through a different process to create the second version of it so if one is concerned about that one will be concerned about knocking out more than one copy of any document when you push the print button as I say I think these are disadvantages but they are so minor and they are outweighed by the greater efficiencies we have by executing separately thank you very much thank you very much on that and that takes respect to Stuart Stevenson who I think perhaps has a point on that before he moves on yes I just wanted to ask whether consideration being given to the use of electronic signatures that relate to the document in other words validate that the document is a particular version and that therefore allowed quite quick comparison of electronic signatures rather than having to dot by dot cross T by cross T compare the detail okay I'm not aware of that certainly in a real estate context and personally I think it's probably unnecessary we have throughout a lot of the documents negotiated online you have different versions when a version is agreed and it's ready to push the button to engross that document then clearly the solicitors for each party should be looking at the final version should be circulated to the respective solicitors and the solicitor then comes back and says I'm happy with that document the lawyer who is producing one of the lawyers will produce the final form of the document will physically or email the document to the other side any lawyer doing their job properly will then check the document what they I mean we I use the tool here in the office called PDF comparison which can do it's a technical device which shows any differences between the two I agree with you that effectively locking down the agreement by an electronic signature it's funny we're going to come onto that course on later questions but in terms of this context yes it probably would be a more effective way to do it but it's I'm guessing will probably be more administrative probably more costly you'd have to have the solicitors liaising between themselves will there be any incompatibility in the technology between the respective solicitors and I think my answer to your question is I think that the technology that we have at the moment gives sufficient protection to solicitors and their clients bearing in mind the cost pressures on transactions what clients are prepared to pay in the real world what firms are prepared to spend what they can afford to spend they're going to do things that they need to do and if the technology here is sufficient to protect them to a reasonable degree then I think people will perceive that to be enough right I'm available on consultancy at about a thousand a day so there we are anyway anyway let me just move on to the mercury case and the law society's practice note which your introductory remarks indicated you were party to and I just wonder if you could tell us to what extent you're satisfied that the practice note addressed the issues that was raised by the mercury versus HMRT case I think that I mean this was a case from 2008 that I'm sure the committee is aware of it was a case as often happens with these kind of cases it was very specific to its particular facts and in that sense you could say well it wasn't that significant but it was important because it highlighted areas that perhaps the profession had been focused on closely enough in relation to pre-sign signature pages and also practice of contracts being exchanged by signature pages being exchanged by email so particularly in a commercial context and actually to a degree in residential context with increasing numbers of overseas purchases we have lots of people who are abroad who we act for and it is too fiddly to send an overnighter to somebody to get it signed with wet ink and then send it back and lawyers have always been attempting to come up with their own solutions as to how they can go about trying to effect an exchange legally that were properly buying the parties and there was great uncertainty really about how they go about doing this and whether the clients would be properly protected in that situation so the mercury case was not of great relevance to what practitioners do but it highlighted that there was an issue that the law society needed to address in its guidance and it wasn't only as you say the law society it was also the city of London law society that was involved arguably particularly that society because a lot of its clients involved transactions overseas so we have this guidance which was in the practice notes and my particular interest obviously was in relation to real estate documents and deeds and what the law society came up with were three options and you're probably right it's the committee fully OFA with the contents of that practice note or shall I reiterate the key points on the three options we may know as much as we need to but if you can briefly just point to a few bullet points I would be better informed so just a couple of introductory points as I say virtual signings mainly occur in a property context in relation to real estate contracts so in English law we have a contract which is usually a contract which is the agreement to sell the land usually there will be the disposition the actual transfer of the legal interest virtual signings normally occur in a real estate context in relation to contracts to sell so it will be at that point where the parties are initially bound to transfer the property at a later date and the urgency usually arises where the clients want to get the contractual commitment the legal transfer itself will happen later but the urgency is getting that contractual commitment and that's why they need to do an electronic signing so it's normally property sale contracts so up to recently the dispositions themselves the transfer of the legal interest we would never do by virtual signings and the key reason for that was these dispositions had to be registered at the English land registry and the English land registry up to about two months ago required wet ink signatures so they wouldn't be happy with a PDF copy they needed a wet ink signature however from the 30th of June the land registry has changed its practice now and it no longer wants to see original documents unless it's a first registration situation so for the vast majority of property transfers the land registry does not need to see the original document now I don't know what the practice of the land registry of Scotland is but it's quite an interesting practice and actually what's very interesting about it is it opens up virtual signings to a much wider group of documents because now it not only includes the contracts but it also includes the transfers the leases and any other disposals why this is all relevant to the options is of course it means that these options can be much more widely used and it's very helpful for practitioners to have the guidance so in terms of the options number three the strictest option which is option one relates to deeds because deeds have the greatest technical requirements under the law property miscellaneous provisions at 1989 in England and also real estate contracts which again have technical requirements documents like guarantees and simple contracts have less strict requirements and options two and three deal with that and I'll come on to those in a short while now each option contains a series of steps that need to be taken by the clients the parties and by their solicitors I'm not going to go through all of the steps for all three options you'll be delighted to know but what I will do is I'll go through the main options for the main steps for option one and then highlight to you the two or three small changes for options two and three so with option one which I remind you is for deeds and real estate contracts so any document is a deed and I think in your context most of the documents you seem to be talking about are deeds the parties solicitors have to agree the arrangements which is what you would expect for the virtual signing what then happens is the document is agreed to be finalised between the parties and the person who is controlling the production of documents in the same way that if it was a paper completion as I mentioned a solicitor will produce physically the paper documents so in this scenario that same solicitor will email to the parties overseas the final version of the document as we discussed not PKI or digital signature protected but still the final version of the document the parties have agreed and separately a signature page and this is emailed to parties overseas or to parties who cannot get around to being able to give a wedding signature the reason why we have a separate signature page is let's say you've got a client lying on a beach in south of France and you've got a 500 page document and a one page signature page and in theory you might say well this person has to have a good printer to print out his 500 page document and signature page sign it all and then scan it all back we think in practice that often clients are not going to want to print out lengthy documents but all we're requiring to do is to print out the signature page to then sign with a wedding signature the signature page they then need to have a handy scan somewhere near them on to the system and they then email back to the solicitor the scanned signature page plus that final version of the document now immediately you can see perhaps a slight waterness because it's depending on the client attaching the right document let's say for example they managed to scan on correctly the signed page but then they go to the wrong email and attach a previous version of the document so the solicitor controlling the whole arrangement receives back from one party the scanned signature but version 4 of the document the other party has done it correctly sends back the scanned signature of version 5 you've got a problem haven't you because if you've got documents in a different form you won't have a contract you won't have a legally binding document so somebody somewhere has got to make sure that those documents match brings back to your point to what extent could we have some kind of certification to make the process more foolproof but the danger is you are depending on a layperson client to get it right in terms of doing what they have to do printing out the page, signing it scanning it together with the document they were sent by the solicitor from a technical perspective even for people who are not into IT but you can still see that there's a potential issue that if they mess it up and send the wrong version of the document back with the scanned signature page you could have a problem in terms of achieving legal effect unless that's picked up by one of the solicitors. Let me just develop a little point from that you clearly are discussing the legal link between the signed page presigned in some cases and the document how is that legal link created because it sounded to a layperson a little haphazard potentially and has that been tested by any case law thus far? So what we did following Mercury was as I said we had to produce some guidance and we were concerned about the legal links as you say about how does this stack up in terms of English law I'm not aware of there being any recent cases testing this, testing whether a virtually signed document in this format works as a matter of English law what we did at the time City of London Law Society and the Law Society was what we do whenever we've got a very difficult legal point and it's a very novel is we go to very senior council so we went to a chap called Mark Hapgood who gave a very big opinion on that and we through the City of London Law Society real estate committee were concerned about the specific technical issues for real estate documents and deeds so we went to our own couple of council very senior council one of whom actually I think co-wrote the Land Registration Act 2002 so he's fairly knowledgeable and we got from them about 80 pages on whether or not this works and what we wanted them to say to us was does the way in which it's executed by this email arrangement is this consistent with the legislation for execution of documents in a manual context so what they had to do was look at the legislation and say well can we actually interpret that legislation as encompassing executions by virtual signings and the clear response we got from our real estate council and also from this Mark Hapgood QC was that yes a virtual signing using the step set out in the Law Society formula would equate to a manual signature in accordance with the legislation as I say that has not as far as I'm aware been tested in the English courts so I cannot give you a definitive answer that it absolutely 100% works but we were very careful because we knew the professional wanted guidance on this to get some very detailed opinions from people which gave us the assurance to put out this guidance note which we felt would at least give practitioners and their clients greater comfort that doing these virtual signings had some legal basis though as I say there is no case law that says 100% yes it works Do forgive me and I may regret asking this question clearly we're talking here about the communication method being electronic I just kind of go back to when it was all paper and wet ink the page upon which the signature is which is part of the contract how was it possible in that circumstance to know that that page related to the contract if for the sake of argument is sitting here I have a loose leaf binder where I could take an individual page out and put another one in was there no process of initialing all the pages which were being authorised by the full signature page so that you would actually have the link when it was paper and therefore is there a an issue there? It's an excellent point and call me naive and call most of my fellow practitioners naive but I think we assumed that once the document had been physically bound had a binder on the side that I mean I've always known and always been brought up in practice that once the document has been we call it engrossed physically bound that you must never unbind it and that I think probably gave you the reassurance because what would happen would be the solicitor would physically engrossed the document send it to the other party solicitor the other party solicitor would check it they would then send it to their client bound so it would all be bound so the signature page would be bound in at the end the client would physically sign it and they would then return the bound document to the solicitor the solicitor would then have the bound document so yes I agree that it is possible that the client could decide to unbind the document to take out a few pages put a few more in mess it around doesn't tend to happen that way I mean people generally if they're law abiding citizens are probably not going to go into that process and they'd have no reason to start interfering with the document because the client will be relying on the solicitor to have got the document right and what I'm saying is I think that that scenario was probably a little bit more foolproof a little bit more foolproof than the issues I've potentially raised which I appreciate were not brought out necessarily in the law society practice note but it occurs to me as we're speaking that it's perhaps a bit more foolproof than a virtual signing scenario where there is the danger because you are depending on the client to actually send back to you the right part and if he's got a number of emails in his system and he accidentally just happens to attach the wrong document one could see it happening and I think that's more likely to be of an issue than somebody unbinding a physical document so we knew it was the same with physical documents it was bound into one document so in moving to the electronic world we are seeking to replicate that physical relationship which requires a positive action to disrupt that existed into the electronic world but as yet there's been no legal challenge I think probably we've done that to death and I know colleagues of other questions convener thank you very much could I then move on to John Scott please good morning Mr Gordon and what are if I may ask that law society's general views on the bill and it's likely impact on businesses operating in Scotland in a positive position of Scottish law firms unfortunately I'm not an expert in Scots law so I wouldn't have the arrogance to think that I could tell you about that but there is one aspect actually that I think is worth making in an analogy to the English law context and the virtual signing scenarios that I talked about so looking at the option one that we discussed just now the English legal view is if you look at the solicitor a signed page by the client together with the document the views we've got from council the position that we adopt is that counts as a legally effective and binding virtual signature and as discussed in relation to delivery unless you make it clear that delivery takes place other than at the data signature it will take place on the date that the signature page and the document is emailed to the solicitor so with delivery in our context you need to make it clear that even though you've sent through your virtual signature the document doesn't actually have legal effect until the date of the document in the context of your bill I think the analogy is as I understand it you talk about a copy of a signed traditional document being transmitted by electronic means such as emails I think that's the heart of your bill as I understand it from the stuff I've seen and to my mind that does seem to me to be quite similar to option one as we discussed where the client has signed the page, they're sending the page and they're sending the document by email we have council's opinions and we produce a note that says if you follow the relevant option steps the party is legally bound by that virtual signature unless you say it's going to be on the date of the document but for your purposes you're legally bound by that virtual signature and to me that is an analogy to your bill's proposals to a copy of a signed traditional document being transmitted by email and it having binding legal effect so as I say I can't comment on the Scots law element because I'm not a Scottish lawyer and I'm sure I'll say the wrong thing but in terms of the analogy to English law I do see an analogy between the heart of your proposal and what we have in relation to option one and in relation to that question do you see any competitive advantage accruing to Scottish law firms as a result of this bill I certainly believe that the Scottish legal firms believe this to be the case but I'd be interested to hear of your opinion on that I think that if the consequence of this is that Scottish law firms do a lot more virtual signings then they may perceive that they're doing their executions in a very efficient fashion and if they're doing more of these executions in English firms they're doing virtual signings and then perhaps they may perceive that to be a competitive advantage but as I said I think the way things are going now with the land registry saying they don't require wetting signatures and the way that so many transactions are so to overseas based quite often cosmopolitan I think there's a great chance that a lot more virtual signings are going to take place in the English jurisdiction so if that is the advantage that they're doing more virtual signings than us I think ultimately it will balance itself out Thank you very much Can I just ask you whether the law society has any comments on the fact that the bill does not require parties to include an express counterparts clause in contrast to the normal position in England Okay so in relation to my experience of real estate documents we don't have counterparts provisions in our documents we simply say the part executed by the land is the original and the part executed by the tenant is the counterpart and you don't need to say it's the county you don't need to have a four or five line clause in your document that says that it's a counterpart it's just called a counterpart Usually in commercial agreements you do have a four or five line counterpart provision basically saying that each party counts as the original and they're in identical form but as I understand it's a matter of law English law you do not need to have a counterpart clause in a commercial agreement provided clearly the documents are in identical form Thank you that's very clear and finally whether the law society has any other comments on relevant differences between the English law and counterparts and their approach envisaged in the Scottish bill I personally have no comments in that regard my only comment and great interest is the concept of being able to have legal effect to a document merely by physically delivering it which is something that we don't really have a concept of in English law and does highlight the great and interesting differences between our jurisdictions but I have nothing further to add on that question Thanks very much Thank you John, I think Margaret McCulloch would like to come back Can I go back to the signature page where all parties actually sign and you says it could be sent to them electronically for them to sign print out, scan and send back to you Can you confirm that page, does it have a header or footer tying that page into the actual document that they're agreeing to sign or is it a blank page No, it won't be a blank page I can't confirm every document I've ever seen it's got page numbers because some don't but usually it will be if the final page of the main part of the document is page 56 page 57 and it will literally have on it the footer will just be the document number so that again I suppose ties it into the rest of the document there will be no header, you'll simply have the execution clause the wording signed as a D by the presence of that you have those words which will then be the words that enables the client to sign in the relevant place but the only things to tie it into the rest of the document will be a page number at the bottom and the same document number I agree that that is probably not quite as crystal clear as you might want it to be, you know you might say well it would be really good if we had something on there saying this is a signature page for the documents to which it relates, I agree that would be clearer the way that we do it at the moment I would suspect is not as clear as that So is there any reason why that hasn't been done that is implemented, would it make the document more secure as that signature is tied to that particular document and can't be used for anything else? It hasn't been done because I don't think people perceive it to be a concern I think if people have got lawyers acting for them they trust their lawyers to get it right you know clearly there's a fraud going on different scenario but that rarely happens in most normal scenarios the party would have their solicitors acting for them and they would trust their solicitors to get it right in terms of the answer to your question I believe having the words at the top probably would make it more secure but actually does it make it, what situations are we concerned about I mean one of the key concerns we have not really touched upon with virtual signings is the possibility that it makes fraud more likely and if fraud is going to be perpetrated the fact that you put two lines at the top of the page saying this is the document to which it relates isn't necessarily going to stop a fraud being perpetrated because somebody can just manipulate the legislation to suit their own nefarious purposes so I think that people trust the system I'm not sure that my suggestion about having the lines at the top of the page would take off in our jurisdiction people would just think it's fiddly there's no, that is actually the first suggestion I've heard made about that idea I've not heard it made in the English jurisdiction from your perspective starting afresh looking at our new yeah why not it's a good idea yes it won't stop a fraud but it does tie the signature page better into the rest of the document so it is a good suggestion I think okay thank you very much right thank you if I can bring in Stuart McMillan please hi there good morning Mr Gordon just following on from your comments a moment ago how prevalent actually has fraud been with this particular practice that's taking place in England and Wales essentially I mean I've not been provided with any statistics by the law side to anybody else as to the regularity of fraud here it is a new practice and I suppose the problem is that if frauds were taking place publicly one wouldn't necessarily get to hear of it and I almost answer by saying that although these types of signatures have been going on for some time it probably is too early doors to say how prevalent fraud is it's not been highlighted in the press as an issue although it's a concern it's a concern because of some of the fact that anything done electronically we just see in the press every day there's a greater chance of hacking there's a greater chance of fraud in that context because personally call me a ladaid but when I've got a physical document it still feels like it gives you more security like when we used to have land certificates it gives you more security than just relying on somebody will amend the register and there's nothing to prove it so I'm still a believer that possibly physical documents give you that greater degree of security so in that sense there is a greater chance of fraud but I don't at the moment have the status to show that fraud is happening more often in relation to virtual signings than it is in relation to manual ones have there been many reports in the media in terms of fraud cases? In this area I've not heard of any in relation to virtual signings but as I say that doesn't mean there haven't been any but none has been reported and I suppose if there was such a scenario then it would presumably have the police involved and there may be I don't know if those kind of cases may not even be published for a time because of the investigations that are going on so the practice now has been out for a time now I think what will be particularly interesting is the fact that now the land registry will accept certified copy documents remember that at the end of the day virtual signings in relation to sale contracts are probably less of an issue than they are in relation to the actual transfers of the properties that's where the fraudsters would really be interested and it's only from the 30th of June of this year that the land registry has said we can have certified copy signatures which lays open the possibility of having virtually signed leases or transfers effectively being sent to the land registry now if a fraud was going to take place in that context it is quite early because it literally was only seven weeks ago that this went live it's probably too early to judge if it was going to happen but it certainly will be interesting over the next year or so to see whether we get more of these cases coming out in the press and that really will highlight if there are serious pitfalls with the virtual signing process particularly where it relates to dispositions of land OK, thank you very much Thank you very much indeed for that We return to Stevenson on the particular issue of electronic signatures Yes, I just had put back in my mind a gentleman called George Scoville who 200 years ago broke Napoleon's Legrand Schiff and thus led the groundwork for his ultimately defeat at Waterloo so maybe the lawyers are quite correct to stay away from anything electronic requiring encryption and encoding but I just want caution indeed what worked 200 years ago might still be a danger today The bottom line is really interested to know what plans of work is currently being undertaken by the law society or other people in the English legal system to promote the use of electronic signatures to create an infrastructure that would allow it to more simply, cheaply and easily be introduced As far as I'm aware the law society themselves are not actually at the moment involved in the promotion of true digital signatures it is something that we have looked at at length over the years and many firms have written about the subject matter Probably for my mind the best iteration of digital signatures actually came from the land registry's earlier iterations of e-convancing and on that subject I was doing a bit of research last night because I thought you might ask this and I actually found quite an interesting article in Computer Weekly from 2008 which looked at the role of public key infrastructure systems in guaranteeing the authenticity of property transaction documents If you go online and look at Computer Weekly 2008 you'll find it there I noticed there was also some land registry documents from that time setting out some of their technical parameters in relation to PKI In a nutshell what this involved if the land registry's proposals had gone ahead which ultimately they didn't was that authorised parties would be able to exchange information quickly between each other and the land registry and what would happen there is that there would be an encryption of the documents and they would be signed with a digital certificate I think this is probably what you have perhaps in mind and for people to get into those documents they would need a secure token and you need a username and a password to produce and read the documents The original plan of the land registry was for up to 300,000 documents a day to be affected this way and that up to half a million security certificates would be supported and ultimately in that arrangement the land registry would be managing a central authority that issued the certificates that enabled parties to sign electronically the documents such as transfers and mortgages The law firms themselves under that arrangement would appoint particular administrators to ensure that the people at their end are acting in a secure fashion and properly utilising these certificates and there will be security to enable access As I say, the system never saw the light of day in any convincing context but if you haven't spoken to them already it might be worth the committee speaking to the land registry of England and Wales so that you can maybe speak to them about their experiences and as I say, if you don't want to do that I did notice if you do a search on PKI there was a land registry there was a 10 page document which talked about some of their technical aspects of their project which may be of interest In terms of English legislation we have the Electronic Communications Act of 2000 and that's actually quite a wide-ranging bitter legislation in relation to electronic signatures because it makes all electronic signatures whether they're simple ones or advanced ones and I'll come on to the difference in a short while all of those signatures would be admissible in UK legal proceedings but in terms of the evidential weight that is carried by that signature it does depend on whether or not it's simple or advanced so simple is something like a simple typed signature at the end of an email which frankly doesn't carry much evidential weight because it's not very secure The more advanced signatures that are talked about are those that are certified by some kind of certification authority more akin to the kind of land registry PKI protected signatures that I was just talking about and the other problem of electronic signatures is although we have an umbrella act in the Electronic Communications Act of 2000 it's not entirely clear that every other bit of English legislation enables that act to be used to effect electronic signatures in that context as I say in relation to the property legislation we specifically went to council to get their views on virtual signings but in terms certainly of an application of PKI infrastructure or equivalent to signatures under English law one couldn't definitively say that every English bit of legislation allowed for that and that was simply perhaps due to the not complete incorporation of the 2000 act into other bits of legislation It's very interesting I'll just close with an observation that the banks and the chat system have been using this technology since 1982 so there is a bit of evidence that it actually works I happen to be the project manager for the project so I know something about it but I think that's helpful, thank you Thank you very much indeed It does occur to me Mr Gordon that we might be looking at a situation where there's a need for some internationally agreed protocol on these things the route that we're going down doesn't seem to be reversible Is there any indication that that's happening from where you're sitting? From where I'm sitting in a real estate context no but that doesn't mean it won't happen in the future and particularly with the transatlantic cosmopolitan nature of transactions it would not surprise me if that does happen in the future but that is not an aspect that I specifically have been involved in I'm not aware that the law society has had any discussions with law societies from other jurisdictions in that regard but I agree with you that I think that that is an important step going forward Thank you very much indeed We now move on to electronic document repositories and I go back to Stuart McMillan Thank you Mr Gordon, what are your thoughts and the benefits that a dedicated electronic document repository can bring to the system envisaged by the SLC report? Can you just be clear as to what you mean by electronic document repositories in that context? The Scottish Law Commission in their report suggested that a repository was recommended and this was in page 63 of the report but it's not been dealt with in the bill so just to have some type of facility where all the electronic signatures all the electronic documents could actually be collected So we have in the property context and it's usually finished documents completed documents, we have extra nets so an extra net is what I would define as an electronic document repository because what we do is we put all our electronic documents in one place we usually do it for clients and it's used on transactions and the ease of it of course is moving into the virtual world we don't want to be sending the other parties on transactions a whole ton of paper documents so people access those documents in one place In terms of a wider application there have been discussions I think and I'm not sure how progress they've been possibly even involving the land registry about the extent to which they could take on board holding a series of different documents in context but I'm not sure how it's proceeded at all I mean ultimately I suppose people are seeking to improve the efficiency of property transactions in our jurisdiction, I'm sure in other jurisdictions and having ease of access to all relevant documents in an electronic context in one electronic document repository would be very helpful to all the parties In terms of how far progress that has got in a sort of public sector context with agencies I don't think that's progressed at all but we do use it as I say in a private context in terms of the way that we transact and the way that we hold documents and that is a big thing for law firms particularly at the larger end where there are often big properties lots of documents and you want to make it as easy as possible for people to access them so used in a private context not used so much in a public one Okay now certainly in Scotland the Scottish Parliament passed legislation only two or three years ago to improve the efficiency of that particular organisation and to bring it more into the electronic age as compared to the system that was there beforehand so that certainly has been from the SLC perspective the proposal to have them as the main body to collect these documents at the end I'm sure that it may well be that it goes live Has it gone live already Yes So I'm sure if the Lamborship of England chose to go down that route there would be some interesting conversations Okay, thank you very much Right, I'm grateful to you Mr Gordon I think that probably concludes our questions I'm just wondering whether you feel there's anything we've missed seems unlikely we've been at it for an hour but is there any point that we've inadvertently missed police The only point actually that we didn't cover was just the options two and three on the Law Society practice note which is in the context of documents that are not real estate contracts or deeds and certainly options two and three take a more adventurous approach to the execution of documents with in fact an option three a presigned signature page so what happens is you get the client to sign a separate page to then go away and agree the document and then attach the page to the finished version of the document Speaking as a real estate lawyer that's not something that feels me with great comfort and if I was a client I wouldn't be filled with great comfort either because I like to look at what I'm signing to be honest so although option three caters of that scenario it would not be one that I would be recommending to people because I think it's a very dicey way of going about executing documents where you sign a page up front I'm not sure how many members of the committee would be happy doing that but I don't think I would be but apart from that I think we've gone through all the points Indeed that seems to be where the law of agency and the law of trust actually bump into each other in commercial nonsense when we'd suggest Stuart Stevenson wants to come back Well I just wanted very simply to ask whether there is a a legal connection between the release of that presigned signature page in other words the process of attaching it to the document is there a defined process around that that involves the person who provided that signature perhaps many months earlier What would happen is that the solicitors would be authorised to attach the document and I was kind of overstating in a way the adventurous of it but it's still adventurous but what actually happens is that when the final document is agreed it's transmitted electronically to the party who signed it at the beginning so they can at least look at the final version of the document and they then email back and say yes I'm happy with this being attached so although they're physically signing it at the beginning ultimately when the final document is concluded it's still sent to that person and it's that sending to that person and the approval back that is the legal affixing the legal attachment to that original presigned page though the more that you both physically and electronically separate the signature of the page, the signed page from the actual document the more a risk the more fraud that could potentially enter the scenario and the more reason why I'm hesitant about that kind of process So we're back to the situation of having to be a legally identifiable process that connects that signature page to the document and I'm seeing you nodding so I'm clearly getting it right I think that brings us to the end of this can I thank you very much indeed Mr Gordon for your evidence to us to say over an hour very much appreciated we will have written down every word that you say you will find it in the official report perhaps we'll make sure we send you a copy of that Thank you Thank you very much indeed I think just for the moment we'll suspend this meeting just so that everybody can deal with the technicalities and perhaps I can have a cup of tea and we'll come back in a couple of minutes John's just on the phone We've got time It's very reasonable about it Can we go? No points Gender item 3 No points have been raised by our legal advisers on the building Scotland amendment regulations 2014, SSI 2014, 219 nor on the title condition Scotland Act 2003 rural housing bodies amendment 2 Order 2014, SSI 2014 220 Is the committee content with these instruments please Gender item 4 instruments not subject to any parliamentary procedure No points have been raised by our legal advisers on the marriage and civil partnership Scotland Act 2014 commencement number 2 and saving provisions amendment order 2014, SSI 2014 218 nor on the antisocial behaviour crime and policing act 2014 commencement Scotland order 2014 SSI 2014, 221 Is the committee content with these instruments Gender item 5 small business enterprise and employment bill and this of course is UK parliament legislation under this item the committee is invited to consider the powers subordinate legislation conferred on the Scottish ministers in this bill a briefing paper has been provided that sets out the relevant aspects of the bill and comments on their effect. Does the committee agree to report to the lead committee that it is content with the delegated powers conferred on the Scottish ministers in the bill and with the procedure to which they are subject? At this point I move the meeting into private for agenda item 6. I don't think that requires us to do anything so we are now in private. Thank you