Thank you very much for that welcome, convener. Good morning, committee members and everybody else. I thank the committee for inviting me to give evidence on the bill.
As the convener just said, the bill is the first to be considered by the committee under the new Scottish Law Commission bill procedure. I acknowledge the thorough and careful approach that the committee has adopted, which bodes well. As the convener stated, we are obviously taking part in a piece of history this morning, albeit perhaps a minor footnote rather than a significant chapter.
I have, of course, considered the stage 1 evidence sessions, and I have been encouraged by the broad range of support for the bill. The evidence sessions have highlighted that the bill will not operate in a vacuum; rather, it will operate within the wider statutory and common-law frameworks that already exist. It is therefore worth touching on exactly what the bill is intended to do, which is straightforward.
First, the bill enables documents to be executed in counterpart. That puts beyond any doubt whether execution in counterpart is permissible in Scots law and will give the legal profession and the business interests that it represents the necessary confidence to use Scots law for such transactions.
The other provision that is made by the bill is the facility to deliver, in the legal sense, traditional—that is, paper—documents electronically. Therefore, any document that is created on paper may become legally effective by being delivered by electronic means, such as email or fax.
At present, there are conflicting authorities on whether a paper document may be delivered by its electronic transmission to the grantee or to a third party, such as a solicitor or agent for one of the parties.
The question has arisen mainly in respect of purported delivery of documents relating to land by way of fax from the 1990s onwards, and one of the bill’s main aims is to resolve such uncertainty by saying that delivery of a copy of a paper document or a copy of part of that document by electronic means can constitute delivery. We are satisfied that that will meet a clear and pressing demand from those likely to be affected by the bill, and we should not underestimate the value in bringing such clarity to the law. Beyond that, however, it does not attempt to alter the law on delivery.
Having said what the bill does, I think that it is also worth briefly reminding ourselves of what it does not do. It does not deal with the electronic delivery of electronic documents; it does not deal with electronic signatures; and it does not alter the law in relation to the use of pre-signed pages. The Scottish Law Commission’s paper “Signatures in Scots Law: Form, Effect, and Proof” provides a comprehensive account of the current law on the last two matters, and the first is now provided for in legislation.
I am aware of the criticisms that the Faculty of Advocates has levelled at the bill. That such a body has raised concerns has rightly caused us to pause and give them full consideration. Having done so, we remain of the view expressed in the policy memorandum that the bill does not create any difficulties with the law as it stands and will, in our view—which, I should add, is shared by the other stage 1 witnesses—do nothing to increase the prospects of fraud or error as a result of executing in counterpart, including in cases where only the signature pages are exchanged. I have four reasons for holding that view, and if members are interested in hearing them I can share them during questioning.
It might also be worth commenting on a particular possibility for error that was identified, namely that parties might inadvertently execute different versions of a document. In practice, transmitting a document to parties for signature in the form of a PDF, for example, will limit the risk of parties signing different documents. If, however, parties sign different versions of a document, they will not in fact have validly executed it in counterpart under the terms of the bill, which provides that a document is executed in counterpart if it is executed in two or more duplicate, interchangeable parts. Nonetheless, that matters only if the transaction is by law one that should be in writing; in other cases, there might be sufficient agreement between the parties to constitute their contract.
I also want to say something more about the issue of exchanging only signature pages. The approach taken in the legislation is all about ensuring that it is permissive and as flexible as possible. Inherent in that flexibility is the ability of the parties to a transaction to set out how the process will work for them. The parties can agree the method of delivery and what will be circulated, which might be only the signature pages or, say, the signature pages plus one counterpart. A crucial provision in the bill is section 4(3), which applies only to delivery by electronic means and provides that if only part of the document is delivered by electronic means it must be clear that it is part of the signed document and must contain at least the signature page. If the parties agree to deliver only the signature pages electronically, that will usually happen because their solicitors are involved, and there is an implicit relationship of trust between a solicitor and their client, with tried and tested methods for addressing any issues of fraud or error.
In common with the other witnesses from whom the committee has heard, our view of the suggestion from the Faculty of Advocates that the bill be amended to require that, for electronic delivery, the full counterpart be delivered by each party in all cases is that it would just not work. As the committee has heard, it would also be unacceptable to practitioners and their clients and would effectively undermine the bill’s objective.
I hope that, for those reasons, the committee is reassured that the bill’s provisions do not in any way encourage fraud or increase the chances of errors occurring.
In summary, this is a bill that one witness described as having aims that are
“admirable in the sense that they are trying to address a specific problem and to achieve a specific outcome”,
which
“is an admirable ambition”.—[Official Report, Delegated Powers and Law Reform Committee, 7 October 2014; c 28.]
It will plug small but important gaps in Scots law and, in so doing, will punch above its weight and address the impact of the undesirable shift towards the use of other law, usually English law, to complete many business transactions that should for every other reason be transacted under Scots law.
I hope that those comments have been helpful to the committee. I and my officials are happy to answer any specific questions.