March 2013 – Not Guillotines In Tandem But Execution In Counterpart

Author: Mitchells Roberton
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The phrase “execution in counterpart” might bring to mind “the worst excesses of the French revolution” (to borrow from Lady Bracknell in The Importance of being Earnest) as suggesting guillotines operating in gory tandem. But this Note touches on nothing gory.  Instead it makes a few points concerning the Execution in Counterpart etc (Scotland) Bill 2013. The Bill is still at the draft stage with the Scottish Law Commission. But something is said about it here in anticipation – and something too is said about its related statutory forerunners.

What (disregarding guillotines) is “execution in counterpart”?

As the phrase “execution in counterpart” suggests, it is a procedure where:

  • a document to be signed by two or more parties is produced in as many counterpart (or duplicate) copies as there are parties;
  • each party signs their own counterpart or duplicate copy independently of other other(s) in whatever location they may be; and
  • each party then delivers their copy to the other party(ies).

This avoids parties in, say, Aberdeen, Edinburgh and Glasgow all having to meet at the same location to sign a single copy of the document(s) to which they are all to be parties. The counterpart documents may be signed digitally or (more likely) signed traditionally with “wet ink” signatures.

The draft Bill also introduces provisions for the electronic delivery not only of such documents “executed in counterpart” but also traditional documents (i.e. documents on paper with handwritten ink signatures).

This is an example of the law trying to keep up with the impact of the internet age. This is not the first venture into doing so but is part of a continuing progress. This Note outlines some of the key developments in that progress.

 

The Requirements of Writing (Scotland) Act 1995 (“RW(S)A 1995”)

 

Of course, the internet was alive and kicking in 1995. But, although the RW(S)A 1995 generally modernised the law about the signing of documents in cases where writing is required, it did not go so far as to make provision for electronic documents. Not much is said here about RW(S)A 1995 as originally enacted apart from a few key points.

  • A document in writing is only required for certain things: notably for the transfer of land, the granting of leases for more than a year and for wills. Where writing is required but not used the basic rule is that the purported transaction is void. But, of course, parties often choose to set out agreements in writing even if not so required because they prefer to record their agreement formally in writing.
  • Under RW(S)A 1995 the document must be a physical document (almost always, of course, paper) with a handwritten subscription by the granter (almost always in ink). If the document is to be “self-proving” (that is presumed to have been signed by the granter without further proof of that fact) the granter’s subscription must be witnessed by way of a witness’ handwritten signature. In practice, a document’s being “self-proving” is in effect a requirement for many documents that have to be officially registered. In any event, it is sensible for any important legal document to be “self-proving”.

Automated Registration of Title to Land (“ARTL”)

One of the most common types of transaction requiring writing is the deed of conveyance needed to transfer ownership of a flat or house to a buyer. In the age of the internet there was pressure to exploit its capabilities to stream-line such transactions. Hence the introduction of what is known as the “ARTL system” by the Automated Registration of Title to Land (Electronic Communications) (Scotland) Order 2006 which, in particular, made changes to the RW(S)A 1995.

Essentially, the introduction of the ARTL system allowed conveyancing deeds in electronic form, validated by a digital signature, to be accepted by the official Land Register in place of physical documents signed in ink by the granter and a witness. Two particular points to note are:

  • The ARTL System is a computer system managed and controlled by the Keeper of the official Land Register. It is only by means of that ARTL system that electronic documents may be generated and accepted.
  • The ARTL system is concerned with the deeds that e.g. actually transfer ownership of land (or a flat or house). It does not extend to the prior contract generally known as “the missives”. The missives still take the form of a series of (physical) letters to-ing and fro-ing between the buyers’ and sellers’ solicitors detailing the price, and date of entry etc until all matters are agreed and the contract/missives concluded. It is in implement of the concluded missives that a conveyancing deed is delivered, and it is the registration of such conveyancing deeds that may be covered by the ARTL system.

Land Registration (Scotland) Act 2012 (“the 2012 Act”)

 

As things stood before the 2012 Act there was no scope for missives being in electronic form (that was only for conveyancing deeds under the ARTL system mentioned above). This is illustrated in a 2009 case (Park, Petitioners No 2) which concerned missives being sent by fax where the judge concluded that:

“the fax transmissions [i.e. electronic communication] of the qualified acceptance and the final acceptance on 31 August 2007 were insufficient for the conclusion of missives on that date…[a]ccordingly I find that missives were not concluded on that date.”

The 2012 Act however provides for the introduction of missives in electronic form (“e-missives”) validated by a digital signature. The relevant parts of the 2012 Act are not yet in force. But they may be before too long.

In fact, the 2012 Act paves the way for more extensive use of electronic documents. It does not only cover e-missives for buying and selling land and houses. There is provision for electronic documents validated by digital signature for all kinds of documents. This is likely to be some way off but a spokesperson for the Registers of Scotland has said:

“Regulations under the [2012 Act] could allow other documents to be electronically constituted – wills, anything…People who have created an electronic document may wish to have a safe place for it to be stored. Once the technology is developed, the Keeper’s [of the Registers of Scotland] electronic registers might be somewhere they could store these.”

 

 

 

 

Execution in Counterpart etc (Scotland) Bill 2013 (“the 2013 Draft Bill”)

 

This brings us back to where we started with the 2013 Draft Bill.

 

  • As the quote immediately above suggests there is the potential, by virtue of the 2012 Act itself, for parties concluding any form of contract (or granting any legal document) by way of an electronic document validated by a digital signature. Such a document would be “self-proving” (that is presumed to have been signed by the granter(s) without further proof of that fact).
  • The 2013 Draft Bill has a more targeted aim although, to an extent, it overlaps with the 2012 Act in that both make specific provision to facilitate the use of electronic documents.
  • The 2013 Draft Bill is primarily targeted at facilitating the completion of commercial transactions (including in particular cross-border transactions) by way of execution of documents in counterpart.
  • As mentioned above, this would enable parties in, say, Aberdeen, Edinburgh and Glasgow each signing their counterpart (duplicate) copy of an agreement at the same time in their different locations. The scope for doing so is already available in England. Clearly it could be useful here too – particularly in larger transactions with many parties geographically scattered.
  • So, although in relation to electronic documents generally there is some measure of overlap between the 2012 Act and the 2013 Draft Bill, the latter is more targeted and specific. In particular, it clarifies and confirms the legal underpinnings to ensure that multi-party signings involving multiple copies of the same document have a legal effect which is certain.
  • Further, it also makes provision for documents which are traditional documents (i.e. paper and pen documents, not just those in electronic form) being delivered by electronic means (for example as a pdf attachment). This is something of an innovation as the case of Park Petitioners mentioned above illustrates. In that case the faxed missives (being an electronic document) were held not to qualify as being equivalent to the delivery of the original formal missive which the law required.

 

Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Ian Ferguson: Ian@mitchells-roberton.co.uk.

 

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