Regulatory Reform (Execution of Deeds and Documents) Order 2005

rose to move, That the draft regulatory reform order laid before the House on 21 February be approved [14th Report from the Regulatory Reform Committee, Session 2004–05]. The noble Lord said: My Lords, I beg to move the Regulatory Reform (Execution of Deeds and Documents) Order standing in my name on the Order Paper. I bring forward this order under the Regulatory Reform Act 2001 on behalf of my noble and learned friend the Secretary of State for Constitutional Affairs and Lord Chancellor. This is the first such order promoted by his department, or its predecessor the Lord Chancellor’s Department, to have reached this stage. The order amends the law relating to how companies and other corporations enter into deeds and other documents. However, before I go further let me make something absolutely clear: I am not a lawyer; I have never been a lawyer; and noble Lords will be delighted to hear that I have no plans to become a lawyer. That may put me at something of a disadvantage because an order about how companies sign and seal documents is bound to be extremely legal in content. In fact, the order before us is not just the stuff of lawyers’ law, it is the stuff of the minutiae of lawyers’ law. Whatever the technical merits of the reforms contained in the order—and I think they are worth while—the order will not be turning the world upside down. In commending the order to the House, I, as a layman, cannot exaggerate the comfort I draw from the process by which the order has been created. First, the order implements almost verbatim recommendations of the Law Commission. Those recommendations bear all the hallmarks of quality and precision that we have come to expect from that body. The commission reached its conclusion after an extensive and detailed consultation. Secondly, as part of the regulatory reform order   process, the department consulted publicly on the recommendations and their suitability for implementation by order. Of those who replied, over 90 per cent supported the recommendations and over 80 per cent supported their implementation by order. Thirdly, following on from that consultation, the draft   order was closely examined by your Lordships’ Select Committee on Delegated Powers and Regulatory Reform and was approved by it as suitable for implementation. The committee concluded that the proposals removed burdens and that the one new burden enhanced the protection provided by the law. The committee was satisfied that the order met the test of proportionality, fair balance and desirability. The Regulatory Reform Committee in another place reached a similar conclusion and recommended that the order be approved. I am sure that noble Lords will agree with me that this legislation has been as fully aired and as closely examined as any piece of legislation is likely to be. Here I must pause to express my thanks, and that of Ministers, to the chairman and the members of the committee for their work in scrutinising the draft order and for recommending the order to the House. We are very grateful to them. I shall now briefly describe the content of the order. The overriding purpose of the order is to clarify and simplify the law by removing inconsistencies and uncertainties. This will bring greater certainty to business transactions. This can only benefit those involved. The order amends three aspects of the law of England and Wales relating to the execution of deeds   and documents by corporations: first, how corporations enter into deeds; secondly, the use by corporations of agents to enter into documents; and, thirdly, how a deed is distinguished from other documents. I turn first to the law relating to how corporations enter into—or, in the technical language of the law,   execute—documents. The principal statutory provisions relating to the execution of documents by corporations are Section 74 of the Law of Property Act   1925 and Section 36A of the Companies Act 1985. The order makes three main changes. First, under the present law, Section 74 allows a purchaser to assume that a deed has been properly executed by a company incorporated under the Companies Acts, when the deed is sealed and attested by a director and the company secretary. However, Section 36A permits an additional director to sign any document in place of the company secretary. The two provisions are therefore inconsistent and Section 74 is an unnecessary restriction on the way that business may be conducted. Article 3 of the order removes these difficulties by making it clear that attestation by two directors is equivalent to attestation by a director and a secretary. Secondly, there is also a lack of clarity under the present law as to whether a person who is a director or the company secretary of more than one company entering into a deed needs to sign the deed separately for each company or whether one signature will do. Paragraph 10 of Schedule 1 to the order will clarify the position by requiring directors and secretaries of more than one company to sign separately for each. This small additional burden will make it clear that the signatory has directed his or her mind to all the companies for which he or she is signing, enhancing the protection offered by the law. Thirdly, there are corporations, who are themselves directors and company secretaries. Sections 74 and 36A do not seem to accommodate these legal persons very clearly. Paragraphs 2 and 11 of Schedule 1 to the order set beyond doubt that they are included in the statutory scheme. The second principal aspect of the law affected by the order relates to the use by corporations of agents to enter into documents. As legal persons, corporations are able to delegate the execution of deeds and documents to third parties, whether as agents or under a power of attorney. However, Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989, which defines how a deed may be created, makes no reference to execution on behalf of the person creating the deed. Similarly, Section 7 of the Powers of Attorney Act 1971 deals with the execution of a document by a person acting under a power of attorney, but refers to the signature of the person giving the power, which appears to preclude that person being a corporation. Article 7 and paragraphs 6 to 8 of Schedule 1 to the order put an end to these uncertainties by making it clear that there is no restriction on corporations in these areas. The third and final aspect relates to how a deed is distinguished from other documents. Here, we descend—or, maybe if one is a lawyer, ascend—to the almost mystical concept of delivery: in particular, to the irrebuttable presumption of delivery, the concept of delayed delivery and the presumption of authority to deliver. We must also address the face value requirement. I will attempt to explain. Delivery is an essential element in the creation of a deed. It describes the moment at which the maker of a deed demonstrates that the deed is to take effect and that he or she is to be bound by it. Once again, the interaction of statutory provisions has rendered the present law somewhat uncertain. Section 36A currently provides that in favour of a purchaser a deed created by a company is delivered on its execution. This presumption cannot be rebutted. This imposes a restriction on companies preventing them delaying delivery where it might be appropriate: for example, where it is administratively necessary to have a deed sealed in advance of a transaction. The presumption also appears to be at odds with the general scheme of delayed delivery for deeds introduced by the Law of Property (Miscellaneous Provisions) Act 1989. Delayed delivery allows the maker of a deed to sign or seal it and to allow a third party, such as a solicitor, to deliver the deed when the relevant conditions—perhaps the payment of money—have been met. Articles 4, 5 and 6 of the order amend Section 36A so that companies will benefit from the possibility of delayed delivery. The second reform in this area relates to Section 1 of   the 1989 Act. It simplifies the operation of the concept of delayed delivery by giving conveyancers a presumed authority to deliver deeds in conveyancing transactions. This useful provision is restricted to land transactions. Article 9 extends its benefit to all types of transaction. Finally, we arrive at the face value requirement. This is the rule in Section 1 of the 1989 Act that a deed must make it clear on its face that it is intended to be a deed. This may sound straightforward enough, but does the   affixing of a company seal in itself satisfy the requirement? Many people appear to believe that it does. The better opinion is that it does not. Article 8 makes clear that it does not. I hope that I have sufficiently explained the purpose and effect of the order. I pay tribute once again to those who have assisted in its scrutiny and I beg to move. Moved, That the draft regulatory reform order laid   before the House on 21 February be approved [14th   Report from the Regulatory Reform Committee, Session 2004–05].—(Lord Evans of Temple Guiting.)