Opinion on Mandates
Opinion by Professor Robert Rennie for The Law Society of Scotland relative to Special Mandates for the Adhibition of Digital Signatures
1.0 Introduction
Automated registration of title to land (“ARTL”) will be introduced by way of Statutory Instrument . Initially it will apply to dealings with the whole of a registered interest in the first instance. It will not apply where new burdens or rights are being created. The system will involve the creation of digital deeds which will require to be digitally signed. Until such time as the holding of a digital signature becomes as common as holding a credit or debit card solicitors engaged in conveyancing transactions will require to digitally execute deeds on behalf of their clients. It is assumed that firms or individuals in firms will hold a digital signature or a number of digital signatures.
1.1 The subscription of a deed is of course fundamental to the validity of the deed . Accordingly a forged or wholly unauthorised signature will render any deed liable to reduction and any entry in the title sheet subject to rectification .
1.2 Under the present law where a party signs a deed on behalf of another party they do so under an authority expressly conferred by power of attorney or under the statutory provisions relating to the execution of deeds by persons who are blind or unable to write . It is therefore clear that where a solicitor adhibits his or her own digital signature to a deed granted by a client the authority to do so must be clear. If the authority can be challenged then the deed granted can be challenged and the integrity of the ARTL system seriously undermined. Accordingly, for a transitional period the question of authority to execute a deed digitally on behalf of a client is fundamental to the system.
1.3 Four Professors of Conveyancing or Property Law (myself, Professors Brymer, Gretton and Paisley) delivered an opinion to the Keeper of the Registers in relation to the introduction of ARTL . The question of the authority of a solicitor to adhibit a digital signature on behalf of a client was considered . In that Opinion we stated:-
“An ARTL Mandate would need to be clear, and would need to direct itself with precision to the deed that is authorised ….. Mandates could be either general or special. No legislative provision would be needed: this is a matter for agreement among those involved. A general mandate would authorise the solicitor to exercise a deed of a certain general type. A special mandate would authorise the solicitor to execute a deed which would contain a copy of the deed itself as a schedule. The schedule to the mandate would not be the deed itself. The real deed would be the digitally executed registered deed.”
When we delivered the opinion it was not envisaged that the mandate itself would be registered or noted in the ARTL system. The point of the special mandate, with a copy of the deed annexed, was to provide clear evidence of the authority of the client for the adhibition of the digital signature. We did state in our opinion that it was important that mandates should be preserved and we suggested that the Law Society give guidance and perhaps promulgate rules as to these mandates and their preservation. We did discuss whether or not it might be appropriate to register mandates in the Books of Council and Session although we realised that this would add to the cost of a transaction.
1.4 Matters have moved on since the Opinion was delivered on 28th April 2003 and there has been much debate as to the form of mandates and how the mandates should be preserved. On one view of course the mandate is simply evidence of an instruction given by a client to a solicitor. On the principle which underlies much of the ARTL system in relation to what information or documents need be provided to the Keeper , the mandate has nothing to do with the registration itself. Accordingly on that basis all that a solicitor would have to do would be advise the Keeper that the digital signature had been adhibited in terms of an appropriate mandate or authority. On the other hand concern has been expressed in many quarters that until all members of the public have their own digital signatures the mandate is vital to the integrity of the whole ARTL system. The mandate is therefore more than evidence of an instruction given by a client to a solicitor. Eventually the Keeper agreed that mandates could be submitted to the Keeper and that he would scan and store them relative to an ARTL application. I should emphasise that in no sense is this registration of the mandate by the Keeper nor will he examine it or take responsibility for its validity. The principal mandate will be returned to the applicant’s solicitor. This facility will however preserve the best evidence that a mandate has been granted for the adhibition of digital signature. The Law Society of Scotland have agreed that archiving mandates with the Keeper in this way will be a mandatory professional requirement for solicitors using the ARTL system.
1.5 Mandates or indeed more formal powers of attorney can take a variety of forms. They can be long winded or short and to the point; they can be general as where an attorney is to act for an elderly person in all things or they can be specific as where a limited company authorises a particular officer to execute a specific document. Given the fact that the Keeper has agreed to scan and archive the document outwith the actual process of registration the preference is for a clear, unambiguous and relatively short form of mandate.
1.6 Two forms of special mandate have been presented to me, one for use where the granter of the deed is actually represented by the solicitor who adhibits the digital signature and another where the granter is effectively unrepresented. The latter mandate would be used in re-mortgage transactions where the practice increasingly is to leave all the documentation to the lender’s solicitor with the borrower being wholly unrepresented. These two forms of mandate are appended to this opinion and simply marked “Special Mandate A” and “Special Mandate B”. Although mandates themselves are not registered as part of the ARTL process there is a box at the top right hand corner of each mandate for the title number and the solicitor’s F.A.S number. This is purely for accounting purposes. I have been asked to provide an opinion on the style of these mandates with a view to a general recommendation being given by the Law Society of Scotland to solicitors who will use these mandates.
2.0 Opinion
There are several issues which arise and which merit special attention.
2.1 Should the Deed be Attached?
In the original opinion which was delivered by the four Professors it was suggested that a copy of the deed in question should be attached to a special mandate. The forms of the mandates which I have seen do not cater for this possibility. Obviously if a copy deed is attached then scanning and archiving becomes a much more complicated and indeed more expensive procedure for the Keeper. It might be suggested (as it was in the original opinion) that having a copy of the deed attached would be more satisfactory for the client who would know specifically what deed was to be digitally executed. One might of course be cynical and enquire just how many clients purchasing a dwellinghouse or obtaining their fifth re-mortgage actually read the standard security which they sign together with of course all the standard conditions and variations applicable to that security. In practice, I suppose, most clients simply sign “the loan documents” knowing that if they fail to repay then their houses are at risk. It must also be remembered that by far the most significant documents in any conveyancing transaction are the missives. The missives create the binding obligations on the purchaser to purchase at a specific price and on the seller to give entry and exhibit or deliver a valid marketable title with no exclusion of indemnity. The disposition merely gives effect to the missives and the standard security is merely the vehicle by which the purchaser secures the necessary funds to pay the seller. Without the missives there would be no transaction at all. Despite this it could not be denied that solicitors on a daily basis accept oral instructions over the telephone to lodge offers, issue qualified acceptances, issue letters with further modifications and finally issue a letter concluding the bargain on behalf of clients without any form of written mandate or authority. I accept of course that it is normal practice for solicitors to send copies of offers and qualified acceptances to clients and to take detailed instructions in relation to proposed qualifications. All solicitors however have a standard form of offer and some have standard forms of qualified acceptance. Increasingly standard missives are in use in areas of Scotland where there is a faculty or association of local solicitors. Few solicitors, if any, would be able to state in the witness box, on oath, that they had explained each and every technical clause in a standard schedule of conditions attached to an offer to a purchasing client before that offer was despatched. Professors Gretton and Reid in dealing with the conclusion of missives put it in this way :-
“Solicitors will usually accept oral instructions, but this involves an element of risk, in that the client may subsequently deny the instructions, or admit the instructions but deny an important detail, such as the price. Once appointed the solicitors have authority to conclude the contract (in consultation with the clients) and to carry out the usual steps in a conveyancing transaction .”
In our book on missives Professor (now Sheriff ) Cusine and myself state :-
“Nowadays it is common for instructions to be taken over the telephone rather than by writing or at a meeting and it is more than usually important for the solicitor to keep detailed notes.”
No-one suggests however that a solicitor should have some form of written mandate before lodging an offer or, indeed, concluding missives. A fortiori no-one has yet to suggest that there should be a series of written mandates with attached copy offers or qualified acceptances or letters concluding the bargain. Accordingly in coming to a view as to whether it is necessary (as opposed to desirable in the best of all possible worlds) to have a copy of the deed attached to the mandate one must bear in mind that no such requirement has ever existed in relation to the conclusion of missives.
2.2 I am satisfied that the forms of special mandate appended to this Opinion are legally sufficient without the annexation of the deed subject to any technical comments I make later on in this Opinion.
2.3 In Whose Favour Should the Mandate be Granted?
Where a firm of solicitors signs an offer or a qualified acceptance on behalf of a client it is normally the firm’s signature which is adhibited. Although an individual solicitor will be involved it is the firm as an entity which represents the client and in the event of a negligence claim arising in the future it is the firm and the Partners who are sued. Similarly if there is a breach of a letter of obligation it is the firm granting the letter of obligation who are liable to the purchaser unless the obligation is expressly granted on behalf of the client. Plainly the mandate must be in favour of whichever party or person is to adhibit the digital signature. There is presumably no reason why a firm or a limited partnership as a legal entity should not have its own digital signature. However if this is the case there will require to be a detailed internal structure indicating who within the firm or limited partnership has authority to adhibit the digital signature . There is also the problem of authorised persons dying, retiring or resigning. On the other hand if the mandate is granted to an individual solicitor so that that individual solicitor adhibits his or her own digital signature as opposed to the firm signature then the problem arises as to what would happen if that solicitor was ill, on holiday, or indeed died suddenly. I do not regard that problem as particularly difficult to solve. A client could quite easily sign a fresh mandate to another solicitor in the firm. In any event I think it is preferable there should be as clear a link between the client and the solicitor who is to adhibit the digital signature as possible. I consider therefore that it is preferable that the mandate be granted to a named solicitor rather than a firm or limited partnership. I did consider the possibility of granting a mandate in favour of all the partners or members of a firm for the time being but I do not think that this would be effective nor do I consider it desirable.
2.4 Mandates to Non Solicitors or Unrepresented Parties
There are cases where a digital signature may be adhibited by someone who is not a solicitor. This can arise in some secondary lending cases. I understand that in these cases a senior member of the lender’s staff might be asked to execute a deed on behalf of a potential borrower. There is an obvious cause for concern in relation to conflict. Nevertheless mandates are granted under the law of agency. There is no reason in principle why a borrowing client who has had the opportunity to be represented, but declined, should not grant a mandate to an official or, indeed, any other party authorising them to adhibit a digital signature. Similar questions arise in the case of re-mortgages where it is now almost universal practice for the borrower to be unrepresented. Lenders do not prohibit separate representation but of course such representation will be at the borrower’s expense. Some years ago I was asked for an opinion as to whether a solicitor acting solely for a lender could sign a registration warrant on behalf of an unrepresented borrower. The view which I took as a matter of agency law was that there was nothing to prevent a borrower authorising a firm of solicitors or an individual solicitor to perform a particular act which the borrower could have performed himself or herself. The same would apply to an application for registration or a digital signature. Accordingly in principle I see no legal difficulty with the second form of special mandate which caters for the situation where the borrower is unrepresented. In a re-mortgage transaction what the borrower wants is plain, namely, a replacement or increased loan on better terms, the dwellinghouse being secured in respect of the new loan as it was in respect of the old loan. Another question which has arisen is whether an officer of a lending company who has authority to execute deeds on behalf of that company can grant a mandate to someone else such as a solicitor to append a digital signature. The general rule of course is delegates non potest delegare . There is no reason however why the lender should not specifically authorise the officer to delegate to a solicitor. In such a case of course this “added” authority would require to be evidenced. Alternatively the lender could grant a mandate directly to the solicitor.
2.5 Law Society Regulations and Waivers
I understand thee will be regulations imposing a duty on solicitors to obtain the appropriate mandate and lodge a copy with the Land Register. In the usual way the Society will be able to waive these regulations in appropriate circumstances. It did occur to me that there would be cases where a solicitor was acting under an existing authority from a client such as a power of attorney or authority from an institutional lender to execute discharges. In such a case another mandate would be unnecessary if the power of authority was wide enough to cover the adhibition of the solicitor’s digital signature to the deed in question. Presumably there would be no difficulty in obtaining a waiver in such circumstances.
2.6 General Points
Special Mandate A caters for sale transactions, purchase transactions, the grant of a standard security and the discharge of a standard security. There is provision for the insertion of the amount of loan. Where the digital signature is to be adhibited in relation to a disposition on sale I think it would be appropriate to indicate the amount of the price as this may well be the most critical feature of the transaction so far as the seller is concerned. I envisage that the Special Mandate B, which applies in the case of an unrepresented borrower, will only arise in a lending transaction. So far as the authority and instruction are concerned in both forms of special mandate I think that it is technically correct to say that it is the Keeper who effects the change in the Land Register. The document itself is merely the vehicle which necessitates the change. This is consistent with the view that in a land registration system ownership itself or any subsidiary heritable right arises from registration rather than the deeds which induce the registration or the change in the Register. Accordingly I think that clause 1 should read:-
“I grant authority to the Solicitor to execute such Documents/the Document and to register such Documents/the Document to effect the change to the title in the Registers of Scotland.”
The styles are appropriate only to a case where title is held by a single individual. Obviously they would require to be altered where there are two or more parties to the deed in question. I did consider the question of timing. In the normal way a power of attorney can be recalled by the granter at any time. Since ARTL is however an instantaneous procedure any recall of the mandate would require to be in the solicitor’s hands before registration was effected. There therefore should not be the possibility of a recall of a mandate while an application is in limbo as would arise where the application has been posted but not received and acknowledged at the Land Register. I considered whether or not it would be appropriate to state that the mandate was irrevocable. For obvious reasons I did not consider that to be appropriate since there could be situations where, for perfectly proper reasons, a client would not wish a transaction to proceed, for example as where a purchaser has discovered some defect in the seller’s title or where the property has been destroyed in a fire. In such a circumstance of course the solicitor would normally not consider proceeding in any event. It should also be borne in mind that death terminates all mandates . Third parties who transact with an attorney in good faith are generally unaffected by an event which terminates the authority unless it is intimated to them . In so far as continuing or welfare powers of attorney are concerned there is now a statutory provision to the effect that no liability shall be incurred by any person who acts in good faith in ignorance of the coming to an end of a power of attorney nor shall any title to heritable property acquired by such a person be challengeable on those grounds alone. By no stretch of the imagination are the special mandates continuing the welfare powers of attorney but at common law it may be the case that the death of a granter of the mandate will not affect an alteration in the title sheet as a result of an ARTL submission made after death in circumstances where the solicitor who adhibits or adhibited the signature and the grantee of the deed were wholly unaware of the death. For practical purposes this is of course an unlikely scenario. Presumably if a party in the middle of, or close to the end of, a conveyancing transaction dies the solicitor will be informed immediately.
2.7 It is of course tempting for lawyers to add all sorts of caveats and obligations to any legal document mainly with a view to ensuring that on paper at least the client confirms that he or she has read every single word and punctuation mark in the document. I would advise against any such additions to the mandates especially now that letters of engagement are the norm.
The Opinion of Professor Robert Rennie
