Overview
The Bill will give third parties more rights and protection in a contract. Common law is law which comes from judges' decisions in courts and similar tribunals.
This Bill uses recommendations from The Scottish Law Commission's Review of Contact Law: Third Party Rights.
Someone who is affected by the original contract would be a third party. For example, a person whose friend booked their holiday and the operator went bust would have third party rights.
Or if a small trades person was contracted onto a large job by another trades company and the customer did not pay, the small trades person would have third party rights.
You can find out more in the Explanatory Notes document that explains the Bill.
Why the Bill was created
The right in favour of a third party who is in a contract is currently a common law.
The aim of the Bill is to let parties in a contract create legal rights in favour of a third party.
The Bill will give a clearer and legally binding version of the common law rule.
You can find out more in the Policy Memorandum document that explains the Bill.
The Contract (Third Party Rights) ( Scotland) Bill became an Act on 30 October 2017
Becomes an Act
This Bill passed by a vote of 109 for and 0 against or abstentions. It became an Act on 30 October 2017.
Introduced
The Scottish Government sends the Bill and related documents to the Parliament.
Related information from the Scottish Government on the Bill
Why the Bill is being proposed (Policy Memorandum)
Explanation of the Bill (Explanatory Notes)
How much the Bill is likely to cost (Financial Memorandum)
Opinions on whether the Parliament has the power to make the law (Statements on Legislative Competence)
Information on the powers the Bill gives the Scottish Government and others (Delegated Powers Memorandum)
Stage 1 - General principles
Committees examine the Bill. Then MSPs vote on whether it should continue to Stage 2.
Committees involved in this Bill
Lead committee: Delegated Powers and Law Reform Committee
Who examined the Bill
Each Bill is examined by a 'lead committee'. This is the committee that has the subject of the Bill in its remit.
It looks at everything to do with the Bill.
Other committees may look at certain parts of the Bill if it covers subjects they deal with.
Who spoke to the lead committee about the Bill
First meeting transcript
The Convener
Item 5 is consideration of the delegated powers in the Contract (Third Party Rights) (Scotland) Bill. As members will be aware, we are looking at the bill in our capacity as a secondary committee that is considering the powers in the bill. That differs from our role as lead committee, when we look at the bill’s policy merits.
The bill contains only one delegated power, which is a commencement provision, and it is suggested that we should be content with that power. Is the committee content with the one delegated power in the bill and content to reflect that in its stage 1 report as lead committee for the bill?
Members indicated agreement.
The Convener
At our next meeting, which is on 14 March, we will, in addition to our regular consideration of Scottish statutory instruments and our consideration of an approach paper on the Seat Belts on School Transport (Scotland) Bill, hold our first evidence session on the Contract (Third Party Rights) (Scotland) Bill, which will be with the Scottish Government bill team and the Scottish Law Commission. I look forward to seeing you all next week. Thank you for attending today.
Meeting closed at 10:14.7 March 2017
7 March 2017
14 March 2017
21 March 2017
28 March 2017
25 April 2017
25 April 2017
What is secondary legislation?
Secondary legislation is sometimes called 'subordinate' or 'delegated' legislation. It can be used to:
- bring a section or sections of a law that’s already been passed, into force
- give details of how a law will be applied
- make changes to the law without a new Act having to be passed
An Act is a Bill that’s been approved by Parliament and given Royal Assent (formally approved).
Debate on the Bill
A debate for MSPs to discuss what the Bill aims to do and how it'll do it.
Stage 1 debate on the Bill transcript
The Deputy Presiding Officer (Christine Grahame)
The next item of business is a debate on motion S5M-05762, in the name of Annabelle Ewing, on the Contract (Third Party Rights) (Scotland) Bill at stage 1. I call on Annabelle Ewing to speak to and move the motion.
14:30The Minister for Community Safety and Legal Affairs (Annabelle Ewing)
I am very pleased to open the debate on the Contract (Third Party Rights) (Scotland) Bill. The bill is the result of some solid law-reform work on the part of the Scottish Law Commission, so I thank the team at the Scottish Law Commission for its considerable hard work in producing its report and the draft bill. I also thank the Delegated Powers and Law Reform Committee for its thorough and considered deliberations on the bill. I particularly welcome its stage 1 report and am pleased to note that the committee welcomes the bill and recommends that its general principles be agreed to. I am glad also that the committee recognises support among stakeholders for the bill and that the changes that the bill will make to current law are widely welcomed.
In the stage 1 report, the committee highlights a number of issues on which it has invited the Scottish Government to reflect. I hope that the committee has had an opportunity to consider my response to it. I will return to the issues within it in more detail a bit later in my opening remarks.
The bill addresses some fundamental difficulties in the law as it stands, and will remove the barriers that prevent people from having confidence in and using the law. The ability to create third-party rights is important. There are many reasons for third-party rights to be created, and the reasons apply to individuals as much as to businesses. For example, when booking a family holiday it may be beneficial for family members other than the person who booked the holiday to be able to enforce rights under the contract, but at present that area is plagued with difficulty.
Another example is life insurance, the proceeds of which are payable to another person. It would be of value to the third-party beneficiary to be able to enforce terms of the insurance policy in their favour—but again, in current law, that area is plagued with difficulty.
Another example is a company in a group taking out an information technology contract under which it wants all the companies in the group to be covered. It may be helpful if group companies that are not party to the IT contract are able to sue—for example, in relation to losses that are suffered as a result of breach of the contract—but that is another area of economic life in which there is considerable difficulty under the current common law.
In everyday life and in business, it can therefore be very helpful to create third-party rights. They can provide entitlements and protections not just for businesses but, importantly, for individuals. For that reason, we need a legal system that is fit for purpose and which keeps up with the times. As the Faculty of Advocates’ representative, Dr Ross Anderson, said when he gave evidence to the committee, the bill will
“ensure that ... Scots law provides the tools”—[Official Report, Delegated Powers and Law Reform Committee, 21 March 2017; c 8.]
that practitioners and others need.
The bill is intended to address a number of problems with the law as it stands. For a third-party right to be in existence, the current law requires that the contracting parties intended to benefit the third party and that the right is constituted irrevocably. However, that common-law doctrine is rarely used in Scotland and has been the subject of some criticism on the basis that it is inflexible, that there are many uncertainties surrounding its application, and that it does not meet modern standards. I note that the committee welcomes the abolition of irrevocability and welcomes the flexibility that the bill provides.
The law has also been criticised for being unclear. Lord Reed of the United Kingdom Supreme Court remarked that there is a need for commercial parties to have
“clearer rules in relation to third party rights under contract”.
The absence of confidence in the law as it stands among Scots law practitioners means that English law is sometimes chosen in place of Scots law to govern transactions that are otherwise Scottish in nature. The uncertainty over third-party rights and the lack of flexibility damage the reputation of Scots law by limiting its use.
Of course, it would be possible to allow the status quo to continue and, in effect, to leave it to the courts to improve the law through judicial reform. However, if that approach was taken, although some policy objectives might be achieved by the courts under the common law, that cannot be predicted or guaranteed and it would certainly take much longer than the statutory route that is offered by the bill.
I do not wish to engage in a law lecture—I see that there are some eminent jurists among us—but the leading case on irrevocability dates back to the 1920s. I am sure that members on the Tory front bench know that I am going to cite the case of Carmichael v Carmichael’s executrix, which is, of course, the seminal case on third-party rights and irrevocability. Even assuming that a suitable case might arise—which is doubtful if English law is used instead, as a workaround—there would be no guarantee that the policy objectives of the bill would be realised.
In addition, any court decision would examine only the relevant facts of the particular case and would be unlikely to look at the law in the round. It would therefore be unlikely to produce a comprehensive solution in the way that the bill does. Such uncertainty is unsatisfactory for practitioners and others who have to base advice to clients on the present law. We therefore see no benefits in the non-statutory approach. The law in Scotland on third-party rights would likely remain out of date and inflexible and would continue to constitute an unnecessary hindrance to business and individuals alike.
I therefore welcome the positive evidence that has been presented to the committee from a range of witnesses. Although, like the committee, we do not think that the bill will result in transformational change overnight, we are confident that placing third-party rights on a statutory footing will represent a significant improvement on what we have now, and that over time—not too long, we hope—we will see an increase in the use of Scots law. By that, I simply mean that, where Scottish solicitors are currently turning to alternatives and workarounds, including applying English law to a contract or to part of it, or having recourse to collateral warranties because of a lack of confidence in our law as it stands, and because of the current difficulties with which the committee is familiar, there will be the welcome option of using the new legislation. It seems to be clear that there are practitioners out there who are keen to make use of it.
More than once I have heard, as the Law Society of Scotland rightly pointed out in its briefing ahead of the debate, that although some people might be able to adopt expensive and complicated workarounds to the law as it stands, that facility is not available to everyone, but everyone deserves a legal framework that works. The bill will deliver that.
It is fair to say that any issues with the bill have focused on a few drafting matters. As I mentioned, the committee invited the Scottish Government to reflect on those. I will turn now to some of those issues. I am grateful to the committee for bringing them to my attention.
One issue that the committee raised is whether the bill inadvertently fails to preserve conditional undertakings that are constituted before the legislation comes into force and where the third-party right may, in fact, crystallise after commencement of the legislation. That point was noted in written evidence from Shepherd and Wedderburn LLP. The concerns relate to section 12, which will abolish the common-law rules on third-party rights, which are otherwise known as jus quaesitum tertio. We have considered carefully the points that Shepherd and Wedderburn raised and which were discussed in committee, as it clearly was not our intention to hinder the enforcement of such putative third-party rights. We therefore agree that the bill should be amended to address the issue, so I will lodge an amendment at stage 2 to do that.
Similarly, we have reflected on the provision in section 10, which relates to the renunciation of a third-party right. On the basis of the view that was offered by Professor Vogenauer on that section, and the Law Society’s evidence to the Scottish Government that the provision is superfluous, we have concluded that section 10(1) is not needed. Section 10(1) is simply a statement of what is already a matter of general principle, and we agree that there is no need to restate that in the bill.
We are also still considering whether a change should be made to the arbitration provisions at section 9 of the bill to address the concerns that were raised by the Faculty of Advocates. Officials have written to the faculty’s witnesses, Dr Ross Anderson and David Bartos, about the matter because I think that their concerns might be down to a small misunderstanding. Officials have suggested a meeting with those representatives of the faculty. I assure Parliament that, if there is a better way of implementing the Scottish Law Commission report, I will be happy to reflect further on that.
The Scottish Government is absolutely committed to the principle that legislation should be clear and accessible. However, it also needs to be effective. On section 1, as I have set out in my response to the stage 1 report, the Scottish Law Commission gave careful consideration to the use of the word “undertaking”, and concluded that it is the most suitable choice because the undertaking may be found expressed or implied in one or more terms of the contract.
Against the background of that careful consideration, we are not inclined to interfere lightly with the commission’s recommendation—number 5 in its report—that
“The provisions in a contract which are intended to comprise the third party’s rights thereunder should be referred to as the ‘undertaking’.”
On whether the section is unclear about what the benefit is to the third party, we think that the cumulative effect of sections 1 and 2 is that the undertaking in favour of the third party must be contained in the contract; that it must be clear that the contracting parties intended to confer an enforceable right upon the third party thereby, although their intention need not be stated as such expressly, but can be implied from other wording in the contract and admissible surrounding circumstances; and that the third party must be identified in or identifiable from the contract. I think that, from that, it is clear that a third party merely benefiting from a contract between others without any of the other requirements being in place is not enough to create any right for that third party, and we are therefore content with the effect of section 1.
As I explained in my response to the committee, the provisions at sections 4 to 6 need to be capable of dealing with a wide and sometimes complicated range of circumstances, and must be fit for all purposes. We are concerned that, in paring down the provisions to make them more streamlined, we might lose that capability, which would be highly undesirable.
However, in any case, I flag up the fact that there was no real consensus among witnesses about what the revised drafting should look like. It is fair to say that their views were mixed. Some found the drafting to be quite wordy, but others were content that the words reflect the product of some careful consideration by the Scottish Law Commission. Ultimately, everyone was, I think, of the view that the sections will achieve the right result. That is very encouraging, and I think that that is most important. For all those reasons, we do not intend to amend sections 4 to 6. I hope that the committee is reassured that we have thought carefully about what it said in its stage 1 report.
It seems to be clear that the bill has struck the right balance by providing an effective legal framework for third-party rights while preserving the rights of parties to decide whether they want to give third parties rights, and how they want to give them those rights. As Karen Fountain from Brodies LLP put it,
“people will have more confidence that what they’ve written down will work”.
I move,
That the Parliament agrees to the general principles of the Contract (Third Party Rights) (Scotland) Bill.
14:43John Scott (Ayr) (Con)
As the convener of the Delegated Powers and Law Reform Committee, I am delighted to speak on behalf of the committee on the Contract (Third Party Rights) (Scotland) Bill. I refer members to my entry in the register of members’ interests.
The bill proposes changes to the law in Scotland that allows parties to a contract to create rights for third parties. The main aim of the bill is to make the law clearer and more usable in this area.
Members will be aware that this is a Scottish Law Commission bill. The Scottish Law Commission bill process is a relatively new one that was created in order to improve the implementation rate of Scottish Law Commission reports.
This bill is the third Scottish Law Commission bill to be considered by the Delegated Powers and Law Reform Committee following changes to standing orders in 2013. The committee took evidence from law bodies, academics, arbitrators, representatives from the Scottish Government and, of course, the Scottish Law Commission. The committee endeavoured to capture a wide range of views on the bill. The committee heard evidence from legal practitioners representing the sectors that are most likely to be affected by the bill, including the finance and construction industries and less obviously affected areas such as the agricultural sector. We also considered the implications of the bill on small businesses and individuals.
By way of background, I now turn to the current law on third-party rights in Scotland, which is based on common law and which has existed for centuries. I will briefly explain what is currently required to create third-party rights in Scots law.
First, there needs to be a contract. Secondly, that contract must identify the third party in some way and the intention of the contract to confer a right on a third party, whether by implication or derived from an express provision in the contract. Lastly, the third-party right needs to be irrevocable, meaning that it needs to be clear to a third party that the contracting parties to the contract intended to give up their right to change their minds about granting a third-party right.
There are concerns about the lack of clarity and certainty and about the inflexibility in the current law, which has resulted in legal practitioners and their clients not using the Scots law of third-party rights and instead relying on English law or workarounds such as collateral warranties.
Further, a key problem with the current common law on third-party rights is that it has been developed on the basis of case law, but that development is itself dependent on cases being brought. As that is an area of law where no cases have been brought, there is continuing uncertainty as to the position of the law. Indeed, the current position was dramatically explained to the committee by David Christie of Robert Gordon University as a “death spiral” of third-party rights, as the lack of clarity in the law prevents their use, which therefore leads to a lack of case law, which in turn prevents the law from being developed, meaning that the uncertainty continues.
The uncertainty that the bill seeks to remedy stems from a House of Lords judgment that was made in the 1920s, to which the minister referred. It stated that, once someone had been given a third-party right, it was irrevocable. In other words, it could not be taken away, cancelled or modified. The committee heard that that judgment has created significant inflexibility in the law and, as a result, legal practitioners tend to shy away from using it, more recently favouring English law or workarounds instead. Therefore, the main proposal of the bill is to abolish the existing rule that third-party rights have to be irrevocable once created, thus making it easier to create and subsequently remove third-party rights in contracts.
To help the committee understand how the bill might be used in practice, the Scottish Law Commission helpfully provided some examples in its written evidence to the committee of when the bill might be used in practice. For example, the bill will make it easier for contracting parties to create third-party rights in their contract, even if a third party does not yet exist. That is often the case in relation to companies within a group structure that have not yet been formed at the time of creation of the third-party right.
I now turn to the committee’s key conclusions on the bill. First, it is clear that there is universal support for the bill, as moving from the current common-law position to a statutory footing will provide greater clarity for users of the law, namely legal practitioners and their clients. As well as greater clarity, the bill will provide greater flexibility for users of the law. As I have mentioned, it is currently the case in Scotland that third-party rights have to be irrevocable to be made. The proposed legislation will abolish that rule and make it easier to create and also subsequently remove third-party rights in contracts. The committee therefore welcomes the abolition of that rule.
Nonetheless, and while recognising that it was not appropriate for the bill, the committee’s report encouraged the Scottish Government to reflect further on the protections that are in place for smaller businesses. It is therefore pleasing to note the role highlighted in the Government’s response for the small business commissioner in affording those protections to smaller businesses.
The committee also recognises that protections and balances are required to protect third parties, particularly as the bill will allow those rights to be changed or cancelled altogether. The committee therefore welcomes the protections that are included in the bill at sections 4 to 6. However, I would like to highlight concerns that a variety of stakeholders have raised about the clarity and usability of the provisions in those sections. Although the committee welcomes the protections for third parties that are included in those sections, we invited the Government to reflect on the evidence received from stakeholders, particularly the Faculty of Advocates, on sections 4 to 6. I note from the response to the stage 1 report, and from what the minister has said today, that the Government does not intend to amend those sections. I recognise that there was no unanimity on how those sections should be amended, but it is perhaps a little disappointing that a revised form of words could not be found.
The committee also received evidence from stakeholders highlighting the need for greater drafting clarity in sections 9, 10 and 12. Although I do not intend to detail those drafting concerns, we welcome the Government’s commitment to lodge amendments to sections 10 and 12, and to reflect further on the drafting of section 9.
I have outlined some of the principal benefits that would be derived from passing the bill, but the committee is also aware that it may not be widely used in the short term. Indeed, the committee heard evidence that the equivalent new legislation in England and Wales, which has been in place since 1999, is only recently starting to be used. However, it is worth highlighting that the Scottish context with regard to third-party rights is different from the English one. As I have mentioned, there is already a legal tradition of third-party rights in Scotland under common law that did not exist in England and Wales prior to 1999. Therefore, the bill does not start from a blank sheet of paper on third-party rights. On that basis, the committee recognises that there is scope for the legislation to be used more quickly than has been the case in England and Wales.
There are both technical and financial difficulties associated with the continued use of workarounds such as collateral warranties, so the committee believes that there is good reason for greater use of the proposed legislation to avoid those difficulties in the future.
I highlighted at the start of this speech the importance of ensuring that Scots law is fit for purpose in order to remain modern and competitive alongside other legal systems across the world. Our committee is of the view that the introduction of the bill would be a useful tool for legal practitioners and their clients to have available to them when setting up third-party rights in contracts, and we encourage the Government to promote the advantages of the legislation should the bill be passed by the Parliament. The committee therefore has no hesitation in recommending to the Parliament that the general principles of the bill be agreed to.
14:54Murdo Fraser (Mid Scotland and Fife) (Con)
I start by reminding members of my entry in the register of members’ interests, which states that I am a member of the Law Society of Scotland, although I note that I do not hold a current practising certificate.
I have faced many challenges in my career as a member of this Parliament. There are the complex constituency cases with which we are all so familiar, in which it seems that, no matter what effort is put in, it is almost impossible to get a resolution that satisfies the constituent; there are the lively chamber debates on a variety of divisive issues on which party positions have to be set out and defended; and there are the constant pressures of juggling workload with competing parliamentary, constituency and family demands. However, I can honestly say that I have faced few greater challenges in my parliamentary career than trying to craft a seven-minute speech to open this debate on the bill before us.
In saying that, I intend absolutely no slight on the diligent and hard-working members of the Parliament’s Delegated Powers and Law Reform Committee and its able convener, my colleague John Scott, who has just opened the debate for the committee. I enjoyed reading the committee’s report, which was a very fair and balanced summary of the issues that the bill faces and addresses. It is fair to say, however, that there is not a lot of controversy around what is proposed. The two and a half hours that had originally been allocated to debate this afternoon’s topic seemed rather overgenerous, and I am sure that I am not alone in being relieved that the time has been reduced to two hours. I suspect that many of us will end up making very similar points over the course of the afternoon, and I am refreshed by the fact that I am one of the earlier speakers in the debate.
To the bill, then, which has arisen from work done by the Scottish Law Commission. The commission is an excellent and probably undervalued body, whose members beaver away to address important, if sometimes seemingly minor, changes in the law, and I echo the minister’s remarks about its importance and its approach to legislative reform.
The bill deals with third-party rights, specifically allowing rights to be conferred by contracting parties upon a person who is not a party to the contract. In Scots law, this is known as the jus quaesitum tertio, if I remember the pronunciation correctly from my law lectures many years ago.
The Deputy Presiding Officer
It is good enough for me, from what I can remember.
Murdo Fraser
Thank you, Presiding Officer.
As we have heard, the issue identified by the commission was that third-party rights could be conferred only if they were deemed to be irrevocable. That created a problem for those dealing with commercial contracts, because if a third-party right was not deemed to be irrevocable, it could not be enforceable in the Scottish courts. In practice, there were many situations in which it did not suit the contracting parties to have those third-party rights deemed to have been granted on an irrevocable basis.
However, there is always a way around such problems. In practice, Scots lawyers have got round them by drafting collateral warranties, which are separate documents that convey a specific third-party right and which stand alongside the main contract document. I well remember from my own legal experience good practical examples of where the issue might arise. For example, when a new building is constructed, a developer will engage a range of professionals, including an architect, a structural engineer and a surveyor, in the construction contract, and the contract itself will be between the developer and those professionals. However, on completion the building will usually be sold on to a third party or leased, and the new owner—or the new tenant—has no direct contractual relationship with the architect or the other property professionals. As a result, if a fault with the building arises that leads to a claim being made—and if appropriate warranties are not in place or if the matter has not been addressed in another fashion—it will not be possible for the new owner or tenant to pursue the professionals involved in the event of any negligence on their part.
As I have said, under existing practice, people have got around such problems with collateral warranties from the professionals involved. Indeed, in a previous life, I made a reasonable living out of drafting and revising such documents. However, the changes in the bill will require at least a new approach to the issue and might well mean that such extensive warranties are no longer required in such situations; it might even make it easier to enter into commercial or construction contracts.
Annabelle Ewing
It might be interesting to draw members’ attention to recent reports that certain difficulties are appearing with regard to enforcement of collateral warranties. That is another trend that we should perhaps take into account.
Murdo Fraser
I am grateful to the minister for her intervention. That is a useful additional piece of information to bear in mind.
As the committee said in its report, we have known about the third-party rights problem for a long time. Indeed, the issues go back to the second world war. In England and Wales, the problem was identified as far back as 1937 but was legislated for only in 1999. The gap in Scotland has been somewhat longer, but the good news is that the bill was introduced only three years after the date on which the Scottish Law Commission issued a discussion paper. We have therefore moved relatively quickly to resolve the issues since the commission brought the matter to people’s attention.
The bill has been widely welcomed by stakeholders on all sides. As the committee noted, a few minor concerns about the drafting have been raised, on which the Scottish Government has been asked to reflect. I welcome the minister’s comments about how the Government intends to respond to the points in the committee’s report. Overall, the bill seems to have universal support.
The committee considered how quickly the bill will be used, once it has been passed and implemented. Now, lawyers are, by their nature, conservative beasts—I stress that it is “conservative” with a small c, for the purposes of the Official Report, although of course sometimes it is with a large C, too—and it is likely that it will take some time for working practices to adjust to the new legislation. As John Scott said, in England and Wales, the Contracts (Rights of Third Parties) Act 1999 took a long time to be used. However, there will be, in time, a new approach to the preparation of contracts, and perhaps there will be less paperwork than there is currently. In theory, less paperwork will mean quicker deals and lower costs for clients, although from my days in the legal profession I do not want to be overoptimistic about what can be achieved in that regard.
Presiding Officer, I have done my best to fill my time on the subject. This is a worthwhile bill and the Scottish Conservatives will be happy to support it at stage 1. I hand on to other members the challenge of continuing the excitement.
The Deputy Presiding Officer
You are indeed lucky to have spoken so early in the debate. I am wondering what other members will manage to say, but I have no doubt that they will come up with something.
15:02Claire Baker (Mid Scotland and Fife) (Lab)
I associate myself with Murdo Fraser’s opening comments, and I thank the committee for its stage 1 report on the Contract (Third Party Rights) (Scotland) Bill.
The Delegated Powers and Law Reform Committee is a fairly recent creation of the Parliament, and I understand that this is the first bill that it has considered in this parliamentary session. The committee was established in recognition of the pressures on the Justice Committee, in particular, in previous sessions. It developed out of the Subordinate Legislation Committee and has the additional role of being the lead committee for bills that arise from Scottish Law Commission reports. Although it is recognised that the Scottish Parliament, as an institution, has facilitated a significant and necessary increase in law reform, it can still be difficult to secure parliamentary time for Scottish Law Commission bills. The appointment of a dedicated committee provides greater opportunity for scrutiny and legislation.
The Scottish Law Commission plays an important role in ensuring that our laws are relevant, easily understood and consistent. It was established more than 50 years ago and its task is to recommend laws that will improve, simplify and update the law of Scotland. As the bill that we are considering illustrates, the relationships that are governed by laws constantly develop and change as society changes, and it is important that the law keeps pace with changes in the way in which we live, work and do business.
The process in which we are engaged is therefore important. If our laws are outdated or unnecessarily complex they can lead to injustice as well as inefficiency. Law that is in need of reform can increase inequality and limit access to justice. The law must be relevant to how people live in society. It must facilitate good business relationships and support people’s personal decisions.
The bill enjoys a degree of consensus among committee members and the witnesses who gave evidence to the committee. That might suggest that law reform is easy, but a look at other recommendations that the Scottish Law Commission has made, including the abolition of feudal tenure of land and the protection of the rights and interests of adults who are incapable of managing their own affairs, demonstrates that changes can generate a great deal of debate and discussion—although that perhaps does not apply to the changes that we are considering this afternoon. The bill has been thoroughly discussed by the committee and I thank those who provided evidence over a number of weeks.
The bill was introduced following a long-established understanding that the existing common law governing third-party rights is no longer fit for purpose, and a growing confidence that it should be replaced with new statutory rules. A Scottish Law Commission discussion paper from 2014 identified the range of legal and practical problems arising from the current law on third-party rights—primarily, those are concerns around clarity, certainty and inflexibility within the current law. The absence of clarity, certainty and flexibility has meant that legal practitioners and their clients typically resort to the use of English law or workarounds such as collateral warranties rather than Scots law on third-party rights. In evidence, it was recognised that
“The law does not allow the flexibility that people need in today’s commercial or indeed personal legal transactions.”—[Official Report, Delegated Powers and Law Reform Committee, 14 March 2017; c 7.]
Although the bill is widely supported, a few issues were raised for further consideration as we look towards stage 2. The bill changes the rights of third parties by abolishing the irrevocability rule and introducing new flexibility, but the counter is the need to protect third parties, given that their rights could then be changed or cancelled altogether. Some improvements to the drafting have been suggested, and the Government should further reflect on them. One of the more interesting comments in that regard came from Craig Connal QC, who said in evidence:
“when I see sections that talk about ‘reliance’ and ‘to a material extent’ I wonder what that means and think to myself that we can litigate over that.”—[Official Report, Delegated Powers and Law Reform Committee, 28 March 2017; c 22.]
In evidence, the Government said that it was reluctant to redraft but in a briefing for today’s debate, the Law Society of Scotland says that signposting of the content and effect of sections 4, 5 and 6 would improve the accessibility of the legislation—that suggestion underlines the purpose of the bill. There was also evidence of a need to redraft parts of section 9, on arbitration, but again the Government appeared inflexible about that in committee. However, I recognise the Government’s commitment to review those sections—the minister has commented on that this afternoon—so we will see what arrives at stage 2.
There was a discussion at the committee about arbitration as the only available dispute resolution mechanism. It was suggested that that might not best serve all contracts—particularly construction contracts—and that it might not provide flexibility. I note the comments from both the committee and the minister that they were not persuaded of that case, but I hope that there is an opportunity for further reflection.
The bill aims to provide a new statutory framework, with clearer, more usable rules on third-party rights and clarity in Scots law. However, there is at the outset a recognition that, while the bill seeks to address the use of workarounds or the deployment of English law, it is not expected to be widely adopted any time soon. Although there is undoubtedly evidence that supports the need for the bill, it is initially unlikely to be used very often, with a preference for the familiar and a tendency towards caution—or conservatism, as described by Murdo Fraser—to be anticipated from the legal profession. However, witnesses, including the Law Society and the Royal Incorporation of Architects in Scotland, suggest that the benefits offered by the bill may encourage legal practitioners and clients to use it, particularly in the pursuit of flexibility, which is currently offered by English law. Others identified difficulties with the use of collateral warranties.
The Faculty of Advocates makes an interesting point that the accessibility and clarity of the bill may be an advantage to people who are unable to access “expensive legal advice”. The Law Society of Scotland briefing states:
“It is important to bear in mind, that the legislation will significantly improve the position of parties who were always going to use Scots law, particularly those who cannot afford the legal advice necessary to set up an arrangement which uses foreign law or a complex alternative. Their interests should not be forgotten.”
If the bill can increase equality in good legal practice, that is to be welcomed. There is, however, no expectation that the bill will immediately make any difference to working practices, although it addresses an identified weakness in Scots law and provides an additional tool to be used alongside existing alternatives.
There is a role for the Scottish Government and partners in highlighting the potential benefits of the bill. Although challenges were identified, raising awareness will lead to the appropriate use of the bill, increasing confidence and familiarity. In advance of the bill being passed, the Government could reflect on the most appropriate way to achieve that.
The Deputy Presiding Officer
Now the challenge for the open speakers: I call Stuart McMillan, to be followed by Alison Harris.
15:09Stuart McMillan (Greenock and Inverclyde) (SNP)
I do not need to address the whole bill, as the minister and John Scott, the convener of the Delegated Powers and Law Reform Committee, have undertaken that role in their usual efficient and meticulous manner.
I was quite impressed by the contributions from Murdo Fraser and Claire Baker, which showed their understanding of what we discussed in committee as we went through the evidence. Murdo Fraser made a speech of seven minutes—although it felt as though he was struggling to manage that—and the whips will have watched and listened to him this afternoon and appreciated that that was his pitch to get a transfer to the Delegated Powers and Law Reform Committee so that he can undertake this piece of work and further SLC bills. He is not denying it, so it must be true.
I want to discuss a couple of points that have been touched on by previous speakers but which are worthy of further debate. However, before that, I want to address one issue. As members know, the bill has come about because of the work of the Scottish Law Commission. It is the third such bill and it is the first time in this parliamentary session that the SLC has sent a bill to the Delegated Powers and Law Reform Committee. In the previous parliamentary session, I was on that committee and we undertook a similar piece of legislation, which was the Legal Writings (Counterparts and Delivery) (Scotland) Bill. If memory serves me correctly, it was the minister’s brother, Fergus Ewing, who steered the bill through.
At that time, I thought that the Delegated Powers and Law Reform Committee was a useful tool to have in the armoury of the Parliament when it comes to law reform. I am genuinely delighted that the committee now has the power and responsibility to look at law reform, as it helps with the wider issue of law reform in Scotland.
The Delegated Powers and Law Reform Committee has been supportive of the bill, as those who have provided evidence have suggested. Paragraphs 27 to 40 of the committee report touch on the speed of law reform and the introduction of the bill, as others have said. As the evidence shows, there was not much concern about that. Nonetheless, given that SLC proposals are on smaller, focused legislative improvements, I asked the minister whether she and the Scottish Government, along with the SLC, would consider whether further SLC bills could incorporate more than one area of law reform. I am pleased that the minister provided a commitment to explore that issue in the future. Law reform does not take place regularly or in a vacuum and, as the bill and the area that it covers highlights, if it is possible to improve and update the law by more SLC bills covering multiple areas, we could make even more headway with law reform. However, we are not alone, as the bill highlights, and similar legislation was first mooted in Westminster in 1937, with a bill being presented to the UK Parliament in 1999.
In the bill, the codification of the law of third-party rights provides certainty for users of Scots law, which our report highlights in paragraphs 51 to 61. Law firms will be able to use that certainty in legislation instead of using expensive collateral warranties or law from other jurisdictions. Murdo Fraser touched on the area of collateral warranties, which was also touched on as we went through the evidence. Collateral warranties can be expensive and there was a hint that some organisations might prefer to still use them, because of the revenue that they can generate for those firms. The bill that is in front of us will help to deal with that and will help Scots law. In our case, it will ensure that cases that do not use English law can use Scots law.
Witnesses were clear that there will not be a rush to use the new legislation, because training will certainly be required once the bill has been enacted. Nonetheless, it will in time be used for a greater number of contracts, and that can only be of economic benefit for Scotland.
The evidence from Karen Fountain, who is a partner at Brodies LLP, was particularly useful. She said:
“The bill is effectively taking us back to the Ronseal moment: the contract should do what it says on the tin. At the moment, you cannot be confident that that is the case, and you need to be confident.”
That was a very strong argument to use.
Jonathan Gaskell of DLA Piper also provided positive evidence. He stated:
“For that reason, the bill is a good thing: it codifies the existing law and gives certainty.”—[Official Report, Delegated Powers and Law Reform Committee, 21 March 2017; c 17, 18.]
My final point concerns sections 4 to 6 of the bill. Witnesses presented their opinions on the clarity of those sections, and the evidence that we took as a committee was clear. The Faculty of Advocates suggested that they are not easy to follow, and the Law Society of Scotland shared that view. The Law Society of Scotland presented members with a useful briefing for the debate, which highlights those sections, and it has provided a suggestion to assist with making them clearer. I absolutely agree with the minister’s evidence to the committee—we touched on that in paragraph 90 of the stage 1 report—but, in paragraph 91, the committee invited the Scottish Government
“to continue to reflect on the clarity and usability of these provisions.”
As members will know, we received the Scottish Government’s response today. Having read it—I will read it again, as well as members’ contributions this afternoon—
The Deputy Presiding Officer
I never thought that I would have to say this, but I am afraid that I must ask you to conclude.
Stuart McMillan
I have been enjoying the bill. Okay. I conclude by saying thank you very much, Presiding Officer.
The Deputy Presiding Officer
I notice that this is your second stint on the Delegated Powers and Law Reform Committee. You are a rarity.
15:16Alison Harris (Central Scotland) (Con)
I very much welcome the opportunity to participate in this debate on the Contract (Third Party Rights) (Scotland) Bill, and I thank the Scottish Law Commission for its work, which led to the introduction of the bill, and for helping us to understand the importance of reform in this area of law.
As a member of the Delegated Powers and Law Reform Committee, I have been involved in the scrutiny of the bill and, with my fellow committee members, I have heard compelling evidence on why the general principles that it captures are the correct ones. I therefore support the bill at stage 1.
Let me turn first to the problems that have been consistently identified with the current approach in common law. We heard from the Scottish Law Commission that the common law was not fit for purpose and that waiting for the courts to change it could take decades. Lord Reed of the UK Supreme Court said that there was a need for
“clearer rules in relation to third party rights under contract”.
Indeed, the current law has remained unchanged since 1920. In our modern market economy, the requirement for reform is more pressing, and that is why it is up to us in the Parliament to embark on reform.
One of the main challenges that the current law presents is that it has contributed to significant legal uncertainty. The Law Society of Scotland has said that lawyers are really not comfortable with giving advice to clients in such areas, where the law is unclear. For example, it is not even clear at present what remedies are available to third parties in the event that their rights have been breached. The Scottish Law Commission highlighted that issue as one of the main benefits of codifying the law, and referred to
“the most significant uncertainty in the current Scots law of third party rights.”
The requirement for third-party rights to be irrevocable is another serious issue with the existing legal position. Essentially, that means that, for a third-party right to even be created, the parties must intend to give up the right to change their minds about granting the right at any point in the future. The committee heard a lot of evidence that echoed the concerns of the Scottish Law Commission, which suggested that parties are deterred from creating third-party rights at all because of that requirement and lawyers are left looking for workarounds, such as using English law instead. That happens because the legislation in England—the Contracts (Rights of Third Parties) Act 1999—grants much greater flexibility to the contracting parties. It allows them to terminate or vary the terms of the contract without the consent of a third party. That kind of approach encourages the parties to create third-party rights in a way that Scots law deters them from doing.
Bringing the law in Scotland on to a statutory footing is beneficial. However, as the committee heard from Hew Dundas, who is the honorary vice-president of the Scottish Arbitration Centre, the bill will also be beneficial as it will bring some harmonisation between Scots and English law. He said—and I agree—that
“it would be unfortunate if we tripped up on a difference in principle between English and Scottish legislation, given that there is such a high volume of common trade”.—[Official Report, Delegated Powers and Law Reform Committee, 18 April 2017; c 5.]
The main principle that the bill promotes is the abolition of the existing rule that third-party rights have to be irrevocable in order to be created. Contracting parties are severely restricted because they cannot build flexibility into the contract at the outset, or respond in a flexible way to events as they unfold. The bill can also bring greater clarity to third parties about how they can enforce their rights, in a way that they cannot do currently.
It is essential that, when the Scottish Law Commission and practitioners tell us that the common law creates commercial barriers, we respond accordingly and pass legislation to remove those barriers. The committee’s stage 1 report highlighted the fact that the general principles of the bill had very broad support, but identified a few areas in which it could be strengthened. While the evidence that we heard suggested that the bill might not be widely used in the short term, I hope that the greater flexibility that it allows will encourage parties to make use of it in the future. I also welcome the Scottish Government’s commitment to reflect on the committee’s comments about the drafting of some of the provisions, and I hope that those concerns will be addressed as the bill proceeds. As we work to overcome those challenges, the general principles of the bill remain the correct ones, in my view.
The bill gives us the opportunity not only to bring greater clarity to the law, but to create a framework that will allow third-party rights to become usable. Third-party rights that are properly created and able to be revoked in certain circumstances will be positive for the parties to the contract as well as for third parties themselves. By building greater flexibility into our system of third-party rights in Scotland, we can offer the commercial environment that contracting parties and third parties need. I sincerely hope that the bill can achieve its objectives and that it will address the concerns that have been identified in the current law.
I thank members for listening as though they had not heard all this earlier on in today’s debate.
The Deputy Presiding Officer
You are a wee hero.
15:22Ben Macpherson (Edinburgh Northern and Leith) (SNP)
I refer members to my entry in the register of members’ interests as a non-practising member of the Law Society of Scotland, and also to my history of employment as a solicitor with Brodies LLP, some of my experience of which I will refer to during the debate.
I thank the Scottish Law Commission for carrying out the process that has brought us to debating the bill at stage 1. I thank members for their speeches. I also thank members of the Delegated Powers and Law Reform Committee for their arguments in committee and the committee’s witnesses for their evidence.
I warmly welcome the bill and the principles expressed in it, as a development to ensure that Scots law is fit for purpose in a modern commercial environment, that it is flexible and ready and, crucially, that it can provide contract security. The codification of third-party rights will be helpful for practitioners and their clients, as Murdo Fraser rightly said. It will remove a practical barrier to commercial transactions, so that they will be able to meet modern-day expectations.
As has been stated already, the codification and the principles of third-party rights relate to the ability of parties who are not directly party to the contract in question to have rights within that framework. Members have rightly alluded to a few different aspects of commercial law, and I will do the same.
In evidence given to the committee, and particularly in the report by the Scottish Parliament information centre, it was stated that the new provisions will have application in insurance and also in pensions, but in the debate the focus has been on construction law. In my experience as a trainee solicitor working on construction contracts, it is that aspect that will be of most practical use.
A funder, a buyer or a tenant can create a direct relationship with and claim losses from third parties. A common example that has been used is from construction and is, for instance, a subcontractor such as an architect, or other subcontractors to a commercial contract, such as electricians.
The ability to create that relationship within the contract itself will certainly be of use to practitioners and those who are seeking to take forward construction contracts. It will also be of use to those who are involved in commercial property transactions around previous construction projects.
For example, I worked on a transaction once that had multiple aspects to it. Elements of the construction were based in English law and other elements were based in Scots law. As third-party rights are available in English law, they were drafted into the substance of the contract, whereas the Scots law elements of the contract required collateral warranties. I remember thinking one evening during that deal that I was going to be able to go home after finishing the Scottish contracts and being told, “No, we have to do the collateral warranties now.”
For anyone working in construction, there are nuances about construction law and the inclusion of third-party rights. It may sometimes be advantageous to put the rights in collateral warranties, for example, and there are questions around when step-in rights are advantageous.
However, overall, for construction lawyers and those involved in the construction business, the bill will assist them by providing the legal frameworks that are necessary, thus creating an environment where construction projects can be developed with less legal work being required—although I appreciate Murdo Fraser’s point that that is not always the case.
The bill will also be useful in terms of financing projects. For example, for renewable energy projects, financiers will now be able to create third-party rights within the contract rather than having to rely on collateral warranties. That will be helpful for Scotland’s renewable energy industry.
I warmly welcome the element of flexibility. The removal of irrevocability and the ability to set up flexible contracts at the outset and to adjust contracts in response to events will be useful aspects in terms of developing the law.
I welcome the fact that arbitration is included in the bill. In my previous role as a lawyer, part of my work was on contracts that went to arbitration, and any mechanisms that can help to make it easier for parties to seek arbitration rather than go through litigation should be welcomed.
I also welcome the minister’s consideration of the points on drafting that have been raised by the committee and by stakeholders. I think that we can all work together to make the bill as user friendly as possible and, in the words of the Law Society of Scotland, something that helps to promote Scots law for the benefit of all, so that Scots law contracts can be used in Scotland where advantageous and required.
15:28Monica Lennon (Central Scotland) (Lab)
I am pleased to have the opportunity to speak in the debate to agree the general principles of the Contract (Third Party Rights) (Scotland) Bill. I am one of the members of the Delegated Powers and Law Reform Committee and, as members have heard, we have taken extensive evidence on this Scottish Law Commission bill in recent months. If anyone has been wondering what we do on a Tuesday morning, they now have some idea.
I echo the opening comments of our convener, John Scott: there are a lot of people to thank. They have been thanked already—I will just add my thanks to them as well.
I am not a lawyer as, I know, many members are, and the matter is very technical, so from the outset I was keen to understand why the bill was required and who would benefit from it. We have had many weeks to consider those points, and as the process has moved forward I have been persuaded of the bill’s merits.
The minister, in her opening remarks, explained that third-party rights are helpful in everyday life and in business, and it is therefore important that Scots law is effective and keeps up with society. There is consensus that the current common-law arrangements do not achieve that, and that the bill will provide a welcome remedy; it is good that we all agree on that.
At the Delegated Powers and Law Reform Committee, we explored in written and oral evidence the question of what benefits would be derived in moving from the current common-law position to a statutory footing. We heard that case law is unlikely to develop fast enough to deal with the problems in the law that have been identified. Indeed, the bill team and the Scottish Law Commission have indicated that relying on the common-law position is unsustainable.
Many of the witnesses raised concerns about the legal uncertainty arising from the current common-law approach, and the underlying rationale for introducing the bill is that the current arrangements are simply not fit for purpose. A lack of certainty in the law prevents the use of third-party rights, which leads to a lack of case law, thereby preventing the law from being developed. John Scott quoted David Christie of the Robert Gordon University, who eloquently described that scenario as a “death spiral”.
The evidence overwhelmingly showed that the system needs an upgrade, and the bill therefore seeks to codify the existing law on third-party rights in one easily accessible place, which is a very welcome step.
I contemplated many times during the committee’s deliberations the question of how the bill will be used. If the bill is enacted, will it be a useful law that will be used in the face of competing and well-established workarounds and reliance on English law, as we have heard today?
One of the themes that emerged from our evidence sessions was that the bill’s purpose is to clarify the law in Scotland and, as the policy memorandum states, to
“promote the use of Scots law”.
Scottish Law Commission officials stated during evidence sessions and as part of the SLC’s investigation that lawyers in Scotland are currently applying English law to Scottish contracts, although it was not possible for that to be quantified in any way other than through anecdotal evidence.
In response to questioning on that particular point, Professor Hector MacQueen of the Scottish Law Commission said:
“It is certainly not that we have anything against the use of English law or, indeed, English law generally. It is more a case of where Scots law is not doing the job, it is up to Scottish lawyers, the Scottish Parliament and the Scottish courts, where possible, to do something about that. If one leaves a law in a state that means that nobody uses it, there is something amiss. Our attitude to such matters is just part of the mechanics of society, if you like. People will remain free to use English law if they prefer it, and they might do so. However, it is a pity if the legal system is not working for those who work in it.”—[Official Report, Delegated Powers and Law Reform Committee, 14 March 2017; c 11.]
That captures exceptionally well the principles and the practical aims that underpin the bill.
At the same time, there has been a dose of realism about the bill’s implementation. As we have heard, the experience in England and Wales suggests that it takes time for such legislation to be adopted. It is therefore perhaps to be expected that the bill’s provisions will not necessarily be immediately adopted by the legal profession in Scotland. In fact, we heard that, although legislation on third-party rights has been in place in England and Wales for some time through the Contracts (Rights of Third Parties) Act 1999, there has only recently been an uptake in the use of the act, and even then it appears that, in most cases—in the construction sector, for example—people continue to rely on collateral warranties.
However, witnesses including the Law Society of Scotland and the Royal Incorporation of Architects in Scotland have suggested that the benefits offered by the bill may encourage legal practitioners and their clients to use newly codified legislation. Of course, we in Scotland are not beginning from a standing start.
In terms of fairness and equal access, Dr Ross Anderson of the Faculty of Advocates suggested that the bill might benefit people who do not have the resources to access expensive legal advice. He said:
“One of the great advantages of the bill is that it sets out, in modern language, what the law actually is.”—[Official Report, Delegated Powers and Law Reform Committee, 21 March 2017; c 8.]
We also heard that the use of collateral warranties can be costly, so the bill will have practical benefits in that regard.
I did not think that I would have more to say than the time allows, but I am being encouraged to wrap up by the Presiding Officer.
The bill will be a useful tool for legal practitioners and their clients. No one expects a rapid uptake of the legislation in the short term, but it is important for the reputation of Scots law that it does a good job. I welcome the general principles of the bill.
The Deputy Presiding Officer (Linda Fabiani)
This has obviously been a fascinating debate, because we are now over time. I ask the remaining speakers to be a bit more disciplined, please, with speeches of up to six minutes.
15:35John Mason (Glasgow Shettleston) (SNP)
I had the privilege of being a member of the DPLR Committee in the previous parliamentary session. I told the whips last May, though, when I was re-elected to Parliament, that I did not want ever to be on it again. However, I accept that one attraction of the committee is its compact size—five members. Other committees that I am on have 11 members and are unwieldy.
I commend the committee for holding five evidence sessions and reassuring me that they have carried out their work very diligently, as always. I believe that Parliament can rely on the committee with regard to the bill; many of us in Parliament probably need to rely on the committee, because the bill deals with a technical area with which most of us are not familiar.
It was good to see the comment by James Rust of Morton Fraser LLP, who said that change in the area that the bill deals with had not been made in the past because of lack of parliamentary time, but now that we have the Scottish Parliament,
“the dam has burst and we have got on with it.”—[Official Report, Delegated Powers and Law Reform Committee, 28 March 2017; c 37.]
Specifically having the DPLR Committee to handle this type of legislation is clearly good. I note the recommendation at paragraph 40 of the report that
“more than one area of law reform at the same time”
might be considered. I certainly agree that it is worth exploring that, as long as lay members of the committee, which I was, do not get too confused by dealing with different issues at the same time. I note that the minister will consider the recommendation further.
The process of recommendations from the Scottish Law Commission leading to SLC bills is one that seems to be settling down well. I was a member of the committee when it considered the previous such bill—the Bankruptcy (Scotland) Bill. It is easier to speak on bills that deal with such subjects when one has been a member of the DPLR Committee. I was not a member of the committee when it dealt with the Legal Writings (Counterparts and Delivery) (Scotland) Bill, but I ended up speaking on it in the chamber, which was—as others have said—a bit of a challenge.
As I understand it, the DPLR Committee can consider only non-contentious bills, but I feel that we could relax that stipulation a bit and let the committee consider a slightly wider range of legislation. This is the second SLC bill dealing with contract law, with the Legal Writings (Counterparts and Delivery) (Scotland) Bill being the first. If I remember correctly, the purpose of that bill was to make it easier to sign contracts without all signatories being in the same place or having one piece of paper physically travel round all the signers.
On the bill that is before us, I am particularly attracted by the comment by the SLC, which said that it supports the policy to
“make arbitration in Scotland and under Scots law as attractive as possible to potential users from elsewhere as well as those already in the jurisdiction.”
That comment is to be welcomed. The fact is that we live in a competitive world and we want to win business for our legal system, just as we do for other sectors of our culture and economy. Scots law has long been distinct from law elsewhere; we want to harness that distinctiveness for our benefit. That is not to say that we want to make our system as cheap as possible or otherwise encourage a race to the bottom, as the saying goes. However, we want our law to be simple and straightforward, and if that requires moving from common law to statute, so be it.
I felt that the SLC submission put it clearly that case law can have the advantage of being more flexible but the downside of that is less certainty, which might put people off entering a contract at all or, at least, entering a contract under Scots law. I liked the comment by David Christie, to which others have referred, that uncertainty is effectively a “death spiral” that means a lack of case law, leading to the law not being developed.
However, in the specific case of third-party rights, it is actually the lack of flexibility in revising or amending a contract that is one of the key problems. Normally, a contract can be revised or amended by agreement, but the present situation makes that more difficult if a third party is involved. We have heard reference to the House of Lords judgment that enforced that inflexibility.
The report deals with the issue that increasing flexibility for the parties to a contract—that is, removing irrevocability—could reduce the rights of third parties. That is dealt with in paragraphs 62 to 73. However, the committee concluded at paragraph 74 that it supports abolition of the irrevocability rule and that sufficient protections have been provided.
I see from its report that the DPLR Committee has raised a number of issues with the minister. She agreed to consider them and has recently responded. The tone of that response seems to be very constructive, so I look forward to seeing what amendments might be lodged at stage 2.
However, today we are at stage 1 and we are considering the principles of the bill. I see that the committee spent some time on the question whether the bill will be used much in practice. That was a worthwhile question to ask. There is little point in our passing legislation for the sake of it or for the sake of appeasing Parliament’s detractors who measure our success by the number of bills that we pass.
The general feeling among witnesses seems to be that the bill will not have an immediate and dramatic impact, and nor will its provisions be widely used in the short term. However, it certainly moves us in the right direction. I note the comment of Professor Vogenauer—I am not sure whether I have pronounced that correctly—about which legal system provides the “law of choice”. I guess that in the longer term, many of us would want Scotland to be a small and flexible nation to which organisations and individuals might be attracted to do their business because of the legal and economic benefits.
I am always interested in the financial aspects of a bill, but I see that there were no responses at all to the Finance Committee’s call for evidence. That is reassuring.
I am happy to add my support for the bill, and I trust that members will allow it to proceed at decision time.
15:41Mike Rumbles (North East Scotland) (LD)
Being the 10th speaker in this debate is something of a challenge, even for me. [Laughter.] I will not take an intervention just yet. Everyone is agreeing and making largely the same points—but here goes.
I contrast this debate with the debate earlier in the week on the Seat Belts on School Transport (Scotland) Bill at stage 1. That bill was unanimously supported, as this bill will be, but in that debate major contentious issues were discussed. It was argued that the bill could be improved, and there was an effective exchange of ideas in the chamber. Today, everybody is agreeing with me.
That was meant to be a joke, but it fell flat. There we are. If you are a Liberal Democrat, it is not usual to have everybody in the chamber agreeing with you. I am glad that everybody is agreeing with me. I notice that the Greens are not here—I would like to have included them in that remark.
For the Liberal Democrats, I start as other members have done by thanking the Delegated Powers and Law Reform Committee and Parliament staff for their work to date on this relatively small but important bill. I acknowledge all those who have given evidence to the committee—in particular, the Scottish Law Commission, the deliberations and recommendations of which have given rise to this welcome and much-needed codification of third-party rights in contracts. As the committee makes clear in its report and as members across the chamber have highlighted, the bill commands unanimous support among stakeholders.
To ease proceedings, I will stick to about three minutes, Presiding Officer. I have just removed the next two and half pages of my speech.
Members: Hear, hear.
Mike Rumbles
There we are: “Hear, hear.”
Notwithstanding the benefits that the bill is expected to deliver, all the evidence suggests that there is unlikely to be an immediate impact should the bill be passed. In the short term, take-up and use of the new law is unlikely to be high. Over time, however, there is every reason to expect that the newly created certainty and flexibility should prove attractive and encourage greater use of the law in the future. On that point, it would be helpful to know whether the minister believes that steps can be taken to raise awareness or perhaps even encourage take-up. Has that been discussed with the Law Society, for example, and, if so, can the minister update Parliament on the outcome of those discussions? Indeed, are there particular circumstances in which the change in the law may be expected to have a more immediate impact or where the advantages of the bill are likely to be most significantly felt?
Rare is the bill that reaches stage 1 without identification of the need for some form of amendment. I note that the committee has helpfully identified a number of areas in which the bill’s language would benefit from being tightened up. I welcome the fact that ministers have accepted the case that the committee has made about the need to tighten up the language and that work on that is already under way. That is very helpful and should ensure that, in due course, Parliament is able to pass a bill that will deliver the certainty and flexibility that are needed, so that contract law in Scotland around third-party rights is fit for purpose.
I have failed by 12 seconds to stick to three minutes.
15:45Rona Mackay (Strathkelvin and Bearsden) (SNP)
As a member of the Justice Committee, I care deeply about access to justice and about demystifying the legal process so that it is better understood by the layperson. That is why I am happy to support the general principles of the Contract (Third Party Rights) (Scotland) Bill and the stage 1 report on it. The bill replaces the current law, which is causing uncertainty and confusion; in short, it is past its sell-by date. The proposed changes are based on recommendations by the Scottish Law Commission, which found that the existing law is no longer fit for purpose.
The bill provides a new statutory framework that incorporates clearer, more user-friendly rules on third-party rights. As we have heard, those rights can be of use in a wide range of both personal and commercial situations—for example, insurance contracts, company contracts, construction contracts and, last but not least, employers’ pension schemes, which might allow a third party to be nominated as the beneficiary if the employee dies while still in employment.
The difficulties with the current law include confusion over whether third parties have a right to claim damages for breach of a third-party right, and time limits for bringing claims under the current law are also unclear. The general rule is that most claims can no longer be made five years after the day on which loss, injury or damage first occurred. However, the Prescription and Limitation (Scotland) Act 1973 does not even mention third-party rights.
In addition, the rule of irrevocability is too inflexible. We know that, under Scots law, third-party rights have to be irrevocable, but there is uncertainty as to what that actually means. The SLC believes that the need for irrevocability is one of the main problems with the current law.
Scottish arbitration legislation under the Arbitration (Scotland) Act 2010 does not deal expressly with third-party rights, unlike legislation in England and Wales and some other countries, where the law enables third-party disputes, under certain circumstances, to be dealt with by arbitration.
It is clear that the law needs a new statutory framework, and that is why the bill has been universally welcomed by stakeholders such as the Royal Incorporation of Architects in Scotland, which says that it will clear up
“areas of ambiguity and doubt”.
The Law Society of Scotland states:
“The law on this issue is outdated compared to the approach of other modern legal systems”.
I note that the Delegated Powers and Law Reform Committee has raised concerns about the drafting of some provisions in the bill, and I am pleased that the Scottish Government will reflect on their clarity and usability, because that is, after all, the main purpose of the new statutory framework.
The good news is that the bill is not expected to result in any great costs and there is an argument that, in time, it could provide some savings to businesses and the legal profession.
I stated at the outset that I applaud anything that brings clarification to legal matters and enhances access to justice. For that reason, I am happy to support the general principles of the Contract (Third Party Rights) (Scotland) Bill and recommend it to the Parliament today.
15:48Gordon Lindhurst (Lothian) (Con)
Who can say that Scottish law is not interesting after the contributions that we have had on this matter here today? I must say that, as a member of the Faculty of Advocates and a long-time student of the law—details are in my entry in the register of interests, to which I make reference in passing—the concept of “uptake” of a new law seems to be rather less than traditional Scots legal parlance. “Jus quaesitum tertio” rolls off the tongue more readily than the thought of someone going into the supermarket of law and choosing a nice juicy law such as the Contracts (Third Party Rights) (Scotland) Act 2017. That may come more easily to parliamentarians such as us.
It is, however, right to consider the background to where we find ourselves today. The case of Carmichael v Carmichael’s executrix, which was reported in the 1920 volume of Session Cases at page 195 of the House of Lords reports, is seen as one touchstone of the current common law in Scotland on third-party rights. It is instructive to consider that the case was decided almost 100 years ago and that it arose out of events that took place more than a century since. I think that it is helpful to think briefly about the individuals in that case, because to do so brings us face to face with the reality of what most, if not all, law is about—fellow human beings like ourselves.
No doubt, Mr Hugh Fletcher Carmichael did not think that he would be making legal history when he accepted that proposal for insurance on 21 October 1903, and nor is it likely that he wished to ever see the policy that was taken out on the life of his son, Ian Carmichael, encashed on his son’s death. For many years, he paid the annual premium of 9 pounds, 10 shillings—but no pence—in
“lawful money of Great Britain”,
to use the words of the policy. His son, Ian, joined the new and fledgling air force during the first world war and tragically died in an air accident in the summer of 1916. Ian had left a will in favour of his aunt, Miss McColl, as his executrix. His father, however, had kept and retained the policy in his possession. Sadly, there followed a dispute between Mr Carmichael and Miss McColl about who was entitled to have the proceeds paid out to them. Out of that dispute arose the case of Carmichael v Carmichael’s executrix, which was eventually decided in the House of Lords in favour of Miss McColl.
I have outlined the background of the case and the individuals who were involved simply to bring to life the bill that we are debating. Among the dusty legal furniture of bills, sections and subsections, we need to remember that what we are dealing with is and will be important in the lives of the people of Scotland. That is one reason why it is important to have legal clarity, which is one of the driving purposes behind the bill.
With that in mind, and mindful that others have already made reference to the background, I would like to raise a number of points on drafting clarity in the bill. Most of them have already been presaged in the evidence before the Delegated Powers and Law Reform Committee and set out in its report. I note the letter from the minister to my colleague John Scott, as convener of the DPLR Committee, setting out the Scottish Government’s position on those matters, and I thank her for that. Notwithstanding that response, I will mention three matters in the hope that further thought might be given to them.
The first is the suggestion that was made in evidence to the committee that sections 1 and 2 could conveniently be made into a single section. That is not a bad idea, but I have a particular concern with section 2(1), which states that section 2
“makes provision elaborating on section 1”.
It is unclear to me why that is thought to be at all necessary, since the normal statutory practice—as indeed is done elsewhere in section 2—is simply to refer to the particular subsection that it is intended to modify. If one couples section 2(1) with section 2(7)—I can see people’s eyes glazing over as I go into the detail of this—the application of the normal rules of statutory interpretation may lead to undesired results. At best, section 2(1) appears unnecessary and superfluous but, at worst, and as is likely, it will be a source of difficulty that may result in litigation.
Secondly, sections 5 and 6 appear to depart from the normal mode of statutory drafting by putting a definitional subsection first followed by the subsection that it is meant to define and clarify. Contrast that with the immediately preceding section 4, which follows the usual order of a subsection that sets out a proposition and then a further definitional subsection. To a lawyer’s eye—at least mine—the approach in sections 5 and 6 looks like writing backwards. Although it may not alter the effect of the sections, it makes reading them awkward for the practitioner.
The third and final issue—here I commend the drafting of the bill rather than criticise it—is on section 10(1). My comment here is not meant as a criticism of the minister, because my understanding is that she has listened to and taken on board comment that section 10(1) is unneeded. However, my comment is that, in a bill that is meant to define and bring clarity to third-party rights and place them on a statutory footing, it is in fact probably helpful to have the definition that is contained in section 10(1). I simply raise that as another point.
For what they are worth, those are my humble comments on the bill at this stage.
15:54Emma Harper (South Scotland) (SNP)
I am pleased to speak in the debate, and I take the opportunity to thank the five members of the Delegated Powers and Law Reform Committee—John Scott, Stuart McMillan, Alison Harris, Monica Lennon and David Torrance—for their work. As is customary, as well as warranted, I thank the committee clerks who were involved in drawing together the report and everyone who gave evidence to the committee.
When I was elected, I was advised to participate in debates on subjects that I am not familiar with. That advice, which came from George Adam, the MSP for Paisley, was guid. I see that he is back in the chamber. Having listened to the minister’s opening speech and members’ speeches, I am already better prepared to explain some aspects of the law on third-party rights, and I look forward to supporting South Scotland constituents if the issue affects them.
Since coming to Parliament, I have attended many committee meetings, cross-party group meetings and events. Although my background is in healthcare, I have had to engage with many subject areas and learn a new language in order to assess and process information that is presented to me. I have adopted terms such as “Scottish statutory instruments”, “affirmative and negative instruments”, “process of annulment” and now—thanks to the Delegated Powers and Law Reform Committee—“collateral warranties”.
Learning about the various processes that are involved in running our country and developing knowledge in a range of areas and portfolios is something that I enjoy about an MSP’s job. Yesterday, I stumbled on colleagues having a conversation in the corridor about today’s debate. Although I am no expert on the law, I was interested to hear about the importance of the bill in bringing an area of Scots law into line with what happens internationally. Some reasons why the bill is important have been mentioned.
My goal today is to speak about the Scottish Law Commission’s report and convey to South Scotland constituents how the bill will positively affect them. I looked first for a definition of a third party. In simple and generic terms, a third party is any individual who does not have a direct connection with a legal transaction but who might be affected by it.
In 2014, the Scottish Law Commission examined Scots law on third-party rights and compared it with international benchmarks. The commission’s report, which was published last year, concluded that the existing law needed to be replaced. Its concerns were about a lack of clarity and inflexibility in the current law. The Law Society of Scotland highlighted that uncertainty and noted that lawyers do not like to give advice in areas where the law is unclear.
Scots law on third-party rights dates from a House of Lords decision in 1920, in the case of Carmichael v Carmichael’s executrix. Gordon Lindhurst described that case eloquently—if I had to repeat what he said, I would probably have to stop speaking after one minute.
In that case, the judges decided that it is not enough for contracting parties to convey an intention for a third party to have a right by saying so in their contract and stated that they must take additional formal steps to make that provision irrevocable. To establish the right under the current law, the contract must identify the third party; show an intention on the part of the contracting parties to confer a benefit; and provide a benefit that is unalterable and irrevocable. The current situation in Scotland is unfortunate, as contracts in favour of third parties are of great economic importance, particularly with regard to life insurance and contracts of annuity.
I understand that a further issue concerns the inability of groups of companies to rely on third-party rights to deal with group loss. That problem arises when a company operates using a complex group structure and suffers loss when problems are caused by a supplier’s failure to provide a particular service. In the absence of a clearly defined third-party right, the supplier can state by way of defence that it was contracting only with one member of the group. As a result of those complexities, the Scottish Law Commission found that legal practitioners and their clients are relying on English instead of Scots law in relation to third-party rights, as has been mentioned.
In evidence sessions, the committee was told that there has been an awareness of the problems that were created by the 1920 judgment since the period after the second world war. However, Professor Beale of the University of Warwick told the committee that there had been an equally long period between the identification of the problem and its resolution in England and Wales.
The bill was supported universally during the committee’s evidence sessions. It will implement the Scottish Law Commission’s recommendations and reform the common law on third-party rights.
Earlier, I thanked the witnesses for the evidence that they provided. I am aware that the minister, Annabelle Ewing, was extremely knowledgeable about the complexities of third-party law when giving evidence to committee. It is welcome news that our minister is well informed in her portfolio.
The bill has been welcomed by stakeholders including the Law Society of Scotland and the Royal Incorporation of Architects in Scotland. Third parties will benefit from the bill because how a third party may enforce his or her right will become clearer. For example, as has been mentioned, if a mother books a holiday for her spouse and her children and the holiday fails to deliver on promises that were made in the contract, the mother can claim damages for her disappointment, but her spouse and each child will also be able to claim, as third parties with rights under the contract.
16:00Mary Fee (West Scotland) (Lab)
In closing for Scottish Labour, I thank everyone for taking part in the debate. It is clear that we all agree that the bill makes a necessary change to our legal system that will benefit all parties that enter into contracts. I thank the Scottish Law Commission for undertaking the work and producing the resulting bill, and I thank the Delegated Powers and Law Reform Committee for producing an informative stage 1 report.
To ensure that our legal system is fair, balanced and just, Scottish Labour supports the changes that the Scottish Law Commission has proposed. By replacing the common-law third-party rights system with a statutory version, we can end the uncertainty and inflexibility of the current system. The committee report informs us that the bill is universally supported and welcomed by all stakeholders.
The lack of speed in law reform is not a new issue to politicians or to those in the legal profession, and the proposed changes to third-party rights in Scotland are not unique in their lack of progress to reform the law. Nearly a century after the House of Lords judgment in Carmichael v Carmichael’s executrix, it is right that we make the necessary changes soon. I was surprised to read the evidence from Professor Beale of the University of Warwick. He highlighted that, in England and Wales, the work to change third-party rights started in 1937, but legislation was produced only in 1999.
On the bill’s general principles, the creation of legal certainty and flexibility is an important and crucial benefit of replacing the common law with a statutory approach. The committee reports that
“the common law position is unsustainable as case law is unlikely to develop fast enough to deal with the problems identified”.
That view was shared by those who provided evidence.
On creating legal certainty, we read that David Christie of the Robert Gordon University described the current system as a “death spiral”. Those are strong words. Lawyers are by nature risk-averse creatures, and they have to be for obvious reasons. Businesses, investors and public bodies also fear uncertainty. We only have to consider the constitutional quagmire that grips the UK to know that. We read that, as a result of the uncertainty, lawyers are resorting to other jurisdictions for certainty. David Christie rightly referred to the bill as rebooting the common law.
I turn to the members who have spoken in the debate. They have illustrated the benefits that the bill will bring in areas such as insurance and finance. In her opening remarks, the minister spoke of the need for legislation that is “fit for purpose”. Ben Macpherson also referred to that.
Monica Lennon spoke about the savings that the bill may bring, which the Law Commission and the Royal Incorporation of Architects highlighted in evidence. Claire Baker spoke about the need for clarity and the uncertainty that exists, while highlighting the need to protect third parties. John Mason touched on the need to make arbitration more attractive. As one of the closing speakers in the debate, I whole-heartedly support Murdo Fraser’s opening remarks.
To return to the bill, the flexibility that it will bring is a key benefit that addresses an issue that has been raised by several members, including Stuart McMillan and Alison Harris. The abolition of the irrevocability rule is welcome in order to make it easier to create and remove third-party rights in contracts. The committee’s report and the bill’s explanatory notes give details about the inflexibility under the current common-law approach.
The Law Society of Scotland and the Faculty of Advocates support the abolition of the irrevocability rule. In supporting the abolition and welcoming increased flexibility, Kenneth Rose, a partner in CMS Cameron McKenna, said that the required flexibility
“would make our legal system more attractive and more user-friendly for individual parties.”—[Official Report, Delegated Powers and Law Reform Committee, 21 March 2017; c 20.]
It is right that we abolish the rule, to ensure the required protections and balances for third parties that are affected by contracts.
I recently criticised the Scottish Government during the stage 1 debate on the Railway Policing (Scotland) Bill for trying to fix something that was not broken. Here is an area of law that is broken and must be fixed. The Contract (Third Party Rights) (Scotland) Bill might not be on an issue that is as important to the public as policing is, but the bill is necessary for our businesses, investors, public bodies and any other users of Scots law to ensure legal certainty in contracts, and we in Scottish Labour are happy to support the principles of the bill.
The Deputy Presiding Officer
I call Adam Tomkins. Strangely enough, we now have time in hand, so you may have a generous seven minutes, but not too generous.
16:06Adam Tomkins (Glasgow) (Con)
When Murdo Fraser and I contracted with our whip not to have to speak in James Dornan’s earlier members’ debate on the Lisbon Lions, we had little idea that we would have to sign a collateral warranty to appear in this debate instead. As Rangers fans—that is, supporters of Scotland’s most successful club—it was nice to listen earlier today to memories of Celtic’s historic achievements.
My law school colleagues past and present would be both appalled and alarmed to know that I was speaking in a debate about the law of contract. Not only was the law of contract my worst paper at university, but I had the misfortune to study the English law of contract, not Scots law. The minister, Annabelle Ewing, referred to there being “eminent jurists” in the chamber this afternoon. I do not know whom she was referring to: I am sure that she was not referring to me because I am certainly not an eminent jurist in the law of contract. Constitutional law is my field.
There are some overlaps between contract law and constitutional law, and I was reminded of the great work by Sir Henry Maine, “Ancient Law”. The principal argument in that great work is that, over the centuries, law moved from status to contract and from a hierarchical order to a voluntary compact. Stanley Baldwin, the great interwar Conservative Prime Minister, said that Henry Maine had been his most influential tutor, although he confessed that he could not quite remember whether Maine’s argument had been that law had moved from status to contract or the other way round. It just goes to show, I suppose, that one can be a successful political leader without paying any attention in one’s law lectures.
Contracts allow people and companies to create rights and duties that can be enforced in court. In general, those rights and duties are enforceable only between parties to the contract, and no right or obligation can be created in respect of someone who is a stranger to the contract and is termed a “third party”. In some legal systems, the rule is strictly enforced. In Scots law, by contrast, it has long been recognised that, in certain limited circumstances, a contract can contain enforceable rights in favour of a third party. We have heard in numerous contributions, including that from the minister, how those third-party rights can be used in a wide range of personal and commercial situations, including in insurance contracts, in contracts involving company groups, in construction contracts, which Ben Macpherson and others mentioned, and in pensions law.
The current common law is widely criticised in Scotland, not least because of the rule of irrevocability, which insists that the third-party right, to be enforceable, must be clear to the third party from such circumstances as delivery or intimation or equivalent, and that the parties to the contract intended to give up the right to change their minds about granting the third-party right.
Brodies LLP, one of Scotland’s leading law firms, said in evidence to the Delegated Powers and Law Reform Committee that Scots law in this area is
“stuck in the 17th century”,
which is an odd thing to say about an area of law that really dates from a case that was decided in 1920. However, it is widely regarded as being historical, inflexible and not fit for purpose. The irrevocability rule is, as I have said, particularly controversial and, as we have heard, representatives of the Law Society of Scotland and the Faculty of Advocates have welcomed the bill and its proposed removal of that rule.
It has been difficult to find very much politics in the bill, which is probably a good thing. However, I want to make one point that the minister might or might not wish to respond to when she winds up. It is very important for Scots law to retain its market competitiveness; there is competition in legal systems, and we have heard numerous members this afternoon talk about how Scots lawyers currently draft contracts that are enforceable under English law—in other words, in the English courts—rather than under Scots law, because of the antiquated nature of our rules on third-party contracts.
We have also heard how this area of law changed in England as long ago as 1999, and we are changing it in Scotland only now. I know that we are doing so because the Scottish Law Commission reported on it only relatively recently, but my question to the minister is this: if there are other areas of Scots law in which we are losing our market edge or our competitiveness because the statute book has not been kept up to date and the common law is falling behind, is it part of the Government’s thinking to encourage the Scottish Law Commission to identify such areas at an early opportunity and report on them so that we can update Scots law and ensure that it is able to compete effectively with other legal systems in Europe and, indeed, the United Kingdom? It seems odd that we are only now dealing with a problem that was created by a House of Lords judgment of nearly a century ago. I know that the law does not always move very quickly, but this seems to be particularly slow.
As Stuart McMillan and others pointed out in their speeches, the bill is an exercise in codification of an aspect of Scots contract law. That puts me in mind of the very first essay that I wrote as a very young law student a number of years ago. The subject that I was studying in the first year of my law degree was comparative legal systems, and my tutor asked me to write an essay comparing the strengths and limitations of codification as a means of law reform. No copy remains of the essay—
Murdo Fraser
Shame!
Adam Tomkins
No—I am glad to say that no copy of that rather tiresome essay remains, but I remember that I took the French civil code as an example of what not to do when using codification as a means of legal reform. The first half of the essay was a series of arguments against codification; I started the second half with the phrase, “However, to be fair to be French” and then wrote about why we should codify things. However, my tutor took exception to that opening phrase; he underlined it and wrote in the margin, “Arrest this unhealthy tendency. Never be fair to the French”—the only bit of advice that I remember getting from that law tutor.
In closing, I want to make two quick comments about specific aspects of the bill that the Delegated Powers and Law Reform Committee has referred to and to which the minister responded in her letter, which I saw for the first time earlier this afternoon. I urge her to pause and think again about these issues, given the strength of the concerns that have been reported by the committee.
The first point is about the use of the word “undertaking” in section 1, which seems from the evidence that the committee has marshalled to be ripe for wholly unnecessary litigation. It might be worth taking another look to ensure that the word is being used appropriately and has been defined as carefully and as specifically as possible.
Secondly, with regard to the committee’s comments on sections 4 to 6, which have already been mentioned this afternoon, I note that the Faculty of Advocates was quite strong in its evidence that the provisions are not drafted appropriately. That view is shared by the Law Society of Scotland. Craig Connal said that he could see litigation written all over the provisions, and Professor Hugh Beale, who wrote the book on the law of contract from which I studied at university many years ago, said that the provisions are hard to understand—although so was his book. I urge the minister, gently and respectfully, to reconsider whether the provisions have been appropriately drafted. I know that she said in her letter to the committee yesterday that she is satisfied “On balance” that the bill is satisfactorily drafted, but I think that the issues merit further consideration.
The Deputy Presiding Officer
Mr Tomkins, I have taken advice and we reckon that that was a B+.
Adam Tomkins
A very generous mark, Presiding Officer.
16:15Annabelle Ewing
I thank members for their speeches in what has been a worthwhile debate. There were important contributions from across the chamber, from lawyers—eminent or otherwise—and non-lawyers alike. I thank everyone for their consideration of the important issues that are the subject of this debate.
I am pleased that members share the aim of reforming the law in the area and that there is support across the chamber for the general principles of the bill. A clear, positive and readily accessible statement of law, in a short statute, will improve the standing and value of Scots law. Contracting parties to a contract and those who are provided with third-party rights in a contract should all benefit from the law being clearer, up to date and more flexible.
Where a third party has rights under a contract as a result of the bill, they will be able to take full advantage of the legal remedies for any breach of contract that will be available to a party to that contract, where they are undertaking in favour of that party. Also, the defences on the part of the contracting parties will be available in the context of any claims from the third party, to the extent that they are relevant—that is an important issue, although it was not much touched on in the debate.
I listened with interest to what members said and I will reflect on all the points that were made, including Gordon Lindhurst’s technical points and Adam Tomkins’s point about the meaning of “undertaking” in section 1.
In the time available, I will try to respond to at least some of the other points that members made. On the pace of law reform in general, Murdo Fraser and Mary Fee mentioned the 1999 act in England and Wales. As we see from the committee’s report, discussions on the matter first started in 1937. It is important to recall that the legislation in England and Wales introduced third-party rights into the law for the first time, because of course in that jurisdiction people had proceeded on the basis of privity of contract. Therefore, we cannot make a direct comparison with what has been going on in Scotland, where third-party rights have been in existence for centuries. I think that the earliest case on record is the Moncur case, which dates from the 1590s—perhaps Mr Tomkins’s B+ would have been higher if he had made reference to it. Scotland has had the common law of third-party rights for centuries.
However, particular problems developed with regard to certainty and flexibility around 100 years ago, with the seminal case of Carmichael v Carmichael’s Executrix, to which many members referred—members are becoming quite relaxed about citing seminal legal cases, which I think is a positive development. We heard an eloquent overview of the facts of Carmichael v Carmichael’s Executrix from Gordon Lindhurst. Problems started to develop as a feature of that case, but it is not fair to say that there has been an on-going focus on third-party rights since the case, because it is only recently, as society and commerce and industry have developed, that the problems have been felt more acutely. It is important to place the issue in context.
Of course, we recognise that the 1920 case caused a lot of problems, which is why we are engaged in this important work to bring our law into the 21st century and fix the problems that have been identified. That is what the bill is designed to do.
More widely in the area of law reform, it is important not to react to particular decisions and developments overnight, because a one-off decision by a court can often be quickly overturned. In many instances, the law is capable of keeping itself in good order. However, that has not proven to be the case with regard to the importance of third-party rights in Scots law. At the same time, it is important to note that the law is often complex and needs careful thought and consideration. I agree with Stuart McMillan that the DPLRC plays an important role in Parliament to progress law reform; in that regard, Adam Tomkins suggested that we may seek to accelerate that process. We have regular meetings with the Scottish Law Commission and I am due to meet Lord Pentland in, I think, September, so that is an issue that we can discuss for the future. Reforms to the civil law of Scotland were a matter for the Westminster Parliament prior to the reconvening of this Parliament. In a crowded agenda, the focus was perhaps not on reforming Scots civil law.
Stuart McMillan asked whether it might be possible, in our approach to law reform via the DPLRC, for the Scottish Law Commission to consider bundling up—to use an ungainly word—what would otherwise be discrete issues. I am happy to take up with Lord Pentland the extent to which that would be possible when we next meet. We are all interested in ensuring that we keep our law up to date.
With regard to how quickly we feel this legislation will be taken up if passed by Parliament, we cannot be definitive. I stress that our starting point here is different from that in England and Wales, where the 1999 legislation introduced third-party rights in England and Wales for the first time. From a commercial perspective, it is clear to members of the legal profession and to those conducting business in Scotland that the law will be a route to save time and money—and legal fees—which are always attractive options, particularly for business. Therefore, it may be that recourse to the workarounds to which we have referred this afternoon, including collateral warranties, will become less attractive over time.
On the issue raised by Mike Rumbles and others of how to encourage use of the new legislation, reform of this kind often has a momentum of its own. Professor Hector MacQueen of the Scottish Law Commission, who is listening to our deliberations, has spoken at many law conferences about the bill, which I hope has encouraged others to consider making recourse to it once, I hope, it is passed by the Parliament. Members of the Law Society of Scotland and the Faculty of Advocates have also spoken about the role that they can play in raising the profile of the legislation. David Wedderburn of the Royal Incorporation of Architects in Scotland presented evidence to the effect that he would issue practice notes to members alerting them to when the bill will become an act. In my evidence at stage 1 in committee, I said that we will work with business and the legal profession to facilitate take-up and awareness. I will be happy to raise the matter with the Law Society of Scotland in our regular discussions.
I have heard members’ comments about sections 4 to 6, and I will reflect on them further. The Government is committed to the principle that legislation should be clear and accessible, and it needs to be effective. I stress that no one who offered evidence suggested that sections 4 to 6 do not produce the right result. All that has been said is that the sections could, perhaps, be drafted differently. While it is always possible to draft provisions differently, there is no immediate consensus among witnesses on what might be a better formulation. I will reflect further, but I remain not entirely persuaded that such changes would be necessary to ensure that the bill is as effective as it can be.
On the question whether there should be dispute resolution mechanisms in the bill—for example, adjudication—I point to the evidence of Hew Dundas, honorary vice-president at the Scottish Arbitration Centre. He concluded by saying:
“In summary, adding adjudication is not necessary and could be confusing.”—[Official Report, Delegated Powers and Law Reform Committee, 18 April 2017; c 10.]
We are minded to reflect the position of such an eminent witness, and that was also the conclusion that the committee itself reached.
This has been a comprehensive debate on an important bill and I thank all members for their contributions and their impressive diligence in considering the very technical issues that are raised by the bill. Their diligence is much appreciated and it has made for a much more interesting debate than some of us had initially foreseen.
I have indicated that I intend to lodge amendments to sections 10 and 12, and that I am still reflecting on the points that were raised on section 9, on arbitration. Although I believe that those might have arisen as a result of a misunderstanding, we will continue discussions with the SLC and the Faculty of Advocates.
With regard to other general points that were raised and that I have not had time to refer to in my winding-up comments, I will look carefully at all the contributions that were made. I look forward to progressing the bill through the next stages in the Parliament.
The Presiding Officer (Ken Macintosh)
Thank you, minister. That concludes the stage 1 debate on the Contract (Third Party Rights) (Scotland) Bill.
25 May 2017
Vote at Stage 1
Vote at Stage 1 transcript
The Presiding Officer (Ken Macintosh)
There are three questions to be put as a result of today’s business. The first question is, that motion S5M-05762, in the name of Annabelle Ewing, on stage 1 of the Contract (Third Party Rights) (Scotland) Bill, be agreed to.
Motion agreed to,
That the Parliament agrees to the general principles of the Contract (Third Party Rights) (Scotland) Bill.
The Presiding Officer
The next question is, that motion S5M-05776, in the name of Joe FitzPatrick, on the Committee of the Regions, be agreed to.
Motion agreed to,
That the Parliament endorses the Scottish Government's proposal to nominate, as a representative of the Parliament, Maurice Golden MSP as a full member on the UK delegation to the Committee of the Regions for the remainder of the parliamentary session to 2021.
The Presiding Officer
The final question is, that motion S5M-05767, in the name of Joe FitzPatrick, on the approval of a Scottish statutory instrument, be agreed to. Are we agreed?
Members: No.
The Presiding Officer
There will be a division.
For
Adam, George (Paisley) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Harper, Emma (South Scotland) (SNP)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Hyslop, Fiona (Linlithgow) (SNP)
Johnstone, Alison (Lothian) (Green)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Matheson, Michael (Falkirk West) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rumbles, Mike (North East Scotland) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wightman, Andy (Lothian) (Green)
Yousaf, Humza (Glasgow Pollok) (SNP)
Against
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Balfour, Jeremy (Lothian) (Con)
Beamish, Claudia (South Scotland) (Lab)
Bowman, Bill (North East Scotland) (Con)
Briggs, Miles (Lothian) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Chapman, Peter (North East Scotland) (Con)
Corry, Maurice (West Scotland) (Con)
Fee, Mary (West Scotland) (Lab)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Golden, Maurice (West Scotland) (Con)
Gray, Iain (East Lothian) (Lab)
Greene, Jamie (West Scotland) (Con)
Harris, Alison (Central Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Lennon, Monica (Central Scotland) (Lab)
Lindhurst, Gordon (Lothian) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Scott, John (Ayr) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Tomkins, Adam (Glasgow) (Con)
Wells, Annie (Glasgow) (Con)
Whittle, Brian (South Scotland) (Con)
The Presiding Officer
The result of the division is: For 50, Against 27, Abstentions 0.
Motion agreed to,
That the Parliament agrees that the Apologies (Scotland) Act 2016 (Excepted Proceedings) Regulations 2017 [draft] be approved.
Meeting closed at 16:34.25 May 2017
Stage 2 - Changes to detail
MSPs can propose changes to the Bill. The changes are considered and then voted on by the committee.
Changes to the Bill
MSPs can propose changes to a Bill – these are called 'amendments'. The changes are considered then voted on by the lead committee.
The lists of proposed changes are known as a 'marshalled list'. There's a separate list for each week that the committee is looking at proposed changes.
The 'groupings' document groups amendments together based on their subject matter. It shows the order in which the amendments will be debated by the committee and in the Chamber. This is to avoid repetition in the debates.
How is it decided whether the changes go into the Bill?
When MSPs want to make a change to a Bill, they propose an 'amendment'. This sets out the changes they want to make to a specific part of the Bill.
The group of MSPs that is examining the Bill (lead committee) votes on whether it thinks each amendment should be accepted or not.
Depending on the number of amendments, this can be done during one or more meetings.
First meeting on amendments
Documents with the amendments considered at this meeting held on 27 June 2017 :
First meeting on amendments transcript
The Convener
Agenda item 2 is stage 2 proceedings on the Contract (Third Party Rights) (Scotland) Bill. I welcome to the meeting Annabelle Ewing, the Minister for Community Safety and Legal Affairs—good morning, minister—and from the Scottish Government, Catriona Marshall, solicitor, legal directorate; and Jill Clark, bill team leader, civil law reform unit.
For the purposes of stage 2, members should have copies of the bill, the marshalled list and the groupings of amendments.
Sections 1 to 8 agreed to.
Section 9—Arbitration
The Convener
Amendment 1, in the name of the minister, is grouped with amendment 2.
The Minister for Community Safety and Legal Affairs (Annabelle Ewing)
I have set out previously that it would be a matter of concern if the bill’s provisions were not readily understood. The committee is aware of the concerns that were raised by the Faculty of Advocates in respect of section 9, and my officials met a representative from the faculty to discuss those concerns and section 9 in general.
A number of the points that were raised in those discussions go beyond third-party rights into possible wider changes to the law of arbitration. Such changes were not part of the recommendations of the Scottish Law Commission that underpin the bill and, unlike those recommendations, have not been consulted on. I therefore do not consider the bill to be the right vehicle for addressing all the points that were raised by the Faculty of Advocates. However, to the extent that the points raised by the faculty expose a certain amount of confusion about what section 9(3) is intended to achieve, there is merit in amending it to clarify the intended relationship between section 1 and section 9.
The bill is intended to allow contracting parties to give third parties a right to resolve disputes by arbitration, even if the dispute arises from outside the contract—for example, personal injury claims that arise under the law of delict. The essentials necessary for the creation of such a procedural third-party right to arbitrate are the same as for any third-party right and are set out in section 1.
Section 1 is the legal basis for a third-party right to arbitrate, as it is for any other kind of third-party right. However, without further provision, a third party would be unable to enforce that right because, under the Arbitration (Scotland) Act 2010, only a person who is a party to an arbitration agreement can go to arbitration. Section 9 is a technical fix to overcome that obstacle. It allows someone with a third-party right to arbitrate to be treated as a party to the relevant arbitration agreement.
Section 9 is what is often called a deeming provision. It provides for someone who is not a party to an arbitration agreement to be deemed to be a party. It is a common drafting device. Exactly the same approach to the issue of allowing third parties to arbitrate is taken in section 8 of the Contracts (Rights of Third Parties) Act 1999, which applies to England and Wales.
Amendment 1 is intended to make it explicit in section 9(3)(c) that the third-party right is to enforce the undertaking to arbitrate. That should remove any doubt that the third-party right referred to in that subsection must be a third-party right arising under section 1.
Amendment 2 is consequential on amendment 1.
I move amendment 1.
The Convener
As no colleague has a comment, is there anything that you want to say in winding up, minister?
Annabelle Ewing
No. I have explained our position. Thank you.
Amendment 1 agreed to.
Amendment 2 moved—[Annabelle Ewing]—and agreed to.
The Convener
Amendment 3, in the name of the minister, is grouped with amendments 4, 5 and 7.
Annabelle Ewing
We have had an opportunity to reflect on the view offered by Professor Vogenauer on section 10 and also the Law Society of Scotland’s evidence to the Scottish Government that the provision is superfluous. We have concluded that section 10(1) is not needed.
Section 10(1) provides for the third party to renounce their right and confirms that the effect of such renunciation is extinction of the right. It is simply a statement of what is already a matter of general principle. However, section 10(2) remains in point, as it provides that where a third party raises a court action it is not to be taken as a renunciation of the right to submit the same dispute to arbitration.
Amendment 5 will leave out section 10, while amendment 3 will move what is presently section 10(2) to sit within the wider arbitration provisions under section 9.
Amendments 4 and 7 simply remove cross-references to section 10.
I move amendment 3.
The Convener
As no member has a comment to make, do you have anything to add in winding up, minister?
Annabelle Ewing
No. Thank you.
Amendment 3 agreed to.
Amendment 4 moved—[Annabelle Ewing]—and agreed to.
Section 9, as amended, agreed to.
Section 10—Renunciation of third-party right
Amendment 5 moved—[Annabelle Ewing]—and agreed to.
Section 11 agreed to.
Section 12—Abolition of common-law rule: jus quaesitum tertio
The Convener
Amendment 6, in the name of the minister, is in a group on its own.
10:15Annabelle Ewing
In written evidence to the committee, Shepherd and Wedderburn raised the very valid issue of how the bill would impact on contingent or conditional third-party rights that have not yet crystallised at the point at which the bill’s provisions are commenced. It was not the intention that the bill should impact adversely on those rights. The amendment to section 12(1) addresses that point.
In that regard, it is important to point out that, because section 13 allows contracting parties to choose to apply the bill’s third-party rights rules to pre-commencement undertakings, a single undertaking could give rise to a common-law and a statutory third-party right. That is why amendment 6 adds new subsections (1A) and (1B) to section 12.
The purpose of new subsection (1A) is to ensure that if a pre-commencement contract gives rise to a statutory third-party right, any parallel common-law right becomes unenforceable. That is to avoid the confusion that could result from a third party simultaneously having a common-law and a statutory third-party right.
Linked to that, new subsection (1B) will prevent a third party from being able to assign a statutory third-party right to enforce an undertaking—which means that someone else can enforce it—and then be able to enforce it themselves through a revived common-law right.
I move amendment 6.
The Convener
Thank you for that clarification.
I see that members have no comments to make. I presume that you have nothing further to add, minister.
Annabelle Ewing
No.
Amendment 6 agreed to.
Section 12, as amended, agreed to.
Section 13—Application
Amendment 7 moved—[Annabelle Ewing]—and agreed to.
Section 13, as amended, agreed to.
Sections 14 and 15 agreed to.
Long title agreed to.
The Convener
That ends stage 2 consideration of the bill. I thank the minister and her colleagues for coming to the meeting and delivering the stage 2 process.
Annabelle Ewing
Thank you.
10:17 Meeting suspended.10:18 On resuming—
27 June 2017
Additional related information from the Scottish Government on the Bill
Revised explanation of the Bill (Revised Explanatory Notes)
Stage 3 - Final amendments and vote
MSPs can propose further amendments to the Bill and then vote on each of these. Finally, they vote on whether the Bill should become law
Final debate on the Bill
Once they've debated the amendments, the MSPs discuss the final version of the Bill.
Final debate transcript
The Deputy Presiding Officer (Christine Grahame)
The next item of business is a debate on motion S5M-07774, in the name of Annabelle Ewing, on the Contract (Third Party Rights) (Scotland) Bill at stage 3.
Before the debate begins, I point out that the Presiding Officer is required under standing orders to decide whether, in his view, any provision in the bill relates to a protected subject matter—that is, whether it modifies the electoral system and franchise for Scottish parliamentary elections. If it does, the motion to pass the bill requires support from a supermajority of members. That is a two thirds majority of all members, or 86 members.
In this bill’s case, the Presiding Officer has decided that no provision in the Contract (Third Party Rights) (Scotland) Bill relates to a protected subject matter. Therefore, the bill does not require a supermajority to be passed at stage 3. I am sure that we are all relieved to hear that.
15:42The Minister for Community Safety and Legal Affairs (Annabelle Ewing)
I refer members to my entry in the register of members’ interests, where they will find that I am a member of the Law Society of Scotland. I hold a practising certificate, but I am not currently practising.
It gives me great pleasure to open this stage 3 debate on the Contract (Third Party Rights) (Scotland) Bill and to invite members to agree to pass the bill this afternoon. I thank the Delegated Powers and Law Reform Committee members for their hard work and careful scrutiny of this narrow and specialist bill—they have been a great credit to the Parliament. I thank MSPs across the chamber for their comments on the bill during its passage through the Parliament, as well as the organisations and individuals who provided oral and written evidence to the committee. I am also very grateful to the Delegated Powers and Law Reform Committee clerks for their support.
I pay special thanks to the Faculty of Advocates. Its members have given their time and expertise generously as we have developed the legislative proposals on arbitration. I also thank all the witnesses who have supported the process and highlighted helpful improvements to the bill. Last, but not least, I thank the Scottish Law Commission. As always, the commission’s advice and views have been invaluable.
As I indicated during the stage 1 debate, the bill has its origins in the Scottish Law Commission’s “Review of Contract Law Report on Third Party Rights”, which was published in July 2016. This is the third bill to be considered as part of the SLC bill procedure. I take the opportunity to state that the process in place to scrutinise such bills continues to work very effectively; it is clear that we can continue to have confidence in that process.
I have mentioned the bill’s specialist nature, but it became clear through the scrutiny process that its provisions have the potential to impact on any one of us who may find ourselves the third party to a contract, so ensuring that the bill fulfils the policy aims of making the law fairer, clearer and more consistent is important.
As we have heard, these are the first significant developments to the law in this area in nearly 100 years.
The Contract (Third Party Rights) (Scotland) Bill has been widely welcomed by the legal profession and other professions, such as members of the Royal Incorporation of Architects in Scotland, recognising as they did the potential usefulness of the provisions for construction law.
The concept of third-party rights in Scots law is termed jus quaesitum tertio. I know that colleagues have become expert in the term as we have gone through the various debates on the bill, but jus quaesitum tertio dates back to the 17th century and the term is still used today. It has the literal meaning of “right acquired by a third party”.
For a third-party right to be in existence, the current law requires that the contracting parties intended to benefit the third party and that the right must be constituted irrevocably. However, this common-law doctrine is rarely used in Scotland and has been the subject of some criticism on the basis that it is inflexible and does not meet modern standards. The law has also been criticised as being unclear, with Lord Reed of the United Kingdom Supreme Court remarking that there is a need for commercial parties to have
“clearer rules in relation to third party rights under contract”.
The absence of confidence in the law as it stands among Scots law practitioners means that English law is sometimes chosen in place of Scots law to govern transactions that are otherwise Scottish in nature. The current uncertainty over third-party rights and the lack of flexibility therefore damage the reputation of Scots law by limiting its use.
The law as it stands is simply not working well for most people, if at all. We are aware that workarounds such as resorting to English law or the use of collateral warranties have been adopted to compensate for the law not being fit for purpose, but those workarounds can bring their own difficulties and issues.
A clear, positive and readily accessible statement of the law in a short statute will improve the standing and value of Scots law domestically—and internationally, given the multijurisdictional nature of many of the transactions in which contracts are created. The bill therefore abolishes the existing common-law rule and establishes a statutory basis for the operation of third-party rights in Scotland.
Most importantly, the bill addresses the issue of irrevocability. For a third-party right to be in existence, the current law requires that the right must be irrevocable, so when the contract is formed—assuming that the criteria for the creation of jus quaesitum tertio are met—the contracting parties are unable to withdraw or change the third-party right. This is at odds with the freedom of the contracting parties themselves to modify, cancel or otherwise amend the terms of the contract.
Much of what is contained in the bill is intended to be the default position. It remains open to the contracting parties to define exactly what they intend to happen. Overall, I believe that the bill strikes the right balance by providing an effective legal framework for third-party rights that does not cut across party autonomy. I am pleased that this is a view that was shared by a number of witnesses. As the Scottish Law Commission points out in its business regulatory impact assessment,
“the Bill is general in its application and not confined to any particular sector or group. A wide range of sectors will potentially be able to make use of it.”
Voting for the Contract (Third Party Rights) (Scotland) Bill today will ensure that an important area of the law is subject to long-overdue reform. It is an area that could impact on any of us at any time should we find ourselves as third parties to a contract. For that reason, it is important that the law meets expectations and is fit for purpose, and I believe that these reforms will achieve that aim.
I move,
That the Parliament agrees that the Contract (Third Party Rights) (Scotland) Bill be passed.
15:48Graham Simpson (Central Scotland) (Con)
Before I start, I want to pay tribute to the work of my colleague, John Scott, who was convener of the current DPLR Committee at the start of this session and a member of its predecessor committee. He can take a considerable amount of credit for the smooth and constructive, yet careful and rigorous, way that the bill has been scrutinised. I thank him and the committee.
I have had a lot of catching up to do on contract law and third-party rights. It was not something that we talked about much in my previous job as a Scottish Sun journalist, nor is it the big talking point on the number 31 bus in East Kilbride, but it is an important bill.
As I said, this has been a constructive process. As John Scott said in the stage 1 debate, this is the third Scottish Law Commission bill to be scrutinised by the Parliament. The Scottish Law Commission bill process itself is relatively new and was created to improve the implementation rate of Scottish Law Commission reports. To put it simply, the process is there to update, simplify and improve the law in Scotland. As parliamentarians, lawmakers and representatives of the people, we welcome that.
The bill follows the Scottish Law Commission’s report, “Review of Contract Law: Report on Third Party Rights”, which was published in July 2016. I thank the commission and in particular Professor Hector MacQueen for their constructive and helpful engagement with the Parliament at all points in the process.
The bill proposes changes to the law in Scotland that allows parties to a contract to create rights for third parties. The main aim of the bill is to make the law clearer and more usable in that area.
Some may find the bill quite dry, technical and ever-so-slightly dull; I might even have fallen into that trap, but that would be to miss the point. This is a bill that provides clarity in law, not just for politicians, Queen’s Counsels and judges, but for ordinary men and women in everyday situations in all our constituencies.
The bill means that if a family holiday goes wrong, family members who did not book the break themselves but still suffered the holiday from hell will be able to enforce their rights under statute. It means that, under statute, an informal carer will be able to enter into a contract to get building work done on behalf of a client who suffers from dementia and lacks the capacity to make that contract. And it means that a subcontractor who is running a small business and struggling to pay their bills will have the statutory right to claim payment from the contractor who signed the original contract. For real people, in everyday situations, the bill will ensure fairness and equity.
As I said, in what was a constructive process, the Scottish Law Commission engaged with the Parliament from the start and will doubtless do so again. I also thank the Scottish Government—in particular, the minister, Annabelle Ewing—for listening to the DPLR Committee and responding to the will of the Parliament.
The Government’s stage 2 amendments responded to the concerns of witnesses such as the Faculty of Advocates, the Law Society of Scotland and others, and to the recommendations in the committee’s stage 1 report. The amendments cleared up any semblance of doubt over the enforcement of the right in relation to arbitration, and they removed the potential for unintended consequences of the application of existing third-party rights under the common law of jus quaesitum tertio—or something like that—after the provisions of the bill are commenced.
The amendments ensured that what will emerge following the parliamentary process will be even clearer than the bill that was introduced. I thank the minister and her officials for their constructive, democratic and thoughtful approach.
On 5 September, the First Minister announced that in this year’s programme for government there will be a prescription bill, which the DPLR Committee expects to scrutinise. I look forward to scrutinising that bill and to engaging constructively with the Scottish Law Commission. Indeed, I look forward to holding the Scottish Government to account as we work together to improve Scots law and ensure that it remains relevant and competitive alongside other legal systems.
Perhaps most important, I look forward to hearing and championing the views of those who are affected by the legislation, from advocate to artist, solicitor to student and professor to punter.
United States Supreme Court judge Louis Brandeis said:
“If we desire respect for the law, we must first make the law respectable.”
The work of the Scottish Law Commission in seeking to update and improve Scots law to make it relevant and competitive is to be commended, and I thank the commission for its work on the bill. I support the motion in the name of the minister, that the Contract (Third Party Rights) (Scotland) Bill be passed.
The Deputy Presiding Officer
Thank you, Mr Simpson. You are surrounded by advocates and I do not think that they are finding this the least bit dry.
15:54Claire Baker (Mid Scotland and Fife) (Lab)
This afternoon, we conclude the passage of the Contract (Third Party Rights) (Scotland) Bill. For those of us who contributed to the stage 1 debate, I imagine that much of today’s debate will be fairly familiar. This is not the most debated, controversial or wide-ranging piece of legislation that we have considered, but that does not diminish its value.
I thank the Scottish Law Commission for its work on the bill. The commission plays a significant role in ensuring that our laws are relevant, accessible and consistent. For over 50 years, it has worked to recommend laws to improve, simplify and update the law of Scotland. In the past 20 years, the Scottish Parliament has provided greater opportunities for taking forward its work, and high-profile—even contentious—pieces of legislation have originated from it. They include the Abolition of Feudal Tenure etc (Scotland) Act 2000, which took considerably longer to pass than the bill that we are considering, and the legislation on the protection of the rights and interests of adults who are incapable of managing their own affairs. However, the Contract (Third Party Rights) (Scotland) Bill has passed with a degree of consensus. I note that such was the consensus that, at stage 2, MSPs were entirely content with the minister’s amendments.
I thank the committee members for their work on the bill and all the witnesses who gave evidence to the committee. The expansion of the role of the Subordinate Legislation Committee to include law reform is proving to be effective. We owe a debt of gratitude to the many witnesses who give us their time and expertise to support the legislative process and the work of the Parliament. Indeed, the witnesses provided effective reasoning to the committee, which highlighted those issues in the stage 1 report. Their input has been invaluable.
The discussion at stage 1 persuaded the minister to lodge a number of amendments at stage 2, including amendments to provide greater clarity to section 9 and its relationship with section 1, following discussions with the Faculty of Advocates. In speaking to the amendments, the minister said that a number of the points that the faculty raised
“go beyond third-party rights into possible wider changes to the law of arbitration”
and that she did not
“consider the bill to be the right vehicle for addressing all the points that were raised by the Faculty of Advocates.”—[Official Report, Delegated Powers and Law Reform Committee, 27 June 2017; c 2.]
Will the minister in closing reflect on the merits of those points from the Faculty of Advocates and on whether the Government intends to pursue a different route to addressing them?
The minister also recognised the Law Society of Scotland’s argument that section 10 is superfluous, and she lodged amendments to address that, as well as amending sections 12 and 13.
The amendments that were agreed indicated that there was a desire to deliver a bill that is clear, efficient and readily understood.
The bill that we intend to pass, which originated from the important work of the Scottish Law Commission, has received considerable scrutiny from the Parliament, and there has been valuable insight and improvement from suggestions that other interested parties made. It will provide a new statutory framework with clearer rules on third-party rights and greater clarity in Scots law. However, there is recognition that the act is unlikely to be widely adopted at any time soon and that practitioners will continue to use the established workarounds or English law. Although there is substantive evidence that supports the introduction of the bill, its use is likely to be limited, with a preference for the familiar and a tendency towards caution to be anticipated. However, in time, if the benefits of the act are clear, that may encourage legal practitioners and their clients to use it, particularly in the pursuit of flexibility. It provides an additional tool to be used alongside existing alternatives.
What role does the Scottish Government see for itself and its partners in promoting the potential benefits of the legislation? Raising awareness of it and the opportunities that it presents could increase the application of the law, which would lead to increased confidence and familiarity. I hope that the Government will consider the merits of taking that work forward once we have concluded this afternoon’s business.
15:58Rona Mackay (Strathkelvin and Bearsden) (SNP)
Anything that demystifies the legal process so that it is better understood by the layperson and improves access to justice can only be good. That is why I am happy to support the Contract (Third Party Rights) (Scotland) Bill at stage 3. The bill will replace the current law, which is causing a great deal of uncertainty and confusion.
The Delegated Powers and Law Reform Committee, which was the lead committee, took evidence from a wide variety of stakeholders, who welcomed the reform. I suppose that it could come under the category of being a commonsense improvement. The Royal Incorporation of Architects in Scotland said that it will clear up
“areas of ambiguity and doubt”,
and the Law Society of Scotland stated:
“The law on this issue is outdated compared to the approach of other modern legal systems”.
The general aim of the bill is to provide a new statutory framework with clearer and more usable rules on third-party rights. The proposed changes are based on recommendations that were made by the Scottish Law Commission, which found that the existing law is no longer fit for purpose—or, to put it another way, it is long past its sell-by date.
Under the current law, it is not clear whether third parties have a right to claim damages for breach of a third-party right so, as I understand it, the bill strengthens the rights of the third party. Examples of where such rights might apply are insurance contracts, company contracts, construction contracts and, of course, pensions, where an employer’s pension scheme might allow a third party to be nominated as the beneficiary if an employee dies while in employment.
Time limits for bringing claims under the current law are also very unclear. The general rule is that, in most cases, a claim can no longer be made five years after the day on which loss, injury or damage first occurred. However, the Prescription and Limitation (Scotland) Act 1973 does not even mention third-party rights. Under Scots law, third-party rights have to be irrevocable, but there is uncertainty as to what that actually means, and the SLC believes that the need for irrevocability is one of the main problems with the current law. Put simply, the rule of irrevocability is too inflexible and is one of the main problems with the current law. That rule in itself would be cause for a new statutory framework.
The bill also includes rules under which third-party rights to arbitrate could be created. In England, Wales and some other countries, the law enables third-party disputes in certain circumstances to be dealt with by arbitration. However, Scottish arbitration legislation under the Arbitration (Scotland) Act 2010 does not deal expressly with third-party rights, and the bill will correct that.
I end with the good news that the bill is not expected to result in any new costs; indeed, there is an argument that it could provide savings to businesses and the legal profession.
I stated at the outset that I applaud anything that brings clarification to legal matters and enhances access to justice. For that reason, I am happy to recommend the Contract (Third Party Rights) (Scotland) Bill to the Parliament.
16:01Alison Harris (Central Scotland) (Con)
I am delighted to see further progress in the passage of the bill and I welcome the opportunity to take part in the stage 3 debate. I have been involved in the scrutiny of the bill in my role as a member of the Delegated Powers and Law Reform Committee. I have enjoyed the process and, over the months, my initial view that the measure was worthy of support has never wavered. Since I spoke in the stage 1 debate back in May, amendments have been made that make the bill even more fit for purpose. They included the tightening of the language that is used to ensure that the provisions are readily understood and other measures that were unanimously agreed to by the committee.
The committee heard compelling evidence from bodies such as the Scottish Law Commission that the existing law really needs to be updated. That was brought home when, during discussion on the bill, reference was made to case law going back to Wood v Moncur in 1591. Case law in the centuries since then has only added to difficulties with interpretation, flexibility and clarity, to such an extent that the Law Society of Scotland has said that many lawyers are not comfortable with giving advice in an area of the law that is so unclear.
As regards modern day commercial activity, the current law clearly is not working. Many groups choose to enter into contracts under the more flexible terms that are set out under the revised law in England and Wales. Since 1999, the law there has been in sharp contrast to the irrevocable nature of the law here in Scotland. The need for irrevocability in the current law is one of its main problems and has led to significant barriers to the use of third-party rights, as it restricts the freedom of the contracting parties.
I hope that another of the pleasing effects of the bill will be a return of parties, happy once more to use the law of Scotland in settling disputes and seeking remedy. Reform will not only remove concerns that limit the usage of Scots law in commercial transactions but keep Scots law fit for purpose for modern usage. The bill will bring much-needed clarity to the law and it will remove many of the barriers and address many of the concerns that the Scottish Law Commission and others have told us about. The bill will not only assist business but be of great benefit to individuals, whether they are booking a family holiday or are a third-party beneficiary of a life insurance policy.
Further, the bill clarifies that a third party could be entitled to any remedy to which a contracting party would be entitled, and it removes any doubt as to whether third parties have the right to claim damages. It will bring our law more into line not only with the law of our neighbours in England and Wales but with that of friends across the Commonwealth, in places such as Singapore, New Zealand and several Australian states, which in recent years have moved away from positions similar to the current law in Scotland.
In conclusion, I thank all my colleagues on the Delegated Powers and Law Reform Committee, the former convener John Scott, the current convener Graham Simpson, ministers, parliamentary staff and all those from outside the Parliament who have assisted us in our role.
The bill gives us the opportunities that I have mentioned; it gives us clarity and flexibility, and it restores confidence that Scots law on this topic is among the most up to date in the world. It will be of great benefit to both businesses and individuals. I am delighted to continue my support for the bill this afternoon.
16:05Monica Lennon (Central Scotland) (Lab)
As another member of the Delegated Powers and Law Reform Committee, it is a pleasure to follow Alison Harris. As you have heard, Presiding Officer, over the past several months, the committee has been the lead committee on the bill. It is fair to say that we have become fairly well acquainted with the arguments for why the change in the law is necessary.
As I previously set out during the stage 1 debate on the bill, the evidence of those from whom we have received submissions—including the Law Society of Scotland, the Scottish Law Commission and the Faculty of Advocates—is clear that the current common-law arrangements are not sufficient and that clarification is required. As other colleagues have said, the fact that there is so much agreement on the content of the bill is welcome. The largely uncontroversial nature of the bill also undoubtedly means that members will be repeating many of the same points throughout this short debate.
When reading the Official Report of the stage 1 debate, I was struck by Murdo Fraser’s comments—I do not think that he is in the chamber—in which he rhymed off all the challenges that we face as MSPs and said that, despite his own legal background, he had found it quite challenging to construct a lengthy speech on the bill. I am not sure whether that was because of the bill’s dry and technical nature or because we all agree so much on its merits. I associate myself with that sentiment of consensus.
I thank the witnesses who gave expert evidence to the committee over several committee meetings. I also thank the clerks for their support throughout the process. I echo Graham Simpson’s remarks in his tribute to John Scott, whom we already miss from the committee. However, I am sure that Graham Simpson will be an able replacement. We are already learning about our new convener and the fact that he spends time on the number 31 bus in East Kilbride—you might be interested to hear that, Presiding Officer.
Witnesses have told us that codifying and updating the law on third-party rights will provide clarity, flexibility and revocable rights, which will promote the use of Scots Law. That was an important point for everyone on the committee.
Ross Anderson from the Faculty of Advocates suggested that the bill might benefit people who might not have access to expensive legal advice. He made an important point when he said:
“One of the great advantages of the bill is that it sets out, in modern language, what the law actually is.” —[Official Report, Delegated Powers and Law Reform Committee, 21 March 2017; c 8.]
I pay tribute to the Scottish Law Commission for being a leader on the issue and for proposing the changes to Parliament.
Although the changes appear to be largely technical and not, on the face of it, to be of mainstream and pressing importance, the issue of third-party rights is important and the change will make a difference to many people, as the minister pointed out in her opening speech. As Rona Mackay noted, the change to the law could benefit many people, from those involved in insurance contracts to those involved in construction contracts and pensions.
I want to pick up one point that arose in the evidence to the committee in respect of future enforcement of the law. It has been said that the bill will promote the use of Scots law, but although there has been widespread support for the bill, witnesses have suggested that they do not expect the bill’s provisions to be adopted straight away.
I hope that we will see the bill used and adopted in Scotland. I also hope that the Scottish Law Commission and the Law Society of Scotland, among others, can play their part in raising awareness of the changes among their members to ensure that those who need the provisions of the bill will be able to make good use of them.
I am no legal expert, but the evidence that the committee heard clearly highlighted that the codifying of third-party contract rights will be important to improving the use and reputation of Scots law.
I welcome the amended bill.
16:09Stuart McMillan (Greenock and Inverclyde) (SNP)
I put on record my thanks to the former convener of the DPLR Committee, John Scott, for his chairing of the committee, particularly as the bill progressed through it. John was a fine convener and I am sure that Graham Simpson will be, too—I wish him well in his new role. It can be a challenge to take part in scrutinising a bill at the end of its progress, but Graham Simpson made an excellent contribution today, for which I thank him.
The bill is not contentious, as we can gather from the speeches that we have heard from around the chamber. It provides the opportunity to codify and modernise the common law on third-party rights. As was stated during the passage of the bill, the current law has caused some concern and confusion, but this bill, which was proposed by the Scottish Law Commission, will rectify that, which stakeholders have welcomed.
This is the third such bill from the SLC and the first in this parliamentary session. I was a member of the DPLR Committee in the previous session, when we scrutinised a similar bill, the Legal Writings (Counterparts and Delivery) (Scotland) Bill. At that time, I thought that the DPLR Committee was a useful avenue for Parliament to use to deal with law reform, and I am genuinely delighted that the committee now has the power and responsibility to look at law reform and to assist with that wider issue in Scotland.
The DPLR Committee has been supportive of the bill, as those who provided evidence suggested. Paragraphs 27 to 40 of the committee’s report touch on the speed of law reform and the introduction of the bill. The evidence shows that there was not much concern about that.
I return to a point that I made in committee and during the stage 1 debate. The minister stated in the stage 1 debate that, when she next met Lord Pentland, she would raise with him the issue of “bundling”. The SLC proposals relate to smaller, focused legislative improvements, but I asked the minister whether she and the Scottish Government, along with the SLC, would consider whether further SLC bills could incorporate more than one area of law reform. I am pleased that the minister provided a commitment to explore that issue in the future. Law reform does not take place regularly or in a vacuum and, as the bill and the area that it covers highlight, if it is possible to improve and update the law through having more SLC bills that cover multiple areas bundled together, we could make even more headway with law reform. However, we are not alone. Similar legislation was first mooted in Westminster in 1937, with a bill being presented to the UK Parliament in 1999.
Paragraphs 51 to 61 of our report highlight that, under the bill, the codification of the law of third-party rights provides certainty for users of Scots law. Law firms will be able to use the legislation, instead of using expensive collateral warranties or law from other jurisdictions. During the stage 1 debate, Murdo Fraser referred to collateral warranties, which were also touched on as we went through the evidence. Collateral warranties can be expensive and there was a hint that some organisations might still prefer to use them, because of the revenue that they can generate. The bill will help us deal with that and it will help Scots law. It will ensure that cases that do not use English law can use Scots law.
Witnesses were clear that there will not be a rush to use the new legislation, because training will certainly be required once the bill has been enacted. Nonetheless, it will, in time, be used for a greater number of contracts, and that can only be of economic benefit to Scotland.
Although the bill is short—it has only 15 sections—it was clearly well written, as only seven amendments were lodged, which were agreed to unanimously at stage 2.
I echo others’ comments by thanking the SLC, the Scottish Government, everyone in the DPLR team and witnesses for their efforts in bringing the bill to a successful conclusion.
16:14Mary Fee (West Scotland) (Lab)
I once again thank the Scottish Law Commission for undertaking the work that has resulted in the Contracts (Third Party Rights) (Scotland) Bill, which we are debating at stage 3. In ensuring that our legal system is fair, balanced and just, we must listen to the people who work daily in their legal fields. The Parliament took that approach with the bill.
I also thank the Delegated Powers and Law Reform Committee for its informative stage 1 report, which gave us an insight into why we need to make this small but crucial legal change. Speeches from around the chamber today have been supportive of the principle behind the bill and the need to make the change. In the short time that I have, it is difficult for me to reflect on all of them, but I am grateful for the consensual and constructive way in which colleagues have approached the debate, which was reflected in their speeches.
The bill has support from across the legal profession and has been backed by a range of stakeholders. Its general principles allow us to ensure legal certainty and flexibility in advancing third-party rights. Replacing the existing common law with a statutory version will end reliance on the ad hoc development of case law. That legal certainty should also allow parties who enter into a contract to use Scots law, not laws from other jurisdictions.
The policy memorandum informs us that the bill will promote the use of Scots law. However, witnesses who spoke to the Delegated Powers and Law Reform Committee raised a note of concern that the legal profession might not adopt the bill’s provisions following its ascent to an act. Witnesses indicated that legal practitioners and clients might continue to use familiar practices such as collateral warranties and English law. We will have to be mindful of that in the coming years to ensure that the bill’s ambitions are achieved. Scrutiny will be of key importance as the bill moves forward. Third-party rights must become more flexible, more adaptable and easier to understand and apply.
Another aim of the bill is to make it easier for contracting parties to create and remove third-party rights. The Law Society of Scotland and the Faculty of Advocates welcome the abolition of irrevocability. The abolition of the rule will also ensure that protections and balances are required for third parties that enter into contracts.
Scottish Labour will support the bill because we want a legal system that guarantees certainty while providing flexibility and fairness for all parties. In addition, when things go wrong, we need the right to proper arbitration. The bill can deliver those outcomes and is an important step forward. We are happy to support it and the motion in the minister’s name at decision time.
16:18Gordon Lindhurst (Lothian) (Con)
I echo the thanks of my colleague Graham Simpson to our colleague John Scott, who was the convener of the DPLR Committee when the bill was introduced to Parliament, for his sterling work on the bill and in that committee. He did not shy away from dealing with issues of detail in their occasional horror.
No doubt we are all agreed that simplification and clarification of the law is a good thing. As I commented in my speech in the stage 1 debate on the bill, the case of Carmichael v Carmichael’s executrix is a good illustration of the human importance of what we do in making law—law that can be for the good or the ill, even if it appears to deal with mundane and technical issues.
I will not repeat for the sake of speaking the areas already mentioned by others in which the bill will clarify and improve the law of Scotland, such as the current inflexibility of the irrevocability rule and the enforceability of third-party rights in relation to damages. Is this adieu to jus quaesitum tertio, as we lawyers pronounce it—no disrespect to my colleague Graham Simpson? Lord Stair spoke of that third-party right in I.10.5 of the second edition of his “Institutions of the Law of Scotland”, which was published in 1693, as quadrating to our customs.
I hasten to add, by reference to my entry in the register of interests, as a practising advocate, that Stair is no longer the daily resort of a Scottish court practitioner, nor is the case that Lord Stair referred to. That was Auchmoutie v Laird of Mayne, which was decided on 25 November 1609 and recorded in “Morison’s Dictionary of Decisions” at page 12126. We would not expect it to be, as it related to an action of “spuilzie of teinds” and—a very ancient term—the “circumduction of the term”, which was no longer applied in the “modern form of procedure”, according to the seventh edition of “Bell’s dictionary and digest of the law of Scotland”, which was published in 1890. There is a serious point to make. Unless an act, even an act of this Parliament, is entirely clear, the courts can be thrown back on historic terms and case law.
I made certain comments in the previous debate, including on section 10(1) of the bill as introduced, which related to renunciation by the third party. However, that provision does not appear to have remained in the bill.
The policy memorandum to the bill stated:
“The principal policy aim of the Bill is to replace the current common law”.
The financial memorandum referred to the abolition of the jus quaesitum tertio rule, but reference was made in the explanatory notes to the importance of having a clear method of rejecting the third-party right if desired, hence section 10(1) of the bill as introduced.
In her letter to the DPLR Committee dated 24 May 2017, the minister said that the Scottish Government had come to the view that section 10(1) was superfluous. She wrote:
“It is simply a statement of what is already a matter of general principle.”
Presumably, that is a general principle of the common law, which, at least, raises a question mark over the operation of the act. Question marks lead back to Stair, Auchmoutie, Bell and the Laird of Mayne.
I ask the minister whether, notwithstanding section 12, the bill that we pass into law today merely modifies the jus quaesitum tertio rule, completely abolishes the rule, or codifies the rule to make it purely statutory in the act-to-be—in other words, in the bill that we will vote on today. If there is no clear answer to that question, it could be goodbye, hello to jus quaesitum tertio.
The Deputy Presiding Officer (Linda Fabiani)
It is very difficult for a Presiding Officer who has to know whether words are appropriate.
16:22Annabelle Ewing
What can I say? On the Government side of the chamber, we verge to the view that it will be goodbye jus quaesitum tertio, but I will be happy to write in detail on the detailed point that Gordon Lindhurst raised.
I thank all members who have spoken in the debate for their contributions and their interest in this piece of legislation, which has demonstrated the importance of the bill and of modernising our law on third-party rights. As we have seen, we have been wending our way from jurisprudence that dates back to the 16th century through that from various centuries in between to bring us up to speed in the 21st century. In itself, that demonstrates the need for a fresh look at the matter.
I welcome Graham Simpson to his new role as convener of the Delegated Powers and Law Reform Committee. He recognised that, although this is perhaps not the most exciting of bills that the Parliament has had the opportunity to scrutinise, it is nonetheless important as it sets forth important rights for our constituents, which is what we should always come back to when we are debating matters in this chamber.
I welcome the support that has been expressed from the outset for the reforms, and I am grateful for the time that members have taken to engage with what is quite a discrete and specialist area of contract law and for the constructive way in which they have approached the scrutiny of the bill. I very much welcome the careful consideration that has been given.
The bill has, undoubtedly, benefited from a willingness among stakeholders to participate fully in the development of the legislation. There has been little, if any, disagreement about the need for the reforms, and the process has been more about ensuring that the provisions meet the aims of the reforms.
I again thank the committee for its supportive and helpful stage 1 report, which enabled us to focus clearly on a few issues that might have benefited from further consideration. We took on board the committee’s views and we spoke further with key stakeholders. We were therefore able at stage 2 to lodge a few amendments, which have ensured that the bill is clear and usable and that a small gap in its application was plugged. We are confident that the amendments that we made to the bill at stage 2 have further improved it. That was a very useful process, and all credit goes to the hard-working, diligent members of what is now Mr Simpson’s committee.
I am of the firm view that any opportunity to enter into an informed discussion with stakeholders about various issues enhances policy considerations. In response to the specific question raised by Claire Baker, I would say that we indeed addressed some of the issues that were raised by the Faculty of Advocates, in particular regarding arbitration. My door is always open to members of the faculty should they wish to pursue any of the issues further.
The ability to create third-party rights is important. There are many reasons for third-party rights to be created and, as we have heard, those apply as much to individuals as to businesses. They provide vital entitlements and protections for individuals and businesses. Contracting parties to a contract and those who are provided with third-party rights in a contract should all benefit from the law being clearer, up to date and more flexible, for we all deserve a legal framework that is fit for purpose. The bill will deliver that.
In the few minutes that I have left, I will deal with a couple of themes that have recurred during the passage of the bill; indeed, they have been referred to this afternoon. I hope that we are about to pass the bill, and a key issue is, of course, what happens next. How do we encourage recourse to the legislation? Reform of this kind often turns out to have a momentum of its own.
Professor MacQueen has spoken personally about the bill at various contract law conferences, and I am sure that that method of spreading the word will continue. During the passage of the bill, Jonathan Gaskell and Craig Connal also spoke about the role of the profession and practitioners in raising the profile of the eventual legislation.
I am confident that there are strong advocates for the bill among the profession. Numerous positive articles have already been written and published about the legislation, and all of that will continue. David Wedderburn of the Royal Incorporation of Architects in Scotland spoke about getting in at the ground level. He indicated that the Royal Incorporation of Architects would be issuing practice notes to members alerting them to when the bill becomes an act.
All those actions will help to ensure that the relevant people are aware of the change in the law and what it could mean for them. Once people start to use the provisions in the bill, that, too, should instil confidence that the law is now fit for purpose. The Scottish Government stands ready to do what we can to help the process along.
I am optimistic that, given the clear benefits of the bill in saving time and money, people will no longer need to look to workarounds such as applying the law of England, which is more costly for contracts here in Scotland, or using collateral warranties—I am optimistic that those workarounds will no longer be necessary, so we can save time and money. I am therefore optimistic that that will be a great incentive to members of the legal profession in properly advising their clients.
An analogy with the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015—again, a Delegated Powers and Law Reform Committee bill—is perhaps apposite here. Prior to that legislation being passed by the Parliament, the inability of documents to be executed in counterpart meant that Scots law was less attractive in the commercial world. However, we have received some qualitative anecdotal feedback that supports the view that the 2015 act has had a positive impact in that regard. It has generated efficiencies. For some, it has made the decision to use Scots law easier. We see no reason why the Contract (Third Party Rights) (Scotland) Bill would not have a similar effect in improving and encouraging the use of Scots law to create third-party rights.
In response to a point made by Stuart McMillan—I know that he raised it in the committee—on having discussions with Lord Pentland about the approach to the reform process, I am to meet with Lord Pentland, I believe, in the next few weeks, and I will of course be happy to raise that point directly with him.
I believe that the Contract (Third Party Rights) (Scotland) Bill is a worthy one for the Parliament’s consideration. It will bring much-needed reform, and it will help individuals and businesses. It will make the law of Scotland more modern, bringing us from where we have been earlier today—the 16th century—right up to the 21st century. Once again, I thank members across the chamber for their stated support during this stage 3 debate, and I invite them to pass the bill tonight.
21 September 2017
Final vote on the Bill
After the final discussion of the Bill, MSPs vote on whether they think it should become law.
Final vote transcript
The Presiding Officer (Ken Macintosh)
There are two questions today. The first question is, that motion S5M-07584, in the name of Tom Arthur, on the Edinburgh Bakers’ Widows’ Fund Bill, be agreed to.
Motion agreed to,
That the Parliament agrees to the general principles of the Edinburgh Bakers’ Widows’ Fund Bill and that the bill should proceed as a private bill.
The Presiding Officer
The next question is on a bill at stage 3, so we will hold a division even if the decision is unanimous.
The question is, that motion S5M-07774, in the name of Annabelle Ewing, on the Contract (Third Party Rights) (Scotland) Bill at stage 3, be agreed to.
For
Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Allan, Alasdair (Na h-Eileanan an Iar) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Balfour, Jeremy (Lothian) (Con)
Ballantyne, Michelle (South Scotland) (Con)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Bibby, Neil (West Scotland) (Lab)
Bowman, Bill (North East Scotland) (Con)
Briggs, Miles (Lothian) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Burnett, Alexander (Aberdeenshire West) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Carlaw, Jackson (Eastwood) (Con)
Chapman, Peter (North East Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Corry, Maurice (West Scotland) (Con)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Ewing, Annabelle (Cowdenbeath) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Golden, Maurice (West Scotland) (Con)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Greene, Jamie (West Scotland) (Con)
Greer, Ross (West Scotland) (Green)
Griffin, Mark (Central Scotland) (Lab)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Harper, Emma (South Scotland) (SNP)
Harris, Alison (Central Scotland) (Con)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Hyslop, Fiona (Linlithgow) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lennon, Monica (Central Scotland) (Lab)
Lindhurst, Gordon (Lothian) (Con)
Lochhead, Richard (Moray) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Mason, Tom (North East Scotland) (Con)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McDonald, Mark (Aberdeen Donside) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McNeill, Pauline (Glasgow) (Lab)
Mitchell, Margaret (Central Scotland) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Neil, Alex (Airdrie and Shotts) (SNP)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rumbles, Mike (North East Scotland) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Russell, Michael (Argyll and Bute) (SNP)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Elaine (Central Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Tomkins, Adam (Glasgow) (Con)
Wells, Annie (Glasgow) (Con)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Whittle, Brian (South Scotland) (Con)
Wightman, Andy (Lothian) (Green)
Yousaf, Humza (Glasgow Pollok) (SNP)
The Presiding Officer
The result of the division is: For 109, Against 0, Abstentions 0.
Motion agreed to,
That the Parliament agrees that the Contract (Third Party Rights) (Scotland) Bill be passed.
Meeting closed at 16:32.21 September 2017