By Daren Curry, Partner and Mark Elias, Law Graduate
With the current restrictions on travel, businesses and social distancing, the otherwise simple process of signing and witnessing legal documents has become a challenge. For insurers, this presents difficulties where Releases and other settlement agreements need to be executed. In this article we look at the various means for executing documents electronically, including a look at the temporary measures put in place in various states to facilitate this during COVID 19.
Electronic Transactions Act 2000 (Cth)
The Electronic Transactions Act and its counterpart in each state facilitate the execution of some documents electronically as follows:
- A transaction (which includes a contract or agreement) is not invalid because it took place wholly or partly by means of one or more electronic communications.
- If the signature of a person is required on a document by law, that requirement will be satisfied through an electronic signing platform or program been provided that:
- a reliable method is used to identify the person and to allow the person to attach their signature or acknowledge their execution of the document in some way; and
- the other party to the document or the person for whom the document is being signed has given their consent to the first person signing it electronically.
The method used to identify a person must satisfy basic evidentiary requirements (for example, the method should be capable of storing an audit trail, time stamps and access logs that evidence that the relevant signatories “signed” the contract).
The Regulations made under these Acts differ in each state but, electronic execution cannot be used for:
- Affidavits and other documents required to be signed before being lodged with a judicial body in connection with legal proceedings; or
- Any requirement for a document to be verified, authenticated, attested or witnessed.
Importantly, the legislation is facilitative, not mandatory. It exists to enable transactions to be affected electronically that otherwise would not have been possible but for the legislation. It does not provide a code for electronic execution or formation of contracts, it simply provides that requirements for writing or signing are taken to be satisfied in certain ways, bit does not limit the ways in which those requirements can be satisfied.
Electronic Document Platforms
Electronic document platforms facilitate the electronic formation and execution of contracts. Various security measures can be used to demonstrate an “authenticating intention” of the signer such as a code sent by SMS to the signer’s mobile phone or requiring the signer to answer knowledge-based questions, before they can access the document. These measures are critical to making sure there is a record of the signatory personally authenticating the placement of his or her signature on the specific document in question. They also record things such as the IP address as to where the signing process occurred.
Most electronic execution platforms have processes which purport to cause both signatories to concurrently “sign” the same electronic document, or simultaneously apply their signatures to a single electronic document with their authorisation, together with a mechanism to record that fact.
Whilst some platforms allow for witnessing, they still require the witness to physically see the signatory’s screen whilst they place their signature, following which the witness signs. However, the point of the platforms is they negate the need for a witness as they provide a means of independently verifying the signatory has signed the document.
Examples of platforms that facilitate electronic signatures that are designed to meet the requirements of the Act include DocuSign, SignNow, PandaDoc and RightSignature.
Documents that do not require witnessing
The electronic signing platforms do not typically allow for the witnessing of documents and as a result, are generally not suitable for documents such as Deeds, Affidavits and Statutory Declarations that are required by law to be signed and witnessed.
If there is no statutory requirement for a particular contract to be in writing or signed, there is nothing to prevent a party from using an appropriate electronic method to enter into a written and signed contract.
The witnessing of a simple agreement signed by an individual is often requested by the parties to the contract but is not a legal requirement. As witnessing is only required for evidentiary purposes, other means of establishing the authenticity of the signature are advised if witnessing is not possible.
These can include electronic execution which essentially provides an electronic verification and trail of evidence that the signatory signed, or some other means of establishing that the signatory signed the document.
Under the Corporations Act people dealing with companies are entitled to assume that a document has been duly executed by the company if the document appears to have been signed in accordance with S127, unless they knew of suspected the relevant assumption to be incorrect. Given these assumptions, it is recommended that execution in accordance with s127 be insisted upon when dealing with Corporate insureds.
S127 permits a company to execute a document with or without its company seal provided it is signed (if not using the seal) or witnessed (if using the seal) by:
- two directors of the company; or
- a director and a company secretary of the company; or
- for a proprietary company that has a sole director who is also the sole secretary – that sole director/sole secretary.
It is generally accepted that, if two signatories are required (ie, 1 or 2 above), both are required to sign the same document for s127 to apply, although they are not required to sign in each other’s presence.
Accordingly, the document needs to be signed by one director and then the same document signed by the other director or secretary. There is some doubt whether the same document requirement can be met when the document is electronically signed.
As a result, the following scenarios may not amount to execution of the same document so as to engage s127:
- If one physically signs and the other uses an electronic signature;
- If one physically signs then scans the document to another director who then prints and signs it (as the document only bears an image of the first person’s signature)
- If each sign a separate electronic document
- If each signs a separate physical document.
The following methods would be effective:
- The document is printed, one director signs and then the same document is given to the other director who signs it.
- Both signatures are electronically applied to a single electronic document. A number of electronic execution platforms operate in this way, however there must be a single, static document rather two electronic signatures being sequentially applied to an electronic document.
Of course, just because an agreement is not signed in accordance with section 127 does not mean that the company will not be bound by it. It simply means that the other parties to the agreement cannot rely upon the assumption in the Corporations Act that the agreement has been duly executed by the company.
Deeds of Release
The main advantages of a deed are:
- the absence of a requirement of consideration and
- the 12 year limitation period (or 15 years in South Australia and Victoria) for actions for breach to be brought
- They are also regarded as the most serious promise that can be made, over and above a normal agreement.
- Unlike a normal agreement, a deed is also binding on a party when it has been signed, sealed and delivered to the other parties, even if the other parties have not yet executed the deed document.
In the case of individuals, whilst the legislation differs in each state, Deeds generally require the elements of ‘signed, sealed, and delivered’ on ‘vellum, parchment, or paper’ with a witness to the signature, which is usually satisfied by wet ink on paper in the physical presence of a witness who then signs the Deed.
In the case of Corporations, they may execute Deeds in accordance with the requirements of s127 of the Corporations Act.
There are differing schools of thought as to whether Deeds can be executed electronically.
In the case of Corporations, the Electronic Transactions Regulations excludes the operation of the Electronic Transactions Act from the Corporations Law which suggests that it is the Commonwealth Parliament’s intention that a company should not be able to execute a deed (or an agreement) electronically.
Since 2018 the Conveyancing Act 1919 NSW permits deeds to be created (and therefore exist) in electronic form and to be electronically signed and attested by individuals in accordance with Part 3 of the Conveyancing Act. However, the audio-visual witnessing requirements in NSW are difficult to adhere to when the document is being signed electronically (as the requirements contemplate watching the physically sign a hard document) over we are of the view that the prudent approach in NSW is to insist on wet signing of Deeds.
In other states, Australian law does not recognise the validity of a deed which exists in electronic form. The common law requirement that deeds be on ‘paper, parchment or vellum’ prevails, meaning that deeds purported to be executed in electronic form with eSignatures are not valid.
In summary, whilst there is a view that Deeds can be executed electronically, we are of the view that there is an inherent risk with the electronic execution of deeds and the prudent approach is to continue to require deeds to be signed on paper with wet ink signatures.
Temporary measures to facilitate document execution during COVID 19
Due to the difficulties of documents being printed and other difficulties with signatures being witnessed at present, various states and territories have taken steps to introduce temporary legislation to assist parties to execute documents.
The Electronics Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 came into force from 22 April 2020 and facilitates the witnessing of documents being signed via audio visual link. It does not affect the requirement for documents to be physically signed. It only applies to documents required by law to be witnessed, including Deeds, Affidavits and Statutory Declarations.
Its key features are as follows:
- The witness may observe the signatory signing the document over audio visual link in real time and satisfy the requirement of seeing the face of the person
- The witness can confirm the signature was witnessed by signing a counterpart of the document as soon as practicable after observing the witness or signing the document the signatory signed once scanned and returned to them by the witness.
- The witness must be reasonably satisfied that the document is the same document.
- The witness must endorse the document or copy specifying the method used to witness the signature and that the document was witnessed in accordance with the Regulation.
- The link must be audio and visual. Telephone calls are not acceptable, nor are photographs or the use of recorded video footage.
The COVID-19 Omnibus (Emergency Measures) Act 2020 in force from 24 April 2020
Makes amendments to Oaths and Affirmations Act 2018 dealing with both the execution and witnessing of documents governed by that Act (being Affidavits and Statutory Declarations etc), not Deeds.
Its key features are as follows:
- The signatory and/or witness may sign the document by electronic means.
- The witness may verify the signatory’s identity and witness the document being signed via audio link or audio-visual link
- The witness may sign a scanned hard copy or electronic copy of the document
- The witness must state on the Affidavit (as applicable);
– If it was signed or initialled by the deponent by electronic means;
– If specified things (i.e., identification of the deponent and witnessing of the signature) in respect of the affidavit were done by means of audio link or audio-visual link;
– If the affidavit is a scanned hard copy or an electronic copy, not an original.
- A Court can admit an Affidavit into evidence if compliance with the requirements was not reasonably practicable.
The COVID-19 Emergency Response Act 2020 is in force from 23 April 2020 and contemplates that regulations will be made in relation to the requirements under current legislation for the physical attendance of witnesses for certain documents.
The Explanatory Notes suggest that the regulations will apply to Wills, Powers of Attorney, Statutory Declarations and Deeds and will make use of “a range of communication technologies”.
The COVID-19 Emergency Response (Section 17) Regulations 2020 maintain the requirement that for the purposes of witnessing the signing, execution, certification or stamping of a document; or taking any oath, affirmation or declaration in relation to such a document, the witness must be physically present.
Courts SA has published a Practice Note made by the Chief Justice of the Supreme Court, Chief Judge of the District Court and Justice Blue of the Supreme Court that if there are health or logistical reasons as to why an affidavit cannot be witnessed, then recommendations have also been made regarding the solicitor involved in the matter putting on his or her own affidavit exhibiting the unsworn affidavit, as discussed by the Courts Administration Authority of South Australia.
The COVID-19 Disease Emergency (Miscellaneous Provisions) Act 2020, in force from 27 March 2020 contemplates Regulations being made, however not as broad as those in NSW, Victoria and Queensland. It provides that the Minister may by notice declare that despite any requirement to the contrary, signatures or documents may be taken or evidenced by electronic means specified in the notice.
No relevant notice applicable to Deeds, Affidavits etc have been issued yet.
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