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Execution of deeds in the digital age

Business man and women using a laptop outside a cafe

The rise of e-commerce, and the emergence of new accompanying technologies, has resulted in substantial changes to Australia’s legal regime. The enactment of legislation such as the ‘Electronic Transactions’ legislation, both at a Commonwealth and State level,[1] has removed some of the legal impediments that might have otherwise restricted the ways in which e-commerce transactions could be carried out. Despite these developments, however, a number of issues have remained without express legislative or judicial clarification. One of those is the validity of an electronically created, signed and attested deed.[2]

Required formalities for deeds 

Deeds are documents that gain binding legal status upon the satisfaction of certain formalities. Whilst each jurisdiction has its own applicable legislation,[3] the statutory formalities are generally as follows:

  • the deed must be signed by the executing party;
  • that signature must be attested by at least one non-party witness;[4] and
  • the deed must be delivered (i.e. an intention to be legally bound must be shown from some fact or circumstance, including words or conduct).[5]

In New South Wales, the ordinary formalities have been supplemented by the insertion of s 38A into the Conveyancing Act 1919 (NSW) (assented to and commencing on 22 November 2018). The provision expressly confirms that ‘a deed may be created in electronic form and electronically signed and attested’,[6] although there is no explanation of the procedure required to achieve electronic attestation. There is no counterpart to s 38A in any other Australian jurisdiction.

A different set of formalities was traditionally applied at common law,[7] which provided that deeds had to be:

  • written on paper, vellum or parchment (paper requirement);
  • sealed;
  • delivered; and
  • executed with an intention on the part of the executing party that it should take effect as a deed.

The ‘sealing’ requirement has been dispensed with (or otherwise deemed to be satisfied upon valid signature and attestation) by the relevant statutes in each jurisdiction. The validity of an electronically created, signed and attested deed, accordingly, depends on:

(1)    whether the paper requirement is still a required formality or whether it has been dispensed with by statute; and

(2)    whether the statutory formalities – signature, attestation and delivery – can be satisfied by an electronic deed.

Does the common law paper requirement still apply?

The requirement that a document must be written on paper, vellum or parchment in order to qualify as a deed was traditionally strictly applied.[8] Whilst common law formalities have undoubtedly been modified by statute, there are differing views as to the extent of the modification.

In relation to New South Wales, s 38A (which expressly permits electronically created deeds) plainly does away with the common law paper requirement.

The answer is less straightforward in other jurisdictions despite the absence of any express statutory provision for a paper requirement. On one view, the applicable legislation in each jurisdiction exclusively prescribes the necessarily formalities (to the exclusion of the common law).[9] For example, s 45(2) of the Property Law Act 1974 (Qld) provides as follows:

‘(2)     An instrument expressed:

(a)     to be an indenture or a deed …

shall, if it is signed and attested by at least 1 witness not being a party to the instrument, be deemed to have been sealed and, subject to section 47, to have been duly executed.’ (emphasis added)

Likewise, s 41(5) of the Law of Property Act 1936 (SA) states:

‘(5)     Notwithstanding any other law, an instrument executed in accordance with this section is a deed…’ (emphasis added)

The drafting of these provisions suggests that compliance with the formalities set out by the legislation alone will (upon satisfaction of certain further conditions that the statute may impose) create a valid deed.

A potential contrary view arises from the reliance of some courts, in interpreting statutory provisions relating to the execution of deeds, on the proposition that if Parliament had intended to do away with common law requirements then it would have said so clearly.[10] Notably, however, this proposition has never been applied to the paper requirement. Moreover, there are two reasons why this view should not be preferred.

First, the paper requirement is not a fundamental common law principle to which the principle of legality would apply. It is therefore unclear whether the reasoning underpinning the latter view would be followed today in light of Spigelman CJ’s comments in Harrison v Melhem:[11]

‘Given the frequency with which legislatures now abolish or amend ‘ordinary’ common law rights, the ‘presumption’ of non-interference with those rights is inconsistent with modern experience and borders on fiction. If the presumption still exists in such cases, its effect must be so negligible that it can only have weight when all other factors are evenly balanced.’[12]

Secondly, the reasoning applied in cases adopting the view that if Parliament had intended to do away with common law requirements then it would have said so clearly, such as Scook v Premier Building Solutions Pty Ltd,[13] is distinguishable and is not readily applied to the paper requirement. In Scook, the Court concluded that s 9 of the Property Law Act 1969 (WA) did not fully dispense with the common law requirement of delivery. Section 9(4), relevantly, provides that:

‘Every instrument expressed or purporting to be an indenture or deed … and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.’

Significantly, the Court’s conclusion rested upon a narrow construction of the words ‘duly executed’ in s 9(4) so as not to cover delivery.[14] The reason for this is apparent – if the phrase ‘duly executed’ encompassed delivery, any deed satisfying the express formalities prescribed by s 9(4) would be deemed to have been delivered (effectively dispensing with that requirement).

There is an immediate difficulty when attempting to apply analogous reasoning to the paper requirement. Delivery relates to an intention to be bound by what is otherwise a fully executed deed and is accordingly separable from the notion of execution. In contrast, the paper requirement (where it applies) is inextricably tied to execution – it is difficult to imagine how one could possibly execute a paper deed which has not yet been written on paper. The difficulty with drawing an analogy with Scook is even greater for provisions such as s 45(1) of the Law of Property Act 1936 (SA) which, instead of using terms such as ‘duly executed’, simply provide that ‘an instrument executed in accordance with this section is a deed’ (emphasis added).

Accordingly, the preferable view, though this issue has not yet been tested before a Court, is that the paper requirement has been dispensed with by statute.

Some alternative views, based on the premise that the paper requirement remains, include the following:

(1)    that Commonwealth and State ‘Electronic Transactions’ legislation can maintain an electronic deed’s validity, either through:

(a)     the ‘no invalidity’ provisions,[15] which generally provide that a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications (with the exception of Western Australia, where the ‘no invalidity’ provision excludes any transaction that has a witnessing requirement). This is on the basis that the underlying transaction recorded by the deed would retain full legal effect (although, notably, the provisions might not have the effect of preserving the validity of the actual document purporting to be a deed);[16] or

(b)    the ‘document production’ provisions,[17] which provide that where a person is required to produce a document in the form of paper (or some other material), that requirement is (in particular circumstances) taken to be met if the person produces an electronic form of the document. This view draws support from the references in the Explanatory Memoranda to the Commonwealth, Victorian and ACT Acts that ‘production’ includes the creation of original documents (e.g. the creation of an electronic deed);[18] or\

(2)    that printing out the document following electronic signature and attestation will satisfy the paper requirement.[19]

These views, whilst supporting the validity of electronically executed deeds (or at least the underlying transaction recorded by the deed) despite any paper requirement, have not received any judicial consideration.

Does an electronically created, signed and attested deed satisfy the statutory formalities?

Signature and delivery

The satisfaction of the signature requirement using an electronic signature seems to be relatively uncontentious. In Bendigo and Adelaide Bank Limited v DY Logistics Pty Ltd[20] the Court, after noting that ‘a signature is only a mark’,[21] stated:

‘At common law a person may sign a document by stamping their name, by typewriting or by printing, but in all cases, the question will be whether what was done fulfilled the function of a signature. What is required for signing to be effective is that there be some kind of “personal authentication for the individual ‘signing’”.’[22]

An electronic signature falls squarely within that description. The accepted validity of ‘artificial’ signatures in other contexts[23] further supports the validity of their use in deeds.

Compliance with any delivery requirement is similarly uncontentious. Conduct indicating that the person who executed the deed intends to be bound by it is sufficient.[24] The execution of an electronically created deed is plainly capable of satisfying this requirement. A party’s intention to be bound by a document does not depend on whether the executed document is physical or electronic.

Attestation

The current view of the Law Society of New South Wales on electronic attestation (which precedes the commencement of s 38A) is that electronic attestation can be valid provided that the witness (as a minimum): [25]

(1)      is physically present at the time the document is signed by the signatory;

(2)      signs the same document (as opposed to a copy of it); and

(3)      signs at the time that the signatory’s signature is witnessed.

Witnessing signatures via Skype (or some equivalent platform) or using a cloud-based document signing service is not permissible.[26]

This view is based upon the fulfilment of four functions of attestation outlined by the Law Society,[27] each of which fulfils the protective purpose of ensuring that a deed’s execution can be reliably and independently verified:[28]

(1)    certifying that the witness was present at the time the document was signed;

(2)    certifying that the document attested was signed by the witness;

(3)    certifying that the document was signed voluntarily, so that it was the signatory’s own act; and

(4)    representing that the witness attested at the time they witnessed the signature by the signatory.

It is unsurprising that the Law Society holds this opinion. There is no express prohibition against electronic attestation in any Australian jurisdiction and no reason, in principle, why electronic attestation would be incapable of fulfilling the abovementioned functions. An appropriate electronic execution platform which replicates a ‘wet-ink signature’ execution process, such that the only material difference is the application of an electronic (rather than physical) signature, would offer identical protection.[29]

An ‘electronic execution platform’ example

Automic Group has developed a platform which enables documents with witnessing requirements, such as deeds, to be executed electronically. The platform operates as follows:

(1)    The signing party clicks a box indicating his or her consent to signing electronically and confirming the presence of a witness who is physically located with him or her and will use the same device for the electronic signing process.

(2)    The signing party selects an electronic signature (which may be a previously created and uploaded signature or a new manuscript-style signature) and applies it to the document.

(3)    The witness then similarly consents to, and selects, an electronic signature and applies it to the same document.

(4)    The application of a signing party’s or witness’ electronic signature generates a unique identifier ‘stamp’ which records, among other things, the time of signature and the IP address of the computer from which the signature was applied.

This process is consistent with the ‘minimum requirements for attesting [a] document’ as outlined by the Law Society of New South Wales and replicates a ‘wet-ink signature’ execution process to the closest extent possible. As discussed above, such a process appears to satisfy the necessary deed formalities in each Australian jurisdiction.

Conclusion

In light of the recent trend of removing legal impediments to conducting e-commerce, it would not be surprising if other Australian jurisdictions adopt provisions that mirror s 38A of the Conveyancing Act 1919 (NSW) to resolve beyond doubt the ambiguities discussed above. However, even in the absence of such clarification, it appears that the use of an electronic execution platform such as the one described above, mirroring as closely as possible a traditional ‘wet-ink signature’ execution procedure, will create valid deeds.

 

[1] Electronic Transactions Act 1999 (Cth); Electronic Transactions Act 2000 (NSW); Electronic Transactions (Victoria) Act 2000 (Vic); Electronic Transactions (Queensland) Act 2001 (Qld); Electronic Transactions Act 2011 (WA); Electronic Transactions Act 2000 (SA); Electronic Transactions Act 2000 (Tas); Electronic Transactions (Northern Territory) Act (NT); Electronic Transactions Act 2001 (ACT).
[2] An exception is New South Wales, which has expressly clarified the issue through the insertion of s 38A into the Conveyancing Act 1919 (NSW).
[3] Property Law Act 1974 (Qld) s 45; Property Law Act 1969 (WA) s 9; Law of Property Act 1936 (SA) s 41; Conveyancing and Law of Property Act 1884 (Tas) s 63; Civil Law (Property) Act 2006 (ACT) s 219; Conveyancing Act 1919 (NSW) s 38; Law of Property Act (NT) s 47; Property Law Act 1958 (Vic) s 73.
[4] However, in Victoria (and the Northern Territory if the deed has been sealed), there is no attestation requirement.
[5] Note that delivery is not required in South Australia and Tasmania.
[6] Conveyancing Act 1919 (NSW) s 38A.
[7] See, for example, 400 George Street (Qld) Pty Limited v BG International Limited [2010] QSC 66, [44].
[8] Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, 366.
[9] Young J, in Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, suggested (in obiter at 366 and 369) that the relevant provisions in New South Wales (prior to the commencement of s 38A) had removed other common law requirements.
[10] Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263, [24]; Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310, 353–355.
[11] (2008) 72 NSWLR 380.
[12] Ibid, [8] (Spigelman CJ).
[13] [2003] WASCA 263.
[14] Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263, [23]; Monarch Petroleum N L v Citco Australia Petroleum Ltd [1986] WAR 310, 353–355.
[15] Electronic Transactions Act 1999 (Cth) s 8; Electronic Transactions (Victoria) Act 2000 (Vic) s 7; Electronic Transactions (Queensland) Act 2001 (Qld) s 8; Electronic Transactions Act 2011 (WA) s 8; Electronic Transactions Act 2000 (SA) s 7; Electronic Transactions Act 2000 (Tas) s 5; Electronic Transactions (Northern Territory) Act (NT) s 7; Electronic Transactions Act 2001 (ACT) s 7.
[16] Diccon Loxton, ‘Not Worth the Paper They’re not Written on? Executing Documents (Including Deeds) Under Electronic Documentation Platforms: Part B’ (2017) 91 Australian Law Journal 205, 219–220.
[17] Electronic Transactions Act 1999 (Cth) s 11; Electronic Transactions (Victoria) Act 2000 (Vic) s 10; Electronic Transactions (Queensland) Act 2001 (Qld) s 16; Electronic Transactions Act 2011 (WA) s 11; Electronic Transactions Act 2000 (SA) s 10; Electronic Transactions Act 2000 (Tas) s 8; Electronic Transactions (Northern Territory) Act (NT) s 10; Electronic Transactions Act 2001 (ACT) s 10.
[18] Loxton, n 16, 220–222.
[19] Loxton, n 16, 222–224.
[20] [2018] VSC 558; see also 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193.
[21] Ibid [46].
[22] Ibid [50].
[23] McGuren v Simpson [2004] NSWSC 35, [22]; Hinton Demolitions Pty Ltd v Young (1973) 6 SASR 129, 133.
[24] See, for example, Monarch Petroleum NL v Citco Petroleum Ltd [1986] WAR 301.
[25] Legal Technology Committee, FAQ on Electronic Witnessing of Signatures (26 September 2018) Law Society of New South Wales <https://www.lawsociety.com.au/sites/default/files/2018-09/LS2976_LegalTech_Witnessing-electronic-signatures_FAQ_v3_0.pdf>.
[26] Legal Technology Committee, n 25.
[27] Legal Technology Committee, n 25.
[28] Reliance Financial Services Pty Ltd v Pinerio [2017] NSWSC 1739, [23]; Shah v Shah [2002] QB 35, [29]; Burdett v Spilsbury (1843) 8 ER 772, 781.
[29] See, for example, the electronic execution platform described below.