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Any information contained in a blog on this website is general in nature only. The content of any blog posted below reflects information which is known to us as at the date of the posting of the blog. Please be aware that the law regularly changes. Please do not rely on the general information contained in the below blogs, instead we recommend that you contact us to obtain legal advice tailored to your own specific situation.

 

May13

Execution of Electronic Transactions

Amanda Quin - Wednesday, May 13, 2020

Blog authored by Andrew Cannon - Email: aac@peacockes.com
Electronic transactions, signing and the Electronic Transactions Act NSW and CTH

In these current uncertain times and restrictions with COVID-19, professionals are increasingly changing the way they think about communicating and transacting internally in the office and amongst wider colleagues electronically.

Electronic and digital documents and signing are, subject to legislative requirements, providing a real and flexible alternative to completing legal transactions electronically, particularly in the areas of conveyancing and real property. The convenience of near uniform legislation since 1999 known as the Electronic Transactions Act (theETA) ensures that a transaction under a state or Commonwealth law will not rendered invalid simply because a document was signed via electronic means. Courts are also increasingly aware of how electronic transactions and signatures are already a part of modern commercial life[1], as well as their significance to the future of “modern business practice”[2].

However, the ETA sets out three mandatory conditions in order for electronic signatures to be deemed effective. These conditions are:

1. Identity

- the person (signatory) must use a method to identify themselves and their intention;

2. Reliability

- the method used was as reliable as appropriate for the purpose of the electronic communication ( or proven in fact with further evidence); and

3. Consent

- the signatory (and any counter-signatories) must consent to the use of the electronic communication to fulfil the requirement and method of identification.

“Electronic” Signature and “Digital Signature” – What is the difference?

Whilst it is often the case that the terms “electronic signature” and “digital signature” are thought of and used interchangeably, it is important to note the distinction between them.

An electronic signature is essentially a signature on any electronic communication or document which DOES NOT have any physical verification or authentication on the document which it relates to. Such examples include inserting an electronic signature in a pdf letter or clicking an ‘I accept’ button online on a terms and conditions disclosure.

However, a “digital signature” is a type of electronic signature in which a verification element or authentication is provided on the document using specialised software integrated with a Public Key Infrastructure (PKI) system, to help ensure the security of the signatory’s identity, confidentiality and avoid issues surrounding document integrity and fraud.

An example of such a verification or authentication element is an DocuSign envelope ID or an AdobeSign transaction number, which are two well- known digital signing platforms. Most often, digital signing platforms provide a certificate of completion or similar certification or authentication after the completion of electronic signing. This certificate or authentication details and tracks the electronic ‘footprint’ of who, when and how a electronic document was created, sent, opened and signed, providing reassurance for clients and other signatories that the use of their electronic signature is confidential and secured.

Deeds and companies signing under s 127(1) of the Corporations Act – Issues?

Whilst NSW is currently the only state which permits deeds to be signed and witnessed electronically, regard should be had to the Law Society of NSW’s ‘FAQ on Electronic Witnessing of Signatures’. Witnessing electronic or digital signatures for deeds is legally and technologically complex, particularly also if one of the signatories is a company signing under s127(1) of the Corporations Act 2001 (Cth).

However, if electronic execution is required to occur pursuant to s 127(1) of the Corporations Act it may be prudent to consider some further practical measures such as:

  • Including an electronic execution clause and warranties as to the authority of the persons similar to the assumptions set out in s129(5) of the Corporations Act;
  • Requiring evidence of personal authentication of the officer signatories, and that a single electronic document was signed and witnessed; and
  • Requiring evidence of the identity and actual authority of the signatory or signatories to the relevant documents (eg board minutes or company resolutions).

In this respect, legal advice should be sought if you require either a document to be signed under section 127 (1) or a deed .

References

 

[1] C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643 [111].

 

[2] Stuart v Hishon [2013] NSWSC 766 [34].